MUNIB AKHTAR, J.---This appeal arises out of Suit 1177/2013, filed by the present respondents against the appellants, and is against an order dated 21.03.2014 whereby the learned Single Judge was pleased to grant interim relief in terms as stated therein. Three applications were disposed off by means of the impugned order. C.M.A. 10015/2013, which may be regarded as the main application was filed by the respondents (i,e,, the plaintiffs in the Suit) seeking interim injunctive relief. On this application, an interim order was made on 20.09.2013. Another interim injunctive order was made on 06.01.2014, but the order was modified to a certain extent on 09.01.2014. Against this modification the respondents filed a review application, C.M.A. 423/2014, which is the second application that was disposed off by the impugned order. The appellants (i,e,, the defendants in the Suit) had in the meanwhile filed C.M.A. 199/2014, seeking recall of the interim orders. This was the third application disposed off by the impugned order. The ultimate result was that by the impugned order, the appellants were "directed not to dispose of/sell sugar to the extent of plaintiffs [i,e,, present respondents'] claim i,e, 21542 metric tons and/or create third party interest as ordered on 06.1.2014 till disposal of the suit". We may note at the outset that at the conclusion of the arguments, we allowed learned counsel to file written synopses and both sides did so.
2. Learned counsel for the appellants submitted that the appellant No, 1 ("appellant company") owned and operated a sugar mill, i,e,, was in the business of the manufacture and sale of sugar.
Learned counsel submitted that on account of various economic and business factors, it became difficult for the appellant company to obtain full financial facilities from the normal banking sector.
It was therefore forced to obtain financing also from alternative sources, at exorbitant and indeed usurious rates of return from various persons. It was submitted that the respondents were such persons, and the relationship between the parties, as presently relevant, was that of borrower and lender in money lending transactions, and not otherwise. However, in order to disguise and hide the true nature of the transactions, they were "dressed up" as sale of sugar agreements. Each transaction was duly supported by security being given by or on behalf of the appellant company, in the shape of post dated cheques, promissory notes and delivery orders, which served only to establish and emphasize that these were financing, and not sale, transactions.
3. Learned counsel submitted that in respect of the 2010-2011 season/crop (which was the year previous to the one presently relevant), the appellant company "sold" 6435 MT of sugar to the respondents. The sugar was delivered to the respondents. However, they had not accounted for the sale proceeds of the sugar to the appellant company, nor any given any accounting for the sugar "sold" to them.
4. Learned counsel submitted that notwithstanding the foregoing position, in the next season/crop, 2011-2012, which is relevant for present purposes, the appellant company, being in need of financing had no option but to agree to borrow moneys from the respondents. This time around, the parties entered into six agreements, dated 25.07.2011, 26.08.2011, 27.10.2011, 29.11.2011, 12.12.2011 and 12.12.2011 relating to sugar totaling 8917 MT. Learned counsel submitted that these agreements were financing agreements which were duly supported by post dated cheques, promissory notes and delivery orders, all given by way of security. However, the agreements were "dressed up" as sale agreements in order to disguise the fact that this was money lending as usurious rates. Learned counsel submitted that the sugar was in fact delivered to the respondents, which was sold by them. They recovered the amount lent and the interest/rate of return thereon, but did not (again) give any accounting to the appellant company, either of the sugar sold or the sale proceeds.
5. Learned counsel submitted that although the respondents were not rendering any accounts to the appellant company despite its repeated requests, at the same time they in order to pressurize the appellant company kept the threat of the encashment of the post dated cheques dangling over the appellant company. Since the appellant company was in difficult straits and, in effect, financial thrall to the respondents, it was forced to issue fresh cheques for the earlier post dated cheques that were becoming stale. Ultimately, in August 2013, the respondents sought to encash the cheques. Learned counsel submitted that this was notwithstanding that there had been no rendition of accounts, and the respondents had already recouped themselves from the sale proceeds of the sugar delivered but unaccounted for. This forced the appellant company to file suit in this Court on the Original Side on or about 26.08.2013 being Suit 1076/2013, seeking various reliefs, including declaratory and injunctive relief, especially in relation to the cheques that the respondents were attempting to encash.
6. Learned counsel submitted that it was as a counter blast to the appellant company's suit that the respondents filed the suit out of which the present appeal arises, i,e,, Suit 1177/2013, which was filed on or about 20.09.2013. As already noted, this suit is in relation to the transactions in respect of the 2011-2012 season/crop. Along with the suit, and thereafter in it, the three interlocutory applications, as noted in the opening paragraph above, were filed, which were ultimately disposed off by the learned Single Judge by means of the impugned order.
Learned counsel referred to the plaint and in particular drew attention to the prayer clause. The relief sought was for specific performance of the six agreements referred to in para 4 above, as well as for injunctive relief in respect of 21542 MT of sugar. In the alternative the respondents prayed for damages in the sum of Rs,1 Billion for alleged breach of the six agreements. Learned counsel referred to the first of the three applications, C.M.A. 10015/2013 which was filed along with the institution of the suit. On this application on 20.09.2013 an ad-interim order was made in respect of 21542 MT of sugar. An inspection by the Nazir was also directed of the premises where the sugar was said to be lying. Learned counsel submitted that in fact no such quantity of sugar was lying at the premises on the said date. Reference was made to the Nazir's report, especially para 4 thereof.
According to learned counsel the Nazir's report showed that a certain quantity, 4027 bags of 50 Kg each were there, which were pledged to the National Bank of Pakistan. In addition, there was another stock of 924 bags, which were not pledged. Notwithstanding, this, learned counsel submitted that a contempt application was filed alleging disobedience of the order of 20.09.2013.
On this another interim injunctive order was made on 06.01.2014, and another inspection by the Nazir was ordered. The interim injunctive order was again in respect of 21542 MT of sugar. On 09.01.2014 by another order it was clarified that the sugar to which the order related was "in relation to the sugar crop for the year 2011-12". Against this latter order, the respondents filed a review application (the second of the three applications disposed off by the impugned order).
7. Referring to the impugned order, learned counsel submitted that it was clear from the reasoned portion thereof (from para 14 onwards) that the learned Single Judge was much influenced by a belief that the appellant company was in breach and disobedience of the orders made from time to time. It was respectfully submitted that this conclusion was erroneous. The appellants had not at any time disobeyed any order made in the suit. It was emphasized that the amount of (unpledged) sugar actually lying at the premises as per the Nazir's report was still there, in compliance of the order of the Court. Learned counsel emphasized that the order of 09.01.2014 made clear that the interim injunction applied only to the sugar produced for the 2011-12 season/crop and not for any subsequent season/crop. However, this was ultimately modified by the learned Singe Judge in the operative part of the impugned order. Learned counsel submitted that the six agreements (of which one was considered in detail as representative of the others; since the agreements were cast in the same form) were in truth and substance nothing but money lending and financial transactions. It was submitted that the agreements were in violation of the West Pakistan Usurious Loans Ordinance, 1959 and hence unenforceable. Reference was made in some detail to section 4 of the said Ordinance. Learned counsel submitted that the sugar had been delivered to the respondents and they had sold the same, recouped the amount lent plus the (usurious and unenforceable) interest and were bound to account to the appellant company for the balance. In this regard learned counsel referred to one of the promissory notes (which were, again, all in the same form) that were made as security and submitted that it clearly referred to being in relation to a "loan".
8. Learned counsel submitted that even if the case set out by the respondents in the plaint were accepted, namely that the transactions and hence the agreements were that of sale and purchase of sugar, even then the respondents were not entity to any interim relief. The learned Single Judge had erred material!) in reaching the contrary conclusion. It was submitted that the sale was that of sugar, which was a "fungible", i,e,, a type of commodity in which one bag could easily be replaced and substituted by another. No specific performance and hence no injunctive relief could be granted for such a commodity and in respect of a sale agreement for the same.
Reference in this regard was made to the well known provisions of the Specific Relief Act, 1877, being sections 21(a) and 56(f). Learned counsel further submitted, referring to the agreements and to para 16 of the plaint, that the six agreements were for a total amount of 8917 MT, whereas the application for interim relief was. for 21542 MT. As noted above, in the plaint there was also a prayer for injunctive relief for this amount. Explaining the difference between these two quantities, which came to 12625 MT, learned counsel submitted that this represented (as per para 16 of the plaint) the sugar claimed in terms of the "default" clause in the agreements. Learned counsel submitted that any such claim (the validity of which was denied) was nothing but damages for alleged breach of contract (which also was denied) and hence no such relief could be given in interlocutory proceedings. The effect of the operative part of the impugned order was that the respondents' suit had been effectively decreed. Learned counsel submitted further that the damages claimed by the respondents were in addition to the relief of specific performance and not by way of an alternative. Since the respondents had quantified the amount of their loss, on this ground also no interim injunctive relief could be granted. Learned counsel submitted that the respondents had made much of the fact that the original delivery orders were still with them and hence the sugar had not been delivered to them. Explaining the appellants' case, learned counsel submitted that the sugar had been delivered. The delivery orders were issued only for security purposes and were not intended to be used. At the end of the season and once the sugar had been disposed off and accounts settled then all the security documents, including the delivery orders, were to be returned to the appellant company. Learned counsel submitted that the respondents had failed to make out a case for interim relief and that the impugned order ought to be set aside and the appeal allowed. As already noted, learned counsel also filed a written synopsis, in which the submissions were reiterated and developed and much case law cited, from which relevant passages were extracted and reproduced.
9. Learned counsel for the respondents submitted that it was well settled that in appeal, an order of the learned Single Judge would only be interfered with if it were shown that the discretion exercised by him in granting interim relief was not in accordance with the well established principles relating thereto. It was submitted that that was patently not the case here. The, learned Single Judge had exercised his discretion judiciously and in keeping with the well established principles. The appeal ought therefore to be dismissed. Learned counsel submitted that the record clearly showed, and the learned Single Judge had rightly concluded, that the delivery orders were still in the possession of the respondents. That one fact put paid to the appellants claim that the sugar under the six agreements had been delivered. That was patently not the case. Referring to the plaint, learned counsel submitted that the legal relationship established by the agreements was not that of a financing or money lending transaction, but rather of a sale and purchase. The respondents were the buyers of the sugar as stipulated in the six agreements, and the appellant 'company was the seller. Admittedly, the buyers had paid the price. They were therefore entitled to delivery of the sugar. It was submitted that the learned Single Judge had adverted to this aspect of the case in para 15 of the impugned order. Referring to the Sale of Goods Act, 1930 ("1930 Act") learned counsel placed reliance on sections 2(4) and 58 to submit that the respondents were entitled to specific performance of the six agreements and hence to injunctive relief, which was rightly granted by the learned Single Judge. It was submitted that the delivery orders were "documents of title" within the meaning of section 2(4). Each delivery order was with reference to a specific quantity of sugar to be delivered on a specific date. It was accepted that the agreements were all in respect of "future goods" (as defined in section 2(6)) and hence were agreements to sell within the meaning of section 4. Each agreement, in each relevant part, crystallized into a sale of goods on the date as given in each respective delivery order. Referring to the six agreements, learned counsel submitted that the respondents were referred to as "investor" therein (and not, e.g., as buyer) because the payments for the sugar were made upfront in full in order to enable the appellant company to produce the sugar. But, it was emphasized, regardless of the nomenclature adopted in the agreements, they were nothing but agreements for the sale and purchase of goods, i,e,, sugar. It was submitted that the substance of the agreements had to triumph over the form thereof, and the substance was as just noted.
10. In the alternative learned counsel submitted that the agreements were an agency coupled with an interest, which could not be terminated by the appellant company. Even on this basis, the respondents were entitled to interim relief. In support of the alternative claim, learned counsel referred to para 5 of the plaint. In the context of this alternative submission, learned counsel submitted that the six agreements could be regarded as composite agreements, having elements of both an "investment" and of agency. It was on the basis of the agreements that the respondents entered into forward contracts, i,e,, with third parties for the onward sale of the sugar. (This submission was in fact common to both the bases on which learned counsel put the respondents' case.) A huge amount of sugar was involved, and the respondents had paid an enormous sum for the same. It was simply not possible for the respondents to go into the market and purchase this quantity of sugar to meet their onward or forward commitments. Referring to the "default clause", learned counsel submitted that it was this clause that brought the total quantity of sugar to which the respondents were entitled to 21542 MT. It was submitted that this clause was an integral part of the whole transaction. The respondents were thus entitled to the whole quantity bargained for, i,e,, the amount of sugar as per the contract and the "default" quantity to be delivered in addition thereto, since the appellants were admittedly in breach of the delivery obligations. With reference to the submission that there was an agency coupled with an interest, learned counsel submitted that the respondents had a preexisting interest in the subject matter of the agreements (i,e,, the sugar) since the moneys had been paid upfront to the appellant company for its production.
11. Exercising his right of reply, learned counsel for the appellants submitted that the respondents' case failed on both bases, i,e,, as agreements for the sale of goods under the 1930 Act, or an agency coupled with interest. As regards the former, learned counsel submitted that if goods were neither specific nor ascertained, then specific performance could not be granted in terms of section 58 of the 1930 Act. That was the situation at hand. Reliance was placed on Re Wait [1927] 1 Ch. 606. Furthermore, section 58 was in any case expressly subject to Chapter II of the Specific Relief Act, and in terms of Section 21(a) (which fell in that Chapter) the respondents were not entitled to specific performance. As regards the alternate basis, learned counsel referred to a Division Bench judgment of this Court reported as Fospac (Pvt.) Ltd. v. Fosrock International and another PLD 2011 Karachi 362: It was submitted that the facts and circumstances of the case did not come within the scope of section 202 of the Contract Act (which relates to agency coupled with interest). Thus, the respondents' case failed on either ground.
12. We have heard learned counsel as above, considered the record and seen the written synopses filed. We begin with certain general observations. The first point is that this is an appeal against an order made in interlocutory proceedings, on an application for interim relief (and ancillary applications). It is for the plaintiffs (here the respondents) to establish and make out a case for such relief. That case must be made within the frame of the suit as filed by them and not otherwise, i,e,, they must make out a case for interim relief on the basis of Suit 1177/2013. It would not be appropriate for them to be allowed to make out a case, even if only in part, on the basis of what the appellants have said in the appellant company's suit, Suit 1076/2013. We must remain within the frame of Suit 1177/2013. This leads to the second point: how is Suit 1177/2013 framed? On a reading of the plaint as a whole and the submissions made before us, it is clear that the suit is framed on the basis that the six agreements were sale and purchase agreements in relation to goods, i,e,, sugar.
The submission on the basis that the agreements amounted in some sense to an agency coupled with an interest was very much a subsidiary and alternate way of presenting the respondents' case. Now, when the written synopsis submitted by learned counsel for the respondents is considered, the position as set out therein is reversed. On a reading of the written synopsis it would seem that the entire case sought to be made out was primarily and essentially that of an agency coupled with an interest. The case in terms of the sale of goods finds only a brief mention, as though it was this aspect that was subsidiary. Interestingly, this appeal was earlier heard by another learned Division Bench and judgment reserved on 01.04.2014. However, judgment could not be delivered and ultimately the matter was set for rehearing as per roster, by order dated 24.12.2014. Now, when judgment had been reserved earlier learned counsel had also filed written synopses, which are on the Court file. The written synopsis then filed on behalf of the respondents was in stark contrast to the one now filed. Then, as far as we can make out, no submission was made on the basis that the respondents' case was that of agency coupled with an interest. Rather, the case proceeded on the basis that the agreements were sale agreements (see pp.14-23 of the earlier written synopsis). The present written synopsis therefore-presents something of a turnabout by the respondents. With respect; this is not appropriate and cannot be allowed. We will therefore consider the respondents' case on the basis that the six agreements were sale and purchase agreements in relation to sugar, i,e,, that the matter came within the scope of the 1930 Act. It is only if we conclude that the respondents have failed to make out a case on such basis that we will consider the submission that there was an agency coupled with an interest, while keeping in mind that it is very much a subsidiary and alternate argument.
13. The third point to note is that whatever be the nature of the respondents' claim (i,e,, a sale of goods or agency coupled with an interest), it must be kept in mind that the respondents seek specific performance of six particular agreements, as set out in the prayer clause of the plaint.
Now, an examination of each agreement (which, as noted, are in the same form) shows that it is expressly in relation to the 2011-2012 season/crop. This is made clear from clause 3, which specifies the "commodity" to be "White Refined Sugar/Season-Crop 2011-2012". Therefore, any interim injunctive relief must be confined only to that for which specific performance has been sought. It has been noted above that in the suit the order dated 09.01.2014 made a clarification in this regard.
As preseptly relevant, the order stated clearly: "Restraining orders passed on 20.09.2013 and 06.01.2014, which are continuing are in respect of 21542 metric tons of white refined sugar in relation to the sugar crop for the year 2011-2012". However, by the impugned order the order dated 09.01.2014 was recalled and the operative part now generally directed the appellants "not to dispose of/sell sugar to, the extent of plaintiffs claim i,e, 21542 metric tons and/or create third party interest as ordered on 06.1.2014 till disposal of the suit". In other words, the order now applied to any sugar manufactured by the appellant company, regardless of the season/crop. With respect, we are unable to agree that this direction/order is correct. Even if the respondents were entitled to interim relief, it had to remain within the frame of their suit, and the relief of specific performance as sought by them. The learned Single Judge, with respect, erred materially in allowing the relief granted by him to travel beyond those limits.
14. Finally, one further point, since this also would apply regardless of whether the respondents' claim is considered to be one based on the sale of goods or agency coupled with an interest. This is with respect to the difference between the quantity of sugar as per the six agreements (8917 MT) and the quantity for which injunctive relief was sought (21542 MT). The respondents explained this difference in para 16 of the plaint: "16. That in light of the above facts, the Plaintiffs are entitled to (1) 8917 Metric tons of Sugar being the quantity in the said agreements and (2) 12625 Metric Tons of sugar arising from the default clause."
The total of these two quantities of course comes to 21542 MT. Now, the default clause in the agreements provided as follows (emphasis supplied): "10. Default In case of delay on the part of the Seller to provide sugar as per Quantities on the dates specified in clause 8, the rate of 70 Kgs per metric ton per month proportionally on a daily basis will be reduced from the purchase price from the Seller."
The respondents' claim, in effect, and learned counsel appearing for them so argued, that if there was any delay on the part of the appellant company to supply the contractual quantity as the stipulated date(s), then the latter would be obliged to supply even more sugar (within the same price) at the rate set out in the default clause. With respect, we are unable to agree. It would be a strange default clause that provided that a seller who had breached his obligation to deliver had then to deliver even more quantity of the contractual goods. What use would such a default clause have for the buyer? The seller has failed to deliver. What purpose would be served by requiring him to do more of that which he cannot, or will not; or is unable to do? Furthermore, on this understanding of the default clause, something (i,e,, more sugar) is being added to the purchase price, whereas the clause itself speaks of something being reduced from the purchase price. Thus, this understanding goes against the language of the clause. In our view, with respect, the respondents' claim that the default clause entitled them to even more sugar, over and above the contractual amount, cannot be sustained. Therefore, the 12625 MT claimed in para 16 on the basis of the default clause is not valid. (We pause here to note, and emphasize, that these observations are of a tentative and prima facie nature, and made only for purposes of the present appeal. If the suit goes to trial, the learned Single Judge will be fully entitled to come to his own conclusions both on the facts and the law, and in particular as to the proper legal meaning of the default clause, entirely uninfluenced by anything said here.) It follows that for purposes of the interlocutory proceedings the "default" quantity as claimed by the respondents could not and ought not to have been taken into consideration. If at all the respondents were entitled to an interim injunction, it ought to have been limited to the 8917 MT contracted for (and of course that too only as regards production that related to the 2011-2012 season/crop). Inasmuch as the learned Single Judge failed to appreciate this aspect, of the case, and granted interim relief for 21542 MT, with respect, a material error was made.
15. Rather than proceeding to consider the submissions made by learned counsel for the appellants, we first consider the respondents' main case, i,e,, that the six agreements were sale and purchase agreements in relation to sugar. The reason is that if the respondents' case fails even on its showing and footing, then they would clearly not be entitled to any relief. In respect of the main case, reliance was placed on section 58 of the 1930 Act, which provides as follows:"
"Specific performance.---Subject to the provisions of Chapter II of the Specific Relief Act, 1877, in any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, on the applications of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any-time before the decree."
Putting to one side the opening clause of the section, which was emphasized by learned counsel for the appellants, section 58 applies only in relation to "specific goods" or "ascertained goods".
Now the goods in respect of which the six agreements were entered into were "future goods", and this was quite properly accepted by learned counsel for the respondents: This term and the term "specific goods" are defined in the 1930 Act as follows: "(6) "future goods" means goods to be manufactured or produced or acquired by the seller after the making of the contract of sale; "
"(14) "specific goods" means goods identified and agreed upon at the time a contract of sale made".
The first question that requires consideration is whether future goods can also be specific goods, and if so in what situations. There appears to be no direct authority on this point, and interestingly academic opinion seems to be divided. Thus, a standard treatise appears to take the view that future goods--can never be specific goods (see Atiyah's Sale of Goods, 12th ed. (2010), pp. 80-81). It would seem that this view is shared by Chilly on Contracts (see 32nd ed. (2015), Vol. II, para 44- 043), where Re Wait [1927j 1 Ch 606 is cited as authority in support of this proposition. Another treatise on the other hand appears to take a somewhat different view: see Goode on Commercial Law (5th ed., 2016), para 8.72. Be that as it may, we are of the view that at least in the facts and circumstances of the present case, the future goods that were the subject matter of the six agreements were not specific goods. We come to this conclusion on the basis of the following statements to be found in the well-known treatises: In Benjamin's Sale of Goods (8th ed., 2010) it is stated as follows (para 1-114): Specific goods are by the agreement of the parties designated as the unique goods which can be delivered by the seller in performance of the obligation under the sale contract: their individuality is established, so that there is no room for further selection or substitution."
The future goods that were the subject matter of the six agreements at hand obviously did not meet this description. In Chitty on Contracts (op. cit.), the following statement appears: "Thus the sale of a particular quantity of future goods from a defined source is not a sale of specific goods...."
Here, although the source is defined (being the appellant company's sugar mill) and the quantities are particularized in the six agreements, the subject matter is future goods and that cannot be a sale of specific goods. Finally, in Goode on Commercial Law the following passage appears at para 8.74: "An agreement to sell 200 kilos of potatoes from a particular piece of land is not a contract for the sale of specific goods, for the contract contemplates that the total output from the land may be greater than 200 kilos, and if it is, some act of appropriation will be necessary in order to identify the particular 200 kilos that re (sic) to satisfy the contract."
Substituting the appellant company's sugar mill for the "particular piece of land", and the quantities set out in the six agreements for "200 kilos of potatoes" the same result is reached since it was clearly within the contemplation of the parties that the output of the sugar mill for the 2011-2012 season/crop would be in excess of 8917 MT (or even 21542 MT for that matter). Therefore, the future goods in the present case were not specific goods.
16. Were they ascertained goods? Now, it must be remembered that the 1930 Act is very closely modeled on the UK Sale of Goods Act, 1893. Section 58 is virtually identical to section 52 of the UK statute. The Act of 1893 was replaced in the UK in 1979 by fresh legislation, also called the Sale of Goods Act. That Act is in many respects the same as the Act of 1893. Thus our 1930 Act continues to bear a close affinity to the UK legislation. The provision now equivalent to section 58 is section 52 of the Act of 1979. That section also speaks of specific goods and ascertained goods. (Like the 1930 Act, the UK legislation, both past and present, defines specific goods in the same manner, and leaves ascertained goods undefined.) Goode on Commercial Law explains the use of these two expressions in section 52 of the Act of 1979 in the following terns (para.14.07, f.n. 18): "The reference to ascertained goods is another example of the draftsman's compression technique. The contract cannot, itself be to deliver ascertained goods, since such goods are not identified until after the making of the contract in longhand, the section means that where there is a contract to deliver goods, and these are either identified at the time of the contract or become identified thereafter, the court can order specific performance."
Thus, it requires to be considered whether the future goods, the subject matter of the six agreements, were identified in sufficient manner at any time after the making of the agreements such as to make them ascertained goods. Now, the respondents' case is that under each agreement they held delivery orders, each of which had a specific date and quantity. Although it is not fully clear from the respondents' pleadings whether these delivery orders were presented and delivery refused, and this is in any case contested by the appellants, we assume in favour of the respondents for purposes of this appeal (without deciding) that this was done. This is so because if the delivery orders were in fact not presented at all, then clearly there could be no question of the goods under the agreements ever having become ascertained goods. In other words we test the validity of the respondents' claim on terms most favorable to them. Now, on this basis each presentation of a delivery order was a point in time when the goods (at least to the extent as quantified in the delivery order) could have been identified. Again, we assume in favour of the respondents for purposes of this appeal that on each presentation, there was sufficient quantity of sugar of the 2011-12 season/crop available at the appellant company's premises. Did the goods become ascertained goods? In our view, this question must be answered in the negative on the authority of Re Wait [1927] I Ch 606, a decision of the Court of Appeal. It was there held by majority decision that "no order for specific performance should be made of a sub-contract to sell 500 tons out of a consignment of 1,000 tons of wheat bought by the seller, because the 500 tons were neither specific nor ascertained goods' (Benjamin's Sale of Goods, para 17-097). The position under the agreements was analogous. Therefore, in the present case even if we take the most favorable view of the respondents' case, at the time of the presentation of the delivery orders the goods remained unascertained.
17. In view of the foregoing, we conclude that section 58 did not apply in the facts and circumstances of the respondents' case.
18. Learned counsel for the respondents however submitted that the respondents were entitled to specific performance and hence injunctive relief even otherwise, i,e,, independently of section 58.
That could only be in terms of the Specific Relief Act, and we therefore turn to consider this aspect.
Here of course learned counsel has to meet the formidable objection taken by learned counsel for the appellants that such relief could not be granted on account of sections 21(a) and 56(f) of the said Act. As is well known, the latter provision provides that no injunction (and hence no interim injunction) will be made "to prevent the breach of a contract the performance of which would not be specifically enforced". The former provision provides that "a contract for the non-performance of which compensation in money is an adequate relief" will not be specifically enforced. Finally, reference may be made to the Explanation to section 12, which provides as follows: "Unless and until the contrary is proved, the Court shall presume that the breach of a contract to transfer immoveable property cannot be adequately relieved by compensation in money, and that the breach of a contract to transfer moveable property can be thus relieved". The appellants' case was that even if the respondents' claim that the six agreements were for the sale and purchase of sugar, they were agreements for the sale of moveable property, which could be adequately compensated in money terms. The contracts could not be specifically enforced and hence the respondents were not entitled to injunctive relief. The response to this from the respondents' side was that they had, relying on the six agreements, entered into onward or forward sale contracts for the sugar that had to be delivered by the appellant company, that they had paid the entire price upfront and given the huge quantities and, sums of money involved, it was simply not possible for them to procure the sugar from the market in order to meet their own contractual commitments and obligations. (Reference may be made to para 12 of the plaint.) Hence, compensation in money was not an adequate relief in the facts and circumstances at hand, and the respondents were entitled to specific performance and hence to injunctive relief. We have carefully considered this submission. With respect, it cannot be sustained. Firstly, no details or particulars are given by the respondents of their onward or forward contracts. No indication is at all given of the quantities to be supplied, when and to whom. Thus there is a factual blackout in this regard. Secondly, while the respondents have claimed injunctive relief in respect of 21542 MT, i,e,, for the contractual 8917 MT and the "default" supply of 12625 MT, a moment's reflection indicates that the respondents could not possibly have entered into forward or onward contracts in relation to the latter quantity. The respondents could at most have entered into such contracts only for the contractual 8917 MT. At the time the six agreements were entered into it was obviously the intent of the parties that there would not be a default in the supply. As reasonable persons of ordinary prudence, the respondents would only have (if, in fact, they, at all did) entered into forward contracts for this quantity. Once the default as claimed by the respondents had occurred then if they entered into further forward or onward contracts for the "default" supply of 12625 MT, they surely did that at their own risk and not at all while acting in a reasonable or prudent manner. The reason is obvious. Their supplier had defaulted. This default put them in breach of their own forward contracts, already entered into. As interpreted by them, the default clause in the agreements entitled them to further supply from the same supplier. (Of course, we have expressed our views on this aspect but for the moment we go along with the case as put by the respondents.) Would a reasonable person enter into forward contracts based on the additional "default" supply in such circumstances? The answer to this question must surely be in the negative. If the person did enter into forward contracts based on the "default" supply he would do so entirely at his own risk. Therefore, there could be no question of the respondents, assuming they were acting reasonable throughout, having entered into forward or onward contracts for the 12625 MT. If they did so, then they acted recklessly and have only themselves to blame for any predicament or liability to third parties. At most, they could have entered into forward contracts for 8917 MT but no details have been provided in this regard. It would be wholly speculative to assume anything and here no assumptions can or ought to be made in favour of the respondents. They ought to have produced the relevant record. They did not do so. They must suffer the consequences.
19. In view of the foregoing, we conclude that the respondents have failed to show that there was anything in the facts and circumstances of the present case as would enable the Court, even tentatively and prima facie, to conclude that monetary compensation would not be adequate remedy for the alleged breach by the appellant company of its obligations under the six agreements for the sale and supply of sugar. Therefore, prima facie section 21(a) and hence section 56(f) of the Specific Relief Act did apply and the respondents were not entitled to any interim relief. Again, we emphasize that these observations are of a tentative and prima facie nature, and made only for purposes of the present appeal. If the suit goes to trial, the learned Single Judge will be fully entitled to come to his own conclusions both on the facts and the law, entirely uninfluenced by anything said here.
20. In our judgment the respondents have been unable to make out a case for interim relief on the basis of that the agreements were sale and purchase agreements in relation to goods, i,e,, sugar.
The learned Single Judge, with respect, did not advert to any of the matters taken up in the paras herein above and therefore erred materially in making the impugned order.
21. We now turn to consider the alternate and subsidiary submission, i,e,, whether there was an agency coupled with an interest. Here, as per the respondents' case, the six agreements were composite "investment" and agency agreements. The respondents agreed to "invest" certain monies to enable the appellant company to produce the sugar, which was to be sold by the respondents acting as agents. The respondents would recoup themselves from the sale proceeds both as regards the moneys "invested" plus the interest/return thereon and pay the balance, if any, to the appellant company. The key provision here is of course section 202 of the Contract Act, 1872.
This section was considered by a Division Bench of this Court in Fospac (Pvt.) Ltd. v. Fosrock Internationat and another PLD 2011 Karachi 362. Reference may be made to para 18 of the judgment, which as presently relevant is as follows: "18. Section 202, and its illustrations, provide as follows:
202. Termination of agency where agent has an interest in subject-matter. Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
Illustrations
(a) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority nor can it be terminated by his insanity or death.
(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the price, the amount of his own advances.
A cannot revoke this authority, nor is it terminated by his insanity or death.
For section 202 to apply, the following three conditions must be fulfilled: (a) there must be an agency; (b) the subject matter of the agency must be some property; and (c) the agent must himself have an interest in such property. Thus, for section 202 to apply, the court must ask itself the following sequential questions: (a) is the contract in the nature of an agency? If so, (b) what is the subject matter of the agency, i,e,, does it involve some property? If so, (c) does the agent himself have an interest in such property? A negative answer to any one of these questions would negate the application of section 202. In our view, for a proper understanding of section 202, it is crucial to keep in mind the word "himself", as used therein. The section requires that the agent must "himself" have "an interest in the property" which forms the subject matter of the agency. In other words, the "interest" of the agent with which the section is concerned must be an interest that he has in his own right or capacity, i,e,, a capacity other than that of simply being the agent. The point is reinforced by the concluding words of the section: if the agent "himself" has such an interest, then the agency cannot (absent an express provision) be terminated to the prejudice of "such" interest.
The word "such" obviously relates back to the nature of the interest that the agent must have, which is an interest in his own right, and not simply an interest on account of his position as agent."
Learned counsel for the appellants relied on the above passage, and in his written synopsis elaborated the reasons why, in the facts and circumstances of the present case, none of the three conditions were fulfilled. Learned counsel for the respondents on the other hand of course argued that, the section did apply. We turn to consider the rival contentions in respect of each condition.
22. The first condition is that there must be an agency. The key clauses in the six agreements, to which both sides referred, were contained in a part of the agreements titled "OTHER TERMS/CONDITIONS". The relevant clauses were as follows: "A. The Investor [i,e,, the respondents] shall facilitate the sale on behalf of the Seller [i,e,, the appellant company] the Sugar at the Market rate on the Due date on cash basis.
D. That all sales shall be between the Seller and the market and the Investor shall only facilitate the sale to invest money and recover deposit price and the commission and pay back the difference if more than principal commission."
The "deposit price" was the amount paid over by the respondents to the appellant company being, in the present context, the principal or the "investment". The "commission" was the return/interest to which the respondents were entitled on the principal. Learned counsel for the appellants submitted that the "commission" in the present context could not be equated to, e.g., that paid to a broker who finds a buyer for his principal. It was simply a disguised way of paying the (usurious and unenforceable) interest/return to the respondents for the financing provided to the appellant company. We have considered this submission. Section 182 of the Contract Act defines "agent" and "principal" in the following terms: "An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal" " The foregoing clauses of the six agreements provided that the respondents would "facilitate" the sales of sugar on behalf of the appellant company in the market on the due date(s) (i,e,, the date(s) on which the delivery orders could be presented) at the market rate or price. In our view, such "facilitation", would (at the least) be regarded as authority for the respondents to represent the appellant company in its dealings with third persons for the sale of sugar. The foregoing clauses did bring the relationship between the parties within the scope of section 182. There was therefore an agency within the meaning of the Contract Act.
23. We turn to the second and third conditions since these can be taken up together in the present facts and circumstances. The second condition is that the subject matter of the agency must be some property and the third condition is that the agent must "himself" have an interest in the said property, being an interest that he "has in his own right or capacity, i,e,, a capacity other than that of simply being the agent". Learned counsel for the appellants denied that the second condition was met, arguing that there was no property involved. The reason was that the six agreements were in relation to future goods, i,e,, the sugar yet to be manufactured by the appellant company.
Referring to the illustrations to section 202, learned counsel submitted that they clearly related to property existing, ascertained and identified at the time that the agency was created. That was patently not the situation at hand. As regards the third condition, learned counsel submitted that there was no interest that the respondents had in the sugar since the goods were future goods (i,e, unascertained) and property in such goods could only pass when the goods became ascertained.
Reliance was placed on section 18 of the 1930 Act. We may, with respect, note that the last submission cannot be sustained. Section 18 is concerned only with the passing of property between the buyer and the seller. In the present context, while the appellant company would always be the seller, the respondents would not be buyer since they were only the agents (the "facilitators" as per the clauses in the agreements). Furthermore, with respect, learned counsel has misunderstood the nature of the "interest" that the agent must "himself' have in the property that is the subject matter of the agency. That interest need not be (and indeed, would hardly ever be) a property interest as such. Indeed, if that had to be so, then the illustrations would be clearly negative since in neither was the interest of the agent a property interest per se. Thus, in the first illustration B has no property interest as such in A's land, and in the second illustration has no such interest in the bales consigned to him. However there is an interest (being the amounts advanced and the debts due, which are to be recouped from the sale proceeds) which in each case inheres in the agent "himself", i,e,, independently of his position as agent.
24. Now, in the present case, assuming for the moment that there was some property that was the subject matter of the agency created in terms of the six agreements the third condition would be satisfied. This is so because the respondents were to recoup themselves from the sale proceeds of the sugar for the principal amount (i,e,, the deposit price) and the return/interest thereon (i,e,, the commission). This was clearly an interest that arose from the moneys "invested" with the appellant company, i,e,, it inhered in the respondents "themselves" and existed independently of their position as agents for the appellant company. But of course, learned counsel for the appellants challenged that which has just been assumed, contending that there was no property. It therefore must now be considered whether the second condition was fulfilled, i,e,, was there any property that was the subject matter of the agency? Now at the time that the agreements were entered into there was no property since the sugar had yet to be manufactured. Of course, that would not negative the very agency itself. As seen above, an agent is a person employed to do any act for another or to represent such other in his dealings with third persons. That act, or those dealings, may not involve any property at all. Or, the act or dealings could involve property yet to be acquired or manufactured, such as future goods within the meaning of the 1930 Act. This last is unexceptionable. A seller may enter into a contract (called an agreement to sell) in relation to future goods the 1930 Act expressly so provides. The contract would be perfectly valid. Why should it impermissible for a seller to enter into, such a contract through an agent? A seller can appoint an agent in respect of future goods if he so wishes. However, this is not the point in issue here. Section 202 is clearly intended to apply only in some, and not all, situations relating to agency. That is why its operation is conditional upon the three requirements being met. The question that now needs to be considered is as follows. Do both the second and the third conditions have to be fulfilled together in praesenti, i,e,, at inception and at the very moment the agency is created, or could one or the other (or perhaps even both) come about and be fulfilled at some other time or date? This question can, for convenience, be broken into two. The first question is must, the property that is the subject matter of the agency exist when the agency comes about, or can the property come into existence at some other date or time? (We use the word "exist" compendiously, to include situations where the property is yet to be owned, manufactured or acquired, etc. by the principal.)
The second question is, must the interest that the agent "himself" must have in the property exist at the inception of the agency or can it come about at some other date or time?
25. We first take up the second question. In our view, there is nothing in section 202 that requires that the interest that the agent "himself" must have should necessarily exist at the very inception or the moment the agency is created. The point can be understood by considering a slight variation in the facts of the first illustration to section 202. Suppose A appoints B as his agent to sell his land.
This is an agency simpliciter. There is no coupling of any interest. But suppose that thereafter A takes a loan from B, separately from and independently of the agency. A then gives B authority to pay himself out of the sale proceeds of the land the debt due to him. In this example, the interest that B "himself" had in the land (the subject matter of the agency) came into existence after the creation of the agency. Why should the agency now not be regarded as one coupled with an interest within the meaning of section 202? We can see no reason why this should not be possible.
26. The first question poses greater difficulty. It may be noted that we are here concerned only with goods that come within the scope of the 1930 Act. For present purposes, the goods can be regarded as running the gamut from being future goods to those to which section 23 applies. This section provides in its subsection (1) as follows: "Sale of unascertained goods and appropriation.---(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state ate unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made."
We have seen that there can be an agency in respect of future goods though it cannot be one coupled with an interest at that stage. Essentially what learned counsel for the appellants has argued, relying on the illustrations to section 202, is that an agency coupled with an interest can come about only in respect of goods to which section 23 applies. With respect, we are unable to agree. It is well settled that illustrations to a section do not control its full meaning or scope. They are simply aids to interpretation. In between the two "extremities" of future goods and goods to which section 23 applies there necessarily lies another stage: when the goods come into existence.
At that stage they may be unascertained goods or ascertained goods but not a deliverable state or goods that would fall in some other category or classification under the 1930 Act. However, they must necessarily exist. In our view, at that stage, the second condition is fulfilled and therefore; provided that the other two conditions of section 202 are also fulfilled, there will be an agency coupled with an interest. In our view, with respect, perhaps learned counsel for the appellants has been led into error by equating the term "property" as used in section 202 with this term as used in the 1930 Act. However, that is not so. The same word, "property", serves different functions under the two statutes. In section 202 the term is used in a broad and general sense as including both immoveable property and moveable property. These terms are of course defined in the General Clauses Act, 1897 (and apply also to the Contract Act by virtue of section 4 thereof). The term "property" is used in the 1930 Act in another sense. It is defined in section 2(11) as meaning "the general property in goods, and not merely a special property". (Sections 62 and 61 of the UK Acts of 1893 and 1979 respectively contain identical definitions.) Essentially, it is used in the 1930 Act to signify ownership. We acknowledge that this is only a first approximation of how the term is used in the 1930 Act, and must be regarded as subject to many qualifications and much elaboration. (See, e.g., the discussion in Atiyah's Sale of Goods, Chapter 19 ("The transfer of property") especially at pp. 305-310.) However, it suffices for present purposes. The equivalent in the 1930 Act to the term "property" as used in section 202 would be the term "goods", which is defined in section 2(7). While therefore it may be that when considering the application of section 202 in the context of moveable property that comes within the scope of the 1930 Act one must confine oneself to "goods" as defined in the latter, that is still a much broader use than that urged by learned counsel for the appellants.
27. Reverting now to the specifics of the case at hand, while there was an agency simpliciter at the time that it came about (i,e,, when the six agreements were respectively entered into), at some point that agency became coupled with an interest. That stage arose when the goods came into existence, i,e,, when the sugar was manufactured, bagged and brought to the relevant place in the appellant company's premises. When exactly that happened in indeterminate on the record as it stands. But it did happen since it is not in dispute that the appellant company did bring into existence much more than the sugar to which section 202 applied. For reasons that will become clear shortly, it is not germane that the stage or point in time that the agency became coupled with an interest is indeterminate. It suffices to conclude, as we do, that at some point all three conditions of section 202 did become fulfilled and that therefore there came about an agency coupled with an interest.
28. Before proceeding further it is important to make one point. The agency coupled with an interest that came about was only in relation to 8917 MT produced for the 2011- 2012 season/crop. It was neither for the "default" amount as claimed by the respondents nor for any sugar produced for any other season/crop. The reason is that the parties intended for the respondents to recoup themselves from the sale proceeds of the contractual amount of sugar. The interest that the respondents "themselves" had in the property that was the subject matter of the agency was therefore limited to this quantity.
29. Having concluded that an agency coupled with an interest did come about at some stage, the next question is whether the respondents would be entitled to specific performance of the six agreements on such basis and hence to injunctive relief Here again the respondents must satisfy the Court that their case comes within the scope of section 12 of the Specific Relief Act. As now relevant, that requires the respondents to show that "the act agreed to be done, is such that pecuniary compensation for its non-performance would not afford adequate relief". In other words, the respondents must show that if the agency coupled with an interest is not given effect to, then monetary compensation would not constitute adequate relief. Having considered the point, in our view the respondents have been unable to show this. All that the agency was about was to enable the respondents to recoup themselves for their "investment" plus a return thereon. In other words, it was a purely financial transaction and nothing else. Furthermore, the thing to be sold, sugar, was a fungible. It was not some special product or luxury item or branded good. It is indeed an essential commodity for which there is always a market. It is nobody's case that the appellant company was going out of business. As already noted, the respondents claim that they entered into onward or forward contracts. But it has also been noted that no details or particulars of those contracts have been provided. And, in the present context, those contracts must have been those entered into by the respondents while acting as agents. They would therefore not have any personal liability on that score. If they entered into the contracts without disclosing that they acted for a principal, then they were prima facie in breach of the aforementioned clause D, which provided that "all sales shall be between the Seller and the market and the Investor shall only facilitate the sale". It is obviously implied in this term that the respondents would enter into contracts only as agents and not otherwise. If they incurred any personal liability by not disclosing the name of their principal (i,e,, the appellant company) then they acted recklessly, in disregard of their contractual commitments and have only themselves to blame for any predicament. We therefore conclude that in the facts and circumstances at hand pecuniary compensation would be perfectly adequate relief and hence that the respondents were not entitled to specific performance of the agency coupled with an interest. It follows that they were not also entitled to any injunctive relief.
With respect, the learned Single Judge failed to advert to any of the matters or aspects as set out herein above, and therefore erred materially in making the impugned order.
30. Since we have concluded that the respondents have failed to make out any case on the basis of their own showing and footing, it is not necessary to consider in detail the submissions made by learned counsel for the appellants, other than what has been noted in the above discussion and analysis. We intend no disrespect in not adverting to or considering those submissions. Finally, we may again note that whatever has been said herein above is of a tentative and prima facie nature, and only for purposes of the present appeal. If the suit goes to trial, the learned Single Judge will be fully entitled to come to his own conclusions both on the facts and the law, entirely uninfluenced by anything said herein above.
31. In view of the foregoing, this appeal is allowed. The impugned order is set aside and C.M.A.
10015/2013 in the suit stands dismissed. The other two applications, C.M.A. 423/2014 and C.M.A.
199/2014 in consequence become infructuous and are disposed of as such. There will be no order as to costs.