1. ' The plaintiff, Pakistan Industrial Credit and Investment Corporation Limited has brought this suit for recovery of Rs, 3,896,374.50 against Mehboob Industries Limited and ten other persons named in the plaint under the following circumstances.
2. ' The plaintiff at the request of defendants and one Akbar Ali, who was a Director of Mehboob Industries Ltd. (hereinafter called defendant 8) and who is now represented by his legal representatives defendants 8 (i) to 8 (Ix) granted to defendant 1 a loan in the foreign currency amounting to Deutsche Marks 6,47,200 on the terms and conditions contained in the Loan Agreement dated 29th June, 1964 (Exh. 4) as amended and on the security inter alia of the properties mentioned in Schedule II (A) to the plaint which were mortgaged by defendant 1 with the plaintiff by way of equitable mortgage by deposit of documents of title mentioned in the schedule I to the plaint. The loan was subsequently further secured by defendant 1 by hypothecation of plant, machinery, spare parts, etc. Mentioned in Schedule II (B) to the plaint under a Letter of Hypothecation dated 18th February, 1969 (Exh. 7) and by a floating charge over the entire undertaking and goodwill of defendant 1 and all its properties under a deed of Floating Charge dated 18th January, 1969 (Exh. 8). The loan was also secured by the guarantee of defendants 2 to 10 and by the Letter of Guarantee dated 18th February, 1969 (Exh. 8).
3. ' Under the terms of the loan agreement dated 29th June, 1964 (Exh. 4) initially the loan was repayable in 88 years by 16 approximately equal semi- annual instalments commencing from 1st July, 1965 to 1st January, 1973. However, by a Supplementary Loan Agreement dated 23rd November, 1965 (Exh. 5) the plaintiff agreed to revise the repayment Schedule contained in the loan agreement and to postpone the commencement of the date of repayment of loan from 1st July, 1965 to 1st January, 1967 and ending on 1st July, 1974. It may be useful to reproduce the relevant terms on which the loan was granted to defendant 1.
4. ' ARTICLE I ' Loan amount Commitment charge : Interest Rates: ' Repayments :
(4) As from the 24th March, 1964, the Borrower shall pay to PICIC a commitment charge at the rate of 1/4 of 1% (one quarter of one per cent) per three months on the principal amount of the loan not withdrawn by the Borrower from time to time. The commitment charge shall become due and payable on the 1st of January, 1st of April, 1st of July, and 1st of October in each year and shall be calculated on the highest amount of the loan standing to the credit of the Borrower during the three months preceding the date on which the charge becomes due and payable. The obligation of the borrower to make payment of commitment charge in respect of the Loan shall be computed and stated in Deutsche Marks and such obligation shall be discharged by paying to PICIC in legal tender currency of Pakistan an amount equivalent to the amount of the Deutsche Marks obligation of the Borrower calculated at the highest effective selling rate of Deutsche Marks (highest amount of rupees for Deutsche Marks) quoted by Authorised Dealers in Foreign Exchange in Pakistan on the date of repayment.
5. 5(a) The Borrower shall pay interest on the Loan at the rate of 71.1-2% (seven and a half per cent) per annum. The interest will be payable semi-annually on the 1st January and 1st July in each year on the principal amount of the Loan withdrawn from the Loan Account and outstanding from time to time."
(b) The Borrower shall pay to PICIC as exchange risk charge a commission at the rate of 1/4 of 1% per annum on the principal amount of the Loan withdrawn and outstanding from time to time. This charge or commission shall be payable in the same manner as interest provided for in sub-para.
(a) above."
(7) .......................................................................................................................................
6. 8(a) Except as the Borrower and PICIC shall otherwise agree, the Borrower shall repay the Loan in eight years by sixteen approximately equal semi-annual instalments commencing from the first day of July, 1965 and ending on the first day of January, 1973. The repayment instalments as determined by PICIC and communicated to the Borrower shall be binding on the Borrower. All obligations of the Borrower to make repayments of principal and payments of interest in respect of the Loan shall be computed and stated in the Deutsche Marks and such obligation of the Borrower shall be discharged by paying to PICIC in legal tender currency of Pakistan of an amount equivalent to the amount of Deutsche Marks obligation of the Borrower calculated at the highest effective selling rate of Deutsche Marks (highest amount of rupees for Deutsche Marks) quoted by authorised dealers in foreign exchange in Pakistan on the date of repayment".
(9) Unless otherwise agreed between the parties, the Borrower shall not have right to repay either the entire Loan or any instalment thereof.
(10) In the event of the Borrower failing to pay, when due, any instalment of the principal of the Loan, interest or any other costs or charge which it is liable to pay under this Agreement, PICIC shall, without prejudice to any action it may take hereunder, be entitled to levy for such period of default penal interest at the rate of 2% per annum in addition to the agreed rate of interest on the amount so unpaid.
"ARTICLE VI
(2) If any of the following events shall have happened and be continuing, PICIC may, by notice to the Borrower declare the principal of the loan then outstanding to be due and payable immediately in which case the security constituted by Article IV shall become enforceable and such principal and all other payments under this Agreement shall become due and payable immediately, notwithstanding anything in this Agreement to the contrary, or suspend the right of the Borrower to make withdrawals from the Loan Account or ask for deposit in cash to give adequate security for fulfilment of the Borrower's obligations :
(a) a default shall have occurred in the payment of principal, interest, commitment charge or any other charge payable under this Agreement ;
(b) a default shall have occurred on the part of the Borrower in the performance of all or any of the terms and conditions governing the Loan or any covenant under this Agreement ; The right of the Borrower to make withdrawals from the Loan Account shall continue to be suspended until the event or events which gave rise to such suspension shall have ceased to exist or until PICIC shall have notified the Borrower that the right to make withdrawals has been restored, whichever is the earlier."
7. ' In the event of PICIC declaring the Loan due and payable immediately under provisions of paragraph 2 of this Article, PICIC shall have the right to charge the Borrower, in addition to interest and other charges due, a premium at the rate of 3% per annum on the amount of Loan recalled for the period from the date of such recall to the stipulated dates of repayment. In such event PICIC shall also have the right to require a cash deposit or bank guarantee to cover the exchange risk for the full tenure of the Loan."
8. ' Defendant 1, it is averred in the plaint, failed to pay the instalments of principal and the interest amounts as and when they fell due in spite of extension of time granted by the plaintiff. Therefore, the plaintiff through its Counsel served a notice dated 29th August 1970 (Exh. 11) on defendant 1 recalling the loan under clause (2) of Article VI of the Loan Agreement and declaring the amount outstanding against defendant 1 being the sum of Rs, 9,25,752.92 provisionally calculated at the rate of exchange then prevailing but subject to changes, representing the principal, interest, additional interest and premium as on 31st September, 1970. Defendant 1 by its reply dated 23rd September, 1970 (Exh. 12) admitted the liability but pleaded that it was not in a position then to discharge its obligation and made certain suggestions therein requesting a few months more time to arrange for payment of the dues. Thereafter, on defendant l's failure to pay the dues the plaintiff through its Counsel served a notice dated 1st October, 1970 (Exh. 13) on defendants 2 to 10 requiring them to pay the dues together with the accruing interest thereon, premium, costs and charges and further informed them that it would hold them primarily liable jointly and severally for payment went of the outstanding amount together with such additional amounts as might have accrued until the date of payment. However, on defendants failure to pay the dues the plaintiff filed the present suit on 5th November, 1971 under Order XXXIV, C. P. C. Claiming a decree for the sum of Rs, 11,50,415.75 against the defendants jointly and severally with interest at the rate of 91 per cent, per annum from the date of the suit till payment and also among other reliefs for a preliminary decree for sale of the properties described in Schedules II(A) and II(B).
9. ' It appears that subsequent to devaluation of Pakistani Rupee the plaintiff on or about 22nd January, 1974, filed an application under Order VI, rule 17, C. P. C. Read with section 151, C. P. C.
10. Praying for amendment of the plaint so as to increase the amount of Rs, 11,50,415.75 to Rs, 38,96,374.50 basing their claim on paragraphs 8 (b) of Article I of the Loan Agreement. Only defendant 2 filed counter-affidavit to this application, paragraphs 3 whereof read as follows :- "3, The Deutsche Marks is floated currency. At the time when the suit loan was taken by D M 83 was equal to Rupees One. At the time the suit was instituted D. M. (6 is alleged to be equal to Rupee one.
11. On 2nd January, 1974. When the amended application is made D. M. 23 is alleged to be equal to Rupee One. On 29th August, 1975, when this counter affidavit is being filed D. M. 26 is equal to Rupee One. In other words the alleged claim of the plaintiff which is said to be Rs, 38,96,374.50 (Rs, Thirty- eight lacs ninety six thousand three hundred and seventy four and paisas fifty) on 22nd January, 1974. Is Rs, 34,15,276.88 (Rupees thirty-four lacs fifteen thousand two hundred and seventy-six and paisas eighty-eight) in all according to his own allegation,".
12. ' However, on 8th September, 1975, this application was granted subject to all just exceptions.
13. Thereafter, the plaintiff filed the amended plaint and the defendants 1 to 10 filed their joint written statement wherein they admitted the liability to the extent of Rs, 9,25,752.92 and pleaded that plaintiff is entitled to his claim in Pakistani Rupee at the exchange rate D. M. 75=Rs, 100 as it existed on 29th August, 1970 for this was the date on which the plaintiff recalled the debt in exercise of its option as agreed between the parties and the same became payable.
14. ' On the pleadings of the parties the following issues were framed.
(1) At what rate of foreign exchange the debt amount is repayable.
(2) Relief ?
15. ' The parties did not lead any oral evidence. Nor did the defendants file any documents. However, by consent of the learned counsel for the parties all the documents annexed to the plaint were exhibited and marked as Exhs. 4 to 13. These documents are (1) Photostat copy of Loan Agreement dazed 29th June, 1964 (Exh. 4), (ii) Photostat copy of Amendment to Loan Agreement dated 29th June, 1964 (Exh. 4-A), (iii) Copy of Supplementary Loan Agreement dated 23rd November, 1965, (Exh. 5), (iv) Photostat copy of Memorandum of Deposit of Title Deeds dated 18th February, 1969, (Exh. 6), (v) Photostat copy of Letter of Hypothecation dated 18th February, 1969, (Exh. 7), (vi)
16. Photostat copy of Deed of Floating Charge dated 18th February, 1969, (Exh. 8), (vii) Photostat copy of Demand Promissory Note without date (Exh. 9), (viii) copy of Letter of Guarantee dated 12th February, 1969. (Exh. 10), (ix) copy of Legal Notice dated 29th August, 1970, (Exh. 11), (x) copy of Reply dated 23rd September, 1970 (Exh. 12) and (xi) copy of Letter dated 1st October, 1970 (Exh. 13).
17. ' However, the material documents for the decision of the suit are the Loan Agreement (Exh. 4), Supplementary Loan Agreement (Exh. 5), the notices (Exh. 11 and Exh. 13) requiring the defendants to pay the entire outstanding amount of loan and the defendant's reply (Exh. 12).
18. ' I shall discuss these documents in detail later on.
19. ' I have heard Mr. Khalid Anwar, Advocate for the plaintiff and Mr. S. A. Jamali, Advocate for the defendants.
20. ' The real controversy in the suit is as to the date or dates of which rate of exchange for conversion of Deutsche Marks into Pakistani Rupees for the purposes of calculating the amount of debt in rupees payable by the defendants to the plaintiff has to be taken and which I am required to determine. According to Mr. Khalid Anwar, learned counsel for the plaintiff for the purposes of conversion of the debt into Pakistani rupees the material date is the date of actual payment. On the other hand, Mr. Jamali contended that the material date of the rate of exchange for conversion of Deutsche Marks into Pakistani Rupees would be the dates when each instalment fell due and since the plaintiff had recalled the entire loan in accordance with the terms of the contract he submitted the date of recalling the entire loan became the material date for the aforesaid purpose.
21. ' Before I consider the respective contentions of the learned counsel for the parties it would be convenient if 1 first examine the law on the issue as obtaining in this Country and in foreign jurisdictions and then examine the respective contentions.
22. In our country for breach of contract damages are assessed in cases where the same are calculated in foreign currency but are required to be paid in terms of local currency at the rate of exchange prevailing at the time of breach of contract. (See : Henry Stainly Ramsden and others v.
23. S. M. Fazil & Co. (1), Messrs Karachi Electric Supply Corporation Ltd. v. Messrs American Export Isbrandtser Lines Inc., Karachi and another (2)).
24. ' As regards debt rule established is that where a debt is payable in foreign currency and an action is brought in this country for its recovery, the debt expressed in foreign currency has to be converted in Pakistani Rupees with reference to the rate of exchange prevailing at the time when the debt became payable. Reliance is placed upon the two decisions of the Supreme Court of Pakistan in the Central Bank of India Ltd. v. Muhammad Aslam Khan (3), S. M. Hanif (Dacca) Ltd. v.
25. The Central (1) PLD 1964 Kar. 290 (2) PLD 1976 Kar. 23 (3) PLD 1962 SC 251 Bank of India Ltd. (1) In the latter case it was observed by S. A. Rahman, J. (as his Lordship then was) at pages 380 and 381 of the report as follows "In support of his position, learned counsel relied on the English cases reported as Cummings v.
26. London Bullion Co. Ltd. (1952) 1 K B 327. In that case it was held that the date on which to convert a debt in foreign currency sued for in England, is the date on which the defendant was in default by reason of his failure to pay, and though normally that date was the date on which the debt became due, in the case in question the defendants were not in default until the permission of the Treasury to pay it had been obtained, under the Exchange Control Act, 1947. It was their failure to act on that permission when obtained that constituted the default, and the rate of exchange prevailing on that very date would apply for conversion of the foreign currency into English currency. It is contended, therefore, that the due date was postponed because of the necessity of permission of the State Bank for the remittance of a debt, after the devaluation."
27. ' It was further observed :- "Mr, Asrarul Hosain pressed for the American view taken in Die Deutsche Bank Filiable Nurnberg v.
28. Charles Franklin Humphery (1926) 272 U S 517, for acceptance in this connection. In that case a majority of five Judges as against four dissentient opinions, ruled that in an action in the United States to recover damages for failure of a German Bank, to return on demand, a deposit payable in marks, the relevant amount, in marks must be translated into dollars as of the time the suit is brought, and not when demand is made. This dictum is contrary to the rule enunciated by Judicial Text Book Writers, such as Cheshire and Dicey. If adopted, such a rule would import an element of uncertainty into commercial transactions, as the rate of conversion of the foreign currency would depend on the unilateral action of one party in the transaction deciding to sue on a particular date.
29. The other view has the merit of making the liability depend on a date which could be determined with precision with reference to the law applicable. We are not, therefore inclined to 'change the view taken by this Court in the previous case referred to above. It is interesting to note that the maturity date rule has been authoritatively affirmed, in respect of a claim founded on failure to pay a debt expressed in terms of foreign currency, in a recent judgment of the House of Lords, reported as Tomkinsor and another and First Pennsylvania Banking & Trust Co. In re : United Railways of Havana and Regla Warehouses Ltd. (1961) A C 1007. The American decision cited before us was also noticed in that case, while reviewing old and modern authorities on the point but their Lordships did not in the words of Viscount Simonds, "find in the judgment persuasive authority" justifying change of the rule that had been hitherto accepted by the English Courts. It (1) PLD 1962 SC 376 was also pointed out therein that in respect of bills of exchange, express provision existed in section 72(4) of the Bills of Exchange Act, 1882 embodying the same principle. But even if the question is examined on general consideration, apart from, the statutory provision in English law, there appears no strong ground for departing from the rule accepted generally in respect of a debt expressed in foreign currency, including those founded on foreign bills of exchange payable in this country. The words of Lord Denning. 'the creditor is entitled to be put into as good a position as if the debtor had done his duty and paid the debt on the due date and he is only truly put into such a position if the debt is converted into sterling at that date ; rather than at a later date when the foreign currency has depreciated or appreciated'. The dictum,, may well be applied here with the substitution of the words, sterling" by "Pakistani Rupees" 1 may also refer to a Division Bench's decision of the then West Pakistan High Court (Lahore Bench) in the matter of Income-tax Assessment of the Khanewal Oil Mills Ltd., Khanewal (1) which was a reference under the Income-tax Act. In this case the assessee was a company having its office in Pakistan and made sales to Indian parties. Under the Mercantile System of Accountancy, observed by the assessee, the sale price was entered in the books although no payment was received. On the 19th September, 1949, the Indian Government devalued its currency and in consequence of it, the assessee claimed a loss by reducing the debit entry. This loss was negatived by the Income-tax Authorities, but the Appellate Tribunal allowed it on the ground that it had adversely affected the realizable value of the company's dues from its debtors in India, and therefore, it was admissible deduction in the ascertainment of profits chargeable to tax.
30. ' It was held by Yaqub Ali, J. (as his Lordship then was) following Rule 181 in Dicey's Conflict of Laws, 5th Edition, and the decisions Di Ferdinando v. Simon, Smits & Co. (2) ; s. s. Celia v. s. s. Volturno (3) ; Scott v. Bevan (4) and Cash v. Kenn ion (5), at page 829 of the report as follows :- "In the present case the amount of Rs, 33,693-12-0 became payable on the assessee as soon as goods were supplied to the firm Uttam Chand Om Parkash and J. L. Rellan Co. Of Delhi, the rate of exchange in both the countries at that time was the same. If, therefore, at the close of the year the Indian currency was devalued, it did not result in any trading loss to the assessee, because the buyers were under legal obligation to pay the full amount of sale price to them in units of account, i,e,, currency which was legal tender at the time when payment became due."
31. ' I must also refer to an earlier Division Bench judgment of the same Court, delivered almost two years earlier than the above-cited
(1) PLD 1962 Lah. 821 (2) (1920) 3 K B 409
(3) (1921) 2 A C 544 (4) (1931) 2 B & Ad. 78
(5) (1805) 11 Ves. 314=32 E R 1109 ' cases, by Inamullah and S. A. Haq, JJ. (as their Lordships then were) in Dr. Muhammad Rafiquddin and another v. Federation of Pakistan (1). In this case Dr. Muhammad Rafiquddin and his Guarantor had executed bond and guarantee respectively for payment of the foreign exchange amount spent on the training of. Dr. Muhammad Rafiquddin in England and it was agreed that in case of the Doctor's failure to join the service of the Central Government in accordance with the terms of his bond, Dr. Muhammad Rafiquddin and his Guarantor would become liable to repay to the Government all moneys etc. Spent on his training with interest.
32. ' Following rule 177 at page 914 of Dicey's Conflict of Laws, 7th Edition by J. H. C. Morris, 1958) and Ottoman Bank, Nicosia v. Dascalopoulos (2) and two other decisions immediately noticed hereinafter, it was observed at page 511 of the report :- "The cause of action has arisen to the plaintiffs because of the fact that the condition in the bond is broken by one of the defendants. It is on this day that the debt became due to the plaintiff, and in accordance with Article 68 in the 1st Schedule of the Limitation Act the period for limitation starts to run in such a case when the condition is broken. In other words in such a case the relevant date is 1st May, 1950 on which date the appellant Rafiquddin refused to join service and thus committed a breach of the relevant condition in the bond. This is the date which will govern the rate of exchange applicable for conversion of the sterling debt On this date the rate of exchange was I lb.=9-4-3. The sterling part of the debt must, therefore, be converted into Pakistani currency at this rate."
33. ' Reference also be had to the judgment of this Court in Mst. Khurshid Jamal v. Muhammad Asghar Qureshi (3). It was a case for recovery of dower debt contracted in India before devaluation of Pakistani Rupee. It was held that the debt was payable at the rate of exchange on the date when the debt became due that is, at the time of divorce pronounced and not at the rate prevailing on the date of judgment.
34. ' Same principle has been followed in India in Medhavji Visram Thacker and others v. Ramniklal Vadilal and others (4) wherein the contention that the rate of exchange should be held to be that prevailing on the date of foreign judgment sued was accepted. The same principle was followed in Param Sukh v. Ram Daval (5) and Jshwardas v. Mir Aimuddin Khan (6).
35. ' I may also here refer to two decisions of Calcutta High Court in Dakhina Mohan Roy Chowdhry v.
36. Mohan Roy Chowdhry (7) and Muhammad Abdul Hayee v. Gajraj Sahai (8).
(1) PLD 1960 Kar. 506 (2) AIR 1935 P C 39
(3) PLD 1956 Sind 47 (4) AIR 1923 Boni. 437
(5) 1LR8All.650 (6) 1881 P J 40
(7) (1861) L R 23 Cal. 357 (8) I L R 25 Cal. 283 ' In the first mentioned case which was followed in the second case it was observed as follows :- "Section 610 seems to us to allow the amount expressed in sterling in the order of their Lordships of the Privy Council to be converted into rupees according to the rate of exchange for the time being fixed by the Secretary of State for India in Council, the amount expressed in the order of the Privy Council being described as the amount so payable and to be estimated according to that rate.
37. The words "for the time being" on which the Judges of the Allahabad Court rely, seem to us to have reference only to the time at which the order of the Privy Council was passed. It would, moreover, be contrary to the usual rule in such matters if the amount due under a decree were to be left uncertain, and, indeed, if it were left to the option of the decree-holder to determine by a rate of exchange favorable to him to obtain a larger amount of rupees then would be due under the order as originally passed. Moreover, it seems to us that the object of this clause of section 610 would be lost if, on construction expressed by the Allahabad Court, a decree-holder, instead of obtaining the money due to him in rupees, the currency of this country in which the decree is executed, were practically to obtain in sterling in India the amount at the time of execution that might be due. It seems rather to have been the object of the law that the amount stated in sterling in the order should be at once convertible into Indian Currency at the rate of exchange than allowed by the highest authorities in England. We have also been referred to the case of Lakhpatty Thakoorani v.
38. Leelanund Singh (2 C L R 323). The facts are not sufficiently stated in that case to satisfy us that it is in point. It does not, moreover, appear that section 610 was considered by the learned Judges.
39. ' I may also refer to the view taken by the Rangoon High Court in Y. A. Shakoor & Co. v. Finlay Fleming & Co. (1). In this case Robinson, C. J. Sitting with Beasly, J. Had held that the date at which damages for breach of contract are to be calculated is the date of the breach and the date on which the rate of exchange is to be taken for the purposes of converting the amount in English Currency into rupees is the date on which under the agreement the money was to be paid and on which a breach occurred by its not being paid.
40. ' Before I examine the case-law from English Jurisdiction, I may first refer to the principles stated by certain eminent Jurists, on the issue under consideration.
41. ' Dicey in his book entitled, The Conflict of Laws, 9th Edition (1973) at pages 877-95, in Rules 169 to 174 has stated the principles with regard to payment of debt expressed in foreign currency. Here I may refer to two rules only. The first principle what is generally known as the Nominalist principle is contained in rule 169 and is as follows : "Rule 169.-A debt expressed in the currency of any country involves an obligation to pay the nominal amount of the debt in(1) AIR 1923 Rang. 265 whatever is legal tender at the time of payment according to the law of the country in the currency of which the debt is expressed (lex monetate), irrespective of any fluctuations which may have occurred in the value of that currency in terms of sterling of any other currency, of gold, or of any commodities between the time when the debt was incurred and the time of payment (Principle of Nominalism).
42. ' If damages are to be calculated in terms of a given currency, any fluctuations in the value of that currency which may have occurred after the event giving rise to the claim for damages (breach of contract, tort) must be disregarded."
43. ' The other relevant rule is Rule 174 which reads :- "Rule 174 (1).-An English Court cannot give judgment for the payment of an amount in foreign currency. A debt which is expressed and damages which are calculated in a foreign currency must therefore be converted into sterling for the purposes of litigation in England, irrespective of the place at which they are payble and irrespective of the law governing the substance of the obligation.
(2) For the purpose of litigation in England ;
(a) a debt expressed in a foreign currency must be converted into sterling with reference to the rate of exchange prevailing on the day when the debt was payable ; (Reference is made) to Re : United Railways of Havana and Regla Warehouses Ltd. 1961 A C 1007, Lloyd Royal Beige v. Louis Dreyfus & Co. (1927) 27 I L R 288 (C. A.), Madeleine Vionnet et Cie v Wills (1940) 1 K B 72 (C A), Cumming v. Landon Bullion Co. Ltd. (1952) 1 K B 327 (C A), Re : British American Continental Bank Credit General Liegeois Claim (1922) 2 Ch. 148.
(b) damages for breach of contract must be converted into sterling with reference to the rate of exchange prevailing on the day when the contract was broken. (Reference is made to Di Ferdinando v. Simon, Smits & Co. (1920) 3 K. B. 409 (C A), Bain v. Field (1920) 5 L. I. L. R. 16 (C A) ; Re British American Continental Bank Ltd. Lissar & Rosenkranz's Claim (1923) 1 Ch. 276 (C. A) ; Ottoman Bank v. Chakarian (1930) A. C. 277 (P C) ; Barry v. Van den Hurk (1920) 2 K B 709 ; Lebeaupin v. Cripin (1920) 2 K B 714 ; Re British American Continental Bank Ltd. Golzieher and Penso's Claim (1922) 2 Ch. 575, Mehmet Dogan Bey v. G. G. Abdeni Ltd. (1951) 2 K B 405 ; McDonald v. Wells (1931) 45 C L R 506 ; The decisions in Kirsch v. Allen, Harding & Co. (1920) 123 L T 106 and Cohn v. Boulken (1920) 36 T L R 767 were overruled in the Di Ferdinando case ;
(c) Damages for tort must be converted into sterling with reference to the rate of exchange prevailing on the day when the loss was incurred for which compensation is claimed ;
(d) expenses incurred and remuneration earned by the salvor of a ship must be converted into sterling with reference to the rate of exchange prevailing on the day when the salvage services terminated."
44. ' May also refer to and re-produce herein below some passages from Cheshire's Private International Law, 9th Edition, (1974) pp. 704-706 wherein the learned Jurist clearly states the law, on the issue under consideration as obtaining in England till the time the 9th Edition was prepared.
45. The passages are again, the view taken in England, though not shared by several foreign countries, is that an English Court cannot order payment except in English currency."
46. "The learned Author quotes : "Whatever sum is ordered to be paid, whether for principal, interest or damages, must be expressed in English money, or such order cannot be enforced by the ordinary writs of execution.
47. ' He proceeds to opine "On the other hand, an arbitral award may be made in a foreign currency."
48. "If an action is brought in England to recover a debt payable in foreign currency or to recover damages for the breach of a foreign contract, or for a foreign tort where the damages are fixed the amount of English judgment must be based on the quantity of English sterling that would be required to purchase in England at the ruling rate of exchange the amount of foreign currency due.
49. There was formerly a controversy whether the rate of exchange prevailing at the date of wrong or at the date of judgment must be followed in making this conversion from foreign to English Currency. The date chosen may be of great importance to the parties in view of the violent fluctuations of the rate of exchange that not infrequently occur in the modern world. It is now settled that the relevant date of the wrong. (See Re United Railways of Havana and Regla Warehouses Ltd.) 1961 A C 1007. The extent of the loss for which the plaintiff is entitled to compensation falls to be determined at the date when it was suffered, not at the date when the judgment happens to be delivered."
50. ' The learned author quotes from s. s. Celia v. s. s. Volturno (1) "If the date taken be that note of the tort but of the judgment, it is giving the Plaintiff not damages for the tort, but damages also for the postponement of the payment of those damages until the date of the judgment. If such later damages can be recovered, as under circumstances they may be if the defendant improperly postpones payment, they would be recovered in the form of interest. They would be damages not for the original tort, but for another and a subsequent wrongful act."
(1) (1921) 2 A C 277 "This rule applies not only to an action for tort but also to an action for breach of contract, or for the recovery of a liquidated debt or for an account, or for the non-payment of a promissory note or a bill of exchange or for salvage claim, or for the enforcement of an arbitral award made in a foreign currency."
51. ' Now, I may refer to some of the case which have direct bearing on the issue.
52. ' I may first refer to following opinion of Lord Eldon, L. C. In Cash v. Kennion (1), at pp. 1109-1110 "I cannot bring myself to doubt, that where a man agrees to pay 100 lbs. In London upon the 1st of January, he ought to have that sum there upon that day. If he fails in that contract, wherever the creditor sues him, the law of that country ought to give him just as much as he would have had, if the contract had been performed."
53. ' Now I would refer to a decision of the House of Lords in s. s. Colia v. s. s. Volturno (2). Although this is a case of damages but the principle laid down in this case has been followed in the subsequent cases involving payment of debt expressed in foreign currency but payable in the local currency. In this case following an earlier case in Di Ferdinando v. Simon, Smits & Co. Which was affirmed by the Court of Appeal, it was held by Lord Buckmaster Lord Summer, Lord Parmoor and Lord Wrenbury, Lord Carson dissenting, that the proper date for ascertaining the rate of exchange for the purpose of converting the amount payable into English currency was the date at which the detention occurred. Here I may refer to some of the observations made in the decision which are quite illuminating.
54. ' Lord Buckmaster at page 551 of the report observed : "The final authorities upon this matter are fortunately far from ambiguous, Roche, J. In Kirsch & Co. v. Allen Harding & Co. (25 Com. Cas. 63) decided that the rate of exchange should be taken as the present time, meaning no doubt the date of judgment but in a later decision of Di Ferdinando v.
55. Simon, Smits & Co. (1920) 2 K B 704 which was an action for breach of contract to carry goods from London to Italy and for conversion, the learned Judge held that the proper measure of damages was the value of the goods at the date when they should have arrived in Italy. He found the value in Italian lire and converted the sum into English currency at the rate of exchange on that date. This judgment was upheld by the Court of Appeal, (1920) 3 K B 409, Bailhache, J. In Barry v. Den Hurk (1920 2 K B 709) also fixed the date for conversion as the date when the damages were properly measured, and McCardie, J. In Lebeaupin Crispin & Co. (1920) 2 K B 714, decided the same thing."
56. "There is consequently a very formidable body of opinion in recent decisions against the appellants' contention, and the only (1) (1905) 11 Ves. 314=32 E R 1109 (1110) (2) (1921) 2 A C 544 authority to which they can refer in their support is the American case of Marburg v. Marburg (26 Mad, 8) decided in 1866. There does not appear to have been any consideration of the question in the Supreme Court of he United States, and their Lordships are deprived of the assistance which would have been afforded had the matter been the subject of argument before that tribunal. The principle underlying the decision in the Maryland case appears largely to be due to the consideration of text-books on International Law. In one singe the case undoubtedly affects International matters, but it does not necessarily follow that it involves consideration of international law. The real question must depend upon the true effect of a judgment in one country relating to damages that are measured in terms or a foreign currency, and into this international relations do not necessarily enter. Disputes similar to that in the present case could easily arise between the British subjects out of a purely British contract where the measure of damages was originally expressed in terms of a foreign currency, in such a case the English Court could and ought to measure the damages at the proper date, and then at that date convert the foreign exchange into English currency. There can be no difference in the principle when one of the litigation is not a British subject."
57. ' Lord Summer at page 558 of the report reasoned "Finally it was urged that exchanging lire with sterling at the date of the judgment was the best way of eliminating speculative elements, and had the advantage of ensuring that in no case would a judgment creditor get more than the exact sum, to which he was entitled. Fluctuations in foreign exchanges inevitably introduce a speculative element into all transactions and affairs, and, unless the parties themselves have provided for this by Some contract, the law must apply the same principles as if they had remained stable. Waiting to convert the currency till the date of judgment only adds the uncertainty of exchange to the uncertainty of the law's delays. The result may favour one side or the other, and there is no answer to this except that already discussed-namely, that the claimant's right is exclusively a right to lire, and would result in a judgment for lire, if only an English Court was, so to speak, competent to express itself in Italian. This is a mere assumption. After all the Court is an English Court and in theory decides the right as at the time when it arises, and does so in plain English."
58. ' Lord Parmoor observed :- "The necessity for transferring into English money damages ascertained in a foreign currency arises in the fact that the Courts of this country have no jurisdiction to order payment of money except in English currency. Considerations which are irrelevant in the ascertainment of the amount of damage are irrelevant in fixing a rate of transfer, and I agree in the judgment of Hill, J., as confirmed by the Court of Appeal. In truth the risk of a subsequent fluctuation in the rate of exchange is a risk which the parties themselves respectively incur. In its incidence it may, in any particular case either mitigate or enhance the amount which, under a stable condition of exchange would be payable to the injured party, but in itself it cannot affect the ascertainment of damages."
59. ' The next case which I think, I should refer to is the Privy Council's decision in Ottoman Bank, Nicosia v. Dascalopoulos (1). It was a case from Cyprus which rules that respondent's pension was to be calculated on the basis of Turkish gold pounds as he was entitled to under the terms of his employment. He was therefore entitled to a monthly pension in Cyprus currency of a sum really equivalent to the amount of Turkish gold pounds to which he would be entitled. The Cyprus currency was to be calculated according to the rate of exchange prevailing at the date when each instalment of the pension became due.
60. ' The third important case which I would refer to is again a case of the House of Lords but relates to question of payment of debt expressed in foreign currency but sued for in England, and is known as Re : United Railways of Hawana & Regla Warehouses Ltd. (2). In this case it was clearly held that the provable stun in dollars was to be converted into sterling at the rates of exchange prevailing at the respective dates when the several sums owing by the U. Company to the trustee fell due and were not paid.
61. ' I may here quote from the opinion of Viscount Simonds at pp. 1044-1045 of the report :- "I have spoken of authority ancient and modern, and have given your Lordships an example of ancient authority. Let me pass over more than three hundred years and come at once to a case decided in 1943. In Syndic in Bankuptcy of Salim Nasrullah Khoury v. Khayat (1943) A C 507 the material question was at what rate according to the law of Palestine, which was conceded for this purpose to be the same as English law, should a sum of 2,000 gold Turkish pounds payable at Haifa be converted into local (i,e, Palestine) currency. I venture to quote extensively from a Judgment of the Judicial Committee of the Privy Council which was delivered by Lord Wright. He asked : At what dates must the rate of exchange be calculated ? There can, their Lordships apprehend, be now no doubt as to the English law on this point. It is true that different views have been taken at different times and by different systems of law. Indeed, there are at least four different (alternative) rules which might be adopted. The rate of exchange might be determined as at the date at which payment was due, or at the date of actual payment, or at the date of the commencement of proceedings to enforce payment, or at the date of judgment. English law has adopted the first rule, not only in regard to obligations to pay a sum certain at a. Particular date, but also in regard to obligations the breach of which sounds in damages, as for an ordinary breach (I) AIR 1935 P C 39
(2) 1961 A C 1007 of contract, and also in regard to the satisfaction of damages for a wrongful act or tort," (See (1943) A C 507 at pp. 512 and 513).
62. ' Then, after citing the following words of Lord Summer from s. s. Celia v. s. s. Valurno "The agreed numbers of lire are only part of the foreign language in which the Court is informed of the damage sustained, and, like the rest of the foreign evidence, must be translated into English.
63. Being a part of the description and definition of the damage, this evidence as to lire must be understood with reference to the time when the damage accrues, which it is used to describe."
64. ' The judgment proceeds :- "This can be applied directly to a case where the damage claimed arises from a failure to pay a sum in foreign currency, like the Turkish gold pounds here. It is true that Lord Summer does not deal specifically with and seems to reserve the question of what is the rule where there is a contractual obligation for the payment of fixed or calculable sums in a foreign place and (their Lordships would prefer or) in a local currency. He does, however, observe (15 Asp. M L C 378) that : Waiting to convert the currency till the date of judgment only adds the uncertainty of exchange to the uncertainty of the law's delays". Lord Buckmaster (15 Asp. M L C 375) rejects summarily the idea that the date of the writ or of the commencement of the action is the proper date His view, in their Lordships opinion, is summed up by his statement that, in regard to damages which have been "assessed in a foreign currency the judgment here, which must be expressed in sterling, must be based on the amount required to convert this currency into sterling at the date when the measure was properly made, and the subsequent fluctuation of exchange, one way or the other, ought not to be taken into account."
65. ' And also quote from Lord Reid at pages 1052-53 of the report :- "Really the only practicable choice would seem to be between converting at the date of breach and converting at the date of raising the action in England. The latter alternative might perhaps be preferable, and it was in fact adopted by the United States Supreme Court in 1926 in Deutsche Bank v. Humphrey 272 U S 517. But the rate at the date of raising the action might be very different from the rate at the date of payment. Indeed, the objections to taking it are not very much less than the objections to taking the rate at the date of breach. Moreover, I doubt whether, in view of the great intricacy of some commercial transactions, it would be practicable to have two possible dates for conversion according to the nature of the contract. It would, I think, be wrong to take the date of raising the action "in every case : to my mind, the date of breach is much better in the simple case of an English contract where the parties are in England and one fails to deliver foreign currency which he has contracted to deliver. So even if this were still an open question, I would have to come to the conclusion that in every case where a plaintiff sues for a debt due in a foreign currency, that debt should be converted into sterling at the rate of exchange current when the debt fell due. That rule may in some cases be artificial, it may even be unjust, but it has been accepted for a long time, it is clear and certain, and no other rule could be relied on to produce a more just result indeed, no other rule is really practicable."
66. ' I should not omit to quote here from the observations of Lord Denning at pages 1070-71 of the report.
67. ' He observed :- "It is worth noticing that, as we look upon sterling, so also do the Courts of the State of New York look upon the dollar. They have, I believe the rule that a claim for debt or damages in foreign money must be converted into dollars at the rate of exchange prevailing at the date of the breach. In this respect the New York Courts follow their own course rather than the decision of the Supreme Court of the United States of America, and I think we should" do likewise. It is better suited to a commercial community. Any other rule would mean that the sum payable would depend on the delays of parties or of Courts. That cannot be right. And I would point out that it is often open to creditor or debtor to safeguard himself from any adverse consequences of the rule. Take the case where sterling depreciates. For instance, a debt is payable in dollars in the United States, it is unpaid, and "afterwards sterling depreciates. The creditor can, after devaluation, bring an action in the United States and recover judgment in dollars. He can then sue in England on that United States judgment and the rate of exchange will be taken not at the date of the original contract debt, but at the date of the United States judgment: see Scott v. Bevan, (1831) 2 B & Ad. 78 and section 2 (3) of Foreign Judgments (Reciprocal Enforcement) Act, 1933."
68. ' Take next the case where the foreign currency depreciates : for instance, when a debt is payable in francs in France, it is unpaid and afterwards francs depreciate. The creditor may bring an action in England but the debtor can forestall it by paying the debt in France in depreciated francs ; and then, when the debtor is sued in England, he can claim that he has discharged the debt by the proper law of the contract: see Societe des Hotels Le Touquet Paris Plages v. Cummings (1922) 1 KB 451: T L R 221 (C A)."
69. ' In this case the trust company did not take any steps in Cuba or the United States to get judgment for rentals in dollars. I take it there were good reasons for this : so that this is the only country in which it can get redress. But coming here, it must accept the rule of our law that we can only give judgment in sterling, and at sterling calculated at the rate of exchange when the rentals should have been paid" The rates of exchange for this proportion must be the rates ruling when the rentals accrued due. When the trust company receives the amount so calculated it will have received a sum which in the eye of our law is full satisfaction of the claim for rentals and interest ; and it should receive no more, no matter how the claim is framed. It is true that, when the trust company wishes to turn the sum back into dollars, it may find that it has not enough dollars to pay the certificate holders in full : but that cannot be helped. There are always risks incident to foreign investment. One of the risks is that the lender may have to go to another country to recover his money ; and when he does so he must recover in the currency of that country, and not in that of his own. It is for risks such as these that he stipulates for a high rate of interest ; and his disappointment at the rate of exchange will, I hope be mitigated by the substantial interest which he will receive."
70. ' Then, I may refer to Re Russian Commercial and Industrial Bank (1). In this case the facts were that Russian Commercial and Industrial Bank was incorporated in Russia in 1890, established in 1911 a branch in London. In or about December, 1917, the bank was dissolved under the laws of the Union of Soviet Socialist Republics, but continued business in London Unit, on February 3, 1922, a Petition was presented for its compulsory winding up in England. On October 24, 1922, an order was made for the compulsory winding up of the Bank, for many years prior to the winding up bad a current account with the Bank at the London branch, and he proved in the winding up for a balance of sum 36,430 roubles due to him as at July, 1, 1921. For the purposes of proof it was necessary to convert the sum in roubles into sterling and the question arose at what date the conversion should be effected. In this case it was observed by Wynn Parry, J., at page 77 of the report as follows :- "I turn, therefore, to consider the substantial question which arises, viz., as at what date is the conversion to be effected? The first proposition which counsel for the applicant put forward was that in a winding up by this Court a proof for a debt expressed in foreign currency must be for a sum in sterling converted as at the date when the debt became due. I agree with counsel that this proposition is established by the authorities, which he cited. First there is the judgment of P. O.
71. Lawrence, J., in Re : British American Continental Bank Ltd. Credit General Liegeois Claim (1922) 2 Ch. 589, where he reviewed the prior authorities. As I understand his judgment, he is to be taken as having stated the rule, as a rule of general application, that on a claim in the winding up of a company in England for a debt due from the company to the claimant in foreign currency the correct date on which that debt ought to be converted into sterling for the purpose of ascertaining the amount for which the claimant ought to be admitted as a creditor, is the date when the debt became due. This decision was approved and followed by the Court of Appeal in Madeleine Vionnet entice v. Wills (1939) 4 All E R 136."(1) (1955) 1 All E R 75.
72. ' He further observed at page 78 of the report as follows :-- "Counsel for the Liquidator contended, however, that a gloss had been made on the rule by the Court of Appeal in the recent case of Cummings v. London Bullion Co. Ltd. (1952) 1 All E R 383. As I read that case, the Court of Appeal expressly recognised the general rule, which I have stated above, but felt compelled to choose a date different from the date when the debt became due, because of the construction which they placed on the Exchange Control Act, 1947, S.
33. I cannot, therefore, regard this case as in any way impinging on the general rule. In the present case. I find no circumstance which should militate against its application. I, therefore, hold that the date as at which the sum in roubles should be converted into sterling is the date when they became payable to Mr. Ronassen."
73. ' Lastly, I may refer to a decision of the Court of Appeal in England in the Teh Hu. (1).
74. ' In this case facts were in February, 1967, Japanese salvage contractors salved in mid-Pacific the Teh Hu, which was owned by a Panamanian Company, under a Lloyd's standard form of salvage agreement. By the terms of the agreement the salvor's remuneration was to be fixed by arbitration in London. In November, 1970, sterling was devalued by 14 per cent. The arbitration was held in 1968.
75. The Salvor's original award was 69,000. In January, 1969, the appeal arbitrator held that the devaluation of sterling could be taken into account but reduced the award to 45,000 upon the basis that it was not right to do so.
76. ' On a special case stated, Brandon, J. Held that a devaluation of the pound occurring after the termination of the salvage services was not a relevant factor in assessing the award.
77. ' While dismissing the appeal from the decision of Brandon J., the Court of Appeal (Lord Denning M.
78. R. Dissenting) held that the general rule of English law that the amount for which a judgment was entered was not to be affected by any change in the value of sterling after the date when the cause of action accrued applied to salvage cases. The devaluation of sterling between the date of the termination of the salvage services and the date of the award could not therefore be taken into account in fixing the amount of the award.
79. ' It was however, held by Lord Denning, M. R. That the maritime law as to salvage is a peculiarly equitable jurisdiction seeking to do justice to the salvors and the owners of the ship and cargo saved. The common law rule for debt or damages giving judgment in pounds sterling at a rate or exchange which is taken at the date when the cause of action accrued requires modification and should not be extended to English maritime law or to arbitration under the Lloyds standard form of salvage agreement.
80. On the basis of the opinion expressed by the jurists and the cases noticed herein above it seems clear that in an action in whatever form in Court in this country for the recovery of a debt pay able in foreign currency(1) (1970) Probate 106 the amount of judgment and order must be expressed in Pakistani Rupees, and, that, unless the relative values of the respective currencies are fixed by statute or some authority binding the Pakistani Court or by the agreement of the litigants, the amount of the judgment or the order of Court in this country must be based on the quantity of Pakistani Rupees which one would have to pay here to obtain in the market the amount of the debt payable in foreign currency delivered at the appointed place of payment, i. e. The amount payable according to the rate of exchange. It seems plain that this mode of computing the value of foreign currency in Pakistani Rupee, and thus converting the one currency into the other, is based upon damages for the breach of contract to deliver the commodity bargained for the appointed time and place, and if this is so, it follows that the date as of which that value must be ascertained is the date of the breach, and not the date of the judgment.
81. ' The American view taken in Die Deutsche Bank Filiable Nurnberg v. Charles Franklin Humphrey (1) that in an action in the United States to recover damages for failure of a German Bank, to return on demand, a deposit payable in marks, the relevant amount in marks must be translated into dollars as of the time the suit is brought, and not when the demand is made, was not followed by the Supreme Court of Pakistan in S. M. Hanif Limited v. Central Bank of India Limited, or by Muhammad Yaqub Ali, J (as his Lordship then was) in the matter of Khanewal Oil Mills Limitied. Further, the American view was not followed even by the House of Lords (see the opinion of Lord Reid in s. s. Selia v. s. s. Volturno. Moreover, the decision of the American Supreme Court was a majority decision of five Judges as against four dissentient opinions.
82. ' The other judgment which could be cited in support of the view is Soziete Des Hotels le Touquet Paris-Plage v. Cummings (2). But in that case there was an undertaking to pay a debt on the 1st December, 1914. The debt had been incurred in France and the amount was settled in France. The suit was brought in England, and it was therefore, necessary to arrive at a proper equivalent in English Currency. The rate of exchange prevailing between the two countries from the 31st December, 1914 when the debt became due was adopted, and it was held by Avory, J., that and not the rate at the date of the judgment was the proper rate. That case was taken up on appeal, but the only point considered was whether the payment that had been made by the debtor in France after the suit had been filed amounted to accord and satisfaction of the debt. On that point the judgment of Avory, J. Was reversed but the date on which the rate of exchange was to be taken was left untouched.
83. Now, I would take up the contention of Mr. Khalid Anwar, Advocate.
84. ' Mr. Khalid Anwar relying on the provisions of Article 1 clause (4) and clause 8(b) of the contract submitted that the defendants were liable to repay the debt at the rate of exchange calculated at the highest selling rate of Ceutche Marks (highest amount of rupees for Deutsche Marks) quoted by authorised dealers of foreign exchange in Pakistan on the date of repayment, He emphasized the words "on the date of repayment" (1) (1926) 272 U S 517 (2) (1922) 1 K B 451 used in clauses (4) and (8) of Article 1 of the contract and argued that by using these words the parties contemplated that the debt would be paid at the rate of exchange on the date of repayment and not on the dates when each of the 16 instalments became due or when in accordance with the terms of the contract the whole amount became due and payable.
85. ' Now if this argument is accepted then the defendant, or the plaintiff could fix the date or dates as the case may be, of repayment or the date enforcing the repayment according to their own respective choices and that could not be the intention of the parties. Besides, it would make the amount of debt uncertain and uncertain able till the debt is paid. Then, would it not leave the determination of the amount of debt to the fluctuation in rate of exchange between the two currencies for an indefinite time. Further, on default of the defendants in payment of dues if the plaintiff enforces the payment of the due instalments or the amount due through Court action then what would be the material date of which rate of exchange between the two currencies would be taken ? The date of action, or the date of decree, or the date when the execution of the decree is sought, or when the decree is actually executed ? Therefore, the rule laid down in the cases cited hereinbefore apart from the American view, in the absence of any other provision in the contract and except whey action could be brought under law expressing dues in foreign currency and decree could be passed in that currency, is that the material date for calculating the amount of debt in local currency would be that date on which each instalment of the entire debt became due and this rule is enshrined in the principle that the parties should be put in ' the position that the contract was performed on the due date. Mr. Kha lid Anwar also relied upon the provisions of clause 5 of Article VI of the contract where under on default of the defendant in payment of instalments or breach of any terms thereof if the plaintiff declares the loan due and payable immediately, it has the right to charge premium at the rate of 3 per cent per annum on the amount of loan recalled for the period from the date of such recall to the stipulated dates of repayment and also the right to require the defendants a cash deposit or bank guarantee to cover the exchange risk for the full tenure of the loan, and argued that these provisions show that the exchange risk continued till the debt was paid. This argument is also without substance. In fact the right to charge premium at the rate of 3 per cent. Per annum on the amount of the loan recalled for the above-mentioned period and the other provision relied upon show that the material dates or date are or is when the instalments of the whole amount become due and payable as per contract for the parties contemplated to compensate the plaintiff for any loss cause due to change in exchange rate upto the stipulated dates of repayment of the instalments or before full tenure of the loan in case the whole amount was recalled earlier for any of the reasons mentioned in clause
(2) of Article VI of the contract, by allowing the plaintiff to charge a premium at the rate of 3 per cent per annum on the amount of loan recalled for the period from the date of such recall to the stipulated date of repayment. Indeed the contract further awards to the plaintiff commission at the rate of 1/4 of 1% per annum on the principal amount of the loan withdrawn and outstanding from time to time to cover the exchange risk. The fact is that the plaintiff has included the amount of premium in its claim in the suit, According to the contract, as amended, the debt was payable in years in sixteen equal semi annual instalments commencing from 1-1-196 and ending on 1-7-1974.
86. The Pakistani rupee was devalued on or about 15-5-1972. On that date only five instalments had not become due. According to the law laid down in the cases cited hereinbefore, the amounts of the instalments that became due before the above-mentioned date of devaluation of Pakistani Rupee have to be calculated at the rate of exchange between the Rupee and Deutsche Mark prevailing on the dates when each instalment became due. However, the plaintiff had much before the date of devaluation of the Rupee, by the notice dated 29-8-1970 (Exh. 11), in accordance with the provisions of sub clause (a) (b) of clause (2) of Article VI of the Contract had notified the defendant 1 that due to default committed by it in payment of the instalments, the entire amount of the loan had become due and payable immediately and bad accordingly, called upon the defendant, to pay the same. Thus the entire amount of the loan had become due and payable much before the date of devaluation. The devaluation would, therefore, not make any difference so far as the liability of the defendants is concerned. However, it was submitted by Mr. Khalid Anwar that the plaintiff had recalled this loan provisionally calculating the dues at the rate of exchange then prevailing but subject to change. In my opinion this condition would also not make any difference for unless the debt could be claimed at the rate of exchange prevailing on the date of actual payment, the debt was payable at the rate of exchange prevailing on the dates or date when the debt became due and the plaintiff at its own option, according to the terms of the contract, had required the defendant 1 to repay the entire amount of the loan within three weeks of the receipt of notice dated 29-8-1979 (Exh. 11). Thus the whole debt had become due much before the date of the devaluation. Suppose in response to the notice the defendants had repaid the entire loan amount before the date of devaluation of Pakistani rupee. Could the plaintiff still claim the difference arising out of the devaluation ? The answer could certainly be in the negative. In my opinion once the plaintiff had recalled the entire loan amount it had only the right to charge premium at the rate of 30% per annum one the amount of the loan recalled for the period from the date of such recall to the stipulated dates of repayment of the remaining instalments. Indeed the plaintiff has claimed the same in the suit.
87. ' Let me examine the case in the light of American view. The present action claiming Rs, 11,50,415.75 was brought on 5-11-1971. This claim included the amount of those instalments also which had not but for enforcement of the right under the provisions of sub-clauses (a) & (b) of clause 2 of Article VI of the contract, become due. Even if the American view taken in Deutsche Bank v. Hamphrey could be followed that would not have helped the plaintiff for Pakistani rupee was devalued in the year 1972 much after the present action was brought.
88. ' Now I may mention the last submission of Mr. Khalid Anwar. He submitted that the Court had allowed the plaintiff, subsequent to the devaluation, to increase the amount of Rs, 11,50,415.75 claimed in the suit to Rs, 38, 96,374.50 by amending the plaint and therefore this amount cannot now be reduced. But this amendment in my view, is of no consequence for firstly, it does not estop the defendant from questioning the enhanced amount more so when the amendment was allowed subject to all just exceptions ; secondly it does not confer any right on the plaintiff except to establish that it is entitled to a decree for the enhanced amount and that the plaintiff in my opinion, has failed to establish.
89. I, therefore, hold that the debt is to be calculated at the rate of exchange prevailing on the date when each instalment became due and payable and in respect of those instalments which had become due on account of declaration made by the plaintiff under clause 2 of Article V of the contract by the notice Exh. 11 on the expiry of the period mentioned in the notice.
90. ' Issue No, 2._ ' I, therefore, pass a preliminary decree in Form 5-A in Appendix D to the First Schedule to the Code of Civil Procedure for sale of the proper ties mentioned in Schedules II-A and II-B. I declare the amount due on mortgage as on 5.11-1971 was Rs, 11,50,415.75. The plaintiff shall also be entitled to interest at 9.1-2 per cent. Per annum from the date of the suit till the date of payment and costs of the suit to be assessed on the aforesaid amount.
91. ' The defendants are allowed three month's time to pay the amount due under this decree.