1. MUSHIR ALAM, J.-- This suit for the recovery of Rs. 33,82,735/- has been filed by the plaintiff against the defendants National Insurance Corporation.
2. The controversy forming background of instant suit appears to be that; defendant invited quotation for supply and installation of Air-conditioning and ventilation equipment in its building at Islamabad. Plaintiff made offer for the supply of the required equipment through letter dated 20.4.1998. Price quoted was on the then prevalent Pak Rupee Dollar parity and existing Taxes and Duties etc. Followed by formal contract dated 15.5.1998.
3. It appears that before the import, delivery and installation of contracted equipment could be effected, Pakistan carried out Nuclear Test on 28.5.1998, which drew sharp and hostile international reaction, followed by economic restriction and repercussion. Consequently, Government of Pakistan was compelled to freeze all foreign transaction beside devaluation of Pakistani currency by 4.4% to one US$. This had substantial financial implication on the contract between the parties.
4. As the equipment contracted were to be imported against foreign exchange. Plaintiff notified the effect on the value of the contract, as a result of devaluation of Pakistan Rupee as against US Dollar and its effect on duties and other taxes on the imported equipment. Plaintiff showed their disability to supply the equipment at loss. However, pursuant to a meeting between the plaintiff and defendant such equipment were delivered on assurance that, the escalation will be considered favourably by the defendant. In order to examine the impact of such devaluation of currency and resultant increase on duties and taxes, defendant appointed a consultant, who approved the claim of increase on such count.
5. The defendant, despite recommendation of consultant, through letter dated 30.3.2001 finally refused to pay the increase.
6. Plaintiff ultimately approached the Ombudsman to claim a total sum of Rs.2,847,296.00 learned Ombudsman after hearing both the parties arrived at a following findings dated 20.1.2002:- The matter was examined in the light of the material available on record, which revealed that the main grievance of the complainant is with regard to payment of escalation amounting to Rs.28,47,296/- due to valuation. The stand of the Agency is that this amount cannot be paid as there is no clause in the contract for payment of escalation and the contractor had agreed to accept all payments in Pak. Rupees. This being a contractual dispute involving payment of a huge amount Rs.28,37,296/- the complainant may, if so advised, approached a competent Court of law for recovery of the same form the Agency, after proving his case through recording of evidence etc. However, the refusal of the Agency to pay the admitted claims amounting to Rs.257,184/- and US$ 3967/- without submission of "No Demand Certificate" is unjust and against the spirit of law as well as principles of natural justice as the complainant cannot be compelled not to claim the dues which, according to him, are payable by the Agency to be guilty of maladministration in this respect, this office recommends that the payment of admitted claims should be released to the complainant forthwith without compelling him to forgive his right to claim the escalation through a competent Court of law.
7. It appears that pursuant to the decision of learned Wafaqi Ombudsman only a sum of Rs.248,183 and the defendants paid Rs.200,118.00. A demand for the amount on account of escalation in the sum of Rs. 2,837,296/- was not made despite demand through letter dated 26.8.2002. Hence the suit for the recovery of the said amount in addition also claim compensation of Rs.1000,000/-.
8. It appears that the defendants were served but chose not to appear in Court. The Court accordingly declared defendant ex parte on 11.8.2003.
9. Plaintiff filed affidavit in evidence alongwith all relevant documents. Plaintiff also filed import documents and invoices from banks showing conversion rate of Pak Rupee as against US Dollar varying from Rs.50.8160, Rs. 56.41 and Rs. 50,45 per US Dollar respectively on relevant dates of import of equipment.
10. Mr. Nadeem Azher Siddiqui learned counsel for the plaintiff contended that, the plaintiff incurred additional cost in the import of the equipment due to Nuclear Test by Pakistan, which had serious financial implication on price of the contracted good. He urged that the price quoted was on the basis of the then prevailing exchange rate of Pak rupees with US$ and the then prevailing duties and taxes. Such condition is contained in letter dated 20.4.1998 said letter was made part of the contract in terms of clause 4 thereof. 'According to him, the defendant accepted the contracted goods after the devaluation of Pak Rupee and such fact was brought to the notice of the defendant who did not raised any objection on the price issued before the equipment were delivered and installed at the designated premises. Even the Consultant appointed by the defendants themselves, recommended the case of the plaintiff but the defendant has unjustly refused to pay the increase. Mr. Nadeem, therefore submit that the suit of the plaintiff be decreed as prayed.
11. From the facts and arguments advanced it appears that, only issue that calls for consideration is as follows":- Whether the plaintiff is entitled to recover and defendant is liable to pay escalation in price of the contracted good on account of devaluation of Pakistani Rupee and consequential increase in taxes, custom-duties and other levies or not?
12. There appears to no controversy that the value of Pakistan Rupee as on the date of offer letter of the plaintiff dated 20.4.98 was Rs.44.31 per US$.
13. Letter dated 20.4.98 (annexure P/2 to the Affidavit in Ex-Parte Proof) contained following important conditions:-
(f) Force meajure is applicable.
(g) Offer is valid for 15 days.
(h) The price quoted are based on the present rate of duty and taxes and exchange rate US$ = Rs.
14. 44.31.
15. In terms of Condition No. 4(d) of the Contract dated 15th May, 1998 after letter of the plaintiff, referred to above, formed, read and construed as part of the contract.
16. From record it appears that the defendant themselves appointed consultant to, examine the claim of the plaintiff on account of devaluation of Pak currency and consequential increase in duties and taxes. The Consultant recommended the claim of the plaintiff as regard the price difference on account of devaluation was concerned. As regard claim based on excessive tax, custom-duties and excise were considered, defendants were advised to obtain expert opinion (see P/18 to the affidavit in Ex-parte Proof). It appears, no expert opinion was obtained and the defendant through their letter-dated 30.3.2003 (P/23 to the affidavit to Ex-parte Proof) notified the plaintiff as follows:- "The recommendation of M/s Arshad Abdullah was considered in a meeting of central committee NICL head Office, but the Committee decided to decline the recommendation being untenable in view of the agreement with you in the matter"
17. Though the Defendant chose not to contest the suit. For the sake of agreements, even if the plea taken by the Defendant in the letter reproduced above, is considered on its face value, it cannot be sustained for more then one reason.
18. Firstly as noted above, offer letter of the Plaintiff, not only specifically provided that i.) Offer was valid for 15 days. b.) Force meajure was made applicable. Lastly but not the least c.) The price quoted were based on the then prevalent rate of duty and taxes and exchange rate US$ = Rs. 44.31.
19. Therefore, plea of the Defendant that the claim of the Plaintiff is beyond the purview of the contract is not substantiated.
20. Secondly, in view of Section 64-A of Goods Act, 1930 where under, statutory protection is given both to the buyer and seller in case of change in duties, excise and taxes. Section 64-A bid, was inserted in the Sales of Goods Act, with aim to provide equal protection both to the buyer and. Seller in event of variation in price of contracted goods on account of variation, imposition, remission or decrease in the duties and tax structure. For the benefit of appreciation Section 64-A ibid. Is reproduced as follows; 64-A. In contracts of sale amount of increased or decreased duty to be added or deducted:-In the event of any duty of customs or exercise on any goods being imposed, increased, decreased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contract, or for the sale of such goods duty-paid where duty was chargeable at that time.---
(a) If such imposition or increase so takes effect that the duty or increased duty as the case may be, or any part thereof, is paid, the seller may add so much to the contract price as will be equivalent to the amount paid in respect of such duty or increase of duty, and he shall be entitled to be paid and to sue for and recover such addition, and
(b) If such decrease or remission so takes effect that the decreased duty only or no duty, as the case may be, is paid, they buyer may deduct so much from the contract price as will be equivalent to be decreased of duty or remitted duty and he shall not be liable to pay, or be used for or in respect of, such deduction.
21. On bare reading of Section reproduced above, it is manifest. That above provision equal protection both to the buyer and seller alike. Quoted provision has determined the extent of liability of buyer and seller after the making of any contract for the sale of such goods, in a manner that none of the party is effected by the reason of such change or fluctuation in duties and taxes.
22. There remains no doubt that the contracted equipment were imported after the Nuclear Text dated 28/5/1998 and after the devaluation of Pak Currency and disparity in exchange value of the Pakistani Rupee against foreign currency more particularly against US$. Case of the Plaintiff is fully covered by Section 64-A (a) reproduced above, Section 64-A provided equal protection both to the buyer and seller. In case of any increase in duties or excise or taxes after the contract is executed between the parties the seller is entitled to claim and recover excess- amount paid no account of such increase and the buyer is liable to reimburse the seller. Like wise where there is decrease in duty, excise or taxes on account of reduction in taxes or, duties the seller is liable to pass on the benefit to the buyer. For reference one may see Ch. Brothers v. Province of Punjab (1993 M LD 2437) Gulshan v. Government of Pakistan (1998 MLD 2436) and S.S.A Moeed v. Ebraheem Alibhai Charitable Trust (1987 M LD 308). To dispel any doubt on such score, Honourable Supreme Court in the case of Army Welfare Trust v. Federation of Pakistan (1992 SCM R 1652) in para 54 at page 1698 observed as follows: "It may also be observed that Section 64-A of the Sales of Goods Act, 1930 entitles a vendor to recover from a purchaser any duty of customs, or excise or tax on any goods being imposed or increased after the conclusion of contract for the sale of goods, if the contract does not contain any provision contrary to it,"
23. As regard difference of price resulting from devaluation and currency fluctuation is concerned in a recent case reported as Habib and Company v. Chief Controller of Purchases (2002 CLJ 182), price difference on account of currency fluctuation was claimed for the fact that devaluation was carried out by the Government of Pakistan. Learned Division Bench of Lahore High Court, though dismissed the petition, on the technical ground, nevertheless; at page 184, agreed with the contention of the petitioner's counsel and observed as follows:- .... After hearing the learned counsel for the parties we are inclined to agree with the learned counsel for the petitioner that the devaluation having taken place. By virtue of statutory notification issued by the State Bank of Pakistan the petitioner is entitled to the enhancement in the price.
24. In the instant case, there is nothing in rebuttal to show that there was no devaluation of Pak currency on account of Nuclear Text carried out by Pakistan on 28/5/98, such devaluation in Pak currency was on act of State, over which the plaintiff had no control. From the documents on record there appears to be no dispute that the air conditioning and ventilation equipment were to be imported, delivered and installed by the plaintiff, there seems to be no disagreement that the equipment contracted were imported after the Nuclear Test. There is no quarrel that, the price of the goods was quoted on the basis of exchange rate of ONE US$ = Rs. 44.31/- prevalent at the time of offer letter (P/2 to affidavit in ex parte proof). Plaintiff has produced Bank invoice showing that the conversion rate of Pak Rupee as against US Dollar varied from Rs. 50.8160, Rs.56.41 and Rs.50.45 per US Dollar respectively on relevant dates of import of various contracted equipment which amount the plaintiff had paid. Plaintiff has also produced Bill of Entry and other import documents showing that enhanced taxes, customs-duties and excise were paid on the import value of the contracted good prevalent on the date of import, which amount the plaintiff had paid.
25. From the documents, it appears that there was no delay or negligence on the part of the plaintiff to import and install the equipment. It also appears that the defendant accepted the delivery and installation without disputing the liability on account of devaluation and increase in duties and taxes etc. Such dispute appears to have been raised after the equipment were supplied and installed.
26. Section 64-A of the Sales of Goods Act gives statutory right to Seller to add so much to the contract price as will be equivalent to the amount paid in respect of such duty or increase of duty. Seller may enforce such right and recover the amount of increase or addition in duties and taxes from the buyer through Courts of law. Likewise, any difference on account of devaluation or difference in the Pak Rupee as against foreign currency for the act of Government, the buyer would be entitled to add, claim and recover so much to the contract price as will be equivalent to the amount paid in excess.
27. Purchaser unless agreed otherwise, cannot be allowed to take away the statutory right of a seller to, recover the excess amount paid in respect of new imposition and or increase in duty, excise, or tax after the execution of the contract. On the same analogy and parity the purchaser is liable to pay so much of the difference in the price of goods. Effected on account of devaluation or depreciation of Pak Rupee against the foreign currency after the execution of the contract. More particularly where the contract price is quoted on the basis of exchange rate on the date of contract.
28. Phenomenon of devaluation or depreciation of local currency, against the foreign currency occurs, as a result of act or policy of the State or on account of international financial and economic repercussion, seller has no control over such factors. Therefore, in my opinion where a seller has no control or influence over devaluation or depreciation of local currency, or where it is not shown that such. Difference occurred on account of delay or default of the seller. Seller cannot be made liable to bear the excess amount incurred in procuring the imported good at excessive price on account of devaluation of local currency. More particularly, where the price quoted is linked with prevailing exchange rate, as was in the instant case.
29. In view of the foregoing discussion I have no hesitation to allow the claim of the plaintiff to the extent of escalation of price of good as a result of devaluation and depreciation of Pak Rupee and consequential increase in duty and taxes. Suit is accordingly decreed only to the extent of Rs.23,82,735/- with cost and equaliser at the rate of 10% per annum from the date of suit till realisation.
30. As regard the claim of compensation in concerned since the suit has been decreed with cost and equaliser, I do not consider appropriate to allow compensation as claimed: Suit stand decreed in above terms.