1. ' GULZAR AHMED, J.---In the first place with the consent of parties applications under Order I, Rule 10(2), C.P.C. Were taken up for hearing yesterday and arguments on these applications have continued till today. These are C.M.As. Nos. 11685/2008, 11754/2008, 11758/2008 11760/2008, 11762/2008, 11764/2008, 1166/2008 and 11768/2008.' Mr. Abid Zuberi, represents applicant in C.M.A.
2. No,11754/2008 while Mr. Kazim Hassan, represents applicants in the remaining applications.
3. Arguments of learned counsel for the parties have been heard at length.
4. ' The plaintiffs have filed this suit for recession of contract. Plaintiffs are the members of Karachi Stock Exchange and are dealing in selling and purchasing of shares for themselves as well as for their clients. Defendant No,1 is National Clearing Company of Pakistan Ltd., defendant No,2 is Karachi Stock Exchange Guarantee Limited while defendant No,3 is the Securities and Exchange Commission of Pakistan. These are three parties who have been impleaded as defendants in the suit. Defendant No, 1 acts as facilitation agent of providing Continues Funding System MK-II (CFS MK-II) under National Clearing Company of Pakistan Regulations, 2003 (the Regulations). The defendant No,1 acts as facilitation agent of authorized financiers and financees. The authorized financiers are those who provide CFS MK-II and financees are those who avail such facility. Plaintiffs admittedly are financees.
5. ' Mr. Abid S. Zuberi learned counsel for the applicant who is a authorized financier has contended that the plaintiffs have claimed recession of CFS MK-II contract without impleading as defendants the authorized financiers, who have provided finance under CFS MK-II and that as the right of authorized financiers are likely to be gravely affected by the decision of the suit, they are necessary party and ought to be joined as defendants. In support of his submissions he has relied upon the case of Uzin Export Import Enterprises for Foreign Trade, Karachi v. Union Bank of Middle East, Karachi PLD 1994 SC 95 and case of Islamic Republic of Pakistan v. Abdul Wali Khan PLD 1975 SC
463. Mr. Kazim Hassan learned counsel appearing for remaining applicants while adopting the submissions made by Mr. Abid S. Zuberi has added that major part of plaint contains allegations against authorized financiers and unless they are impleaded as defendants in the suit, there is no way to rebut such allegations and on the record these allegations will go unrebutted and unchallenged which will gravely affect the authorized financiers. Both the counsel for applicants .Have admitted that as per Regulations there is no privity of contract between the authorized financiers and financees but stated that it is mere illusory and contrary to fact as they are underlying parties to CFS MK-II contract but only undisclosed and that the relief sought by the plaintiffs in the suit as well as in the injunction application is such that the whole system of CFS MK- II financed by authorized financiers is stuck up and their finances are eroding day by day since after removal of floor from the stock exchanges i.e, 15-12-2008 inasmuch as mark to market losses are not being met by the plaintiffs/financees and it is stated that the authorized financiers may altogether lose their finances put under CFS MK-II system that it will become irrecoverable from the financiees and that they have a right to be heard where relief is sought in respect of CFS MK-II system because they will be directly affected by it.
6. ' Plaintiffs are separately represented by M/s Abdul Hafeez Pirzada, Munir A. Malik and Syed Mazharul Haq, Advocates. Mr. Munir A. Malik learned counsel for plaintiffs has argued the matter on 17-12-2008. He has contended that to be impleaded as party in the suit it is imperative that the applicant should have legal interest in the lis. He stated that applicants have no legal interest and all obligations of plaintiffs under the Regulations are towards defendant No,1 and that the apprehension expressed by applicants of suffering losses or being affected are unfounded as they are taken care by CFS MK-II protection fund and that no recourse is available to the applicants against the plaintiffs. He submitted that plaintiffs also have no remedy against applicants but only against defendant No,
1. He stated that defendant No,1 is a clearing house who has its own capital and has a clearing and settlement fund under the Rule 12 of Clearing Houses (Registration and Regulation) Rues, 2005. He has argued that in the constitutional petition filed in this court by applicants represented by Mr. Kazim Hassan, plaintiffs have not been joined as respondents and that both the authorized financiers and financees under CFS MK-II system are undisclosed and unknown and that the applicants as authorized financiers remedy is only against defendant No, 1.
7. ' Mr. Abdul Hafeez Pirzada, learned counsel also for the plaintiffs has argued referring to the Regulations 7.4.1 and 7.4.2 that the defendant No,1 is a facilitation agent of both the participants that is authorized financier and financee and that by paragraph 5 of the Regulation 7.4.3 immediately upon execution of CFS MK-II transaction and generation CFS MK-II (R) transaction the defendant No,1 assumes the position of an authorized financer with every financee and financee to every financier on the terms of respective offers and bids. He stated that as soon as para.5 of Regulation 7.4.3 comes into operation, both the authorized financier and financee evaporates and their position is taken over by the defendant No,1 the facilitating agent. Learned counsel has referred to agreement between the authorized financer and the defendant No,1 and stated that it is a biparte agreement and the suit is based upon such an agreement to which applicants have no nexus and they have no right to be joined as defendants in the suit. He further contended that the agreement between authorized financiers and defendant No.1 provides for lien on deposit under which applicants have granted to the defendant No,1 first and paramount lien with right of sale of all securities and margin deposits made by plaintiffs as financiees and that in case of incurring of liability, recourse could only be had against defendant No.1 .He has further contended that relationship between applicants and defendant No,1 is fully stated in the agreement and beyond the agreement nothing is to be read. Learned counsel further submitted that besides the facts that securities are deposited with the defendant No,1, the defendant No.1 also has 35% margin deposits of plaintiffs and that such securities and margin deposits are sufficient to meet any eventuality of any loss. Learned counsel further contended that CFS MK-II comprises of only 7% of total market trading of eligible securities which are of 43 companies having gross involvement of about rupees 11 billion out of which about rupees 2 billion is of brokers/members and about rupees 9 billion of individual persons whereas value of total market trading of Karachi Stock Exchange is of about rupees 2.45 trillion. He stated that approximately 7000 persons are involved in the trading of CFS MK-II and that turnover volume of Karachi Stock Exchange on 15-12-2008 was of 57.82 million shares out of which shares of 142 companies incurred losses. 14 companies recorded gain while shares of 5 companies remained unchanged. Learned counsel contended that irrespective of provision of Order I, rule 10, C.P.C. There is a principle of dominus litis which means that it is within the domain of plaintiff to choose the defendants in suit and no party is to be added as defendant A whom the plaintiff does not wish to be added. In support of his submissions, he has relied upon the case of Moti Ram Roshan Lal Coal Company (P) Ltd. v. District Committee Dhanpat AIR 1962 Patna 357, Altaf Parekh v. Delments Construction Company 1992 CLC 700, a judgment of G.H. Malik, J. (As his lordship then was) and a judgment from English jurisdiction that is Atid Navigation Co. Ltd. v.
8. Fairplay Towage and Shipping Co. Ltd. [1955] 1 All. ER 698. He further submitted that reason for seeking frustration of contract was force majeure which was brought about by the defendants and plaintiffs will suffer grave losses to the extent their basic memberships will be lost affecting their fundamental rights under the Constitution. He has submitted that the judgment of Abdul Wali Khan relied upon by the learned counsel for applicants is distinguishable as it is based upon the Supreme Court Rules and Article 187 of Constitution which has no application to the proceeding in the High Court and has further relied upon the cases of Dr. Saleem. Javed v. Mst. Fozia Naseem 2003 SCM R 965, Province of Punjab v. K.Avi Engineering (Pvt.) Ltd. 2007 M LD 89 and Messrs Jans Caterers v. Islamic Republic of Pakistan PLD 1972 Lah.
169. He has also contended that a Civil Court at Lahore has granted an injunction which is continuing.
9. ' Mr. Ejaz Ahmed, learned counsel for defendant No,1 has submitted that plaintiff has based its suit on the allegation that the authorized financiers have withdrawn their commitment under CFS MK-II.
10. He has stated that authorized financiers under the agreement have committed rupees 10 billion under CFS MK-II system which has been over subscribed to over rupees 11 billion which has been availed by the plaintiffs and other financees. He has further contended that floor on the stock market was imposed at the request of the plaintiffs, members/brokers and in this respect has referred to annexure 'F-6' to the plaint. He has stated that open position of the finances under the CFS MK-II availed is about rupees 19 billions as shown in annexure 'F-1' to the plaint. He has further submitted that since after the decision of removal of floor the plaintiffs, members and brokers have franticly started filing cases in different courts to avoid facing the reality of market and that the defendant No,1 maintained complete record concerning dealing between the authorized financiers and financee with specific transaction and defendant No,1 does not earn any money in its fund but provide service. He stated that defendant No,1 has no objection for the joining of applicants as defendants in the suit.
11. ' Mr. Munib Akhtar learned counsel for defendant No,2 also gave no objection for joining of the applicants as defendants so also Mr.Makhdoom Ali Khan learned counsel for defendant No,3 gave no objection for joining the applicants as defendants in the suit. He however stated that principle of undisclosed principal as laid down in Contract Act will be applicable. Mr. Aamir Raza Naqvi learned D.A.G. Also conceded for joining of applicants as defendants in the suit.
12. ' I have considered the submissions made by learned counsel and have gone through the law cited by them in support thereof.
13. Regulation 7.4.2 contains heading of undisclosed trading and it provides that all CFS MK-II contracts shall be facilitated by the company by acting as CFS MK-II facilitation agent for the respective CFS MK-II participants which are underlying parties to CFS MK-II contracts. CFS MK-II participants will not be able to access the identity of underlying counter party to any of CFS MK-II contracts. This provision deals with undisclosed trading and describes authorized financiers and financeess as underlying parties to CFS MK-II contract but their identities are not made accessible.
14. Regulation 7.4.3 contains a heading of procedure and in paragraph 5 it provides that immediately upon execution of CFS MK-II transaction and generation of CFS MK-II(R) transaction company shall as CFS MK-II facilitation agent assume the position of authorized financier with every financee and a financee to every authorized financier on terms of respective offers and bids. These are the basic features in the regulations which deal with matter of disclosure of a trading and status of the facilitation agent, defendant No,1 and the participants on, execution of CFS MK-II transaction and generation of CFS MK-II (R) transaction. The character of defendant No,1 as depicted under Regulations 7.4.2 is that of an agent of two undisclosed principals. Both principals under the Regulations as well as the agreements made between them and defendant No,1 by their terms are bound to comply with them in their totality which brings about and maintain an equilibrium. In case of deviation by any one of the principal is bound to produce result by which the other principal will find itself to be exposed to prejudice and loss and in the event where such exposure is made or is likely to be made the principal standing in a position of such exposure will be aggrieved who aught to have remedy. Chapter 13 of the regulation deals with money default management which provides mechanism and procedure which has to be adopted and followed for obtaining settlement of money obligation by clearing member and measures in this respect has to be initiated by the defendant No, 1.
15. Provision of sub-rule (2) of Rule 10, Order I, C.P.C. Deals with the matter of adding or deleting plaintiff and defendant in suit and empowers the court with judicial discretion in this regard. It lays down two situations where such power may be exercised. Firstly, when court comes to the conclusion that a party who ought to have been joined is not before it and secondly, whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit. The recession of contract sought by the plaintiff upon their pleadings is basically against defendant No,1 but it seems to ignore fact patent from the allegations made in the plaint that defendant No.1 though having security and margin deposit is only facilitating agent between two participants and is not beneficiary nor seem to have any stake of its own in CFS MK-II transaction who in fact are the participants. Defendant No,1 provides one window operation for CFS MK-II transaction and has to follow Regulations and terms of the agreements with the participants. Where the CFS MK-II transactions are sought to be rescinded on being frustrated, the authorized financiers apparently will be the parties who will directly be affected even though they may have recourse to the security in custody of defendant No.1. More particularly, when it is the case of applicants that such security in custody of defendant No,1 will not be sufficient to meet the loss which is being incurred in the market day to day.
16. The principle of "dominos lit is" will be applicable to a person not connected with the cause of action of the suit and who is total stranger to proceedings, but not to the person, who is directly to be affected by the proceeding of the suit. The applicants seem to be connected with the cause of action of suit and are not total strangers. The question relating to joinder of parties in the suit is always based upon peculiar facts and circumstances of each case and no specific rule as standard procedure can be applied for each case. To ascertain as to who should or should not be plaintiff and defendant in the suit, the facts of that very case have to be looked into with cause of action upon which a decision can reasonably be made in this respect. The facts and circumstances of the suit and cause of action as claimed by the plaintiffs do show that the applicants are necessary party to the suit. The applications of the applicants are therefore allowed and they be joined as defendants Nos. 4 to 11, respectively, according to serial numbers of their applications. Amended title of plaint be filed within one day. Matter is adjourned to 19-12-2008. To be taken up at 9-00 a.m. When the remaining applications will be heard. Interim order passed earlier to continue till then.