1. ' MAQBOOL BAQAR; J.---This is an application under Order XXXIX, rules l and 2, C.P.C., read with section 94 and section 151, C.P.C., filed on behalf of the plaintiff, seeking an order restraining the defendants from conferring on any party, any right, benefit or interest pertaining to the sole distribution agreement adverse to the rights, interest and benefits of the plaintiff and to direct the defendants and all persons through or under them not to interfere with such rights and interest of the plaintiff.
2. ' The brief facts of the plaintiff's case are that the plaintiff is the sole distributor/agent for Pakistan of defendants Nos.1 and 2 in respect of the Industrial Sewing Machines, manufactured by defendant No,1, and supplied/exported by defendant No,2, under the brand name 'BROTHER', since January, 1984. The plaintiff was so appointed under and in terms of a sole distributorship agreement executed between the plaintiff and defendant No,1 and Japan Industrial Machines Corporation (JIMCO), the then supplier/exporter, on 1-1-1984. It is claimed that it was the plaintiff who was introduced the 'Brother' Industrial Sewing Machines in Pakistan in the year 1981 and being impressed by the excellent performance of the plaintiff. The defendant No,1 and JIMCO granted to the plaintiff that the sole distributorship for Pakistan through the above agreement. In the year 1988, the defendant No,1 informed the plaintiff that from then onwards the supply and export of the sewing machines shall be conducted by Brother International Singapore (Pvt.) Ltd., Singapore, (BIC) the defendant No,2, in place of JIMCO. It is further claimed that the plaintiff in order to promote the sale of the defendants sewing machines in Pakistan incurred huge expense and established various facilities, including offices, showrooms, spare parts outlets and after sales service centres and thus provided all necessary infrastructure of permanent nature for promotion and sale of Brother Industrial Sewing Machines in Pakistan, in addition the plaintiff also spent substantial amounts on training of his technical staff in Japan for various models of sewing machines introduced by defendant No,1, from time to time, and it was at the expense of the plaintiff and through his relentless efforts, over a period of twenty five years, that 'Brother' sewing machines were established in, and captured a sizeable share of the local market. The plaintiff also spent huge amounts, on sale promotion and marketing of 'Brother' sewing machines through advertisement and by organizing Exhibition and technical Seminar. It is claimed that the plaintiff throughout this long period of twenty five years, has conducted his business, as the sole distributor, to the utmost satisfaction of defendants Nos.1 and 2, who always expressed their satisfaction and never made any complaint regarding the business. However, on 30-9-2005, the plaintiff was shocked to receive from the defendant No,2 a letter, disclosing that in addition to the plaintiff, they have appointed another party namely, M/s. Salam and Company to market their products in Pakistan. Through E-mail dated 1-1-2005, the plaintiff strongly protested to the defendant No,2 against such appointment, as being violative of the agreement and called upon defendant No,2 to withdraw their letter dated 30-11-2005 and to confirm to the plaintiff, in writing, the fact that the plaintiff is the sole distributor of Brother Industrial Sewing Machines for the entire territory of Pakistan. However, in response; the defendant No,2 company, far from withdrawing the letter and/or issuing the requisite clarification, through E-mail dated 2-10-2005 contended that the impugned letter is not violative of the agreement as the defendants do not intend to terminate the plaintiff's distribution agency, and they merely intend to enhance their sale and strengthen their sales organization against their formidable competitors and invited the plaintiff to visit them in Singapore so that the misunderstanding may be removed through discussion. Through another E- mail of the same date the said defendant explained to the plaintiff that they do not intend to terminate the plaintiff's distributorship and only wanted to extend their market coverage to increase their sales and enlarge their market share through additional distribution channel.
3. Through E-mail dated 3-10-2005, the plaintiff, whilst objecting to the letter dated 30-9-2005 from defendant No,2, also protested against their representative visiting several factories with the representative of M/s. Salam and Company during his stay in Pakistan and objected to issuing a pro forma invoice by defendant No,2 to a customer in Pakistan, without informing the plaintiff. The defendant No,1, however neither withdrew the letter dated 30-9-2005 nor issued the requisite clarification. The plaintiff, therefore, by Email dated 4-10-2005 reiterated its objection and demanded issuance of the clarification, however, since the request was not acceded to, the plaintiff on 14-11-2005 sent a legal notice to defendants Nos.1 and 2, and through E-mail dated 30- 11-2005, the Director and General Manager of defendant No,1 claimed that they have not yet appointed M/s. Salam and Company as their distributors, and contended that through their letter dated 30-11-2005, had only informed the plaintiff of their intention to do so. It is claimed by the plaintiff that as a result of the issuance of the letter dated 30-9-2005 and the defendant No,1 's failure to withdraw the same and on account of the adverse propaganda by M/s Salam and Company against the plaintiff, the plaintiff lost orders worth US$ 10,834,000, placed by Master Textiles Mills Ltd. For Brother Industrial Sewing Machine, who subsequently established L/C in favour, of 'JUKI', as in view of the foregoing the plaintiff, despite efforts, failed to persuade and convince.
4. Master Textiles Ltd. That the plaintiff is the sole distributor of Brother. Industrial Sewing Machines in Pakistan and will ensure after sales service and availability of spare parts to them. Through E-mail dated 6-12-2005, the plaintiff informed the director of defendant No,2 regarding the above and that he reserve his right to claim commission on all the order that he will lose on account of defendant No,1"s conduct. Vide E-mail dated 9-12-2005, the General Manager of defendant No,1 expressed the defendants desire to solve the issue amicably, and whilst claiming that the letter/notice dated 30-9-2005, was addressed and communicated only to the plaintiff and was not made public, assured the plaintiff that they do not at all contemplate to interrupt the plaintiffs' business in Pakistan. The plaintiff further alleged that M/s Salam and Company had booked venues for organizing technical Seminars and Exhibitions of Brother Industrial Sewing Machines on 5th and 7th December, 2005, and the proposed seminar and exhibition was cancelled only after the plaintiff had served the aforesaid legal notice on defendants Nos.1 and Z. It is also alleged that M/s Salam and Company has, during the months of November/December, 2005 imported various models of Brother Industrial Sewing. Machines from defendant No,2. In support of his allegation, the plaintiff has annexed with the plaint a letter addressed by M/s Salam and Company to M/s Regent Plaza Hotel and Convention Centre and the daily list of import issued by Karachi Appraisement, Collectorate of Customs. It is submitted that although the defendant No,2 acknowledged the plaintiffs right as their dealer in Pakistan and informed the plaintiff that they have not yet appointed M/s Salam and Company as their distributor. However, their conduct is contrary to their assurance/commitment, and therefore, it is necessary that an order may be passed that the consignments/ shipment of Industrial Sewing Machines shall not be released without the consent of the plaintiff.
5. ' In his counter-affidavit filed on behalf of defendants Nos. l and 2, the Director and General Manager of defendant No,2 submitted that the plaintiff's suit is not maintainable as the plaintiff's sale distributorship under the agreement dated 1-1-1984, was revoked in accordance with the agreement and the plaintiff has claimed damages from the defendant. It was alleged that the plaintiff, because of his other business interest, did not pay full attention to the agency business and failed to achieve the stipulated yearly sales target. The defendants pointed out that in terms of clause 10 of agreement the plaintiff was required to sell at least 2,000 sets of 'Brother' brand Industrial sewing machines in a year, and also to furnish to defendants Nos.1 and 2, market and business report at the end of every month, but he always lagged behind the minimum stipulated sales target; and also failed to submit the requisite monthly reports. It was alleged that during the years 2002 to 2005, the plaintiff sold only 638, 627, 1099 and 1,321, number of machines, respectively.
6. Whereas during these years in Bangladesh the figures were 4,417, 7,284, 10,243 and 13,389 respectively, and in Sri Lanka the sales figures were 1,315, 1,594, 1,752 and 2,222 respectively. He further claimed that although the rate of commission as agreed between the parties was only 4%, however the plaintiff dishonestly charged commission at the rate of 16% to 20% through.
7. Misrepresentation and by misleading the answering defendants. He rejected the plaintiff's claim that the defendants did not complain to the plaintiff about his poor performance and annexed to the counter affidavit a copy of letter dated 4-5-2005, complaining to the plaintiff regarding his poor performance, he however claimed that usually such complaints were made to the plaintiff orally. He averred that despite repeated complaints the plaintiff did not improve his performance and therefore the answering defendants instead of extending the plaintiff's sole distributorship for another year decided to also try M/s Salam and Company as a distributor, but did not exclude the plaintiff from being considered as one of the agents. However, the plaintiff is no more the sole distributor of the defendants. He pointed out that the agreement dated 1-1-1984 was for a duration of one year and was renewable for the following one year by mutual written consent of the parties, three months before the expiry date. He submitted that investment, if any, was made by the plaintiff for his business and to earn commission. He further submitted that the plaintiff's staff was trained in Japan at the defendant's expense and certain other expenses such as for advertising were also incurred by the answering defendants.
8. ' Through his affidavit-in-rejoinder, the plaintiff denied various allegations made in the counter affidavit. He referred to the correspondence exchanged between the parties commencing from the defendant No,1 's letter dated 30-9-2005, to show that the relationship between the parties was never terminated and submitted that even after filing of, the present suit, the defendant No,1 under cover of their letter dated 6-2-2006 forwarded to the plaintiff a draft memorandum/agreement for his signature, in terms whereof the defendants acknowledged that the plaintiff is their sole agent and agreed to withdraw their letter dated 30-9-2005 and also agreed not to appoint any other agent as their distributor in Pakistan. They further agreed not to export any 'Brother' Industrial Sewing Machines in Pakistan without prior consent of the plaintiff. The plaintiff submitted that the counter affidavit of a director of defendant No,2 cannot be treated on behalf of defendant No,1 also as no authority from the said defendant has been filed in that regard. As regards the defendants' allegation that the plaintiff has filed to achieve the stipulated sales target, he submitted that during the period from 1981 up to 1995, the plaintiff, on the average, sold more than 3000 machines a year and sold substantial number of machines up to the year 1998, however from year 1998, since on the one hand defendants Nos.1 and 2 increased their prices and on the other Chinese machines were available in the market at much cheaper price and thus the buyers switched over to such machines, subsequently the defendant No,1 stopped producing knit machines which 'constituted a large part of plaintiff's sale and in 2004 the defendant No,1, also discontinued the production of all Chain stitch machines. From 2002 the defendant discontinued the production of automatic machines also. Another factor attributed by the plaintiff to reduction in sales was that in the year 2005 the defendants reduced the number of their models from 80 to only 20, whereas, the defendants' formidable competitor 'JUKI' introduced new models to the range of their existing models. He also attributed depletion in sales to acute shortage of machines with the defendants in the year 2005. The plaintiff claimed that in the circumstances, the plaintiff was fully satisfied with the sale performance of the plaintiff who otherwise would have certainly raised objection which he did not and would not have continued the business exclusively with the plaintiff over such a long period which they did. He denied that the plaintiff's staff was trained in Japan at the expense of the defendants and reiterated his claim that all expenses in that regard were incurred by him. He also denied the allegation that he charged commission in excess of the agreed rate and submitted that commission varied from transaction to transaction and was paid accordingly and without any objection. He reiterated that the defendants never ever complained to him regarding his performance and claimed that the alleged complaint filed along with the counter affidavit (Annexure D-1) is a fictitious and fabricated document. He claimed that except during the last three years all advertisements and sales promotion expense was borne by him.
9. ' It is an admitted position that it was under and in terms of a sole distributorship agreement executed between the plaintiff on the one had and the defendant No,1, the manufacturer of Brother Industrial Sewing' Machines, and Japan Industrial Machine Corporation (JIMCO), the exporter of Brother Industrial Sewing Machines on the other, that the plaintiff was appointed the sole distributor for 'Brother Industrial Sewing Machines for the entire territory of Pakistan. The agreement took effect from 1-1-1984 for one year and is terms of clause 11 thereof, was renewable for the following one year by mutual written consent of the parties, three months before the expiry date. In terms of clause 5 of the agreement, the defendant No,1 and JIMCO, the exporter, agreed not to sell or offer for sale the Machines directly to any party organized within the territory of Pakistan. Clause 5. Also stipulated that in case, the defendant No,1 or JIMCO receives any business inquiry from any party organized within the territory of Pakistan regarding defendant No,1 's products, JIMCO shall inform the plaintiff about the inquiry for materializing such transaction. Correspondingly in terms of clause 9, the plaintiff agreed not to sell any competing product. The plaintiff in terms of the clause 10 of the agreement was also obliged to sell not less than 2000 sewing machines during the one year currency of the agreement and was also obliged to send monthly market and business reports to defendant No,1 and JIMCO at the end of every month. Clause 10 of the agreement stipulates that the agreement must not be changed, modified or amended during its life, without so being done in writing, duly signed by the said three parties. However, the parties were at liberty to alter the terms and conditions of the agreement at the time of its renewal, and in terms of Article 13, the parties were set at liberty to terminate the agreement anytime during its life, in the event of its non- performance or violation by any party, subsequently JIMCO was replaced by defendant No,2, who stepped into the shoes of JIMCO, as the exporter of defendant No,1 machines.
10. ' It is case of the plaintiff that in pursuance of the agreement and with a view to fulfil his obligation in terms thereof, the plaintiff incurred heavy expenditure in establishing his distribution network in Karachi, Lahore and Faisalabad, and setting up various showrooms and workshops. He claimed to have spent enormous amount towards sale promotion of Brother Industrial Sewing Machines through advertisement and by holding exhibitions and seminars. He has also claimed to have spent a substantial amount in training of his technical staff in Japan. It is claimed that it was only a result of relentless efforts made by the plaintiff over a period of 25 years since his appointment as the sole distributor, and huge expense .That he incurred towards marketing and sales promotion of the defendant's machines that the Brother brand was established in the Pakistani market and, thus the plaintiff acquired vested right in the continuation of the agency and the agency acquired the status of an agency coupled with interest and as such, the same attracts the prohibitions as contemplated by section 202 of the Contract Act and cannot therefore, be terminated by its makers or suppliers to the prejudice of the plaintiff's rights. It is also claimed by the plaintiff that during the entire period of 25 years since his appointment as the sole distributor and till filing of the suit, the defendant Nos.1 and 2, being fully satisfied with the performance of the plaintiff, never ever raised any objection or made any complaint to the plaintiff regarding the agency business.
11. However, despite the above and without any justification and in violation of the agreement, particularly, of clauses 3, 5, and 12 thereof, in the first instance, the representative of defendant No,2 during his stay in Pakistan in the month of September 2005 visited several potential customers in Lahore and Faisalabad along with the representative of M/s Salam and Company and to the surprise of the plaintiff, through letter dated 30-9-2005, the defendant No,2, whilst stating that the plaintiff will continue to be their distributor in future, informed him of appointment of M/s Salam and Company as another distributor for marketing their products, particularly their knitwear machines. In response, the plaintiff through E-mail dated 1-10-2005 strongly protested against such appointment, as being violative of the agreement, and called upon the defendant No,1 to withdraw the announcement/letter and to verify the fact in writing that the plaintiff is the sole distributor of Brother Industrial Sewing Machines for the entire territory of Pakistan as the aforesaid act of defendant No,1 is adversely affecting the plaintiff's sales. However, in response the Director and General Manager of the defendant No,1 through E-mail dated 2-10-2005, instead of withdrawing the letter or issuing the requisite clarification contended that the impugned letter is not violative of the agreement as the defendants have no intention to terminate the agreement in favour of the plaintiff. The defendant No,2, through another E-mail of the same date, explained to the plaintiff that they do not intend to terminate the plaintiffs distribution agency and only wanted to expend their market coverage to increase their sales and market share through additional distribution channel. The defendant No,1, however neither withdrew the letter dated 30-9-2005 nor issued the requisite clarification. The plaintiff, therefore, by E-mail dated 4-10-2005 reiterated its objection and demanded issuance of the clarification, however, since the request was not exceeded to, the plaintiff on 14-11-2005 sent a legal notice to defendants Nos.1 and 2, and through E-mail dated 30-11-2005, the Director and General Manager of defendant No,1 claimed that they have not yet appointed M/s Salam and Company as their distributor and contended that through their letter dated 30-11-2005 had only informed the plaintiff of their intention.
12. ' The learned counsel for the plaintiff submitted that on the one hand, the defendants claimed that they have not yet appointed M/s Salam and Company as their distributor and on the other, M/s Salam and Company was making, arrangement for organizing an exhibition of defendants' machines. He referred to a letter dated 15-11-2005 (Annexure-N to the plaint), whereby M/s Salam and Company has sought confirmation of booking of a board room and exhibition hall in a hotel for the purpose and submitted that the proposed seminars and exhibitions were cancelled only after the plaintiff has served the legal notice on defendants Nos.1 and 2. He also referred to the daily list of imports issued by Karachi Appraisement, Collectorate of Customs, to show import of Brother Industrial Sewing Machines by M/s Salam and Company from defendant No,2 during the months of November and December, 2005, the learned counsel submitted that as a result of the above, the plaintiff lost a number of potential customers who had in fact placed orders for purchase of Brother sewing machines but later on switched over to other brands on account of the confusion created regarding the distributorship of the plaintiff and because of their apprehensions regarding after sales service and future supplies of spare parts by the plaintiff. The learned counsel submitted that neither the defendants have terminated the plaintiff's agency nor could they do so, firstly because of the prohibition as contemplated by section 202 of the Contract Act as the distribution agency in question is of the nature of an agency coupled with interest and secondly neither has the plaintiff committed any breach of the agreement nor was any breach complained by the defendants during the long period of 25 years of their relationship with the plaintiff. However, despite the above legal and factual position, and in breach of the agreement not only by the representative of defendant No,1 visited various potential customers but the defendant No,1, supplied to the said concern their sewing machines, who made reservation of venues for organizing exhibition and seminars causing serious set back to the plaintiff's business. Regarding the sales target, the learned counsel submitted that during the period from 1981 to 1995 the plaintiff has, on the average, sold more than 3000 machines a year, however reduction in sale was thereafter caused due to the reasons firstly, that the defendants have increased the prices of their machines and the customers thus switched over to Chinese machines which were/are far cheaper and secondly for the reason that from the year 2002, the defendants stopped(production of automatic machines which constituted substantial part of the plaintiff's sale during the period of 1996 to 2002 and thirdly that during the period from 1987 to 7004 the defendant which they now say was excessive, but neither they raised any objection nor threatened discontinuation or termination of the agency and also continued to pay commission at different rates. He submitted that in the circumstances, the plaintiff has conducted himself illegally, in violation of the agreement and with mala fide and ulterior motive and requested that the plaintiffs' application may be granted, and the defendants may be restrained as prayed.
13. ' The learned counsel relied upon the following judgments:-
(1) Muhammad Aref. Effendi v. Egypt Air. (1980 SCMR 588), (2) Unreported Judgment of Honourable Supreme Court in M/s Beecham Group and another v. Universal Trading Corporation (Pvt.) Ltd. (PLD 1982 Karachi 796), (4) Zubair Ahmed v. Pakistan State Oil Co. Ltd. And another (PLD 1987 Karachi 112), and (5) M/s Universal Trading Corporation (Pvt.) Ltd. v. M/s Beecham Group PLC and another (1994 CLC 726).
14. ' On the other hand, Mr. Munawar Akhtar, the learned counsel for defendants Nos.l and 2, submitted that the sole distributorship agreement between the parties came into effect on 1-1-1984 for one year only and was renewable for the following one year by mutual written consent of the parties, three months before the expiry date, however, though it was never extended in writing but the relationship between the parties as envisaged therein continued even after the expiry of the one period on 1-1-1985, over the years and till 30-9-2005 when the defendant No,l sent the letter of even date to the plaintiff, informing him of appointment of M/s Salam and Company as a distributor for Brother Industrial Sewing Machines in Pakistan. The learned counsel submitted that the defendants were constrained to make such appointment as the plaintiff on the one hand has failed to meet the sales target that he was obliged to achieve and on the other, has charged commission at the exorbitant rate of 16% to 22% instead of the agreed rate of 4% through misrepresentation and by misleading the defendants. He referred to clause 10 of the agreement which requires the plaintiff to sale at least 2000 sets of sewing machines a year and submitted that admittedly the plaintiff has, since the year 2002 and up to the year 2005 failed to achieve the stipulated target, causing enormous loss to defendants Nos.l and 2. Although during the said period, as mentioned in the defendants' Counter affidavit, the 'Brother' distributors in the neighboring countries achieved far greater sales. He submitted that over the years defendants Nos.l and 2 have repeatedly complained to the plaintiff regarding his poor sales performance orally and through E-mail dated 4-5-2005, (Annexure D-l to the counter affidavit) not only complained to the plaintiff about his dissatisfactory sales performance and the resultant losses suffered by the defendants but also informed the plaintiff that the defendants are contemplating appointment of another agent and therefore, the plaintiff is not justified in saying that the defendants did not express their dissatisfaction over the plaintiff's failure to achieve the stipulated sales target, or that they were taken by surprise upon disclosure of appointment of another agent. He submitted that even through E-mail dated 13-9-2005, relied upon by the plaintiff, (Annexure-D of the plaint), the representative of the defendant No,l has disclosed to the plaintiff his plans to visit the customers in Lahore and Faisalabad along with the representative of M/s Salam and Company on 23rd and 24th September, 2005. The plaintiff however did not object to the same and in fact arranged aeroplane seats for the said visit. He submitted that it can be seen from the correspondence commencing with the letter dated 30-9-2005, that despite repeated insistence from the plaintiff, the defendants did not withdraw the letter dated 30-9-2005, whereby, as noted earlier, the defendant No,l informed the plaintiff of appointment of M/s Salam and Company as their distributor in addition to the plaintiff. He submitted that although in terms of the agreement no notice was required for the non-renewal of the agreement and as per clause 11 thereof, the agreement could be renewed only with the written consent of the parties, three months before its expiry date, however it was merely by way of courtesy that the defendants informed the plaintiff of appointment of M/s Salam and Company as their distributor in addition to the former, as in view of the poor sales performance and excessive commission extorted by the plaintiff, the defendants were not willing to renew the agreement after its expiry on 1-1-2006. He submitted that M/s Salam and Company were to act as distributor for the defendants' machines from 1-1-2006 and it was keeping in view the' above schedule that some machines were supplied to M/s. Salam and Company in November and December, 2005 for display in their showrooms which was to be opened on the commencement of their distributorship. Mr. Akhtar submitted that even otherwise the plaintiff agency stood revoked upon appointment of M/s Salam and Company, such appointment being inconsistent with the exclusive distributorship of the plaintiff. He further submitted that without prejudice to the defendants No, 1 and 2's contention that in the facts and circumstances of the case, such revocation/termination was neither unlawful, nor unjust or unfair, the only remedy available to the plaintiff in the circumstances, is by way of damages, and such relief has in fact been sought by the plaintiff through the present suit. The learned counsel denied that the agency in question was coupled with interest. He submitted that a contract of agency, is by its inherent nature, a personal contact and the relationship between the parties is of a fiduciary character which depends upon mutual confidence. He submitted that it has long been established that the Courts will not normally enforce the continuation of such a contract, whether directly by an order for specific performance or indirectly by injunction and the normal remedy for breach of contract by the principal is therefore an action for damages. The learned counsel relied on the following judgments:-
(1) Roomi Enterprises (Pvt.) Ltd. v. Stafford Miller Ltd and others (2005 CLD 1805), (2) West Pakistan Industrial Development Corporation, Karachi v. Aziz Qureshi (PLD 1973 SC 222), (3) M/s. Al-Mumtaz Agencies v. Millat Tractors Limited through Managing Director and another (2006 MLD 367), (4)
15. Huma Enterprises and 3 others v. S. Pir Ali Shah and others (1985 CLC. 1522), (5) Mubarak Ali v. Tula Khan alias Sadullah Khan (1985 SCMR 236), (6) Syed Nasir Ahmed Kazmi v. Syed Muhammad Zulfiqar Ali and others (PLD 1987 Karachi 261), (7) Puri Terminal Ltd. v. Government of Pakistan through Secretary, Ministry of Communications and Railways, Islamabad and 2 others (2004 SCMR 1092), (8) Government of Pakistan and 3 others v. Kamruddin Valika (1996 CLC 1086), (9) M/s Universal Business Equipment (Pvt.), Ltd v. M/s Kokusai Commerce Inc. And others (1995 MLD 384),
(10) M/s World Wide Trading Co. Ltd. v. Sanyo Electric Trading Co. Ltd. (PLD 1986 Karachi 234) (11)
16. M/s Farooq and Co. v. Federation of Pakistan and 3 others (1996 CLC 2030), (12) M/s Business Computing International (Pvt.) Ltd. v. IBM World Trade Corporation (1997 CLC 1903), and (13)
17. Philippine Airlines Inc. v. Paramount Aviation (Private) Limited and others (PLD 1999 Karachi 227).
18. ' The plaintiff has attempted to attribute to the agency in question, the status of an agency coupled with interest, and thus claimed a bar to its termination, as contemplated in terms of section 202 of the Contract Act, on the grounds that it was through his strenuous effort over period of twenty five years that the defendants products were introduced and established in Pakistan and that he has made substantial investment in providing the necessary infrastructure for the Agency and not establishing the sale and service network and various other sale promotion activities.
19. The concept of an 'agency coupled with interest' is a special concept. It envisages pre-existing interest of the agent in the subject-matter of the agency which is sought to be protected through creation of the agency an interest arising therefrom. The concept can be clearly comprehended through the following illustration given in section 202 of the Contract Act:-
(a) A gives authority to B to sell A's land. And to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.
(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to, repay himself, out of the price, the amount of his own advances, A cannot revoke this authority, nor is it terminated by his insanity or death.
20. ' The concept has been well illustrated at page 2036 of Halsbury's Law of England, IVth Edn., Volume-I in the following words:- "868. Authority coupled with interest.---Where the agency is created by deed, or for valuable consideration, and the authority is given to effectuate security or to security or to secure the interest of the agent, the authority cannot be revoked. Thus, if an agreement is entered into on a sufficient consideration whereby an authority is given for the purpose of securing some benefit to the donee of the authority, the authority is irrevocable on the ground that it is coupled with an interest. So, an authority to sell in consideration of forbearance to sue for previous advance, an authority to apply for share to be allotted on an underwriting agreement a commission being paid for the underwriting, and an authority to receive rents until the principal and interest of a loan have been paid off or to receive money from a third party in payment of a debt, have been held to be irrevocable. On the other hand, an authority is not irrevocable merely because the agent has a special property in or a lien upon goods to which the authority relates, the authority not being given for the purpose of securing the claims of the agent.'
21. ' A learned Division Bench of this Court has dealt with the scope and applicability of section 202 of the Contract Act, in similar circumstances as follows:- ' "The agreement executed between the parties specifically provides that the said agreements were for a fixed period of time, to come to an end on expiry of such period. The agreement further given rights of termination of it by giving notice of three months by either party to agreement.
22. Reliance has been placed upon section 202 of the Contract Act, which, in our opinion, has no application to the facts of the present case for more than one reason. The agreement dated 1-11- 1997 provided stipulation for the cancellation and termination of it. The phrase 'in the absence of any express contract' used in section 202 of the Contract Act has a great significance and even if any agency due to any reason creates an interest in the property which forms the subject-matter of agency; if agreement itself provided for termination and cancellation of such agreement of agency then section 202 of the Contract Act cannot be invoked. Section 205 of the Contract Act further stipulated that even where there is an agency for any period of time and if it is terminated before the expiry of the period for the loss suffered, if any, by him due to such termination by the principal or agent, as the case may be if such termination was without sufficient cause.'
23. ' In the case of M/s Business Comuting International (Pvt.) Ltd. v. IBM Trade Corporation (1997 CLC 1903), Sabihuddin Ahmed, C.J has dilated upon the concept of an agency coupled with interest in the context of section 202 of Contract Act in the following words:-- '9. In our legal system, this concept has been stated in section 202 of the Contract Act which reads as under:- ' 'Termination of agency where agent has an interest in subjectmatter.---Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot in the absence of an express contract, be terminated to the prejudice of such interest.'
24. ' It may be seen that the above section lays down an exception to the general rule. A contract of agency by its very nature is personal to the parties and revocable at their volition subject to agreed terms. It does not create eternal legal relations. Under this section in certain exceptional circumstances, such contracts can be considered irrevocable, the most common examples of such contracts are when the owner of certain goods appoints his creditor as agent to sell the goods and recover the amount advanced or where the owner of immovable property, having agreed to transfer such property appoints, before formal title is passed, the vendee as his agent to manage the property or effect the final transfer of title. In such cases interest in the property had already been created in favour of another who is appointed agent primarily to secure such interest. The principal is precluded from revoking the authority of such agent unless otherwise agreed, because the main interest in the property is not retained by him but passed on to the agent. This concept has been lucidly explained by Tanzil-ur-Rehman J., in the case of World Wide Trading Company v. Sanyo Trading Company (PLD 1986 Kar. 234) cited above to the following effect:-- The interest of the agent, forming subject-matter of the agency is to be some sort of an adverse nature qua the principal. So, according to the true constructing and scope of section 202 the agency can be said to be coupled with interest where the authority of an agent is given for the purpose of effectuating a security or of securing an interest of the agent. This can be inferred from document forming the basis of agency or from the course of dealings between the parties and from the other surrounding circumstances.
25. ' And further that ' 'I am unable to subscribe to the view that section 202 gets attracted merely because the agent has acquired substantial interest in the returns arising from the agency. Apart from the observations in the cases of World Wide Trading Co. (PLD 1986 Kar. 234) and Farooq and Co., (1996 CLC 2030) cited above, a comparison between sections 202 and 206 may clarify the legal position.
26. Under section 206 when the contract of agency does not contain a specific stipulation as to termination, it may be terminated upon reasonable notice. In the absence of such notice the damage resulting to one party must be made good by the other. If the principal terminates the agency without notice, he must compensate the agent. It obviously follows that the agent must be bearing an interest which must be compensated. For. Therefore it is not possible to say that whenever an agent has an interest in the continuance of an agency section 202 gets attracted, I am, therefore, clearly of the opinion that section 202 applies only where an agent has a special kind of interest i.e, pre-existing interest in the subject-matter of the agency which is sought to be protected through creation of the agency and not an interest arising therefrom.'
27. ' His lordship further held that substantial investment in the business of agency irrecoverable.
28. ' The contention that since the agent had invested colossal amount of funds in setting up of office and necessary infrastructure, the agency was irrevocable, was rejected by Mian Allah Nawaz, J in the case of M/s Farooq and Co. v. Federation of Pakistan and 3 other (1996 CLC 2030) in the following words:- ' As regards the contention that the petitioner had invested colossal amount of funds in setting up of office and necessary infrastructure and so the agency was irrevocable, suffice it to say that setting up of office and employment of necessary staff was essential for carrying on the business of the agency. These acts were not anterior to the contract. These were not consideration to any right of petitioner. Under no circumstances they can be considered as security for any interest of the agent under the agreement of agency. On this state of affairs, it is quite clear to me that the conditions postulated in section 202 of the Act are not attracted to the facts and circumstances of the case in hand. Reference be profitably made to Palani Vannan v. Krislmaswami Konar (AIR 1946 Madras 2036).
29. ' It may however, be appropriate to refer to the two judgments of Honourable Supreme Court relied upon by the learned counsel for the plaintiff in the case of M/s Beecham PLC and another v. M/s would not irrevocable make the agency Universal Trading Corporation and Muhammad Aref Effandi v. Egypt Air (1980 SCMR 588). In the first above judgment, the Honourable Supreme Court held as follows:- '11. Above points cannot be resolved without recording the evidence. Although, in the Leave Granting Order, it has been noted that the first impression is that 'Clause 12 is not controlled by clause 13' and it is an independent provision, we feel that even provisions 12 and 13 cannot be fairly construed without recording evidence of the parties. Closely related to the issue of interpretation of aforesaid two clauses is the equally important question of applicability of section 202 of the Contract Act to this case. Both are inter-linked and inseparable. If it is held that the provisions of above sections i.e, 182 to 202 are attracted in that eventuality the terms of the agreement cannot override the statutory provisions of law. Interim injunction granted to the respondent is operative since 16th August, 1993. There is no justification to interfere in said order at this stage. Looking to the circumstance of the case, we direct learned single Judge to decide the suit on merits within four
(4) months from receipt of this order.'
30. ' In the second judgment, it was observed by the Honourable Supreme Court that the case involved substantial question of law and facts namely:-- "(i) under what circumstance a contract of agency of the kind involved in this case could be cancelled or revoked by a principal;
(ii) whether section 202 of the Contract Act was applicable to the facts of this case and what is true construction and scope of that section;
(iii) whether the plaintiff/petitioner is entitled to continue the agency and or claim damages from the principal on the pleadings as made by him in his plaint and if so, to that ultimate relief he will be entitled on the facts and in the overall circumstances of the case;
(iv) whether the plaintiff/petitioner had not submitted his account to the principal in terms of the contract and whether he was justified in withholding the same on any legal ground; and
(v) whether the termination of contract in this case was lawful or not."
31. ' And then that "these are all substantial questions of law and fact and since they involve a careful scrutiny after leading of appropriate evidence, therefore, the High Court was not justified to refuse grant of a temporary injunction as prayed for at this stage. In the circumstances we are inclined to grant leave to appeal to the petitioner and converting this petition into an appeal accept the same and hold that this was a fit case in which a temporary injunction ought to have been granted on terms."
32. ' However, as can be seen from the plain reading of the aforesaid two judgments, in both the above judgments the Honourable Supreme Court has not laid down, as a general rule, that in every case in which a party alleges that agency agreement in his favour is coupled with interest, the Court is obliged to grant ad interim injunction.
33. In view of the foregoing it is now abundantly clear that the plaintiff cannot seek perpetuity of relationship on the ground that they have made huge investment or have incurred heavy expenditure, and moreso for the reason that the agreement itself provide for its termination as envisaged therein..
34. ' Having come to the conclusion that the agency in question is not an agency coupled with interest and therefore does not attract exceptional status of irrevocability as provided by section 202 of the Contract Act, and in view of section 201 of the Contract Act which provides for termination of an agency by the principal revoking his authority, an order restraining the defendant from revoking the agency and forcing them to continue with the relationship eternally would be unjustified.
35. ' A reference to the case of West Pakistan Industrial Development Corporation, Karachi v. Aziz Qureshi (1973 SCMR 555) may also be beneficial in the present context, where the Honourable Supreme Court held as follows:-.
36. ' Reading the three sections (203, 205 and 206 of the Contract Act) together it seems to me evident that if the principal without sufficient cause revokes the agency before the expiration of the period mentioned in the contract, he must make compensation to the agent. Furthermore, that unless reasonable notice is given of such revocation, the principal must make good the damage resulting to the agent.
37. ' However, the plaintiff's contention that since the defendants Nos.1 and 2 have not renewed the agency upon its expiry on 1-1-2006 and that even otherwise since upon appointment of M/s Salam and Company, which appointment is inconsistent with the agency agreement and the exclusivity of the plaintiff's agency, the agency stands revoked, is wholly misconceived and untenable, as contrary to the defendants claim not only the defendant No,1 in their letter dated 30-11-2005 and all subsequent letters/ E-mails have assured the plaintiff that the purported appointment of M/s Salam and Company would not amount to termination of his distributorship, and have through E- mail dated 2-10-2005 further assured the plaintiff that they have no intention at all to terminate the plaintiff's distributorship agreement, but ultimately, in response to the ,plaintiff's legal notice, through their E-mail dated 30-11-2005 informed the plaintiff that they have not appointed M/s Salam and Company as their distributor, and has no dealing with the said concern. Moreover, under cover of their letter dated 6-2-2006 (annexure A-1 to the plaintiff's affidavit-in-rejoinder).
38. They have sent a memorandum /agreement to the plaintiff for his signature which contained the following text:-- ' Memorandum ' Rajwani Trading Company and Brother (Brother Industries Ltd. And Brother International Singapore PTE Ltd.) have now agreed as follows in regard to the legal Issue of the Agency/Distributorship of Brother brand Industrial sewing machines in Pakistani market.
(1) Brother respect the Sole Agency/Exclusivity agreement (as here attached) and its contents although Brother don't have company policy to grant their sole exclusive to any of their agents in the world market in their business transactions.
(2) Brother agree to withdraw their announcement letter dated 30th September, 2005 and agree that they do not appoint any other agent as Brother distributor based on the agreement as above 1.
(3) Brother agree that they don't export any Brother brand industrial sewing machines to Pakistan 'without prior consent with Rajwani Agency based on the agreement as above 1.
(4) Rajwani, Trading Company appreciate Brother's undertaking at . 1 to 3 and \ confirm that they withdraw their legal suit whereby Brother and Rajwani Trading Company settle the matter dug time amicably and both parties agree that they do not take any further action from their respective side.
(5) Any further issues which are not covered by this memorandum are to be discussed and settled separately between Brother and Rajwani Trading Company in good faith.
39. ' On behalf of Brother On behalf of Rajwani Trading Company Dated: Dated: Witness:(1) Witness:(2)
40. ' Although the defendant filed their sur-rejoinder to the plaintiff's rejoinder, however they did not deny sending the above memorandum to the plaintiff for his signature. As claimed by the plaintiff and have merely contended that "this draft memorandum was sent during without prejudice negotiations which had been started at the plaintiff's persistent request". However, as can be seen neither the letter dated 6-2-2006 nor the memorandum contains any such endorsement.
41. ' From the foregoing it is now clear that neither the defendants Nos.1 and 2 terminated/revoked the agency as is now being claimed by them nor did they notify to the plaintiff that they shall not renew the agreement. On the contrary not only the defendant No,1 assured the plaintiff that he shall continue to be their distributor, but also sent to him a memorandum/agreement to re-enforce his sole distributorship as late as on 6-2-2006. It is indeed true that in terms of the agreement its initial period of currency expired on 1-1-2005, and in terms of clause 11 thereof, was renewable with the written consent of the parties from year to year, however it is significant to note that, although upon the expiry of its initial period on 1-1-2005, there has been no formal renewal but the parties have admittedly continued their business relationship as envisaged in the agreement; and it would therefore be preposterous to claim that the relationship under the agreement has come to an end, for want of a written renewal, and moreso in the face of the aforesaid memorandum. In the circumstances the defendants Nos.1 and 2 cannot be allowed to sale, export or supply "Brother" sewing machines to, or through any party in Pakistan other than the plaintiff, as the same would be in clear violation of clause 5 of agreement, and are therefore restrained accordingly.
42. ' However, since I have held that the agency in question is not an agency coupled with interest and does not attract the prohibition contemplated under section 202 of the Contract Act. I would refrain from restraining the defendant Nos.1 and 2 from terminating the agency, but with a caution that such would, in the facts and circumstances of the case, require a four months advance notice and shall be without prejudice to the plaintiff right to seek their remedy against the same, as provided inter alia, under the provisions of section 205 of the Contract Act, the application stands disposed of in the foregoing terms.