MUSHIR ALAM, J.---Appellants have impugned the judgment and decree dated 10-3-2006, whereby the Suit No.B-55 of 2000 filed by the appellant against the respondent-Bank, claiming damages in sum of Rs.100 millions with interest, was dismissed.
2. Brief facts giving rise to the instant appeal appears to be that the appellant originally held American Express Bank Credit Card with instructions to collect all charges from his foreign exchange Dollar account maintained by him, in the very bank. Credit card business ~ of the American Expresse Bank was franchised to the respondent Union Bank Limited since 1st July, 2001.
Consequently the respondent Union Bank Ltd. Issued American Express Gold Card' to the appellants. The appellant also authorized 'the respondent-Bank to collect the renewal fee and amount due from the account of appellant maintained with the American Express Bank and the later Bank was directed to pay the amount due without any question.
3. In summer, (June, 2002) appellants planed to spend their vacation abroad. Before proceeding abroad, appellant No.1 obtained confirmation from the American Express Bank as to the balance in their account maintained with them and validity of the credit card issued by the respondent-Bank to avoid any untoward incidents. Appellant was informed that they have a balance of US$.7000.00 in American Express Bank. It was claimed that an officer of the American Express Bank, on telephone enquired from the respondent Union Bank and confirmed the validity of the cards.
4. It is the case of the appellant that throughout the journey abroad theircredit cards were not accepted for payment each time it were presented, they not only felt greatly insulted, disgraced, defamed and humiliated, as if they are using stolen card. Appellant, claimed to have suffered mental torture and agony. Hence, the suit for damages was filed.
5. The respondent-Bank filed the written statement and denied the entire allegations. Essentially the f case of respondent-Bank appears to be that the appellant only contacted the American Express Bank and never called respondent's 24-hour customer service, of which they were repeatedly notified, firstly when the franchise arrangement was made and when the card was issued. It was claimed that the card was not a credit card but a charge card. It was deactivated on account of non-payment of renewal fee in time, therefore, the appellant is to blame themselves or to their agent, the American Express Bank, who did not pay the renewal charges in time despite demand having being raised through invoice.
6. Out of the pleadings of the parties following issues were framed:--
(i) What damages are claimed by the plaintiff?
(ii) Whether the defendant is liable for damages?
(iii) Relief?
7. The appellant No.1 beside himself examined one witness Raza Hussain Bundey Ali of American Express Bank. The respondent-Bank examined its Regional Collection Manager, Rafi Muhammad, Card Supervisor Umer Qureshi and one its Asif I qbal.
8. Learned Single Judge decided the Issues Nos.1 and 2 together. The learned Single Judge heavily relied on illustration (n) to section 73 of the Contract Act; which runs as follows:-- "73. When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
When an obligation resembling those, created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Illustrations (a)
(b)
(c) ...
(n) A contracts to pay a sum of money to B on a day specified. A does not pay the money on the day. B in consequence of not receiving the money on that day is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment.
9. Learned Judge in chambers proceeded to observe:- "13. Principle for ascertaining the quantum of general and special damages is laid down in the leading case of Hadley v. Baxendale (1854) 9 Exch. 341 which clearly provides the distinction between the two. The provisions of section 73 of the Contract Act 1872 are not much different for purpose of practical application. Claim for damages was rejected as being too remote in the case of Banco de Portugal v. Waterlow and Sons Ltd. (1932) A.C. 452 and again in the case of Commell Lairds & Co. v. Manganese Bronze and Brass Co., (1993) 2 K.B.
141. General damages naturally arising according to the usual course of things form the breach of contract are recoverable in the ordinary circumstances. Special damages are awarded in cases, as may reasonably, be supposed to have been in contemplation of both parties at the time of contract are recoverable in the ordinary circumstances: Special damages are awarded in cases, as may reasonably, be supposed to have been in contemplation of both parties at the time of contract. The law does not record consequential damages arising of delay in respect of money as one in the case. Of Graham v. Cambell (1877)7 Ch. D.494 and Urquhart Lindsay & Co. v. Eastern Bank Ltd., (1922). 1 K.B.
318."
10. Dilating on the implication of illustration (n) to section 73 ibid, learned Single Judge dilated in detail on phrase `totally ruined' as used in the illustration (n) ibid concluded "law expressly.Bars award of damages in such eventually". Operative part of the finding recorded in paragraph 19 of the impugned judgment, reads as follows:-- '19. In the light of the above my finding on the above issues I have no alternative but to observe that although the plaintiffs suffered mental torture, agony and humiliation but the claim of the plaintiffs for damages is hit by the provisions of section 73 of the Contract Act as elaborated in illustration 'n' thereto. However, as the breach of contract is established, plaintiffs are entitled to recovery of amount paid by them to the defendant for availing the facility. The issues are answered, accordingly. Consequently, suit was decreed to the extent of US$ 175 only being the renewal charges or equivalent amount with costs.
11. Mr. Iqbal Kazi learned counsel for the appellant has impugned the findings on two folds ground firstly that leave to defend or the authorized officer as per authority conferred in the Power of Attorney did not file the written statement. According to him, defect was circumvented, by filing an application seeking permission get the signatures .Of another officer through C.M.A. No.3106 of 2003, which application was allowed and another attorney was also permitted to sign the written statement.
12. Syed Saeeduddin Nasir, learned counsel for the respondent contended that non-signing of the written statement by the second attorney was just a (procedural lapse and does not affect the merits of the case. Court generally allows rectification of such flaw unless grave prejduice shown to be caused to the opposite party. We do not wish to dilate on the issue much, as such controversy has been set at rest in large number of cases. (one may refer to Ismail and others v. Mst. Razia Begum and others 1981 SCM R 687 and Ghulam Mohiud-Din v. Noor Dad 1988 PLD 42 SC (AJ&K). It is therefore, clear that even where the pleading are not signed, it cannot be rejected on such hypertechnical ground, such lapse could be remedied by permitting the party to sign it. In instant case, the moment such lapse or objection was raised, it was instantly remedied and Court below rightly exercised the discretion and allowed the other attorney of the respondent-Bank to sign the written statement in red ink. No prejudice is shown to have been caused to the appellant. No exception on this hyper technical ground could be entertained.
13. Now adverting to brass task as to whether the respondent-Bank is liable for any damages or consequences for the non-acceptance of the card issued by it when presented abroad at different places for either services or goods.
14. Credit, charge and debit card in present day is a common and convenient device to acquire goods, services and withdrawal of cash on credit locally and internationally. It has become synonymous to cash and international currency. In order to appreciate the contentions of both the learned counsel, it would be advantageous to understand the nature and implication of transaction arising out of issue and use of credit card.
15. Credit card is defined in the Blacks Law Dictionary (sixth edition) as "Any card, plate, or other like credit device existing for the purposes of obtaining money, property, labour or service on card. The term does not include a note, cheque, draft, money order or other like negotiable instrument.
Federal and often State statutes regulate the issuance and use of credit cards". On the web also numerous definitions are available some of which are as follows; A plastic credit card bearing an account number assigned to a card holder with a credit limit that can be used for purchase of goods and service and to obtain cash disbursement on credit, for which a card holder is subsequently billed by an issuer for repayment of the credit extended at once or on an instalment basis. (www.Lstamericancardservice.Com/glossary and www.
Merchantseek.Com/glossary).
"A credit card system is a type of retail transaction settlement and credit system named after the small plastic and issued to user of the system. A credit card is different from a debit card in that the credit card issuer lends the customer money rather . Than having the money removed from an account."
Debit card is defined as "A plastic card used to initiate a debit transaction. In general these 'transactions are used primarily to purchase goods and services and to obtain cash for which the card holder assets account is debited by the issuer" en.Wikipedia.Org/wiki/credit_card. A credit card is a system of payment named after the small plastic card issued to user of the system. A credit card is different from a debit card in that it does not remove money from the users account after every transaction. In the case of credit card, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is used by the public to describe credit card), which requires the balance to be paid in full each month. In contrast, credit card allows the consumer to revolve their balance, at the cost. (htp//en.Wikipedia/wiki/crclit-card).
From 'above it could be concluded that a credit card is a device usually rectangular plastic card with magnetic strip or Chip or other security feature generally issued by a banker to its customer for repetitive use to procure merchandise, service or withdraw money on credit to the extent of authorized limit. Card is issued to the customer against reciprocal arrangement to reimburse the issuer either in lump sum on each use, periodically or in instalments as and against such charges, renewal fee, interest rate or line of credit as may be agreed between them. It is convenient method of payment as an alternative to conventional mode like cash, cheque, pay order, demand draft etc.
16. Once a card is issued may it be credit, charge or debit card, three separate contracts come into being. Firstly between the issuer and the cardholder under which the issuer agrees to make payment to the retailer of goods, service S or cash dispensers (Automated Teller Machine abbreviated as ATM), which a card holder acquires, avails or withdraws because of use of the card.
Reciprocally the cardholder agrees to reimburse the issuer for payment or liability incurred by the issuer to the merchant of goods, service or cash dispenser because of use of the card. Secondly, by accepting card the retailer of goods, service or cash dispenser enters into agreement with the card holder to provide service, goods or cash against the card. Thirdly, between the retailer of goods, service or cash teller, and the card issuer under which, the retailer of goods, service or cash teller agrees to honour the card.
[see Re Charge Card Service Ltd. 1986 referred to in Credit Card and the Law by Peter E Sayer (1988 publication) at page 8.
17. Once card is issued and as long as it is valid the issuer enters into a contract to provide financial cover and service against the use of the card of the services or goods availed by the card holder. In the event, a valid card is denied, the card issuer becomes liable for breach of contract to provide cover for availing goods or service. In case the retailer of goods or service declines to honour the valid card, he may not only be exposed to damages but also he be liable to reimburse loss as may be claimed and recovered by the card holder from the issuer.
18. Although, dishonour of card has close semblance to, dishonour of a negotiable instrument, parameters to claim compensation in respect of negotiable instruments are circumscribed in section 117 of the Negotiable Instruments Act. As noted in the definition above, credit or other similar card could not be equated with negotiable instruments, therefore, preasure of damages as prescribed under section 117 of the Negotiable Instruments Act cannot be called in aid. In absence of any special enactment defining rights and obligations of issuer and card holder breach of obligations arising out 'of use of card would be regulated by general law of damages contained in section 73 of the Contract Act.
19. Under circumstances in our opinion breach of any of the contract, either between the cardholder and or retailer, cardholder and issuer and or between the issuer and the retailer and or all of three in absence of any special enactment, would be governed by section 73 of the Contract Act.
20. Learned Judge in chamber relying on the illustration (n) to section 73 of the Contract Act, rejected the claim of the appellant. Illustration to a section.
20-A. It may be observed that illustration (n) ibid, does not H override the rule contained in section 73 of the Contract Act, which lays down that when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby:- "which naturally arose in the usual course of things from such breach; or "which the parties knew, when they made the contract, to be likely to result from the breach of it.
(one may refer to JP Singh Law of Damages and Compensation 2nd edition 2003 Chapter 13 Particular Contracts at pages 552 to 554)."
21. Generally failure to pay money may not entail any thing more than interest, however litmus test prescribed per section 73 ibid is whether the loss was within the contemplation of the parties or not.
22. In case a valid card is dishonoured, the cardholder may claim expenses incurred to bail him out of the situation, including cost of borrowing, if any. Cost of protesting, consequential fall out, expenses in communication, because the financial consequences, which may occur, in the particular circumstances, would be within the contemplation of the parties, at the time when the contract is made between the issuer and the cardholder.
23. As noted above, use of credit and other like cards has become widespread and common. It has virtually substituted cash and other conventional modes of payment, increasing dependence on such type of card carries with it concomitant conveniences and inconveniences. Controversies arising out of blockage, freezing, misuse, excessive billing, over charging, dishonouring of cards are but few instances that are subject matter of litigation worldwide and Pakistan is no exception.
There is no reason why damages or injury that may arise out of breach of agreement to honour the card may not be considered as naturally arising according to the usual course of things form the breach of contract and thus could be recoverable in the ordinary circumstances. Likewise, a party to contact of credit card may also recover special damages provided a case is made out. Special damages are awarded in cases, as may reasonably be supposed to have been in contemplation of both parties at the time of contract. Burden is on the person alleging loss, damages or injury.
24. Unlike other countries (Consumer Credit Act, 1974 in United Kingdom) relationship, between the card holder, card issuer and the retailer of service or goods is not yet formally regulated in Pakistan under any statute. However, the State Bank of Pakistan has issued Prudential Regulations for Consumer Financing (2003). Regulations 0-1 to 0-5 and Regulations R-7 to R-8, deal with credit card. The embryonic Prudential Regulations hardly provide sufficient matrix to deal with complex situation that may arise out of issuance and use and dishonour of such cards, it is high time to legislate on the subject. Until legislation is made, State Bank may at least consider framing more comprehensive regulations regulating rights and obligations inter se the card holders, issuers and goods or service providers.
25. In the light of the above, examining the case of the appellant, it appears that the appellants/plaintiffs were issued American Express Card under a franchise agreement by the Union Bank Ltd. In instant appeal, point for consideration is whether the card was validly blocked for non-payment of Annual charges?
26. Appellant planned to spend their summer vacation falling in June, 2002 in Australia, on verifying from Director operation American Express Bank, that a sum of US$ 7000.00 is lying in their account, with the said Bank. Appellant claimed that they obtained confirmation as to validity of the card issued by the respondent from officer of the American Express Bank who telephonically was informed by the respondent-Bank, that their card is valid, they proceeded abroad. It is the case of ' the appellant, card was dishonoured each time it was presented.
27. In cross-examination the appellant, admitted that he "received charged card with Exh.4, and the "defendant (respondent herein) was withdrawing all such fee from my account, which is maintained with the American Express Bank pursuant to authority issued by me in their favour". He further admitted that "I have never paid any renewal fee towards the credit cards issued by the defendant. Since day one the defendant was withdrawing all such fee from my account which is maintained with the American Express Bank pursuant to letter of authority issued by me in their favour before I was issued credit' cards. I have already produced Exh.13 which is statement of account, reflecting that the defendant has withdrawn twice annual fee of credit card from my account in American Express Bank on the basis of letter of authority." He further declined the suggestion "that charge card in question was declined on account of default in payment of annual fee of US$ 175 to the defendant".
Appellant produced letter dated 8-8-2002 addressed to him by the Union Bank (Exh.12), bill for L the card issued in April, 2002 was paid by the American Express Bank on 13th and 17th June, 2002 (Exh.13), two months past demand invoice.
28. There is nothing on record to show that the appellant personally contacted the respondent- Bank to inquire as to validity or otherwise of the card. Such conduct is against the clear instruction contained in the letters addressed to and produced by the appellant Exhs.3 and 4. Even the appellant contacted the branches of American Express Bank throughout his travel, this is clearly in negation to the directions given in the instructions issued by the respondent-Bank. Even the witness of the appellant an officer of the American Express Bank Raza Hussain Bundae All admitted in cross-examination, "It is correct that the Union Banks' Credit Card is not linked with the accounts being maintained with American Express Bank". He further admitted, "The account maintained with the American Express Bank is not a security for the credit card issued by the respondent-Bank." He also produced the Statement of account as Exh.19, it also reflect that the renewal charges were debited from account on 5th and 14th June, 2002 respectively.
29. Defendant Union Bank, examined its Regional Collection Manager, Rafi Muhammad Khan, who produced invoice dated 9th April, 2002, 8th May, 2002 and 10th June, 2002 respectively claiming Annual fees US$ 100.00 for the main card and US$ 75 for the supplementary card (Exhs.24, 25 and 26). Debit invoice issued to the American Express Bank dated 22nd May, 2002 and 7th June, 2002 for US$ 175 each, (Exhs.29 and 30 respectively).
30. Another witness of the respondent Union Bank Sharukh Lali in reply to a question deposed "I see Exh.29, it is correct that the same is the letter of the defendant Bank to American Express Bank for direct debit of US$ 175 from the account of the plaintiff. This amount was not remitted as requested in this letter. The amount was received afterward from American Express Bank. I see Exh.3, entry against Adriana Shaikh is in respect of the same card under direct debit instructions through American Express Bank. It is correct that this amount was received from American Express Bank.
Exh.30 is a reminder when payment was not received as requested under Exh.29.
31, Another witness Asif Iqbal was also examined. It is noted that the plaintiff did not question any of the witness of the defendant, who stated in their respective affidavit in evidence that the appellant never got in touch with any authorized officer of the respondent bank dealing with the American Express Cards (para.9 of the affidavit in evidence of all the three witnesses.)
32. It has also come on record that the respondent-Bank as instructed by the appellant also claimed annual renewal fee from the American Express Bank through invoice demand dated 22-5- 2002 (Exh.29) and 7-6-2002 (Exh.30). The appellant did not dispute that the annual fee claimed and paid by the American Express Bank 60 days after due date. Prima facie the American Express Bank delayed payment past 60 days as is evident from the statement of account produced (Exh.19). Syed Saeeduddin Nasir is right in urging that the appellant has knocked the wrong door, American Express Bank neglected to make the payment on due date to the respondent-Bank when demanded. From the facts as unveiled it appears that fault if any lies with the American Express Bank, which did not debit the account of the appellant to pay annual fee within due date. Appellant in their wisdom and luck chose not to array the American Express Bank as a party to the proceedings, which Bank, in our opinion was necessary party to the claim in suit.
33. Even otherwise appellants admittedly were holding charge cards, which require the balance to be paid in full each month unlike credit card, which allows the consumer to revolve their balance, at the cost. Statement of accounts have come on record that shows renewal fee claimed in April and then in May, 2002 was not paid in time, therefore, appellant N cannot claim performance of agreement to provide financial cover or services without performing reciprocal obligation on the part of appellant to pay the renewal fee in time. Where a person himself fails to perform his part of the obligation cannot compel reciprocating party to discharge its part of duty. In view of the foregoing discussion, we do not find any merit, in the appeal; it is accordingly dismissed.