This judgment will decide two suits, that is, Suits 373 of 1969 and 424 of 1969, in both of which the Trading Corporation of Pakistan Ltd. (hereinafter called the T. C. P.) has challenged the award of the umpire, Mr. A. S. Faruqui. The brief facts may be stated in this way : The plaintiffs are registered industrial consumers of steel strips, which they use for manufacture of G. I. pipes. These steel strips were provided to be imported from abroad under the Import Policy announced by the Central Government in the Gazette of Pakistan, dated 10th July 1967. According to paragraph 26 of this Policy industries detailed in List 1 of Annexure 2 were made eligible to receive licenses for items on the Licensable List according to the basis to be announced by Regional Controllers. Annexure 1 to the Policy contains the list of licensable items. Steel strips are shown at item 1 of part 1 of this Annexure. The plaintiffs in both the suits were eligible to receive licenses as industrial consumers of steel strips for manufacture by them of G. I. pipes. But the plaintiffs' entitlements to these licenses were made subject to paragraph 9 of the policy, which provided that imports under loan credits will be subject to the conditions and formalities specified in Annexure 3 to the Policy and to further details which will be notified as and when necessary. It is the admitted position that in both the cases steel strips were importable into Pakistan under the Italian credit and accordingly paragraph (e) of Annexure 3 laid down the conditions that the imports under these licenses shall be confined to steel strips of Italian origin and from Italy. It was stated at the Bar that the plaintiffs in the two suits were duly granted licenses in accordance with the basis announced by the Regional Controller. However, the Government issued a further notification, published in the Gazette of Pakistan, dated 12th September 1967 under which, in exercise of the powers possessed by the Central Government under section 3 of the Imports and Exports (Control) Act (XXXIX of 1950), and in partial modification of the Import Policy published in the Gazette of Pakistan, dated 10th July 1967, a new policy was introduced for import of various goods including steel strips for G. I. pipes, which policy was to the effect that the eligible importers shall place orders for their imports of steel strips from Italy with the T. C. P., and that the licensing authority shall issue licenses or authorisations to the T. C. P. for the value of all the orders so placed by the eligible importers. Thus, the import licenses granted to the plaintiffs became ineffective except to the extent that under these licenses the plaintiff became eligible to place orders with the T. C. P. for import of steel strips.
2. The two plaintiffs accordingly placed their orders and the entitlements for their imports were authenticated by the Chief Controller of Imports and Exports with the following endorsement : "The order is placed by the purchaser and accepted by the T. C. P. subject to the terms and conditions specified over-leaf." These terms and conditions provided that the purchasers shall open a confirmed and irrevocable letter of credit in favour of the T. C. P. in Pakistani Rupees valid for 90 days on receipt of intimation of firm price from the T. C. P. This firm price had to be intimated in two parts : (i)C & F value.
(ii)Other charges.
As noted above, the import of steel strips was to be from Italy, and these imports were related to a credit agreement between the Government of Pakistan and Italy and the T. C. P. The State Bank of Pakistan issued a directive on 3rd August 1967 in relation to this credit agreement containing the terms and conditions under which the goods were to be imported under this credit. T. C. P. entered into a contract with an Italian supplier for import of steel strips. Under clause 7 of this contract, T. C.
P. had to establish a confirmed irrevocable letter of credit for 10 per cent. of the entire value of the contract, the balance of 90% of the price being made payable, with 6 per cent. interest and credit insurance charges, in 20 equal half-yearly instalments. Before the arrival of the goods, T. C. P. called upon the plaintiffs to open necessary letters of credit on the basis of the "firm price", which was fixed as follows:- (a)C & F valueRs, 541.99 (b)Other charges.Rs, 799.1.
(0 Customs duty, defence surcharge etc. (ii)Clearing, handling, financing and commission charges.
(iii)Element of price enhancement added to the landed cost, element of price equalisation surcharge added to the landed cost.
Total Rs, 1,341.00.
Thus, the total price came to Rs, 1,341,00 per metric ton. It is stated that the plaintiffs made payment of this price under protest, and then invoked the arbitration clause, namely, clause 9 of the terms and conditions referred to above, which provided for reference of the disputes to two arbitrators, one each to be appointed by the purchaser and the T. C. P., and the differrences between the two arbitrators being referable to an umpire appointed by the arbitrators. When the disputes were referred to arbitrations, the two plaintiffs appointed Mr. Fakhruddin G. Ibrahim, Bar-at-law, as their arbitrator. The T. C. P's arbitrators were Mr. Hamid Ali in Suit No, 373 of 1969 and Mr. M. Hadi Hassan in Suit No, 424 of 1969. Several contentions were taken by both the parties which, however, it is not necessary to refer to in the proceedings before me, as the real contest between the parties was only on the "quantum" of the price payable by the plaintiffs to the T. C. P. for the steel strips imported as aforesaid. The real dispute with regard to the price is to the addition of Rs, 460.00 per metric ton, which amount was claimed by T. C. P. on account of 50 per cent. bonus voucher charges to make the price comparable with casheum-bonus prices. This claim was clarified in the document marked Exh. D. 15 by the umpire. There was difference of opinion between the arbitrators in both the cases. In Suit No, 373 of 1969, Mr. Hamid Ali fixed the price at Rs, 1,300.00 per metric ton, whereas Mr. Fakhruddin held that the price recoverable by the T. C. P. should be at the rate of Rs, 857.2639 per metric ton. In Suit No, 424 of 1969, Mr. M. Hadi Hassan fixed the price at Rs, 1,341.00 per metric ton, whereas Mr. Fakhruddin fixed the price at Rs, 1,035.00 per metric ton. In view of these differences both the cases were referred to the umpire, Mr. A. S. Faruqui. Before the umpire also the main Con test between the parties was on the addition of Rs, 460.00 to the firm price which had been shown by the T. C. P. in Exh.. D.
15. But the plaintiffs in both the cases agreed before the umpire that the T. C. P. should be allowed to add 10 per cent. down payment incurred by it in bonus vouchers, that is this amount should be allowed to be added to the "firm price. Accordingly, both the plaintiffs raised a grievance with regard to addition of Rs, 368.00 only per metric ton as the difference between this amount and Rs, 460.00 was accounted for by 10 per cent. down payment in bonus vouchers. As regards, the other charges, totalling to Rs, 338.00 per metric ton, the learned umpire held that the T. C. P. was entitled to Rs, 326.00 per metric ton only on account of these other charges. This conclusion was reached on the concession made by the T. C. O's Advocate, Mr. Muhammad Akram, that Rs,. 12.00 per metric ton should be reduced from these charges. It is, therefore, not necessary to dwell at length on this aspect of the case. In the end, the umpire held that the price of steel strips per metric' ton payable by the plaintiffs should be as follows :-
(i) C & F value Rs, 542.00
(ii) Duty & expensesRs, 326.00
(iii) Bonus voucher chargesRs, 92.00 TotalRs, 960.00 'To this price of Rs, 960.00 per metric ton, the umpire added another sum of Rs, 82.00 per metric ton on account of the provisions of Imports of Goods (Price Equalization Surcharge Act III of 1967), thereby fixing per metric ton price of the steel strips at Rs, 1,042.00.
3. The awards have been challenged by the T. C. P. before me on the ground that the umpire made an error, which is apparent on the face of the awards, in adopting a formula for fixation of price completely contrary to the provisions of section 9 of the Sale of Goods Act, upon which the umpire had himself placed reliance for the purpose of fixing the price of the goods in question. This section reads as follows:-- "9. (1) The price in a contract of sales may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with, the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case."
The T. C. P'S contention before the umpire was that the first part of this section was applicable, in that though the price was not fixed by the contract, it was left to be fixed in the manner agreed to between the parties. For this purpose, T. C. P. rested its case on paragraph 2 of the terms and conditions of the contract which reads as follows : "2. The firm price will be in acted by T. C. P. in two parts: C & F and other charges."
Thus, according to the T. C. P. as soon as they intimated the firm price in two parts, that became the price under the contract in accordance with subsection (1) of section 9 of the Sale of Goods Act. The umpire, however, rejected this argument and held that the contract between the parties did not prescribe any manner for the fixation of the price.
4. Having rejected the contentions of the T. C. P. under section 9 (1) of the Sale of Goods Act, the learned umpire proceeded to determine the reasonable pride of the goods under subsection (2) of this section, and this he did in this way : He accepted the C & F value at Rs, 542.00 per metric ton, to which amount he added Rs, 326.00 per metric ton on account of duty and other expenses and Rs, 92.00 on account of the down payment made by theC. P. fdr 10 per cent. Bonus voucher charges.
Thus, the umpire fixed the price at Rs, 960.00 per metric ton to which he added another sum of Rs, 82.00 per metric ton under Act III of 1967, thereby bringing the total price per metric ton to Rs, 1,042.00. The T. C. P's claim to a further sum of 40 per cent, bonus, voucher charges was rejected by the umpire. The reason for doing so, as given by the umpire, is that under the Import Policy for July- December 1967, the plaintiffs, as registered industrial consumers, were entitled to import steel strips on licenses to be given under the Licensable List annexed to this Policy, and therefore they were not liable to pay bonus voucher price on any part of the value of the goods imported by them, and that the subsequent modification in the Import Policy, notified in the Gazette of Pakistan, dated 12th September 1967, did not have the effect of taking the steel strips out of the Licensable List or to put an end to the plaintiffs' entitlement to import steel strips as industrial consumers on licenses granted under the Licensable List. I am unable to agree with this view. In my opinion the notification of 12th September 1967 in effect took the steel strips out of the Licensable List, as under this notification the plaintiffs were disentitled altogether to import steel strips directly as industrial consumers under the Licensable List and, instead, were required to place their orders with the T. C.
P. This notification of 12th September 1967, contains two important conditions, that is, (i) imports against all orders (placed with the T. C. P.) were made subject to the Provisions of the Import Policy in. force, and to the basis of licensing announced or to be announced by the Chief Controller of Imports and Exports and to other terms and conditions prescribed by the Trading Corporation of Pakistan Ltd., and (ii) the licensing authority was required to issue licenses or authorisations for the value of all such orders in favour of the Trading Corporation of Pakistan Ltd. Thus, the licenses issued to the plaintiffs. were virtually rendered ineffective. The only role of these licenses was, in consequence of this new notification, to establish the eligibility of the plaintiffs to import steel strips by placing orders with T. C. P., and it was now the T. C. P. which had to be given licenses for imports of steel strips under the Italian credit. The obvious inference from the plain language of this notification of 12th September 1967 is that steel strips were taken out of the Licensable List attached to the Import Policy published in the Gazette of Pakistan, dated 10th July 1967, and were made importable only through the agency of the T. C. P. Further, the orders placed with the T. C. P. for such imports were made subject to the terms and conditions prescribed by the T. C. P. A specific question was put to Mr. A. A. Zari as to whether under this latter provision was it not open to the T. C.
P. to fix the price of steel strips. Mr. A, A. Zari replied that this could be done, but only at the time the orders were placed with the T. C. P., and not subsequently by intimation of "firm price" by the T. C. P. to the importers. In other words, T. C. P. being the seller could fix any price it deemed best only at the time orders were placed with it, but not subsequently. I should think that this is not the correct view of the notification of 12th September 1967, and paragraph 2 of the terms and conditions of the orders placed by the plaintiffs with the T. C. P. which expressly provided that the "firm price" will be intimated later under the two heads referred to above. A reasonable view would be that as soon as this "firm price" was intimated, it became the price at which orders were placed with the T. C. P. and that this fixation of the price comes within the expression "any other terms and conditions prescribed by the Trading Corporation of Pakistan Ltd." used in the notification of 12th September 1967. In this view of the matter, it could be said with force that in fact price had been fixed between the parties or, in the alternative, the manner of the fixation of the price had been determined in accordance with the provisions of section 9(1) of the Sale of Goods Act, but, as noted above, the learned umpire did not take this view. He, on the other hand, came to the finding that paragraph 2 of the terms and conditions of the orders did not prescribe the manner in which the price was to be fixed. The question now is whether the umpire was justified in striking off from the price intimated by the T. C. P., 40 per cent. bonus voucher charges. It should be noted that the umpire did allow addition of 10 per cent. bonus voucher charges to the C and F value of the goods, it having been proved before the umpire that this expenditure was in fact incurred by the T. C. P. But then this fact should have put the umpire on notice that the price of steel strips under the Italian Credit was payable in foreign currency, and not in the local currency. The whole reasoning of the umpire, for the purpose of striking off the 40 per cent. bonus voucher charges from the C and F value, seems to proceed on the basis that the price was payable, only in local currency. The very fact that the goods were importable under the Italian Credit showed that the price is payable by Pakistan in foreign currency over a number of years, and therefore the T. C. P. was quite justified, independently of any instructions, secret or otherwise, issued by the Central Government, to add a part of foreign currency costs to the C and F value, which in fact it did by adding 50 per cent. bonus voucher charges. Moreover, the addition of 40 per cent. bonus voucher charges, in addition to 10 per cent. bonus voucher charges already allowed by the umpire, should have been viewed from another aspect also. The loan under the Italian Credit was repayable over a number of years.
Accordingly, it was necessary to keep in view the Possibility of the fluctuations in the rates of exchange between Pakistani rupee and the Italian currency, or the possibility of devaluation or revaluation of either of these currencies during the whole period over which instalments under the Italian Credit were payable. Thus, the price fixed by the T. C. P. could be treated both as a price fixed according to the manner contemplated by subsection (1) of section 9 as well as reasonable price under subsection (2) of this section. But the umpire did, not proceed in either of this way. Instead he struck off 40 per cent. bonus voucher charges from the C and F value on the ground that the plaintiffs were not under any obligation to import their requirements of steel strips under bonus vouchers and that, notwithstanding the notification of 12th September 1967, the plaintiffs were still entitled to make their imports as industrial consumers under the Licensable List contained in the Import Policy published on 10th September 1967. The umpire then held that no price having been fixed between the parties, nor any manner for fixation of the price having been agreed to between them, the T. C. P. should be paid reasonable price of the goods under subsection (2) of section 9, which reasonable price, according to the umpire, was to be arrived at by striking off the 40 per cent. bonus voucher charges, which had been added to the C and F value by the T. C. P. T think that Mr. A. K. Brohi is correct in his contention that this is not the basis for fixation of reasonable price contemplated by section 9(2) of this Act. Under this provision reasonable price has to be fixed with reference to the market rates. In other words, the umpire should have ascertained the price at which the plaintiffs might have fairly obtained steel strips from the market at the relevant time. The view that reasonable price under subsection (2) of section 9 of the Sale of Goods Act has to be determined according to the market rate finds support in an English case, Acebal v. Levy cited on pan 57 of Schmitth off's Commentary on the Sale of Goods (2nd Edition). The same view of the reasonable price according to section 9(2) of the Act was taken in a Division Bench decision of the High Court of Rangoon, A. K. A. C. I. V. Chidambaram Chettavar v. Steel & Co. Ltd. and in another English case, Watson Brothers v. Hornby (H. M. Inspector of Taxes) . In this connection, the following passage from page 233 of Aggarawala's commentary on the Sale of Goods Act (8th Edition) would also be of assistance for the purpose of understanding the scope of subsection (2) of section 9 of the said Act : "What is a reasonable price will be a question of fact dependent on the circumstances of each particular case. Where the goods are such that there is a market price for them, the market price will be evidence of what is a reasonable price between the parties, though not conclusive. The current price of the day may be highly unreasonable from accidental circumstances as on account of the commodity having been purposely kept back by the Vendor himself, or with reference to the price at other ports in the immediate vicinity, or from various other causes."
5. As I have indicated above, in the first place price of steel strips should have been treated as1 2 3 having already been determined between the parties, or in the alternative it should have been held that the manner for fixation of the price had been agreed to between the parties. But for the purpose of these cases I will accept the umpire's view, which is also the view of the plaintiffs agitated before me, that the price of the goods had to be fixed under section 9(2) of the Sale of Goods Act. But then I would say that the learned umpire erred in law in fixing reasonable price of the goods, not by reference to the market rates, but by arbitrarily striking off 40 per cent. to bonus voucher charges from the C and F value of the goods. Here it may he mentioned that the steel strips could be imported not only through the T. C. P. under the notification dated 12th September 1967, but also under bonus vouchers by reason of the provisions of paragraph 42 of the Import Policy for the shipping period July--December 1967, which paragraph reads as follows :-- "42. Import of tied items under bonus.--Import of such industrial items as are exclusively tied to specific countries under Barters/Credit arrangements, shall be permitted under bonus also."
From the record it appears that material was placed before the umpire that steel strips imported under bonus vouchers would at least have cost Rs, 1,800.00 C and F per metric ton. This could possibly have been one of the indications of the market rates of steel strips at the relevant time. Be that as it may, the proper course for the umpire would have been in proceedings under section 9(2) of the Sale of Goods Act, to ascertain the rate at which the plaintiffs would have fairly purchased the steel strips from the market at the relevant time. Since the umpire did not do so, he fell into a legal error, which error is apparent on the face of the awards itself, In that it involves a misconstruction or misconception of subsection (2) of section 9. For this error of law, the awards are liable to C be set aside. Accordingly, I accept the objections of the T. C. P. that the umpire made a legal error in failing to proceed under section 9(2) to ascertain the market price of the goods at the relevant time for the purpose of fixation of reasonable price of the goods. The conclusion from this is that the awards have to be set aside, which I do hereby, with the direction that the cases will go back to the umpire, who will assess the reasonable price of the goods under section 9(2) of the Sale of Goods Act by reference to the market rates of the goods at the relevant time. Here I may refer to one argument of Mr. A. A. Zari, which was to the effect that the T. C. P. did not take the stand before the umpire that reasonable price under section 9(2) of, the Act should be fixed with reference to market rate, and therefore it is not open to them to take a plea to this effect before me. In my opinion this argument is misconceived. The record shows that T. C. P.'s stand was that the price had already been fixed between the parties or at least manner of fixation of the price had been agreed to between them. But the learned umpire rejected this argument and proceeded to fix reasonable price of the goods under section 9(2) of the Act. It is now open to the T. C. P. to show that if the umpire proceeds under section 9 (2) of the Act, then he should do so by ascertaining the market rates of the goods and not by arbitrarily striking off a part of the price claimed by the T. C. P.
Further, the record of the umpire also shows that the T. C. P. had placed material before the umpire to show that the market rate of steel strips, if imported under bonus vouchers would at least have been Rs, 1,800.00 per metric ton. When the T. C. P. placed this material before the umpire, it was certainly with the object to bring to the notice of the umpire that the method for assessment of reasonable price under section 9(2) of the Act is not the one which he has adopted but is the other method that is to ascertain the market rates, and then fix the price of the goods with reference to these rates. I accordingly see no substance in this argument of Mr. A. A. Zari.
6. The conclusion of the above discussion is that the awards in both the suits are set aside on the ground that they suffer from error of law apparent on the face of the awards, and it is further directed that the cases shall go back to the umpire for re-assessment of the price of the goods in accordance with the principles discussed hereinabove. In the circumstances of the case I do not think that it would be appropriate to make any order as to costs against either party.