' MUHAMMAD FAISAL KAMAL ALAM, J.--- The Rice Export Corporation of Pakistan Limited, the predecessor-in-interest of the present Plaintiff, that is, the Trading Cdrporation of Pakistan ("TCP"), a public sector company, has filed the present suit for Recovery of Rs,1,74,86,134.14 (Rupees One Crore Seventy Four Lacs Eighty Six Thousand One Hundred Thirty Four and Fourteen Paisas) against the Defendant, with the following prayer:
(i) Decree for a sum of Rs,1,74,86, 134.14 against the Defendants with interest and for mark up at 14% per annum from the date of suit till recovery.
(ii) In the alternatively the Plaintiffs prays for a judgment and decree against the Defendants to render true and faithful account of the stock of rice and bardana entrusted to Defendant as mentioned in the plaint and to pass final decree for the amount ascertained on rendition of account.
(iii) Cost of the suit.
(iv) Any other relief which this Honourable Court may deem fit and proper in the circumstances of the case."
2. The Defendant was the handling agent of Plaintiff, inter alia, in respect of Rice Crop 1981-82 at Qasim Rice Godown of the Plaintiff and subsequent to a bidding process, an Agreement No,RECP- 5/M&M/81- 82/3, dated 27.10.1981 was entered into between the parties hereto, where under, Defendant's scope of service included receiving, storing, forwarding and shipping Rice consignments, that is, to receive rice from different parts of Country at the designated Godown and after making appropriate arrangement for its storing, the same were to be transported and delivered at the ships for further exports. Term of the Agreement was two years, which was twice extended for a period of one year and six months respectively. For reference sake this entire document be referred to as "Subject Contract", which has been exhibited in evidence as Exhibit P/1- 1.
3. The grievance of Plaintiff is that despite meetings, notices and reminders, the Defendant failed to render the R.S.A-Reserve Stock Accounts ("RSA"), in respect of rice stock and Bardana/bags in terms of the above Subject Contract. Claim of the Plaintiff has been specifically mentioned in paragraph-16 of plaint and paragraph-17 of the Affidavitin-Evidence of Plaintiff's witness (" P. W .-1 " ).
4. Defendant through his written statement contested the claim. Primarily, the Defendant in its pleadings has taken the stance that he performed the work to the satisfaction of Plaintiff and that is why the latter not only issued the Defendant satisfactory work performance certificate but also made payments (to the Defendant). The Defendant has also averred that it had submitted periodical reports about the inventory of Rice Stock to the Plaintiff, but due to detention of Defendant in some criminal case, the Plaintiff dispossessed the Defendant from the Godown. It was also claimed by the Defendant that over all watch and ward of the Qasim Rice Godown was/is with Plaintiff. With regard to the specific claim of Plaintiff as mentioned in paragraphs-16 of the plaint and paragraph-17 of Affidavit-in-Evidence about unaccounted for stock of Basmati Rice of 2051.1318 (approximately) Metric Tons, having value of Rs,92,46,194.48 (at that relevant time), and quantity of 2760.2099 Metric Tons of other variety of Rice, having value of Rs,64,91,986.08 and different types of bags including gunny bags of different quantities; has not been dealt with in detail by the Defendant, except the corresponding paragraph-11 of written statement contains a denial simplicitor.
5. From the divergent pleadings of the parties, the following issues were framed by the Court by its order dated 10.03.1991:- "I. Who has violated the terms and conditions of the contract?
2. Whether the works and services of defendant was un-satisfactory as alleged?
3. Whether the defendant failed and neglected to submit accounts of outstanding rice and bardanas and reports as alleged?
4. To what relief if any the Plaintiffs are entitled to?
5. What should the Decree be?"
6. Respective parties have examined one witness each. Mr. Liaquat Ali Khan, the then Deputy Manager of the Plaintiff, testified on behalf of the Plaintiff as P.W.-1, whereas, Muhammad Alam (the Defendant) examined himself as D.W.-1.
7. Findings on the above issues are as follows:-- ' ISSUES NO.1 AND 2 AS UNDER, AFFIRMATIVE.
' ISSUE NO.3 AFFIMATIVE
8. During arguments, Mr. Sajid Latif, learned counsel for the Defendant, raised a legal plea that the present suit was neither filed by a competent person nor there is any Board Resolution from the Plaintiff dCompany, as envisaged under Order XXIX, Rule 1 of Civil Procedure Code, 1908 ("CPC"). Mr. Ashfaq Hussain Rizvi, learned counsel for the Plaintiff, controverted this on the ground that this objection was neither taken in the written statement nor any issue was framed in this regard. It was further argued that by the Order dated 10.01.2005 a C.M.A.No,6369/2004 filed under Order VII, Rule 11 of CPC was dismissed by this Court, which has attained finality.
9. I have perused the above mentioned order, whereunder though the abovementioned interlocutory application of Defendant was dismissed, but with an observation that the above objection with regard to the authority of person, who had filed the instant suit on behalf of the Plaintiff Company can be considered at the time of final arguments. In evidence also, P.W.- I was cross-examined on this aspect of the case. On this very issue, various judicial pronouncements are holding the field starting from the famous case reported as PLD 1966 Supreme Court 684 (Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd.), which have to be considered before proceeding further in the matter.
10. At this juncture, Mr. S, Ashfaq Hussain Rizvi, learned counsel for the Plaintiff, strenuously argued that the Plaintiff being a government organization, a thorough discussion had taken place amongst the top management before filing of the instant suit. Consequently, by the order dated 09.02.2016, it was deemed just and proper to provide both parties an opportunity to prove or disprove their respective plea by leading evidence. On 15.03.2016, Mr. Liaquat Ali Khan, who earlier had also testified on behalf of Plaintiff as P.W.1, entered the witness box along with official record of relevant noting sheets. He has specifically pointed out that in paragraph-228/N the approval was given in the light of a legal advice that the Suit against M/s Shehzad Enterprise should be filed. This paragraph is preceded by a discussion amongst Plaintiff's officers. Paragraph-232/N of this noting sheet mentioned the fact that plaint has been signed, followed by other paragraphs about the instant litigation. It has been clarified by the Plaintiff's counsel that present Defendant Muhammad Alam admittedly was the sole proprietor of M/s Shehzad Enterprise and the same fact is also mentioned in the title of the present plaint, besides, in the Subject Contract, it is M/s Shehzad Enterprise, which is mentioned as Handling Agent for Plaintiff. Learned counsel for the Defendant, Mr. Sajid Latif, cross-examined the above witnesses whose testimony has now been part of the evidence as Exhibit-P/8 and the relevant record of the noting sheets of the Plaintiff Company has been exhibited as Ex.P-8/I. To a specific question, the above named witness (Liaquat Ali Khan) while refuting the suggestion has stated that the above noting sheets (Exhibit-P-8/1) has approval of two Directors besides other senior officials of Plaintiff Company. It was further deposed by the above named witness that S. M. Humayun Akhtar, who has filed the instant suit, himself was a Director at that relevant time.
11. Learned counsel for the Defendant, in his written arguments has relied upon the following case law in support of his submission that the present suit being unauthorizedly filed should be dismissed:--
(i) PLD 1959 SC page-550,
(ii) PLD 1966 Supreme Court 684 (Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd.) (ibid),
(iii) PLD 1977 SC page-550 (Khan lftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd. Lahore)
(iv) PLD 2004 Karachi page-17 (Abdul Hameed Khan v. Mrs. Saeeda Khalid Kamal Khan).
12. For resolving this issue, the following judicial pronouncements would be most relevant:--
(i) PLD 1966 Supreme Court 684 (Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd.) (ibid)
(ii) PLD 1997 Karachi page-62 (Abdul Rahim and others v. Messrs United Bank Ltd. Of Pakistan)
(iii) 2007 CLC (Civil Law Cases) page-1811 (Trading Corporation of Pakistan v. Merchant Agency, the Trading Corporation Case).
13. The entire plethora of case law on the scope and applicability of Order XXIX, Rule 1 of Code of Civil Procedure was summarized in PLD 1997 Karachi Page-62 (Abdul Rahim v. United Bank Limited) and 2007 Civil Law Cases (CLC) Page-1811 (Trading Corporation of Pakistan v. Merchant Agency); the last two decisions were handed down by the learned Division Bench of this Court. Paragraph-37 of Abdul Rahim 's Case (ibid), contains a precis of law laid down by taking into account various judicial precedents including the aforementioned two well-known judgments of Hon'ble Apex Court, viz. PLD 1966 Supreme Court page-684 (Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd.) and PLD 1971 SC page-550 (Khan Iftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore), which can be further condensed herein below for deciding the present Issue at hand--
(i) any shortcoming in compliance of Order XXIX, Rule 1 (of C.P.C., 1908) is curable, for instance, if a formal Board Resolution is not there, then the Articles of Association and/or even internal record [un-rebutted one] like Noting Sheets, can be taken into account to determine about the authority of a person instituting a legal proceeding/suit, but,
(ii) if the very suit has been unauthorizedly and incompetently filed, that is, neither any authorization from the Board of Directors exists, nor the Articles of Association provide such authority, then such a defect remains incurable, ,even by a subsequent ratification by the Board of Directors.
14. Mr. Ashfaq Hussain Rizvi, learned counsel for the Plaintiff, has also filed Memorandum and Articles of Associations of erstwhile Rice Export Corporation (Private) Limited on whose behalf the present suit was originally filed. Learned counsel for the Plaintiff, has referred to Articles 106, 109, 113, 115 and 116 of the Articles of Associations to further substantiate his stance that approval of two Directors as mentioned above in the noting sheets was for all intents and purposes was in fact the approval of the Board of Plaintiff Company. Article 106 mentions that the two Directors shall form the quorum for a Board meeting, whereas Article 109 provides that if a quorum at a Board meeting is present, then the Board can exercise all such powers and discretion as conferred upon it generally. Article 113 specifically mentions that for a valid and effectual resolution it is necessary that it should be signed or initialed by at least two Directors. Articles 115 and 116 confer upon the Board of Directors of Plaintiff Company the authority and power to take decisions within framework of Memorandum of Association and clause (g) of Article 116 in fact authorizes the Board, inter alia, to institute, conduct and defend legal proceedings by or against the Corporation, that is, Plaintiff.
Learned counsel for the Plaintiff argues that if the above provisions of Article of Associations are seen in the light of un-rebutted documentary evidence in the shape of Noting Sheets produced as Exhibit P.8/1, then it would only manifest that the present suit at that relevant time was competently instituted after due deliberation amongst the Directors and other senior officials of the Plaintiff including its legal advisor. As per learned counsel for the Plaintiff, that since the approval was given by the two Directors including said S.M. Humayun Akhtar, who at that time was Director Technical also, therefore, the instant suit has been properly instituted and filed. In this regard, he has relied upon the above mentioned citation - 2007 CLC page-1811.
15. The above reported case is coincidently of present Plaintiff but against some other party. Facts are also relevant as in this cited judgment issue about non-availability of a formal Board Resolution authorizing the filing of a recovery suit, was raised by the Defendant, which was decided by this Court, and approval given through internal notings was accepted as a valid authorization by the Board of Directors by treating the same as resolution by circulation. It has been held as under:- "Article 106 of the Articles of Association of the appellant provides that minimum quorum for the meeting of Board of Directors shall be two. (emphasis supplied)
' In this background even if no formal meeting of Directors was called for passing the requisite resolution, the approval of three Directors including the Chairman can be treated as "resolution by circulation" under Article 113 of the Articles of Association of the appellant, granting authorization for filing the recovery suit. Thus, we hold that though there was no formal resolution passed in a meeting for filing recovery suit against the respondent, there did exist approval of the requisite number of Directors in terms of Article 113, who authorized the filing of the suit. In such circumstances absence of formal resolution could only be treated as technical omission which in the peculiar circumstances cannot be regarded as incurable defect. Furthermore, the appellant, out of abundant caution, has filed a formal resolution of appellant's Board of Directors signed by six Directors including its Chairman, ratifying the act of the person who filed the suit on behalf of the appellant."
16. Taking into account the facts of the instant case in the light of above judicial pronouncements, in my considered opinion the decision handed down by the Learned Division Bench of this Court in Trading Corporation (ibid); 2007 CLC page-1811, squarely applies to the case at hand, as, the two Directors recorded their separate approvals to file the instant proceeding, besides other senior officers who were at the helm of the affairs of the Plaintiff-Company, recorded their respective approvals after a detailed discussion, as also mentioned in the foregoing paragraph. Veracity and authenticity of the aforementioned Note Sheets/Noting Portion is not disputed. Lastly, the verification portion/clause of the plaint itself mentions said S.M. Humayun Alchtar as Director, means that he was holding one of those offices which has been recognized by the above provision of C.P.C. (Order XXIX, Rule 1) for filing the pleading. Consequently, I hold that the instant suit has been filed by a competent person who was the then Director and Principal Officer of the Company and no violation of Order XXIX Rule 1 of C.P.C. Has taken place that can be adjudged as fatal to Plaintiff's case and, thus, the suit is maintainable.
' ISSUE NO.3:
17. Since finding on this issue would affect the first and second issues, therefore, Issue No,3 is taken up first. The evidence of both witnesses has been assessed. In cross-examination, P.W.-1 has reiterated that outstanding balance of unaccounted for rice stock lying with Defendant was 2051.1318 Metric Tons (Basmati Rice) and 2760.2099. Metric Tons (other Rice) having a total value (at that relevant time) of Rs,15738180.56 (Rupees One Crore Fifty Seven Lacs Thirty Eight Thousand One Hundred Eighty and Fifty Six paisas). In evidence, the Defendant could not shake the testimony of P.W.-1 about non-production of RSA with regard to Rice Stock as well as gunny bags.
18. Though paragraph-17 of Affidavit-in-Evidence is the material part of Plaintiff's testimony, whereunder a detail (breakup) of Plaintiff's claim is mentioned with regard to Rice Stock as well as bags, but on this very factual aspect, P.W.-1 was not cross-examined.
19. The Defendant examined himself as D.W.-1 and in cross examination, he acknowledged non- submission of RSA to Plaintiff with regard to Rice Stock. It would be advantageous to reproduce the relevant portion of D.W.-1 deposition as under:- "Question:- Whether the losses caused to the Plaintiff were normal losses in handling or accidental losses or storage losses and were beyond your control ?
' Answer:- That the losses caused to the Plaintiff are normal storage, accidental, beyond my control. I did not produce any evidence showing the losses caused to the Plaintiff as stated in my answer to the above question.
' In respect of Basmati Rice 2051.1318 Metric Tons I state that neither I have transferred nor submitted accounts to the Plaintiff Voluntarily says that the said Basmati Rice 2051.1318 Metric Tons are the losses. It is correct to suggest that I did not transfer or submitted accounts before the Plaintiffs in respect of other Rice weighing 2760.2099 Metric Tons. Voluntarily says that these are losses in handling and storage etc."
20. In cross-examination, D.W.-1 admitted that submission of periodical accounts of the stock was his responsibility, while further acknowledging that neither with his pleadings nor in the evidence, he has produced the accounts of rice stocks. It was also admitted by said D.W-1 that watch and ward of the Godown was done by his employees. His further deposition with regard to the fact that security staff of Plaintiff did not interfere in the affairs of Defendant while he performed functions as a Contractor, has in fact controverted the stance of Defendant taken in his pleadings. It was also acknowledged by the said D.W.-1 that security staff of Plaintiff posted at the main gate of the Godown did not weigh bags containing Rice.
21. Although, Mr. Sajid Latif, the learned counsel representing the Defendant has vehemently argued, besides mentioning this in his written arguments dated 17.02.2007, that the designated Godown was illegally taken over by Plaintiff on 26.02.1987, hence the exercise of finalization of account could not be carried out and the instant suit is an afterthought on the part of Plaintiff. This defence has been controverted by the learned counsel for the Plaintiff and he has referred to the relevant portion of deposition of D.W.-1, in which the Defendant himself has admitted that he did not file any accounts of stock either with written statement or Affidavit-in-Evidence. The deposition of said Defendant was further relied upon by Plaintiff's side to shatter the above defence of Defendant about taking over of Qasim Rice Godown by Plaintiff and disposal of Rice Stock. The Defendant in his cross-examination has failed to give any specific figures with regard to disposal of Rice Stock by Plaintiff. To a specific question, the Defendant showed his ignorance about the date of his release from the jail, though he has not denied the suggestion that criminal case was lodged against him in respect of smuggling narcotics.
22. Appraisal of the evidence leads to the conclusion that the Defendant did in fact neglect to submit periodical accounts of outstanding Rice and even during evidence did not produce any document containing a breakup in the form of RSA to discredit the claim of Plaintiff.
Consequently, Issue No,3 is answered in Affirmative and against the Defendant.
ISSUES NO. 1 AND 2:
23. The Defendant has neither pleaded nor stated in the evidence about any default on the part of Plaintiff in making timely paym ents to the Defendant for their services as rice handling contractor, therefore, if the Plaintiff fulfilled its part of contractual obligation then the Defendant is also saddled with a liability to discharge its statutory obligation being bailee of the goods and a contractual obligation as contractor. After appraisal of the evidence, it has been proved that Defendant had failed to submit periodical RSA. Defendant could not disprove the figures and amount mentioned in earlier demand letters/notices of 26.03.1987 and 29.04.1987, exhibited as Exh.P/1-4 and Exh . P/1-5 .
24. Mr. Ashfaq Hussain Rizvi, learned counsel for the Plaintiff, while citing a reported Judgment in 1988 CLC page-1381 (Messrs Mastersons v. Messrs Ebrahim Enterprises and another), has argued that Sections 148, 160 and 161 of the Contract Act, 1872, are fully attracted to the present dispute He argued that the Defendant being bailee is liable to make good the losses and to controvert this assertion, onus is on the Defendant to show that he performed his part of contract in a faithful and diligent manner, which onus the Defendant has failed to discharge.
25. The above submission has substance; in terms of Section 151 of the Contract Act, 1872, the bailee has to exercise due care and diligence in respect of goods bailed to him and under Section 161, it is the bailee, who is responsible if the bailed goods are not returned, delivered or tendered on the proper time and if this default results in any loss, then it is the liability of bailee. In the above Judgment of this Court (1988 CLC B 1381); the learned Judge besides holding that burden of proof is on bailee to show that he made appropriate arrangement for the discharge of his statutory duty, has also expounded principle of res ipsa lequitur (things speaks for themselves). As an analogy, the learned Judge has also preferred to Section 116 of the Customs Act, 1969, and held that the warehouse keeper shall be responsible for the custody of goods lodged in his warehouse. This concept of bailment was earlier expounded in a IB Division Bench Judgment from the Indian Jurisdiction reported in AIR 1962 MADRAS 244 (V 49 C 57) (Sri Narasimhaswami, Namagiri Amman and Sri Ranganathaswa mi Temples v. Muthukrishna lyengar). In the above case law reliance was placed on the principle laid down by English Courts, in which a distinction has been drawn between a gratuitous bailee, that is, involuntary bailee and bailee for reward or hire. The status of present Defendant in the instant suit is of bailee for reward. It has been held, that once a contract of bailment is proved and there is the entrustment of the goods with the bailee, then the loss of the subject matter of the bailment is a prima facie evidence of the negligence of the bailee.
Conversely, in the present case onus is on Defendant to prove that he in fact had submitted periodical RSA (Reserve Stock Accounts) to Plaintiff in respect of rice and bags, which, it is evident, after conclusion of evidence, that Defendant never submitted such periodical accounts in terms of the Subject Contract, in order to keep track of rice inventory/stock. If a proper inventory was maintained, any shortage would have been easily ascertained at an early stage, followed by remedial measures, which would have saved the Plaintiff from sustaining losses. In the above Judgment of Madras High Court, relevant rule has been borrowed from Halsbury's Laws of England Vol. 2, 3rd Edn. Page 117, which in my considered view would be beneficial to reproduce herein under, as the same is applicable to the present case:-- "When a chattel entrusted to a custodian is lost, injured, or destroyed, the onus of proof is on the custodian to show that the injury did not happen in consequence of his neglect to use such care and diligence as a prudent or careful man would exercise in relation to his own property: It be succeeds in showing this he is not bound to show how or when the loss or damage occurred. If a custodian declines either to produce the chattel entrusted to him, when required to do so by the owner, or to explain how it has disappeared, the refusal amounts prima facie to evidence of breach of duty on his part, and throws on him the onus of showing that the exercised due care in the custody of the chattel and in the selection of the servants employed by him in the warehousing."
' Accordingly, it is the Defendant, who violated the terms and conditions of the Contract and the Issue No,1 is answered Accordingly, whereas, Issue No,2 is answered in Affirmative and against the Defendant.\ 'ISSUES NO.4 AND 5:
26. The upshot of the above is that the suit is decreed in the sum of Rs,1,74,86,134.14 (Rupees One Crore Seventy Four Lacs Eighty Six Thousand One Hundred Thirty Four and Fourteen Paisas) with 10% markup per annum from the date of institution of suit till realization of amount. However, parties are left to bear their own costs.