1. ' MRS. QAISER IQBAL, J.---This appeal is directed against the judgment and decree passed by the learned Single Judge in Suit No,124/1975 dated 29-6-1995 whereby the suit of the plaintiff was dismissed.
2. ' Brief facts disclosed in the plaint are that the appellant is a limited company carrying on business of Import and Export. The defendant are incorporated in Japan having their Head Office at Tokyo and Branch Office at Karachi carrying on business as indentors and are also agents of Messrs Toho Kogyo Co. Ltd., Osaka, JapA. The appellant has executed three contracts for supply of GP Sheets cutting bright soft temper. The shipment under the contract were to be effected in February / July 1973 and L.C. Was to be opened. Its photocopy was required to be furnished to the defendants by 17th February. 24th February and 28th February, 1973, respectively for three contracts. The appellant applied for Import License dated 9-2-1972, obtained licence No,378497 and opened L.C. In the name of the principal as stated under:--
(a) LC No,83282, dated 19-2-1973, for US$ 29,020,43, in respect of goods under Contract No,K293/73, dated 2-2-1973;
(b) LC No,83283, dated 20-2-1973, for US$ 26,269,75, in respect of goods under Contract No,K- 293/73,dated 2-2-1973; and
(c) LC No,83565, dated 22-2-1973, for US$ 58,410,74, in respect of goods under Contract No,A-348/ 73, dated 19-2-1973; ' To the utter surprise of the appellant a notice was published in two local dailies one English and the other Gujrati to the effect that Mr. Muhammad Naseem Siddiqui, who was officer of the defendants and who had signed the contracts mentioned earlier was declared not to be an authorized person and not able to sign any contract, either in the past or in future. The defendant therefore wrote a letter to the plaintiff referring to the subject letter of credits informing them that no indents had been issued by them and that the said letter of credits were not received by their Head office. Despite the exchange of correspondence between the appellant and the Habib Bank Limited, it was revealed that the respondent was trying to back out from their contracted liability on account of shortage of goods and fluctuation in the market prices. Therefore, the appellant has resorted to file this suit under section 73 of the Contract Act, for compensation and damages, for the differential price between the prevalent market price and its legal market price at the relevant time along with expenses incurred.
3. ' The respondents on the contrary denied the claim of the appellant and pleaded that Muhammad Naseem Siddiqui had no authority to sign a contract and letters of credit. It is averred that the Branch Office in Pakistan was operating as a liaison office and was not authorized to act as indentors in Pakistan and could only negotiate in the matter. It is also specifically denied that the respondent had executed alleged contract. And since there is no privity of the contract between the appellant and the respondent in respect of any transaction they were not liable to pay the damages claimed. The alleged letters were not executed and signed by Mr. Y. Nakayama, Assistant General Manager, Karachi Branch, therefore no liability/ obligation had been created under the contract.
4. ' On the pleadings of the parties following consent issues were framed:--
(1) Whether the suit is, bad for non-joinder of necessary party?
(2) Whether the alleged three letters K-293/73 dated 2-2-1973, K-293/73 dated 2-2-1973, and A- 348/73 dated 19-2-1973, constituted valid contracts between the plaintiff and the defendants for supply of goods mentioned therein?
(3) Whether the plaintiffs are entitled to damages, if any?
5. ' We have heard learned counsel for the parties, perused the record of the case as well as documents filed in support of the respective contentions.
6. ' Learned counsel for appellant has contended that letters dated 2-2-1973, 9-2-1973 constituted valid agreements between the parties for the supply of goods, that these letters were typed on the letterheads of the respondent Company's Karachi Branch and signed by one of the respondents employees namely Mr. Muhammad Naseem Siddiqui, who used to enter into contracts on behalf of the respondents and that these contracts were not honoured which contentions, have specifically been denied by the respondents in the written statement as well as by publication in local newspapers dated 24-3-1973, to the effect that the said company officer Muhammad Naseem Siddiqui was not authorized to sign for or on their behalf and that only Assistant General Manager Mr. Nakayama was responsible for signing all the documents/ correspondents. The respondent did not issue indents nor parted with any instruction for opening any letter of credit in favour of the appellants, and they had acted on their own in opening the letters of credit in collusion with Muhammad Naseem Siddiqui who had no authority on behalf of the company as agent of Messrs Toho Kogyo Company Ltd. Osaka, Japan.
7. ' The important question which calls for determination is whether there was a complete contract between the parties. The respondent is liable for payment of damages under the alleged contracts, exhibited 6/2/A. The learned counsel for the appellant has contended that simple and pure question of fact mainly depicts on the interpretation of the documents signed by Mr. Muhammad Naseem Siddiqui as the agent of the principal. It is next urged that an acceptance on behalf of the respondent was absolute and unconditional construed/ correspondent to the terms of the offer without leaving any term opened for further negotiations. Since there was a qualified acceptance on behalf of the agent for and on behalf of the principal therefore, the respondent were liable to pay damages for breach of the contract. In support of the above contention reliance has been placed in the case of Pakistan Industrial Development Corporation v. Aziz Qureshi (PLD 1965 (W.P.)
8. Karachi 202). Wherein, while dealing with the above question at page No,208 it has been held that a qualified acceptance is equivalent to a new offer which may either be accepted or rejected. In Hajj Muhammad v. Spinner (I). Jenkins, C.J., observed:-- "Until there is such an acceptance, the stage of negotiations has not passed and no legal obligation is imposed."
9. ' It is next urged that there was a complete contract between the parties whereby the respondent had agreed to supply products and on account of breach of the contract the respondent were liable to pay damages on the basis of differential in the contract price and the market price.
10. ' The case of the respondent persistently is that Muhammad Naseem Siddiqui was dismissed from service after holding inquiry on account of unauthorised act by way of sending the documents of contract on behalf of the respondent. DW John David a Senior Executive of the respondent company at Karachi has specifically stated that Mr. Nakayama, Assistant General Manager of the respondent at Karachi Branch was authorized to enter into the contract and the acts of omissions of Muhammad Naseem Siddiqui making him liable for the charges of misconduct were published in newspaper exhibit 12 & 13 and the respondent had informed the appellant through letter exhibit 14, dated 2-3-1973, that Muhammad Naseem Siddiqui had signed the alleged contract without the consent of the respondent and the agreement alleged to be entered by him were fabricated and fake and that there were no negotiations between the parties in connection with the contracts.
11. Under section 23 of the Contract Act, an agent had expressed or implied authority and is exclusively rectified by the principal. In the presence of the evidence led by the respondent I am of the view that Muhammad Naseem Siddiqui could not act as an agent of the respondent nor was he conferred any authority to act on behalf of the principal. This issue was also considered by the Honourable Supreme Court in 1968 SCMR 539. The observation in the report are as follows:-- "Contract Act (IX of 1872), S.238---Misrepresentation or fraud by agent" Clerk in purchasing department of Mills unscrupulously purchasing goods in name of Mills despite fact that he had no authority to make such purchases" Mill cannot be held liable for fraudulent act of clerk.
12. ' In any event in the absence of clear evidence a clerk whose duty does not include purchase of goods, cannot be regarded as having authority to do so. This proposition is plainly based on sound and reasonable grounds. It is needless to say that it will place business of any kind if goods purchased by him in the name of the Mills he serves, were to become liability of the Mills on that ground alone. Considering the facts and circumstances of the case in the light of above observations of Honourable Supreme Court I am of the view that the respondent could not be held liable under sections 327 and 328 of the Contract Act for the acts of Muhammad Naseem Siddiqui which should have been positively established on record that either Muhammad Naseem Siddiqui had expressed or implied authority on behalf of the respondent to do so, and/or after Muhammad Naseem Siddiqui had acted on their behalf, the respondent ratified his acts. On assessment of evidence both these ingredients are completely missing. According to section 182 of the Contract Act an agent is a person implied to do any act for another or to respondent another in dealing with their person. The person for whom such act is done or who has represented is called the principal.
13. The respondents company is not an agent of the company at Japan. It had no authority to enter on behalf of either company for supplying the commodities mentioned in the agreement from Japan to the appellant company at Karachi. Thus there is no privity of contract between the parties and the agreement are clearly void and are not enforceable."
14. ' Learned counsel for appellant contended that question of indoor management is applicable to the facts of the present case as express or implied authority was extended in favour of Muhammad Naseem Siddiqui, and the doctrine of implied authority, came into play and the principal of the agency would be restrained from raising a plea contrary to what had been raised in defence.
15. Section 187 of the Contract Act would come into operations whereby a transaction within the authority of an agent is valid where it is beneficial to the principal or not. It is urged that even if the obligation of the firm was not valid the transition appeared to be saved, due to doctrine of indoor management.
16. 'Adverting to the case of Pakistan Employees Cooperative Housing Society Ltd., Karachi v. Mst.
17. Anwar Sultana and others (PLD 1969 Karachi 474), it reflects that, broadly and briefly stated, this doctrine is to the effect that persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed, and are not bound to inquire whether acts of internal management have been regularly done. We have already held that it was within the competence of the society to grant the lease in question for amended plot. The late Altaf Hussain was not a member of the Society and was accordingly entitled to act on the communication regularly received by him from the Secretary of the Society, as the Secretary was clearly entitled, under bye-laws of the society, to enter into correspondence on behalf of the society. The lessee was not required to inquire as to whether in fact the Society had approved the terms which were being offered to him in writing by the Honorary Secretary of the Society. It will be recalled that considerable correspondence had passed between Altaf Hussain and Honorary Secretary of the society before the final document, exhibit 41, has issued embodying the terms of lease. These letters are on the file as exhibits 39, 40, 71, and 72.
18. ' It is next urged that the doctrine of indoor management reflects that a company which had appointed a Manager of its business shall be bound by the acts made by him in the usual course of business although sufficient powers have not in fact been obligated to him. In the instant case on the analysis of the evidence of DW Jan David it is revealed that the documents exhibit 6, 7 & 8 bear the signature of Muhammad Naseem Siddiqui not authorized to enter into correct. He had not signed the contracts with the consent of the respondent. It is urged by the learned counsels for respondent that the assertions made in the plaint are vague as no evidence has been produced by the appellant in the form of book of entries to substantiate their claim as held in MLD 1990 page 878 and PLD 1964 West Pakistan Karachi 290, thereby express or implied authority was not established: In this connection reliance is placed on PLD 1981 Karachi 504, and on 10 letters placed on record being correspondence exchanged between the parties bearing signatures of Mr. Nakayama, was signed by him comprising of 19/1, 19/3, 19/5, 19/6 and 19/10. Whatever has happened between Muhammad Naseem Siddiqui and the appellant manifestly shows that no inquiry was made from Karachi office. On behalf of the appellant reliance has been placed on the judgment authored by Lord Denning in case of Panorama Developments (Guildford) Ltd. v. Fidelis Furnishing Fabrics Ltd. (1971) 3 All England Report Er, wherein a Secretary of the Company was assumed to have acquired ostensible authority/power to make contracts connecting with the company's affairs, it was held that the contracts were for the company and were not executed with the Secretary. He is an officer of the company with extensive duties and responsibility no longer a mere clerk therefore, all of his acts comes within the ostensible authority within the company Secretary so the company was liable to pay damages.
19. ' Adverting to the doctrine of indoor management and its obligation it is observed that this doctrine applies to the transaction entered into between a third party and a cooperative society registered under the Act in the same manner doctrine applied to transaction between third party and a company registered under the Companies Act, 1913, or the Companies Ordinance, 1984. It is further observed that the doctrine of indoor management is not applicable to the transaction entered into between a registered company and the third party in good faith on the basis of the any statutory provisions in the companies Ordinance. This doctrine as appears from the preceding discussion is applicable to such transaction on the principle of public policy, equity and good conscience to protect innocent persons dealing in good faith with the corporate entity.
20. ' After due consideration to section 237 of the Contract Act, 1872, if the agent has apparent authority to enter into a particular contract on behalf of the principal, the contract is valid even though in fact he has no such authority. The written consent of the principal was not essential before the contract entered into by the agent on behalf of the principal binds the agent. It does not bind the principal and he is entitled at any time to verify it. The law allows the principal to form authority as laid down in case of Sarshar Ali v. Roberts Cotton Association Ltd. And Another (PLD 1963 SC 244).
21. ' Adverting to the damages claimed by the appellant learned counsel for appellants has contended that the appellants have failed to produce evidence, by adducing to the file and there is no proof available on record to prove fluctuation/ differential market rate of goods on the day of the breach, therefore on damages can be awarded to the appellants in the circumstances. In support of the above contention reliance is placed on the case of Islamic Republic of Pakistan Through Ministry Of Finance v. Pioneer Trading Company Karachi (1982 CLC Karachi 495), Bismillah Begum v. Messrs Pak Construction Company Ltd. (1987 MLD Karachi 648), Messrs Taj Oil Company Ltd. v. Bengal Oil Mills Ltd. (1990 MLD Karachi 877). It is revealed from the record of the case that the appellant did not produce the books of accounts required ordinarily in case of breach of contract to prove the measures of damages, the fall short in contract price on which they might have obtained the goods of like quantity at the time and place they should have been delivered. In the present case the appellant was entitled to claim damages on the basis of repurchase of the goods. Learned counsel for respondent contended that the appellant did not adduce evidence to the effect that the goods were purchased at higher rates and in the absence of such evidence the appellants were not entitled to claim damages on the basis of the difference in contract price and purchase price as he is unable to prove the repurchase for adjudication of the claim of damages on the basis of difference in contract rate and market rate on the date of breach. In the present case there is no evidence on the record to prove the market rate of the goods on the day of the breach. In the above circumstances, no damages can be awarded to the appellant, therefore the impugned judgment does not call for interference.
22. ' On the basis of what has been' discussed above High Court Appeal No,152/1995 is hereby dismissed. Parties are left to bear their own costs.