' ZAQAR HUSSAIN MIRZA, 1.-These two Letters Patent Appeals, namely, L. P. A. No, 28 of 1971 and L. P. A.
No, 29 of 1971 arise out of a common judgment dated 20th January 1971 by the learned Single Judge sitting on the original side whereby the awards made in the two cases were set aside and the cases were remitted to the Umpire for re-assessment of the price of the goods in accordance with the principles laid down.
2. Briefly the facts which are not in dispute are that the appellants are registered industrial consumers of Steel Strips which are used by them for manufacture of G. I. Pipes. Under the Import Policy promulgated by the Central Government vide Gazette of Pakistan, dated 10th July, 1967, Steel Strips were included in the list of items on licensable list and according to Paragraph 26 of its Policy industries detailed in List-I of Annexure II were made eligible to receive licences for items on the licensable list according to the basis to be announced by the Regional Controllers. The appellants in both appeals being industries of the type included in List-I attached to the Policy became eligible to receive licences on the basis announced by the Regional Controller. Para. 9 of .This Policy related to import under loan/credits and it was provided that such import will be subject to the conditions and formalities specified in Annexure III to the Policy and to further details which will be notified as and when necessary. In the events that happened. However, by a subsequent Notification of 12th September, 1967 issued in exercise of powers conferred by subsection (1) of section 3 of the Imports and Exports (Control) Act, 1950, the aforesaid policy of 10th July, 1967 was partly modified for the shipping period July-December 1967 and the procedure to be observed for the import of items specified therein was laid down. As a result of the aforesaid modification the import of Steel Strips was confined to the sources prescribed therein and in case of Steel Strips for G. I. Pipes the import was confined to Italy. According to the procedure thus laid down eligible importers were required to place orders for their import of Steel Strips from Italy within the Trading Corporation of Pakistan (hereinafter referred to as the T. C. P.), respondent herein, and the licensing Authorize was to issue licences or authorisation to the T. C. P. For the value of all the orders so placed by the importers. The import against all such orders was further subjected to the provisions of the import Policy in force and to the basis of licensing announced or being announced by the Chief Controller of Imports and Exports and "other terms and conditions prescribed by the T. C. P.
For the purpose."
3. The appellants accordingly placed their orders on the T. C. P. For different quantities of Steel Strips on the basis of their entitlement on the Order Form prescribed by the T. C. P. Which was authenticated by the Chief Controller of Imports and Exports. The Acceptance Clause of the Purchase Orders reads as follows :- "This order is placed by the purchaser and accepted by the T. C. P. Subject to the terms and conditions specified overleaf."
' Under paragraph 2 of these terms and conditions the purchaser undertook to open a confirmed and irrevocable letter of Credit in favour of firm of the T. C. P. In Pak Rupees valid for 90 days on receipt of intimation price from the T.C.P. In any branch of the bank named therein. Further it provided that the firm price will be intimated by the T.C.P. In two parts :
(i) C and F value.
(ii) Other charge.
' The terms and conditions are also contained an Arbitration Clause for adjudication of any dispute arising out of the contract. It may further be stated that the import of Steel Strips from Italy was in pursuance of a Credit Agreement made between the Government of Pakistan and Italy and the T.
C. P. Being a Government Controlled Corporation, was solely entrusted with the task of importing this commodity under their Trade Agreement with the Italian Suppliers. The State Bank of Pakistan issued a Directive on 3rd August, 1967 in relation to this Credit Agreement containing the terms and conditions under which the goods were to be imported under this Credit. In pursuance of the modified Import Policy as stated above and in the light of the Directive of the State Bank, the T.C.P.
Entered into an agreement with the Italian Suppliers for the import of Steel Strips on 7th March, 1968. This Agreement provided that the buyer shall establish a confirmed irrevocable letter of Credit For down payment of 10% of the entire value of the contract and the remaining 90% of the price was payable with 6% of interest and Credit Insurance Charges in 20 equal half-yearly instalments. Before the arrival of the goods the T. C .P. Called upon the appellants to open necessary Letters of Credit on the basis of the "firm price", which was fixed as follows :- {{TABLE}} Rs,
(a) C and F Value 541.99
(b) Other Charges 799.01
(1) customs duty, defence surcharge etc.,
(ii) clearing, handling, financing and commission charges,
(iii) element of price enhancement added to the landed cost, element of price equalisation surcharge added to the landed cost. ----- Total Rs, 1,341.00 {{TABLE}} ' Thus the total price came to Rs, 1,341.00 per metric ton. It may here be added that although in communicating the firm price the T. C. P. Did not disclose the break-up and the particulars in regard to other charges, but in the arbitration proceedings vide Exh. D/9 an amount of Rs, 450 was shown as cost of 5C% Bonus Vouchers. The appellants made payment of the price of goods as demanded by the T. C. P. Under protest and then invoked the arbitration clause to which the T. C. P.
Agreed. In terms of the arbitration clause each party appointed their own arbitrator ; thus there were two arbitrators in each case. The point of difference between the parties before the Arbitrators narrowed down only to the quantum of price payable by the appellants to the T. C. P. For the consignments imported for them. The real question in controversy between the parties centered round the question of the additional charge of Rs, 460 per metric ton claimed by the T. C.
P. On account of 50% Bonus Voucher Charges to make the price comparable with cashcum-bonus prices. The two Arbitrators' in each 'case disagreed in their decision on the dispute and consequently both cases were referred to the Umpire Mr. A. S. Farooqi as provided by the arbitration agreement. Before the Umpire it was conceded by both the appellants that the T.C.P.
Should be allowed to add 10% down payment incurred by it on Bonus Voucher. Asa result the controversy between the parties was further whittled down to the charging of additional 40% for Bonus Voucher Charges added as a component in the "firm price" fixed by the T. C. P. In other words, the appellants objected to the addition of Rs, 368 only per metric ton as the difference between this amount and Rs, 460 was accounted for by 1070 down payment in Bonus Vouchers, which by agreement of the appellants as stated earlier was held to be justified. The Umpire, upon consideration of the matter came to the conclusion that the price of Steel Strips per metric ton payable by the appellants should be as follows :- {{TABLE}} Rs, C and F Value 542
(ii) Duty and Expenses 326
(iii) Bonus Voucher charges 92 Total 960 {{TABLE}} ' The learned Umpire added to this amount a sum of Rs, 82 per metric ton' under the provisions of Import of Goods (Price Equalisation Surcharge) Act, 1967, with the result that he reached the final figure 9f Rs, 1,042 as the price per metric.
4. The awards in the two cases were challenged by T. C. P. Before the learned Single Judge on the ground that there was an error apparent on the face of the award, inasmuch as, the Umpire had fixed the price contrary to the provisions of section 9 of the Sale of Goods Act which was expressly invoked by him for the purpose. The learned Judge in the impugned judgment has taken the view that the learned Umpire having chosen to apply the provisions of subsection (2) of section 9 of the Sale of Goods Act did not fix the price by reference to the market rates, but by arbitrarily striking off 40% from the Bonus Voucher Charges included in the price demanded by the T. C. P. In this view of the matter the learned Single Judge set aside the award and passed further orders as already mentioned.
5. We have heard M/s. Abdul Hameed and Mamnoon on behalf of the appellants and Mr. A. K. Brohi for the respondent.
6. It may at once be stated that at this stage of this litigation it is not disputed by the parties that the price in these cases has to be determined in terms of subsection (2) of section 9 of the Sale of Goods Act. It will be convenient to set out the provisions of section 9 which reads as follows :- "9.-(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with the foregoing provision, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case."
' The learned Single Judge has observed in the impugned judgment that the learned Umpire did not proceed to determine the "reasonable price" as required by subsection (2) of section 9 above, but instead struck off 40% Bonus Voucher Charges from the C and F Value on the ground that the appellants were not under any obligation to import their requirements of the commodity under Bonus Vouchers and that notwithstanding the Notification of 12th September, 1967, the appellants were still entitled to make their imports as industrial consumers under the licensable list contained in the Import Policy published on 10th September 1967. The contention of Mr. A. K. Brohi, learned counsel for the respondent is that in failing to determine the market price of the commodity as a basis for fixing the reasonable price, in the circumstances of this case, the learned Umpire fell into an error of law. He invited our attention to para. 42 of the Policy dated 10th July, 1967 and submitted that there existed a market in the notional sense if not in the physical sense, which could serve as the basis for determining the price. Para. 42 is in the following terms :- "Import of tied items under Bonus. Import of such industrial items as are exclusively tied to specific countries under Barters/Credit Arrangements, shall be permitted under Bonus also."
' It was conceded before us on behalf of the appellants that the commodity in question could be imported under the Bonus Scheme as indeed was found by the learned Umpire himself. It is clear, therefore, that the modifying Notification dated 12th September, 1967 requiring the imports to be made through the T. C. P. Was by no means an exhaustive channel for import of the commodity in question. The question, therefore, that falls for consideration is whether in holding that the Umpire was bound to refer to the market rates for thz purpose of fixing price, the learned Single Judge acted in accordance with law and whether he was justified in setting aside the award. It was contended on behalf of the appellants that under section 9 (2) of the Sale of Goods Act, the market price of the goods is not invariably the reasonable price as was held by the learned Single Judge referring to English and Indian decisions. The first case referred to in this behalf was Acebal v. Levy (1). On the facts in this case the question of the standard for fixing reasonable price did not arise for decision, but in the context of the facts therein following observation was made by Tindal, C. J. : "A contract to furnish a cargo at a reasonable price, means such a price as the jury, upon the trial of the cause, shall, under all circumstances, decide to be reasonable. This price may, or may not, agree with the current price of the commodity at the port of shipment, at the precious time when such shipment is made. The current price of the day may be highly unreasonable from accidental circumstances, as on account of the commodity having been purposely kept back by the Vendor himself, or with reference to the price at other ports in the immediate vicinity, or from various other causes."
' To our mind the principles laid down in the above passage seem to support the contention of the respondent that reasonable price may have no reference to the current price of the goods sold at the port of shipment. The next case referred to was A. K. A. C. T. v. Chidarnbaran Chettayar (2) in which market rate prevalent on the relevant date was considered to be the regulating factor for fixing the reasonable price. The last case referred to by the learned Judge in this behalf was an English decision reported as Watson Bros. v. Hornbi (H. M. Inspector of Taxes) (3) which is a case on the Income-tax law in which for computing profits in respect of transfer of stocks from the one business to other, it was held that the transferee business should be deemed to have bought the stock at the market price and not at the cost of production.
7. In the English Sale of Goods Act, section 8 is the direct equivalent to section 9 of the Sale of Goods'Act and Benjamin in his Commentary (1974 Edition) on his section at page 98 has observed : "The reasonable price of goods for the purpose of this subsection is usually ascertained by reference to the current market price at the time and place of delivery, even although some other figure (e.g. The cost of production) may also be in a sense "reasonable". But market price may not be the sole or exclusive test". The important words in the above quotation are "the current market price at the time and place of delivery". It is in this context that the real import of the observation cited from Acebal v. Levy above will have to be understood. The facts in that case were that the contract in that case provided for sale of goods at (1) 1934 10 Bing. 376 (2) AIR 1936 Rang. 419 (3)
(1942) 2 All E R 506 certain price or value, to wit, at the then usual and common shipping price at the port of shipment in Spain to be delivered at London. It was accordingly observed in the cited observation for the given reasons that the reasonable price may, or may not, agree with the current price of the commodity at the port of shipment. It seems to us from the review of aforesaid cases and, commentary that the usual method of ascertaining the reasonable price will be to take into consideration the current market price at the time and place of delivery, unless any special or accidental circumstances at such time and place tend to artificially or temporarily affect the market price in its trend upwards or downwards as was pointed out in the leading case of Acebal v.
Levy.
8. It was rightly pointed out by Mr. A. K. Brohi that the learned Umpire did not refer to the market rate of the commodity in Pakistan at the relevant time, but instead undertook the analysis of the price break-up demanded by the T. C. P and more particularly the question whether it was entitled to charge 40% Bonus on the C and F value of the goods. It is in this context that our attention was drawn to paragraph 42 of the Policy which made it possible for the goods to be imported on Bonus Scheme otherwise than through the T. C. P. Under the subsequent Notification. There was thus a market available for the commodity in the notional sense at least to be a relevant consideration for the purpose of fixing price. We, therefore, find that there was an error apparent on the face of the award in totally ignoring the market rates for the commodity which is a requirement of law. It may be clarified that , market rate may not be relevant in all cases as reasonable price is a' question of fact depending on the circumstances of each particular case, but it seems to us that in the present case it was a relevant consideration. The contention of the counsel for the appellants that there is no error on the record has, therefore, no force.
9. The argument that the secret directive of the Government to the T. C. P. Under which 50% Bonus Voucher was charged has no force of law, is irrelevant, in view of the admitted position that the relationship between the parties was that of principal to principal. The effect of the amending.
Notification dated 12th September, 1967 was that the appellants were no longer entitled to directly import the commodity under the Italian Credit and for all intents and purposes the T. C. P. Became the importer. It is, therefore, that the resultant effect was the creation of contract for sale of goods by the T. C. P. To the appellants so as to be governed by section 9 of the Sale of Goods Act. In any case the entitlement of the appellants was still beneficial to them vis-a-vis other industrial consumers importing the same commodity under Bonus Scheme as envisaged in para. 42 of the Policy.
10. We are also not impressed by the contention that the T. P. C. By charging 50% Bonus on the price of goods was in effect seeking to amend the Policy which could only be done by a statutory notification in pursuance of powers under section 3 of the Imports and Exports (Control) Act, 1950.
Whether the price charged by the T. C. P. With the Bonus Voucher Charges as a component is a reasonable price, is a question still to be adjudicated by the Umpire, but the basis for charging this amount is not any power exercised under section 3 and, therefore, the question of disallowing the amount by this process of reasoning does not appear to be tenable. It would be recalled that the T.
C. P. Being the seller is claiming the price in virtue of its being the seller in the transaction and not because the rate claimed was chargeable under the aforesaid statute. As far as the secret instructions of the Government to the T.C.P. To charge 50% Bonus are concerned, it was submitted by Mr. A. K. Brohi that the same were binding on the T. C. P. By virtue of Article 138 of the Articles of Association of T.C.P. Whereby it was bound to comply with such directive issued by the Central Government, but he very fairly conceded that by its own force this directive is not binding on the appellants. But the question to be considered is not whether the Bonus Voucher Charges as a component of price is permissible by virtue of the aforesaid secret directive, but whether the price within the meaning of section 9 (2) of the Sale of Goods Act, as the learned Umpire himself proposed to consider. It may be pointed out that section 9 has to be contrasted with section 10 of the Sale of Goods Act which deals with agreement to sell at valuation.
11. Reference was then made to F. R. Circular No, 70 dated 3rd August, 1967 issued by the State Bank of Pakistan (Exh. D/3) and it was urged that the importers were required to pay by way of down payment of 10% before the date of final delivery to be remitted in Italian Liras by the Pakistani Importers to the Italian Suppliers. It was urged that according to this Circular, the agencies to whom allocations were being made from the Italian Credit were required to deposit the full contract value in Pakistani Rupee before the retirement of shipping documents and, therefore, the T. C. P. Had no right to alter the position and convert it to one under the cash-cum-bonus basis. In the first place this Circular does not purport to be an order published in the official Gazette under section 3 of the Imports and Exports (Control) Act, 1950 and secondly in para. 10 of this Circular the balance of the contract value after the payment of 10% initial down payment, was envisaged in para. 10 of this Circular to constitute credit payable in 20 half-yearly equal instalments with interest at 6%. It would, therefore, appear that the remaining 90% was also payable to the Italian Government or Suppliers. In any case this Circular was issued before the amending Notification dated 12th September, 1967 under which the arrangement was changed so that the commodity in question could be imported only by the T. C. P. Subject inter alia, to "terms and conditions prescribed by the T. C. P." We, therefore, find no substance in this submission.
12. For the foregoing reasons, subject to the observations made herein, the appeals are dismissed with no order as to costs.