JAWWAD S. KHAWAJA, J.---This second appeal impugns the appellate judgment and decree passed by the learned Additional District Judge, Lahore dated 2-5-2006 and also a part of the decree of the trial Court dated 4-7-1996, whereby certain reliefs claimed by the appellant-plaintiff were disallowed to it.
2. Although the record of the case is extensive, the dispute in essence, between the parties is straightforward. The appellant-plaintiff, namely, Muhammad Amin Brothers Limited submitted a bid in response to a tender for sale of Basmati Special Rice advertised by the respondent- defendant, namely, Pakistan Agricultural Storage and Services Corporation Limited. The appellant's bid was accepted vide letter (Exh.P.3) dated 26-6-1991. The terms of the contract, which came into existence between the parties, are accepted by both sides as those reflected in two documents (Exh.P2 and Exh.P.3). It is also not in dispute between the parties that the appellant-plaintiff deposited the requisite security of Rs.6,06,260 and an excess amount of Rs.2,42,604 in addition to the security amount.
3. The contract was for the sale of 1409.7 metric tons of Basmati Special Rice for a total consideration of Rs. 1,21,25,185. The description of the rice has relevance in the case for reasons considered below. The appellant-plaintiff lifted 35 metric tons out of the agreed quantity. However, it had objections as to the quality of the rice. More specifically, through two letters (Exh.P.8 and Exh.P.9) dated 16th and 19th of September, 1991, the appellant conveyed to the respondent that the rice was not Basmati Special Rice as contracted, and, therefore, it did not meet the description set out in the contract between the parties. The respondent-defendant, however, terminated the contract on 4-11-1991, on the ground that the sale had been made on "as is where is" basis and, therefore, the respondent was not obliged to meet the description of the rice given in the contract.
4. In order to appreciate the controversy, which arose between the parties, it will be useful to reproduce the letter (Exh.P.3) dated 26-6-1991 addressed by the respondent to the appellant- plaintiff:- "No. PASSCO /DGMC /91/ 7396 dated: -26-6-1991 Messrs Muhammad Amin & Brothers (Pvt.) Ltd, Haji Adam Chambers, (2nd Floor Altaf Hussain Road, P.O. Box No.6067, Karachi-74000.
Subject:- Sale of Basmati Special Rice Ref. Your offer dated: -18-6-1991.
The undersigned is pleased to inform you that your offer for purchase of Basmati Special Rice lyi ig at following Rice Mills/Godowns have been approved on the following terms and conditions:-- Sr.No. Name of Rice Mill/Godownty. In MT without BagQ Rate Per 40 Kg.
Without Bag
1. PASCO Godowns Depalpur564 Rs.352
2. Iqbal Rice Mill 204.400 Rs.351
3. Phalia Rice Mill 641 Rs.335 1409.400 Lifting: The entire stock of Basmati Special Rice shall be lifted within 30 days from the date of issue of sale order. No further extension will be granted. Payment: The cost of Basmati Special Rice will be deposited at Zonal Office before lifting the stock in shape of Bank Draft/Pay Order in the name of PASSCO.
The stocks of Basmati Special Rice will be delivered on "As is where is" basis. You are directed to take the delivery of stock strictly within stipulated period otherwise security amount deposited by you shall be forfeited without further notice and stock will be disposed off at your risk and cost."
(Underlining by Court)
5. The appellant, within ten days of the termination of the contract, filed a civil suit seeking specific performance of the contract and also praying for damages and return of the security amount and the sum deposited in excess of the security. The respondent resisted the suit, inter alia, on the ground, noted above, that the sale had been made on, "as is where is" basis. Based on the pleadings, the following issues were framed by the learned trial Court:-- "(1) Whether the suit is not maintainable? OPD
(2) Whether the plaintiff has no cause of action? OPD.
(3) Whether the suit is hit by the provisions of section 21 clauses C & D as well as section 56 of Specific Relief Act? OPD
(4) Whether plaintiff is estopped by his own conduct bring the present suit? OPD
(5) Whether the suit has not been properly instituted and filed and is not maintainable? Cm
(6) Whether plaintiff is entitled to recover Rs.13,67,870 as prayed in the plaint and also Rs.8,48,764 retained by the defendant towards security/earnest money/excess amount? OPP.
(7) Relief."
6. The learned trial Court allowed the suit of the appellant partially holding that it was entitled to refund of the entire security amounting to Rs.6,06,260 and the excess amount of Rs.2,42,604 deposited by it with the respondent-defendant with mark-up. The other reliefs claimed by the appellant for specific performance and for payment of damages were disallowed. The respondent, feeling aggrieved of the decree of the learned trial Court, filed an appeal. The appellant filed cross- objections to the appeal. The learned appellate Court has dismissed the cross-objections, and allowed the appeal of the respondent. As a consequence, the suit of the appellant-plaintiff has been dismissed in its entirety.
7. The reasons, which has prevailed with the learned appellate Court for its decision, is that the sale was on "as is where is" basis and, therefore, the appellant was not entitled to claim delivery of rice by description. Learned counsel for the appellant has contended that this reasoning is contrary to the provisions of section 15 of the Sale of Goods Act, which stipulates as under:-- "15. Sale by description: Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description."
8. Learned counsel for the appellant has also argued that the reliance of the learned appellate Court on section 16 of the Sale of Goods Act was misconceived because the term "as is where is basis" cannot have the effect of overriding the description of goods agreed between the parties. In support of his contentions, learned counsel for the appellant relied on the cases titled Paramount Corporation, Karachi v. Haji Moosa Haji Oomar, Karachi PLD 1954 Sindh 32 and Messrs Fairland Export Syndicate v. Messrs Bengal Oil Mills Ltd., Karachi PLD 1970 Karachi 125.
9. Learned counsel for the respondent, on the other hand, reiterated the stance taken in the written statement that the term "as is where is basis" was an overriding stipulation in the contract.
According to him, this term meant that despite the description of the contracted goods viz., Basmati Special Rice, the respondent-defendant could deliver rice of any description and even of quality inferior to Basmati Special Rice.
10. The controversy between the parties, based on the above factual narration, thus stands narrowed down to the interpretation of the contract between them and the interpretation of the Sale of Goods Act. At this point, it may be noted that even according to learned counsel for the respondent there are three qualities of Basmati Rice, namely, Basmati Special Rice, Fair Average Quality (FAQ) and Total Both parties as part of their normal business, deal in rice and, therefore, it must be taken that they are fully aware of the quality which is known as Basmati Special Rice and which was repeatedly referred to in their contract.
11. The case of the appellant as set out in its plaint and in the correspondence addressed by it to the respondent has always been that the respondent had not made Basmati Special Rice available for lifting by the appellant. In order to prove this assertion made in the plaint, the appellant produced on record a number of letters. The first of these was Exh.P.8 dated 16-9-1991. In this letter the appellant pointed out that the rice being offered by the respondent was not Basmati Special Rice and also that the quantity which had been lifted by the appellant had to be upgraded to the requisite quality by the appellant after incurring heavy expense. Subsequent letters including Exh.P.9 also reiterated the fact that the rice offered by the respondent for lifting was not Basmati Special Rice. The appellant also made repeated offers to the respondent for joint inspection and survey of the contracted rice with the object of substantiating its contention that the rice made available by the respondent was not Basmati Special Rice. This offer apparently was not accepted because there is no evidence on record of any joint inspection.
12. The response given by the respondent to the appellant's protestations was confined to its assertion that the "sale of the Basmati Special Rice was offered on as is where is basis". This stance also represents the defence taken by the respondent in its written statement,. Paragraph 10 whereof in relevant part, is in the following words:-- "The rice sold by the defendant were (sic) on basis "as is where is" stipulation and no question of its being either below standard could be or is entertainable or relevant".
Here it may be noted that it was not the respondent's case that the rice being offered by it to the appellant was Basmati Special Rice. The implication of the defence urged in paragraph 10, in effect, was that the appellant could have no grievance if rice of an inferior quality was supplied to it because the contract was made on, "as is where is" basis. The appellant on the other hand examined Muhammad Afzal (P.W.2) and Shabbir Abbas (P.W.6) who testified that the rice. Which was offered by the respondent was not Basmati Special Rice.
13. The question which, therefore, requires consideration is as to whether or not the respondent had committed breach of contract and was, therefore, liable to pay the amount claimed by the appellant. There is much merit in the submission of learned counsel for the appellant that the term "as is where is" was applicable only to the stipulation as to delivery of the rice and it did not in any manner absolve the respondent from its obligation to supply the agreed quality, namely, Basmati Special Rice. At this point reference may once again be made to the terms of the contract (Exh.P.3) which have been reproduced above. The term Basmati Special Rice has been used as many as six times in the document leaving no room for doubt that the ' contracted rice was being sold by description. In the last paragraph of -Exh.p.3, the term "as is where is" has been used but only in relation to delivery. The thing, which had to be delivered, remained Basmati Special Rice. It is quite, evident from the wording employed in the contract that the respondent by adopting the term "as is where is" only excluded from its obligations, the duty to put the agreed quantity of rice in a deliverable state.
14. Section 36 of the Sale of Goods Act provides for rules of delivery in the absence of contracted stipulations. Subsection (5) of section 36 provides that "unless otherwise agreed, the expenses of and incidental to putting the goods into a, deliverable state shall be borne by the seller". Learned counsel for the appellant argued, in my opinion rightly, that the only effect of the term "as is where is" used in the contract (Exh.P.3) was to shift the burden of section 36(5) ibid onto the appellant as purchaser. There is no warrant whatsoever for construing the term "as is where is" as overriding the clear and unambiguous obligation of the respondent to supply Basmati Special Rice. In this view of the matter, I do not need to consider the argument advanced on behalf of the appellant that the principle of contra proferentum be applied for interpreting the contract (Exh.p.3) which was drafted by the respondent. This principle can be resorted to if there is an ambiguity which makes it difficult to ascertain the intention of the contracting parties. For reasons which have been discussed above, I am not faced with any such difficulty.
15. However, to press his argument noted above learned counsel for the respondent referred to the case titled United Bank Ltd. v. Messrs Al-Noor Enterprises and another 2006 CLC 822, wherein the term "as is where is basis" was considered. The learned Court while deciding the precedent case, referred to a number of definitions of the term appearing in various dictionaries. The very fact that there are so many different interpretations of the term is sufficient to show that the meaning given to it will have to be determined on the basis of the context in which the term is used. It is not capable of one inflexible meaning. In the present case, I am clear that the term applies only to delivery and not to the description or quality of the rice.
16. Learned counsel for the respondent then argued that even if the respondent was under obligation to deliver Basmati Special Rice, the appellant could have no grievance because it had inspected the rice and therefore, could not be allowed to question its quality. This argument was advanced on the basis of section 16 subsection (2) of Sale of Goods Act which provides as under:-- "16. Implied conditions as to quality of fitness: Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:-- (1)
(2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed."
Before considering the law I will advert to the available evidence.
17. The evidence led by the appellant , both oral and documentary is to the effect that the contracted rice could not be inspected by it. In its letter (Exh.P.8) dated 16-9-1991 the appellant stated that "the quality of bags stocked outside is very different from the stocks inside and varies from row to row". 'Even the witnesses examined by the respondent have not testified that the appellant's representatives inspected the entire quantity of contracted rice. The testimony of the D.Ws. Is to the effect that the appellant's representatives had inspected various godowns in which the contracted rice had been stored. The question as to whether or not the appellant had inspected the rice is, however, wholly irrelevant in the context of the present case. Even if the appellant had inspected each and every bag of contracted rice, it could have consciously chosen not to lift the remaining unlifted quantity of rice as its quality did not meet the description given in the contract. The appellant cannot be faulted for not lifting rice which did not meet the description given in the contract. In the circumstances, I do not see how section 16(2) of the Sale of Goods Act can benefit the respondent.
18. Learned counsel for the respondent also referred to the case titled Thornett and Fehr v. Beers and Son (1919) 1 KB 486 to argue that where a buyer had been given an opportunity of inspecting the goods to be sold, he could not subsequently object to the quality of the goods, even where such goods did not meet the description therefore. I have gone through the aforesaid precedent and find the same to be clearly distinguishable on facts. In the cited case every facility was offered to the buyer for inspection of a quantity of vegetable glue which the buyer purchased after inspection. It was held by the Court that where "the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed". In the present case the contract was for sale by description and there was no occasion for the appellant to inspect the rice prior to the date of the contract. Inspection of the rice, post contract, would be relevant, but only for the purpose of enabling the appellant to determine if it met the contracted description and, if necessary, to refuse taking delivery. In the circumstances, the precedent cited by learned counsel for the respondent does not advance his case.
19. Learned counsel for the respondent next contended that the appellant had not taken delivery of the contracted rice within the period stipulated in the contract (Exh.P.3). He argued that time was of the essence of the contract and, therefore, the respondent was justified in forfeiting the security amount and the excess amount which had been deposited with it by the appellant. This contention is not well-founded, It is, firstly, to be noted that there is no evidence to show that time was of the essence of the contract. On the contrary, the admitted position is that the respondent itself twice extended the time for lifting of the rice. This circumstance itself is sufficient to show that time was not of the essence of the contract. More importantly, however, it may be added that the contract (Exh.P.3) was based on reciprocal promises. The appellant was only obliged to lift the rice if it met the E description given in the contract and had no responsibility for lifting rice which did not meet such description. In the present case I have already held that the respondent had failed to make Basmati Special Rice available to the appellant for lifting. This was a condition of the contract which had to be performed by the respondent-defendant before it could ask the appellant to fulfil its promise to lift the rice. In the circumstances, the appellant's duty to take delivery of the rice had not arisen. It cannot, therefore, be held to be in breach of its obligation to lift the rice within the period specified in the contract.
20. Learned counsel for the respondent, lastly, argued that the suit filed by the plaintiff was not maintainable because it had not been instituted by a duly authorized person. This objection was taken in the written statement and is reflected in Issue No.5. The onus of proving the issue was placed on the respondent. The respondent did not produce any evidence to discharge this onus and nor did the respondent's witnesses depose that the suit had been instituted and filed by an unauthorized person. The two witnesses examined by the respondent were its Deputy Manager (Commercial) and its Deputy Project Manager. They did not even remotely suggest that the person who instituted the suit on behalf of the appellant did not have the authority to do so. In the circumstances, the burden of proving Issue No.5 never shifted to the appellant. On the other hand, the appellant produced its Director Aminuddin Ahmad as P.W.8 and a Board Resolution (Exh.P.21) to show that the suit had been competently filed by a duly authorized person. In this view of the matter, the contention that the suit had not been filed by an authorized person cannot be accepted.
21. I now take up for consideration the appellant's claim for damages. According to the appellant, it is entitled to damages amounting to Rs.13,67,870 on account of lost profits resulting from the respondent's breach of contract. Apart from the fact that no direct nexus between the lost profits and breach of contract has been proved on record, there is also no evidence to prove the quantum of damages claimed by the appellant. I, therefore, find that the appellant is not entitled to recover damages from the respondent.
22. Based on the circumstances considered above, I find that it was the respondent and not the appellant, which committed breach of contract. It follows, therefore, that the respondent is not justified in withholding the security amount of Rs 6,06,260 and the excess amount of Rs.2,42,604 from the appellant.
23. In view of the foregoing discussion, the decree of the learned appellate Court is set aside. The decree of the learned trial Court is modified, and the suit of the appellant is decreed against the respondent for:--
(a) a sum of Rs.8,48,864;
(b) interest on the aforesaid sum at the rate of 12% per annum from the date of the filing of the suit till the date of this decree.
(c) interest at the rate of 12% on the decretal amount from the date of the decree until the realization of the said amount. The respondent shall be entitled to adjust against the decree, the sum (together with accrued return thereon) deposited by it in Court pursuant to the order dated 21-5-1997 passed in R.F.A. No.484 of 1996.
24. The appellant shall also be entitled to its costs throughout.