1. MUHAMMAD SAYEED AKHTAR, J.--- The respondent-Company is engaged in the refining of sugar, wishing to expand its refining capacity of 4000 tons per day to 8000 tons per day, it approached Foreign Financial Institutions `F.M.O.' (a Netherland Company) and `D.E.G.' (a German Finance Institution) for loans. The said two Finance Institutions agreed to provide 3.50 million Netherland Guilders and 3.0 million Deutsche Marks vide agreement dated October, 12, 1993 and 8th December, 1993 respectively. Foreign Private Loans for Financing Foreign Currency Cost of the Project covered by the Government of Pakistan Industrial Policy Statement of June, 1984 which conformed to the standard terms as set out in Annex-II of the Industrial Policy Statement will automatically be approved, and registered by the State Bank of Pakistan as per F.E. Circular No.68 dated September 19, 1984. The application and submission of the loan agreement to the appellant/State Bank of Pakistan was required to be made through an Authorized Dealer (Bank) nominated by the borrower. The appellant vide Foreign Exchange Circular No.52 dated 22nd June, 1994, withdrew the absorption of Exchange Risk Scheme of the Government of Pakistan introduced vide F.E.
2. CircularNo.76. However, the appellant continued to provide Exchange Risk Covering where options were regisLered by it, notwithstanding, the issuance of the F.E. Circular No.52. The respondent- Company filed Loan Agreement on 7-2-1994 through its nominated bank with the appellants for registration of the same. The appellant registered the loan agreement between the respondent No.1 and DEG vide letter dated April 10, 1994 with registered No.INT/C148/1994 and the loan agreement with FMO vide registered No.INT/C-149/1994. On May 2, 1994 the respondent-Company allegedly exercised its option for Foreign Exchange Risk Coverage and requested that the same should be operative with effect from the date of disbursement. The option of the respondent-Company for Exchange Risk Coverage with respect to DEG and FMO loans was also granted and registered by the appellant vide its Letter No.DAD/14223/ERC-137/94 and DAD/14219/ERC-136/94 both dated 5-7-1994 with Registration No.DAD/ERC-137/94 and DAD/ERC- 136/94 respectively. The respondent No.1 also requested the appellant to allow it to establish special currency account in order to receive the disbursement of loans from FMO and DEG. The appellant vide its Letter No.INT.3927/7(999)-94 dated June 27, 1994 granted permission to open the said Foreign Currency Accounts in Deutsche Marks and Netherland Guilders with U.B.L. The permission was valid for a period of one year.
3. The respondent-Company established LCs with U.B.L. in favour of its suppliers of machinery and plant. It applied to the appellant for opening a Special Foreign Currency Account on cash basis under the State Bank Regulations. The appellant granted the permission to the respondent to open the said account. The foreign currency received by the respondent-Company from the reserves of the appellant for the import of machinery was utilized for retiring the aforesaid Letters of Credits.
4. On receipt of funds under the loan agreements with FMO and DEG, the same were surrendered to the appellant and Pak Rupees equivalent thereof were released to the respondent-Company's account with U.B.L.
5. The respondent-Company through their nominated Bank (U.B.L.) approached the appellant on December, 14, 1994 for registration of the repayment schedule with respect to loans from FMO (Netherland) and DEG (Germany). The respondent-Company through its nominated Bank (U.B.L.) approached the appellants on 8th January, 1995 and 16-1-1995 inquiring about its application regarding registration of the repayment schedule in respect of the aforementioned loans. It received a letter on March 7, 1997 from the appellant declining to provide the Exchange Risk Coverage. The respondent made a representation through its nominated Bank (U.B.L.) to the appellant on 6-6-1997. The appellant vide its letter dated Ist August, 1997 informed the respondent- Company that its representation has been referred to the Finance Division and that the appellant will advise the respondent on receipt of the decision from respondent No.2. The letter was assailed in this Constitutional petition. Finally the respondent-Company received a letter dated 19-2-1999 from the appellant stating that the Government of Pakistan had decided that the question of extending Exchange Risk Coverage did not arise. The respondent-Company also received another letter dated March 10, 1999 from the appellant requiring it to submit the repayment schedule in respect of FMO and DEG loans. The said letters dated 1-8-1997, 19-2-1999 and 2-3-1999 were challenged in the amended Constitutional petition which was allowed by the learned Judge-in-Chambers vide judgment dated 14-11-2001.
2. Learned counsel for the appellant contended that the respondent-Company was a public limited company. The Articles of Association of the company appended with the writ petition do not authorize any Director to file the writ petition. No resolution of the Board of Directors authorizing the signatory of the writ petition to file the writ petition has been placed on the record. Reliance was placed on Government of Pakistan v. Premier Sugar Mills and others PLD 1991 Lahore 381; Khan Iftikhar Hussain Khan of Mamdot (Represented by 6 others) v. Messrs Ghulam Nabi Corporation Ltd.
6. Lahore PLD 1971 SC '550 and Muhammad Farooq and another v. Mst. Mussarat 2001 YLR 2660. The respondent-Company with a view to claim benefit of the registration of the contract and Exchange Risk Coverage suppressed the material facts and eventually admitted the serious violations in their letter dated 23rd April, 1996. The consent of the State Bank/appellant was not free in terms of section 14 of the Contract Act, 1872. Under section 19 of the Contract Act when the consent to an agreement is caused by coercion, fraud or. misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. The respondent-Company concealed the facts from the appellant and in fact the appellant was deceived. The registration of the Foreign Loans at the option of Exchange Risk Coverage was exclusively for the -import of plant and machinery. The respondent-Company retired the LCs. On the basis of import licence on cash basis from their own sources, therefore, the respondent-Company violated the terms and conditions of the agreement. The commission settled for providing Exchange Risk Coverage has also not been paid by the respondent-Company. The Exchange Risk Coverage falls within the definition of the contingent contract as contemplated by section 31 of the Contract Act. The Exchange Risk Coverage was available in case of import of plant and machinery out of the Foreign Currency Loans amount received in Special Foreign Currency Account to be opened with the prior permission of appellant but the respondent-Company neither deposited the Foreign Currency Loan in the Special Foreign Currency Account nor utilized the same for the purpose of import of plant and machinery. Constitutional petition is not maintainable for enforcement of a contract. The question of fraud and misrepresentation cannot be decided without recording the evidence.
7. Conversely the learned counsel for the respondent submitted that the facts are admitted and the documentary evidence has been produced by both the parties, no other evidence is required. In these circumstances the Constitutional petition was maintainable. It was further submitted that the respondent-Company complied with all the regulations and instructions issued by the appellant including the standard terms mentioned in F.E. Circular No.68 amended from time to time. No fraud or misrepresentation was made to the appellant. All the facts were disclosed to it through their authorized dealer who had informed the appellant that their LCs for the import of machinery for the expansion of the sugar mill had been established through Cash Import Licence. The learned counsel further argued that the appellant in its reply to ground-a of the writ petition admitted that it discovered on 26-7-1994 that the Company had already imported major portion of the plant and machinery. The appellant after acquiring knowledge issued letter confirming 'Forward Cover' for the loan on 26-12-1994. The appellant was estopped by its own conduct from denying the benefit to the respondent-Company for which it had legally and validly opted. Reliance was placed on Pakistan through Ministry of Finance Economic Affairs and another v. Fecto Belarus Tractors Limited PLD 2002 SC 208; Fatima Enterprises Ltd. v. The Chief Manager, State Bank of Pakistan, Deposit Account Department, Multan and 4 others 1999 SCMR 1497; Gatron (Industries) Limited v.
8. Government of Pakistan 1999 SCMR 1072 and Messrs Army Welfare Sugar Mills Ltd. and others v.
9. Federation of Pakistan 1992 SCMR 1652 and other plethora of cases. The respondent-Company surrendered the Foreign Currency to State Bank and received Pak Rupees in lieu thereof in its account, no permission was required for such conversion/encashment. F.E. Circular 68 refers to financing. This expression has been interpreted in Muhammad Sadiq Khan v. Federation of Pakistan PLJ 1983 FSC 25. The word 'financing' had a very wide connotation, the repayment of debt, retirement of LC:s for the import of machinery and repayment of money utilized for the purposes of import of plant and machinery are included in the term 'financing', hence no violation of SBP Circular 68 took place. Option once exercised for the purpose of Exchange Risk Coverage cannot be withdrawn. Learned counsel urged that the Foreign Exchange was restored by the company to the State Exchequer by surrendering the Foreign Currency received by it as such no loss was caused to the National Exchequer. The appellants declined to produce the record maintained by it regarding the loan in question and thus withheld the best evidence available with it. Reliance was placed on Muhammad Afzal, etc. v. Riaz Mahmood, Additional District Judge, Lahore PLD 2004 Lah.
10. 115; Brig. Muhammad Bashir v. Abdul Karim and others PLD 2004 SC 271; Tata Cellular v. Union of India AIR 1996 SC 11; Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64 and Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others 1998 SCMR 2268.
3. With the assistance of the learned counsel for the parties we have perused the record and considered the arguments of the learned counsel for the parties. As per FE Circular 68 dated September, 19, 1984 Private Sector Entrepreneurs could obtain foreign currency loans from Foreign Banks/Institutions and supplier's credit including credits in PAYE Scheme for financing projects covered by the Federal Government's Industrial Policy Statement-June, 1984. The agreements for Foreign Private Loans which conformed to the standard terms as set out in Annex-II of the said Industrial Policy Statement, [984 will automatically be approved and registered by the State Bank of Pakistan. It will send a confirmation letter within one month of the receipt of the agreements, however, sponsors who wanted terms different from the 'Standard Terms' will submit their proposed draft agreement to Investment Bureau, Ministry of Industries, Government of Pakistan for consideration and approval. Agreements v ill be registered by the appellant/State Bank without prejudice to the provisions of other laws and regulations in force. In the case of loans from Foreign Financial Institutions, the loan amount should either be repatriated to Pakistan or deposited in a foreign currency account to be opened with the prior permission of State Bank. The repayment schedule of loans from Foreign Financial Intuitions will be registered on the basis of evidence regarding initial disbursement of the loan. Sponsors were, however, responsible for producing to the area office of Exchange Control Department, State Bank of Pakistan, evidence regarding import of plant and machinery and debt servicing subsequent to the scheduled arrival of machinery. The letter dated 26-7-1994 with the petition shows that the LCs were opened in the last quarter of 1993. The same were retired by the respondent-Company from their own resources on cash basis. It is pertinent to mention here that though the LCs were retired against cash licence from their own resources but the foreign currency of the State was utilized. When the loan was disbursed by the Foreign Financial Institutions and was received by the respondent-Company, the same was surrendered to the appellant/State Bank. The case of the respondent-Company in nutshell is that all the facts were disclosed to the appellant.
11. The agreement for private loans and the repayment schedule was registered by the State Bank vide letters dated 10th April, 1994. The option for Exchange Risk Coverage was rightly exercised and it shall remain valid till liquidation of the entire credit. The State Bank was estopped from resiling its commitment, whereas, the plea of the appellant is that the respondent-Company has played fraud and deceit upon the appellant, concealed the material facts and violated the terms and conditions of the agreement. The letter dated 10th April, 1994 registering the two agreements clearly states as under:-- "The registration of this Agreement is subject to yOur ensuring compliance of instructions contained in B.S. Circular No.68 dated the 19th September, 1984 as amended from time to time with the understanding that this registration is without prejudicing to the provision of other Laws and Regulations in force with the further conditions stated hereunder:--
(i) The loan amount will be utilized exclusively for financing import of Plant and Machinery.
(ii) Any amendment/alteration/addition in the contract shall require prior approval of the Goverrment of Pakistan/State Bank of Pakistan (underlining is ours).
12. (iii)
13. Para. 4 (ix) of F.E. Circular reads as follows:-- "After the liability to the foreign supplier of plant and machinery as mentioned in sub-paragraph
(viii) above has been established, the repayment schedule as per specimen given at appendix V- 35A should be submitted to the Investment Division, Exchange Control Department, State Bank of Pakistan, Central Directorate, Karachi in quintuplicate through the Authorized Dealer which has issued the repayment guarantee, for registration. However, in case of buyer's credits and loans from foreign banks/financial institutions, the repayment schedule will be registered on the basis of evidence regarding initial disbursement of the loan. The sponsors will however, continue to be responsible for producing to the Area Office of Exchange Control Department, State Bank of Pakistan evidence regarding import of plant and machinery and debt servicing subsequent to the scheduled arrival of machinery wilt be made only after issue of exchange entitlement certificate."
14. The letter dated April 23, 1996 also reveals that LCs were not established in the currency of the loan agreement and the same were opened before signing of the agreements with foreign lenders, whereas, the respondent-Company insists that all these facts were brought to the notice of the appellant and no objection to the arrangement was raised by it but there is no evidence of the same on the record.
15. Fraud and deceit vitiate the most solemn proceedings. The vital condition for registration of the agreement was that the foreign exchange shall be used for the import of plant and machinery. The documentary evidence shows that the foreign currency loan obtained from the foreign lenders was surrendered to the State Bank of Pakistan and not used for the import of plant and machinery.
16. The learned counsel for the respondent-Company strenuously urged that all the facts were disclosed to the State Bank of Pakistan but he admitted that the said letter informing the State Bank is not available on the record. Admittedly the LCs were not opened in the currency borrowed.
17. The foreign currency loans were not utilized for the import of plant and machinery. The appellant/State Bank has been consistently urging for observance of the said condition. We are, therefore, of the view that the principle of Promissory Estoppel is not available to the respondent- Company. No representation or inducement was made by the appellant to the respondent- Company nor any steps were taken consequent thereto so as to irrevocably commit the property or the reputation of the party invoking it. The Honourable Supreme Court in the case of Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan (supra) observed that "the party which has indulged in fraud or collusion for obtaining some benefits under the representation cannot be rewarded by the enforcement of the promise." As far as the contention of the learned counsel for the appellant that the writ petition for enforcement of the contract was not maintainable suffice to say that the point was not urged before the learned Single Judge. The same cannot be allowed to be raised for the first time in this appeal. The plethora of authorities relied upon by the learned counsel for the respondent do not help him.
4. For what has been stated above this appeal is allowed, the judgment of the learned Single Judge dated 14-11-2001 is set aside and the writ petition of the respondent No.1 is dismissed leaving the parties to bear their own costs.