1. ' GULZAR AHMED, J.--- This is a suit for declaration and recovery of US$ 1,059,174.94 and injunction against the defendants being (1) Russian Federation through its Ministry of Foreign Economic Relation and Trade and (2) Bank of Foreign Economic Affairs of the USSR presently named as Bank of Foreign Economic Affairs of Russian federation alleging that plaintiff has exported in the year, 1991 169,000 pieces of warm jackets to USSR which remained uncleared and undisposed of at the port of Nikolaev, USSR. In the year, 1992 plaintiff requested the defendant No,1 to examine the possibility of the delivery of said jackets through FA "Rosvneshtrog" department of defendant No, 1.
2. The defendant No,1 authorized the purchase and outlined repayment procedure allocating funds in the sum of US$ 1.2 Million to the said Rosvneshtrog for payment. An agreement dated 8-4-1992 was concluded between the plaintiff and Rosvneshtrog. Clause-8 of the said agreement provided that payment will be effected in Pak rupees by presenting an invoice for collection through National Bank of Pakistan (NBP). It is alleged that provisional procedure for the payment of the imported goods in 1992 on account of repayment of credits provided by defendant No,1 to foreign governments was established and part payment of the said goods was made to the plaintiff. In May, 1992 certain amendments were made in the agreement by way of addendum. The purchaser Rosvneshtrog informed the plaintiff that in accordance with the letter of the defendant No,1 dated 29-12-1992 payment of goods supplied under the said contract will be effected in 1993. It is alleged that plaintiff understood from the said letter dated 29-12-1992 that the payment of Pakistani goods would be effected by the Government of Pakistan in Pakistani currency and such payment would be adjusted towards indebtedness of Government of Pakistan to the defendant No,1 in respect of the outstanding aids. Rosvnesthtrog through its letter dated 11-1-1995 required the defendant No,1 to arrange payment of US$ 885,706 to the plaintiff in accordance with the Inter-governmental agreement of Russia and Pakistan of 1993. It is alleged that no payment was made despite repeated requests and demands of the plaintiff to Rosvneshtrog and to the defendant No,
1. In terms of the agreement which had an arbitration clause, plaintiff made a reference to International Court of Commercial Arbitration Chamber of Commerce and Industry of the Russian Federation who gave its award dated 10-6-1998 against Rosvneshtrog inter alia, for payment of sum in Pakistani rupees equivalent to US$ 1,046,163.10 towards outstanding of the goods, interest and arbitration fee. Plaintiff approached the N. B. P for obtaining payment on the award who denied payment to the plaintiff. It is alleged that in the year, 1999 an agreement was initialed between the defendant No,1 and the Government of Pakistan regarding settlement of outstanding claims of Pakistani exporters providing that part of the fund held by the defendant No,2 were to be utilized by defendant No,1 for repayment of goods delivered by Pakistani exporters to the defendant No, 1.
3. Plaintiff was denied payment despite Rosvneshtrog having admitted its liability towards the plaintiff and its request to the defendant No,1 to make payment being State owned enterprise. It is alleged that the defendant No,2 who is the Bank of defendant No,1 maintains an account with the N.B.P and all payments and remittance to the defendant No,] are made by the Government of Pakistan through the said account of the defendant No,2. It is alleged that on the basis of agreement dated 8-4-1992 and its addendum of May, 1992 and Inter-governmental agreement dated 22-6-1994 defendant No,1 is liable for payment of dues of Pakistani exporters delivered to the importers of the defendant No,1. Plaintiff has claimed declaration that it is entitled to receive from the defendant No,1 the amount due from Rosvneshtrog from the amounts held by it in the account of defendant No,2 with, N.B.P.
4. ' Defendants were served with the summons. Defendant No,2 filed written statement in which it denied the claim of the plaintiff and sought dismissal of suit. Defendant No,1 choose not to defend the suit and was declared ex parte vide order dated 28-10-2002. On the pleadings of the parties, following issues were framed:---
(1) Whether the plaintiff is entitled to receive and the defendant No,1 is liable to pay the amounts due from Rosvneshtrog to the plaintiff?
(2) Whether the amounts kept in the account of defendant No,2 held with National Bank of Pakistan belongs to the defendant No,1?
(3) Whether the plaintiff is entitled to be paid any amount from the account of defendant No,2 maintained with National Bank of Pakistan?
(4) What should the decree be?
5. ' By order dated 15-9-2003 at the behest of defendant No,2 following further issues were framed:--- '
(i) Whether the suit is barred by limitation?
(ii) Whether this Court has jurisdiction to entertain and try the suit?
(iii) Whether Rosvneshtrog is a department of State of Russian Federation? If so, what is its effect?
6. ' The evidence was recorded on commission. Plaintiff filed affidavit-in-evidence of its director Saeed Alam. This witness was cross-examined by the counsel for the defendant No,2 on 25-3- 2004. The counsel for defendant No,2 then entered a statement dated 20-3-2004 that the defendant No,2 does not want to produce any witness whereupon the commission was returned and accepted by the Court vide order dated 24-5-2004 and the matter was fixed for hearing of arguments. On the request of the plaintiff, the suit against defendant No,2 was dismissed as withdrawn vide order dated 29-1-2008.
7. ' Learned counsel for the plaintiff has contended that through evidence plaintiff has established that it is entitled to payment against supply of jackets to Rosvneshtrog. He has contended that Rosvneshtrog was an association of Russian Federation and thus the defendant No,1 is liable to pay the dues outstanding against the Rosvneshtrog. He has contended that though ,the counsel for the defendant No,2 has cross examined the plaintiff witness but no evidence was led by the defendant No,2 to dispute the claim of the plaintiff and even the defendant No,1 has chosen not to defend the suit. He has also contended that none of the documents produced by the plaintiff witness were challenged and that Ministry of Commerce, Government of Pakistan has admitted making of few payment from the account of defendant No,2 maintained at N.B.P. For meeting the liability of Rosvneshtrog. He has finally contended that the plaintiff is entitled for payment in accordance with the clause-8 of the agreement and the suit is liable to be decreed as prayed.
8. ' Mr. Taswa r Ali Hashmi, learned counsel for the N.B.P. Has contended that the defendant No,2 maintains an account with N.B.P, funds of which belongs to Russian Federation and that such account was started in the year, 1966 under the agreement made with the then USSR and Government of Pakistan. He has stated that clause-8 of the agreement. Does not refer to the account of defendant No,2 maintained with the N.B.P. And has referred to Annexure-A filed with the N.B.P.'s counter affidavit. He has contended that the Bank can allow disbursement from the account of defendant No,2 only when it receives instructions in accordance with the agreement.
9. ' I have considered the submissions made by the learned counsel and have gone through the record.
10. ' The immediate question that needs to be dealt with in this matter is as to whether the defendant No,1 is liable for the claim made in the suit. The defendant No,1 authorized Rosvneshtrog to make purchase of jackets from the plaintiff. Pursuant to such authorization contract dated 8-4-1992 was executed between the plaintiff and Rosvneshtrog. The object of the contract was mentioned in clause-1 of the contract that the sellers have sold and the buyers have bought on CIF Russia readymade garments in the quantity, assortment, at prices and according to technical conditions as stated in Supplement No,1 being an integral part of the present contract. It appears that in respect of the said object of contract, the payment was made to the plaintiff as is apparent from Exh.P.W.2, P.3 and P.W.4 as per clause-8 of the contract. Though with this contract, Supplement-II is also attached but apparently the object of the contract did not cover Supplement-II and it became a matter of issue between the plaintiff and the said Rosvneshtrog pursuant to which plaintiff took up its case before the International Court of Cameral Arbitration Chamber of Commerce and Industry of Russian Federation who gave its Award dated 10-6-1998 in favour of the plaintiff and against Rosvneshtrog in the amount of US$ 1,046,163.10 to be paid in Pakistani currency. The plaintiff sought impleading of defendant No,1 in the arbitration as co-defendant. The Rosvneshtrog denied the plaintiff's claim before the arbitrators on the ground that payment of delivered goods is to be made by defendant No,1 and it be joined as a codefendant. The arbitrators did not agree for joining defendant No,1 as co-defendant in the arbitration proceeding for the reason that it was not a part to the arbitration agreement. Rosvneshtrog further took plea in the arbitration that the contract was concluded on the instructions of defendant No,1 when it was not independent juridical body but a structural sub-division of defendant No,1 and that it had tried to obtain from the Ministry a permit but remained unsuccessful. The arbitrators considered this argument and found it unreasonable on the ground that Rosvneshtrog neither in the moment of contract conclusion nor later was a structural subdivision of defendant No,1 but was an independent juridical body and concluded the contract with the plaintiff and relying upon Rule of Civil Court of RSFSR of 1964 concluded that the juridical body meets its obligations by its own and that the defendant No,1 will not meet the obligations of Rosvneshtrog. The award has been produced by the plaintiff witness as Exh.P/15. Plaintiff seems to have approached National Bank of Pakistan for seeking disbursement of the amount awarded in its favour by debiting the account of the defendant. The defendant No,2 through Exh.X/10 denied its obligation under the award and stated that the obligation is of Rosvneshtrog and declined payment under the award. Plaintiff has produced as Exh.X/11 the agreement between the Government of Russian Federation and Government of Islamic Republic Pakistan with regard to the settlement of counter claims. Annexure "3" of this agreement deals with the claim of the plaintiff and provides that the settlement must take place between the sellers and buyers directly.
11. ' The plaintiff claims that Rosvneshtrog is a department of the defendant No,1 and that the defendant No,1 will be liable to meet its claim. By Exh.X, the Deputy Minister of defendant No,1 seems to have permitted Rosvneshtrog to enter into an agreement to purchase the jackets from plaintiff.
12. The contract itself is made between the plaintiff and the Rosvneshtrog. The said contract nowhere mentions that Rosvneshtrog is a state enterprise. Rather by entering into contract with Rosvneshtrog, the plaintiff seems to have admitted the legal entity of Rosvneshtrog to contract with it. In the award the fact that Rosvneshtrog itself is a legal entity and is liable for its own obligations is specifically mentioned. As seems to be apparent from the award and Exh.X, the function of defendant No,1 was to grant permit and allocate foreign exchange for purchases from abroad by independent associations. This seems to be normal function of all States where it regulates its commerce and trade with foreign States and keeps check on its foreign exchange dealings. The performance of such regulatory functions by the State will not make itself liable for the facts of default on the part of independent associations who contract with foreign parties.
13. ' In cross-examination plaintiff witness categorically admitted that the plaintiff has accepted the award and has not preferred any appeal against it. The plaintiff witness was confronted with Exh.X/11 and did not deny the suggestion that this agreement between the Russian Federation and Government of Pakistan specifically provided that the payment of plaintiff's claim is to be settled by the buyer itself. Plaintiff witness further stated in cross-examination that the suit is based on the arbitration award. The above narration of facts which are admitted by the plaintiff itself amply demonstrates and establishes the fact that Rosvneshtrog was a legal entity separate from the Russian Federation and was liable to meet its own obligation incurred by the contract made with the plaintiff. No evidence has been produced by the plaintiff to establish the fact that Rosvneshtrog was a department of the Russian Federation. Rather the award produced by the plaintiff in evidence goes contrary to such plea of the plaintiff.
14. ' Plaintiff having failed to establish the liability of the defendant No,1 for the claim made in the suit, there is no occasion to deal with further issues in the suit. The suit as against defendant No,2 already stands dismissed as withdrawn. The suit is therefore, dismissed.