This is a Suit filed by the present 2 plaintiffs, namely Plaintiff No. 1, Messrs Pakistan Automobile Corporation Limited, a company incorporated in Pakistan under the Companies Act, 1913 and Plaintiff No. 2, Messrs Republic Motors Limited, also a company incorporated in Pakistan under the Companies Act, 1913 against 3 Defendants, namely, Defendant No. 1, Messrs General Motors Overseas Distribution Corporation, a corporation constituted under the laws of the United States of America having their registered office at General Motor Building, 3044, West Grand Boulevard, Detroit, Michigan 48201 (U. S. A.), defendant No. 2 Messrs Ghandhara Industries Limited, a company incorporated in Pakistan under the Companies Act, 1913 and Defendant No. 3 Lt -Gen. (lietd.) M.
Habibullah Khan Khattak. In the above suit the Plaintiffs have prayed for the following reliefs "(i) to declare that the Franchise letter dated 21st August, 1973 between the Plaintiffs and the Defendants No. 1 was formal franchise agree--ment and is a licence coupled with interest and was duly acted upon and by conduct of the parties over the years, since it was executed, remained and is a franchise agreement in relation to the assembly, manufacture, sales and service if Isuzu trucks buses. Automobiles, spare parts, accessories and all that appertains to these products and that the said agreement/licence cannot be withdrawn or revoked or otherwise assigned or given or granted to any person, company, firm or individual outside the scope of Federal Control ie. To the private sector in view of the express requirement of the law and public policy and the development of the motor vehicle industry under Government Control as also due to commitment under the franchise/licence coupled with interest;
(ii) to issue a consequential mandatory direction or directions to the Defendants No. 1 that the said franchise agreement dated 21st August, 1973 being a licence now coupled with interest and otherwise as a Contract also and by reason of Article 3 of the Order cannot be revoked and be kept in force and operation for the entire territory of Pakistan as in the past since its execution and to restrain the Defendant No. 2 or all persons claiming through or under the Defendant No. 2 and/or the Defendant No. 3 and any and all companies in which the Defendant No. 2 and/or No. 3 is or are a shareholder, director or otherwise interested and each Defendant by appropriate mandatory order be restrained from being given or otherwise accepting any agreement/franchise/grant in the matter covered by the franchise agreement dated 21st August, 1973 (Aanexure `B' hereto):
(iii) to grant damages at the rate of 1.00 lac for the month of April, 1981 and for each month thereafter from the Defendants jointly and severally, for arbitrary, illegal and baseless allegations and withdrawal/ acceptance of the franchise and the said damages be ordered to be awarded for each month from and after April, 1981 until the Defen--dant No.'1 affirm the franchise in favour of the Plaintiffs and resume thereunder all operations, services and supplies and the other Defen--dants disavow the passing of the said franchise to them and each Defendant makes submission of respective effect in this Hon'ble Court;
(iv) to grant costs of the suit to the Plaintiffs; and
(v) to grant such other/further/additional relief or reliefs in favour of the Plaintiffs as may be deemed appropriate, fit or proper in or about the circumstances mentioned hereinabove."
2. Alongwith the above plaint the Plaintiffs have also filed an applica--tion under Order XXXIX, rule3 1 and 2 read with section 1$I, C. P. C. (C. M. A. No. 2119/81), in which they have prayed for the following inter--locutory reliefs "Application under Order YX XIX, rules l and 2 read with section 151, tr. P. C.-For reasons disclosed in the accompanying affidavit this Hon'ble Court may be pleased to direct, by an interim order, until the suit is decided, the Defendant No. I not to interfere with, withdraw or discontinue or otherwise act on or give effect the letter dated 30-3-1981, Annexure 'H' to the Plaint (hereinafter referred to as `the said franchise') whereby or for any other reason, the Defendants may cancel, withdraw, discontinue or interfere with or take away the franchise granted to the Plaintiffs vide letter dated 21-8-1973 as accepted on 5-9-1973 and continued to be acted and by a further appropriate interim order, until the suit is decided, restrain the Defendants Nos. 2 and 3 from accepting the said franchise, in any form, for or in the territory of Pakistan or otherwise manufacture, assemble, make, sell, supply in the territory of Pakistan any Isuzu Products, more particularly trucks, buses, automobiles, vehicles, spare parts, accessories and trading items connected therewith and/or supplies relating to the same in or from Pakistan including supplies of Isuzu Products to Defence Forces/ Services Departments, Road Corporations and Companies and all any other Federal or Provincial Government Department or Statutory Corporation.
Urgent ad interim order is solicited in Chamber."
3. The brief facts leading to the filing of the above suit and the application are that Plaint No. 1 is a corporation promoted by the Federal Government of Pakistan with the objects set out in the Memorandum and Articles of Association, which inter alia arc relatable to assembly and manufacture of motor vehicles or-floating organization, managing and supervising such establishment etc. Whereas Plaintiff No. 2 are wholly owned subsidiary of Plaintiff No. 1 being a company incorporated under the Companies Act, 1913. The objects for which plaintiff No. 2 are, set up inter alia include to assemble and manufacture motor vehicles, their parts and accessories and to supply or to distribute the same. It seems that on 1-1-1971 the then President of .Pakistan and the Chief Martial Law Administrator issued and promulgated Economic Reforms Order, 1972 (P. O. Of 1/1972). Hereinafter referred to as the P. O. The object of the above P. O. Was to take over the management and control of the industries mentioned in the schedule, which Inter ally included under category No. 5 assembling and manufacturing of motor vehicles. It also seems that in or about 1972 in pursuance of the P. O. The Government of Pakistan resumed/control management of certain companies engaged including of Messrs National Motors Ltd., and Haroon Industries Ltd., which were assembling and manufacturing of vehicles etc. It further seems that in pursuance of the power contained in clause (11 of Article 7(b) of the P. O. And in exercise thereof the Federal Government by Order No. 1/18/74-0. P. 3 dated 12-7-1974 issued a notification, whereunder the Federal Government acquired a majority portion of the shares or proprietary interest in the establishments mentioned in the Schedule to the above notification, which inter alts included companies dealing in automobiles and their assembly and manufacture. It may be pertinent to quote hereinabove the relevant portion of the above notification (which is Annex. `A' to the Plaint) which reads as follows No. 1/18/74-0. P. 3 GOVERNMENT OF PAKISTAN MINISTRY OF PRODUCTION AND PRESIDENTIALAFFAIRS (Production Division)
Whereas in exercise of the powers conferred by clause (1) of Article 7-B of the Economic Reforms Order, 1972 (P. O. No. I of 1972), the Federal Government has acquired a majority portion of the shares or proprietary interests of the establishments specified in the Schedule below; Now, therefore, in exercise of the powers conferred by clause (1) of Article 7-E of the aforesaid Order, the Federal Government is pleased to order that the management of each of the establishments specified in the first column of the aforesaid Schedule, and the shares or proprietary interests acquired by the Federal Government therein, shall stand transferred to the Corporation specified in the second column of the Schedule against such establishment; SCHEDULE Name of the Establishment r ~iName of theCorporation
1. National Motors Limited.
2. Millat Tractors Limited.
3. Republic Motors Limited.
4. Trailer DevelopmentPakistan Automobiles Corporation Limited.Corporation Limited.
5. Naya Daur Motors Limited.
6. Awami Autos Limited.
7. Sind Engineering Limited.
(Sd.)
Islamabad,(Alauddin Ahmad)
Dated 12th July,Additional Secretary."
1.974.
It may be noticed that under the above notification, the proprietary interest acquired by the Federal Government in the Companies mentioned therein was transferred to the Corporation specified in second column of the Schedule i.e. To Plaintiff No. 1.
4. It also seems that Defendant No. 1 through their letter dated 21-8-73 addressed to Plaintiff No. I issued a letter of intent for the non-exclusive privilege of purchasing from them assembled Isuzu .Commercial truck and motor vehicles and Isuzu components packed in sets, required for the assembly of certain isuzu models which were to be set forth in an approved models and deletion supplement to the agreement. In the above letter of intent model TXD-5005 and Model BE 5001 were mentioned. It was also provided that during the pendency of the execution of a franchise agreement the letter of intent would be acted upon. Plaintiff No. 2 were required to accept the above letter of intent within 30 days, which they did on 15-9-1973. It also seems that no formal franchise agreement was executed between 'Plaintiff No. 1 and Defendant No. 1. It is also evident that in the letter of intent, the original period of franchise contemplated was 5 years, but even after the expiry of the above period the parties continued to act upon the above letter of intent. It further seems that the parties, namely, Plaintiff No. 1 and Defendant No. 1 exchanged certain letters in the years 1979, 1980 and 1981 on the question, as to whether the arrangement contained in the above letter of intent should be continued or should be discontinued. In this regard it may be pertinent to point out that Defendant No. 1 through their letter dated 17-10-1980, addressed to the Managing Director of the Plaintiff No. 1 with reference to the discussion held on 15-10-1980 purported to confirm that in view of the impending changes in Plaintiff No. 1's future programme isuzu franchise would be granted eventually to private sector company and also purported to confirm the mutual agreement that Plaintiff No. 2 would run out of their isuzu orders and existing stocks by August, 1981.
It also seems that the above letter was followed with further correspondence and eventually defendant No. I through their letter dated 30-3-1981 purported to cancel the arrangement contained in the above letter of intent. It may also be pertinent to mention that defendant No. 1 issued a letter of intent dated 3-10-1980 in favour of defendant No. 2 for the purposes specified in the letter of intent of 1973 issued in favour of plaintiff' No. 1 and thereafter executed a franchise agreement dated 1-4-1980 in their favour. The plaintiffs after the receipt of the above termination notice dated 30-3-1981 have filed the present suit. The above suit as well as the above application have beck resisted by all the 3 defendants.
5. Defendant No. 1 in their counter affidavit have averred that the suit as framed for declaration and injunction is not maintainable and the relief's are clearly beyond the scope of sections 21, 42, 54, 55 and 56 of the Specific Relief Act, and that the plaintiffs are not entitled in terms to any interim injunction as prayed or otherwise and that the ad interim order granting status quo passed on 28- 5-1981 and further order passed on are liable to be vacated. It has been further averred that the letter of intent dated 21-8-1973 did not give exclusive franchise right to the plaintiff for assembly, distribution, sale of isuzu trucks/products. It has been averred that the letter of intent clearly states that GMODC franchise agreement would grant plaintiff No. 1, the non-exclusive privilege of franchise. It has also been averred that since the plaintiff' No. 1 in spite of repeated telexes failed to return the work papers, no franchise agreement could be or was indeed offered to the plaintiffs.
(The copies of telegrams dated 15-9-1975, 26-9-1975, 16-10-1975 and 11-I1-1975 from defendant No. I to plaintiff No. 2 have also been enclosed to the counter-affidavit). It has been further averred that having regard to all these and other reasons, namely the fact that the plaintiffs were not prepared to accept the fundamental term o1 the proposed franchise agreement that it was on non-exclusive basis. It has also been averred that having regard to all these and other reasons, namely, the fact that the plaintiffs' performance in the years 1977, 1978 and 1979 was very poor and that the plaintiffs were not prepared to commit to promote the business of isuzu products as '::core particularly set out in paragraph 8, defendant No. 1 were entitled to withdraw this offer to enter into a franchise agreement with the plaintiffs or either of them. In para. 8 of the counter-affidavit, defendant No. 1 have given the detail of the vehicles imported by plaintiff No. 2 in the years 1974 to 1980, which indicates that in 1977 to 1980 plaintiff No. 2 have not imported any vehicle. It has also been averred that the plaintiffs had imported 408 isuzu Bus chassis in the year 1978 and 344 isuzu trucks in the year 1980, but these were imported from Japanese trading company, namely, Messrs C. Itoh and that such import of isuzu vehicles from sources other than defendant No. 1 is .Of no economical benefit to defendant No. I and that the plaintiff's allegation that they could not import any vehicle in the years 1977-78, 1978-79 because of fire it not true. It has been reiterated that the plaintiffs' performance in the imports of isuzu trucks and vehicles Was not satisfactory and that plaintiff No. 1 was negotiating with Messrs Hino Motors to utilize plaintiff No. 2's facilities exclusively for manufacturing of Hino vehicles and that this fact was brought to the notice of plaintiff No. I by the defendant repeatedly inter alia through their letter dated 11-7-1980 and 7-8-1980 and a reply was finally received 5 months later, namely, through plaintiff No. 1's letter dated 11-8-1980.. It has been averred that from the above letter of plaintiff No. 1 dated I1-8-1980, it is clear that far from denying the existing arrangement, which would exclude isuzu vehicles from being assembled at plaintiff No. 2's factory, plaintiff No. 1 made a vague reply by stating that "it is therefore, unduly early to understand that the present measure will exclude any possibility of future isuzu assembly in Pakistan". It has also been averred that plaintiff No. 2 have facility to assemble vehicles of the makes mentioned in para. 9 of the counter-affidavit, which do not include isuzu vehicles. It has been repeatedly reiterated that the plaintiff have no case for an ad interim injunction.
6. Defendant No. 2 in addition to the filing of a counter-affidavit to the plaintiffs' above injunction application also filed an application under Order XXXIX, rule 4 read with section 151, C. P. C.
(Miscellaneous Application No. 2340 dated 17-6-1981) for recalling the ad interim orders passed by this Court. In supporting affidavit of the above application, it has been averred that plaintiff No. 2 instead of assembling isuzu vehicles, which could have materially enhanced their profit deliberately bypassed defendant No. 1 in dealing with the import of isuzu vehicles on a number of occasions from a Japanees Trading Company C. Itoh. It has also been averred that the plaintiffs have suppressed the fact that they are in actual act of negotiating promotion of Hino trucks and buses to be manufactured at premises of plaintiff No. 2 to the exclusion of other types of trucks and buses in Pakistan except Bedford and that in these circumstances it does not lie in the mouth of plaintiffs to say that sale, distribution or assembly of motor vehicles cannot by law be done except , through a state --owned agency. It has also been averred that defendant No. 1 had issued a letter of intent and also executed an agreement of franchise in favour of defendant No. 2 prior to filing of the above suit. It has also been averred that the P. O. Does not prohibit setting up of assembly and manufacturing plant of motor vehicles by private parties. In the counter, affidavit defendant No. 2 has reiterated the facts mentioned by him in their affidavit in support of their aforesaid application under Order XXXIX, rule 4, C: P. C. And inter alia have averred that the granting of the injunc--tion prayed for shall cause irreparable loss to them. In this connection it may be pertinent to quote hereinbelow relevant portion of para. 4 of the counter-affidavit dated 25-6-1981 "(4) That the contents of para, 4 are extremely misleading and, therefore, repudiated, denied and traversed in tote. The correct facts are :-
(i) Haroon Industries Ltd., was a taken-over establishment and was dealing with the assembly of trucks and buses and had two assembly lines;
(ii) the assembly lines, in the totality of the context may include land, buildings, constructions but the important part is "toolings". The toolings have to be adopted specifically to the line of manufacture of assembly;
(iii) that for assembly of Isuzu vehicles, conforming jigs, fixtures, over-head hoists and other ancillary and subsidiary machinery and equipment bad to be installed and was so done;
(iv) for each assembly workers have to be given special training for while basically assembly of vehicles might appear to be similar, in fact, it has its own differences from make to make. Isuzu vehicles likewise bad their specialties in which the working personnel had to be trained an d fully versed;
(v) in the matter of assembly it is not the assembly lines and the trained personnel which constitute "licence coupled with interest." It is also the inventory of spare parts and accessories which have to go with it and which an assembler/distributor has to keep in store. The present spare parts, accessories and allied material, in the hands of the plaintiffs No. 2 should exceed Rs. 35 lacs;
(vi) the inventory of the assembled vehicles is something about 135 buses and 160 trucks which, even if these are valued at the minimum average of Rs. 1.60 lacs each, would value over Rs. 4.50 crores.The sudden stoppage or disconnection of the arrangement contemplated by the letter of the defendants No. 1 and impugned in these proceed--ings means an immediate staggering and irreparable involvement and involvement represented by the inventory figures as above, say Rs.
5.10 crores."
7. Defendant No. 3 has also filed a counter-affidavit and also rejoinder, in which he has made more or less same averments which have been made by defendant No. 2 in their affidavit in support of their application and the counter-affidavit to the plaintiffs' application. Defendant No. 3 along with his affidavit in rejoinder dated 19-1-1982 has filed Annxs. X/1 to X/3 in order to indicate that the setting up of an assembly and manufacturing plant by a private party is not prohibited under the P.
O.
8. (a) In support of the stay application Mr. Mansoor Ahmad Khan, learned counsel for the plaintiffs have made the following submissions:
(i) That licence in favour of plaintiff No. 1 for assembling and manu--facturing isuzu vehicles and for selling the same and their spare parts etc. Was coupled with interest and, therefore, could not have been revoked in view of section 202 of the Contract Act, 1872..
(ii) That since the franchise in favour of Plaintiff No. f was exclusive, the granting of the same franchise in favour of defendant No. 2 by defendant No. 1 contravenes the plaintiff No. 1's right.
(iii) That the P. O. 1/1972 prohibits setting up of the factories in respect of items mentioned in the First Schedule to the above order and. Therefore, the franchise agreement executed by defendant No. 1 in favour of defendant No. 2 is against the public policy and is hit by section 23 of the Contract Act.
(b) On the other hand Mr. Sharif, learned counsel for defendant No. 1 has urged the following points;
(i) That the franchise contained in the letter of intent dated 21-8-1973 was non-exclusive.
(ii) That defendant No. I was justified in withdrawing their offer to execute franchise agreement as the performance of the plaintiffs was not satisfactory and that in fact they were negotiating with defendant No. I's competitor for exclusively manufacturing Hino vehicles, and, therefore, the action taken by defendant No. 1 was justified.
(iii) That no specific performance of the agreement of the nature can be claimed and that in any case the relief of specific performance being discretionary relief, the Court will not grant to the plaintiffs as they have not come with clean bands.
(c) Mr. Khalid Ishaque learned counsel for defendant No. 2 has contended as follows;
(i) That the franchise in favour of the plaintiff No. 1 was non-exclusive and, therefore, granting of franchise by defendant No. 1 in favour of defendant No. 2 does not contravene any right of the plaintiffs.
(ii) That under P. O. 1/1972 there is no prohibition for setting up private industries in respect of the subjects covered by the Schedule in the order.
(d) Mr. Liaquat Merchant for defendant No. 3 has made the following submissions
(i) That under P. O. 1/1972 there is no prohibition for setting up an industry by a private sector in respect of the subjects covered by the schedule to the above order.
(ii) That defendant No. 1 have given sufficient notice to plaintiff No. 1 before revoking the letter of intent and, therefore, no exception can be taken to the above action of defendant No. 1.
(iii) That the Supreme Court case reported in the 1980 SCMR has no application to the instant case.
9. It may be pertinent to take up the question as to whether the franchise contained in the letter of intent dated 21-8-1973 in favour of plaintiff No. 1 was exclusive right or it was non-exclusive. It may be observed that Mr. Mansoor Ahmad Khan has vehemently urged that the word 'franchise' connotes the exclusive right in respect of the subject-matter covered by the franchise. His further submission was that the nature of the work contem--plated under the letter of intent itself suggests that it was an exclusive franchise. On the other hand M/s. Khalid Ishaque, Liaquat Merchant and Sharif have vehemently contended that from the letter of intent dated 21-8-1973 and also from the other documents on record it is evident that no exclusive franchise was granted in favour of plaintiff No. 1 by defendant No. 1. I have gone through the documents on record and my tentative view is that prima facie no exclusive franchise can be spelled out from the said documents. In this regard, it may be pertinent to refer the above letter of intent dated 21-8-1973 issued by defendant No. 1 in favour of plaintiff No. 1. In sub-para. 3 of the above letter, it has been stated that the GMODC would grant plaintiff No. 1 non-exclusive privilege .Of purchase from GMODC assembled Isuzu commercial and truck motor vehicles and Isuzu components packed in sets required for the assembly of certain Isuzu models which shall be set forth in an approved models deletions supplement to the agreement. (This is Annexure D to the plaint). It may also be pertinent to refer to plaintiff No. 1's letter dated 17-12-1979 document No. 2 to the counter affidavit of defendant No. 1 particularly para. 5 of the above letter, which reads as follows "You make our statement that we would `block' import of Isuzu pro--ducts into Pakistan sound as some sort of a threat. This is not the cue we had mentioned to you the standardization exercise that the Government of Pakistan is currently seized with. We have been asked to recommend products which should be standardized for import. Obviously if we do not have any exclusive rights for Isuzu products, it would be normal business practice on our part to resist inclusion of these products in the list of standardized vehicles.
We would like to reiterate yet once again that GMODC cannot, in all fairness, expect us to effectively market its products as long as-
(i) There is virtually no flow of product information from GMODC to RML.
(ii) There are "free for all" arrangements prevalent which parties of little means and no repute trying to undercut us. (In fact, more often than not, these parties get cheaper prices, and much more quickly, than we, who are supposed to be the exclusive dealers, in Pakistan, do).
(iii) Prices offered to us are in-competitive. In view of the above we would like to propose that in our mutual interest GIVIODC should ensure to us exclusive distribution rights in Pakistan. To set at rest any apprehensions, we are even prepared to consider a 'trial period' for this arrangement.
From the above-quoted para., it is evident that plaintiff No. '1 wanted to have exclusive right of franchise, which prima facie negatives plaintiff No. 1's averment that under the above letter of intent dated 21-8-1973 they were granted exclusive franchise. In this regard, it may also be pertinent to refer to defendant No. 1's telegram to plaintiff No. 2 dated 26-9-1979 (document No. I to the counter-affidavit), in which it was pointed out that defendant No. 1 were not violating plaintiff No. 1's distributorship right inter alia as it was non-exclusive. This averment seems to have not been denied by the plaintiffs in their letters which are on record. On the contrary from the documents on record prima facie, it seems that franchise in favour of plaintiff No. 1 was nonexclusive. In view of my above tentative finding, it follows that defendant No. 1, reserved their right to grant similar franchise to one or more parties in Pakistan for the same products. In this view of the matter prima facie, I am of tentative view that defendant No. 1 by entering into franchise agree--ment with defendant No. 2 have not violated the franchise covered under the aforesaid letter dated 21-8-1973.
10. Reverting to the question as to whether the P. O. Prohibits setting up of assembly and manufacturing plant of motor vehicles urged as by the learned counsel for the plaintiffs and whether the franchise agreement in favour of defendant No. 2 executed by defend--ant No. I is in violation of the public policy, as to warrant the application of section 23 of the Contract Act it may be observed that in this regard the learned counsel for the parties have referred to the provisions of the P. O. It may also be observed that Article 2 (a) of the P. O. Defines an establishment as any undertaking pertaining to any of the categories set out in the Schedule and includes any related office, shop, factory, godown, yard stock and store wherever they may be. Whereas Article 3 provides that the P. O. Shall have effect notwithstanding anything contained in the provisions of the Constitution. Order or any law for the time being in force or any contract, memorandum of article of association. This article was amended by the Economic Reform (Amendment) Ordinance, 1973, whereby in above Article 3, sub-clause (2) was added to providing that "it is hereby declared that development under Federal control of the industries pertaining to any of the categories set out in first Schedule is expedient in the public interest".
It has been vehemently urged by Mr. Mansoor Ahmed Khan that Article 3 a: amended by the aforesaid amending Ordinance clearly prohibits the setting up of private industry in respect of the subject-matters covered by the Schedule to the P. O. On the other hand learned counsel for the defen--dants have invited my attention to Annexs. X/1, 2 and 3 filed by the defendant No. 3 along with his affidavit-in-joinder dated 19-1-1982 referred to hereinabove. Annex. X/1 is a letter dated 31- 3-1981 addressed by the defendant No. 3 to the Hon'ble Minister for Industries and Production.
Ministry of Industry, Government of Pakistan, in which it has been stated that defendant No. 3's group was keenly interested in re-entering the automobile industry and they were in the advance stages of finalisation of franchise arrangement with lsuzu Motors Limited, a leading Company of Japan, whose products were well established and in fact had been standardized by the Pakistan Army. The above letter was replied to by the Minister of Industries and Production through his letter dated 25-2-1981 (Annex. X/2), in which defendant No. 3's above letter was acknowledged and an assurance was extended that defendant No. 3's proposal would be given prompt consideration and it was reiterated that present Government had full confidence in the private sector and defen- -dant No. 3's project would be examined in this spirit. Whereas Annex. X/3 is the letter dated 24th September, 1981 from Dy. Secretary. Government of Pakistan, Ministry of Industries addressed to defendant No. 2 with reference to their letter dated 10-9-1981, wherein it has been stated that the Economic Reforms Order, 1972 does not debar the private sector from entering into any industrial field and that by and large only the basic and heavy industries are reserved for public sector detail of which is attached. It was also stated by the Deputy Secretary that this demarcation was only indicative and depending upon the merits of each case and that the Government had the option to permit private investment in any industry reserved for public sector. Without expressing myself on the above question finally, it will suffice to observe that P. O. Prima facie does not expressly provided any prohibition from setting u an Industry by private Sector in respect of the subject- matters covered b Schedule to the Order, which includes assembling and manufacturing of vehicles. It may be noticed that the aforesaid Schedule does not cover sale/distribution of the assembled vehicles or sale/distribution of components/spare parts etc. However, it has been vehemently urged by Mr. Mansoor Ahmed Khan that the above order impliedly prohibits setting up of any industry in respect of the subject-matters covered by the Schedule to the P. O. It will suffice to observe that at this stage, it is not necessary to conclude even tentatively that the P. O. Impliedly prohibits setting up private industries in respect of the items covered by the Schedule to the P. O.
However, at the final stage, it will be open to the plaintiffs to urge the above point which will require further detailed examina--tion. It may also be observed that from Annexs. X/1 to X/3 referred to herein: above it is evident that defendants Nos. 2 and 3 had approached Government of Pakistan with the object of getting its permission for setting up an assembly and manufacturing plant in respect of Isuzu vehicles. From the above letters, i! Is clear that defendant No. 2 cannot set up any assembly or manufac--turing plant in respect of vehicles without the permission of the Federal Government. Any franchise agreement in respect of items covered by the Schedule to the P. O.
Prima facie does not contravene any provision of the P. O. Particularly when one of the contracting parties approaches the Federal Government for permission. The Federal Government has the option either to grant permission to defendant No. 2 or to withheld the same for cogent reasons for setting up assembling and manufacturing plant in respect of vehicles etc. Plaintiff No. 1 being a functionary of the Federal Government cannot have any legitimate grievance if the Federal Government decides to grant the permission to defendant No. 2 for the aforesaid purpose. In this view of the matter, I am inclined tentatively to hold that prima facie the right of franchise granted by defendant No. I in favour of defendant No. 3 has not violated the provision of the P. O. In order to warrant the pressing into service section 23 of the Contract Act.
11. (a) With reference to the question as to whether the franchise licence in favour of plaintiff No. 1 contained in the letter of intent dated 21-8-1973 was coupled with interest as to warrant the application of section 202 of the Contract Act, it may be observed that Mr. Mansoor Ahmad Khan has referred to para. 4 of plaintiff No. 2's managing director's counter-affidavit dated 21-6-74 quoted hereinabove in para. 6, in order to urge that in view of the heavy investment made by the plaintiffs and their predecessor in interest, the licence in question was in fact coupled with interest and, therefore, the same could not have been revoked by defendant No. 1. In support of the above contention Mr. Mansoor Ahmed Khan has referred to the case of Muhammad Aref Effendi v. Egypt Air (1980 SCMR 588and also the case of Martin Baker Aircraft Co. Ltd. And another v. Canadian Flight Equipment Ltd., Martin-Baker Air--craft Ltd. v. Murison ((1955) 2 All E R 722) and the case of London Borough of Hounslow v. Twickenham Garden Developments Ltd. ((1970) 3 All E R 326).
(i) In the above Supreme Court case the petition for leave was converted into appeal and an ad interim injunction was granted by the Supreme Court in respect of a sales agency pertaining to Egyptian Airways. It may be pertinent to quote hereinbelow paras. 4 to 7 of the above Judgment :- "4. The plaintiff/petitioner has come up in a petition for special leave to appeal against the same to this Court. We have heard the learned counsel for the parties and from their arguments as also after going through the judgment under appeal, we notice that the case involves substantial questions of law and fact namely :-
(i) under what circumstances contract of agency of the kind involved in this case could be cancelled or revoked by a principal ;
(ii) whether section 202 of the Contract Act was applicable to the facts of this case and what is true construction and scope of that section.
(iii) whether the plaintiff-petitioner is entitled to continue the agency and/or claim damages from the principal on the pleadings as made by him in his plaint and if so to what ultimate relief he will be entitled on the facts and in the overall circumstances of the case.
(iv) whether the plaintiff/petitioner had not submitted his account to the principal in terms of the contract and whether he was justified in withholding the same on any legal ground ; and
(v) whether the termination of contract in this case was lawful or not.
5. These are all substantial questions of law and fact and since they involve a careful study and scrutiny after leading of appropriate evidence therefore, the High Court was not justified to refuse grant of a temporary injunction as prayed for at this stage. In the circumstances we are inclined to grant leave to appeal to the petitioner and converting this petition into an appeal accept the same and hold that this was a fit case in which a temporary injunction ought to have been granted on terms.
7. Consequently we grant a temporary injunction to the plaintiff/ petitioner against the defendant on the following terms which we think would meet the ends of the justice and maintain the interests of both sides
(i) petitioner would render accounts for six months L e. July, August. September, October, November and December, 1979, to the Naazar of High Court within four weeks and thereafter within a period of fortnight furnish Bank guarantee for the amount found due by the Naazar.
(ii) respondent should also furnished Bank guarantee within six weeks for Rs. 40,00,000 (Forty lacs).
(iii) current business with effect from 1-1-1980 continue under the terms of contract."
It may be pertinent to observe that the above petition for leave was filed against the order dated 16-2-1980 passed in Suit No. 1079/79 by me. I while dealing with an application under Order XXXIX, rules 1 and 2, C. P. C. In the Suit filed by Muhammad Aref Effendi declined to grant injunction on the basis of sections 205 and 206 of the Contract Act and because of the view found favour with the various Superior in Indo-Pakistan. It may be observed that in the above case Supreme Court was pleased to grant an ad interim injunction on the conditions quoted in the above para. 7. From the above judgment of the Supreme Court, it is evident that the Supreme Court was of the view that in a fit case even where a party seeks the specific performance of an agency agreement, the Court can grant an ad interim injunction for keeping intact above contract till such time as it may consider just and proper or till the disposal of the suit. M/s. Liaquat Merchant and Sharif's contention that the Supreme Court as a general rule has not laid down that in every case, in which a party alleges that agency agreement in his favour is coupled with interest, the Court is obliged to grant an ad interim injunction, seems to be correct. Each case is to be examined on, its own merits.
(ii) In the above case reported in (1959) 2 All E R, the facts of case were that by an agreement the plaintiff en English company herein--after called as M. B. Which manufactured aircraft ejection seats designed by its Managing Director agreed to permi a Canadian company, which had been formed at the instance of the English Company and of which one Mr. M. R. a former employee of the English Company was a director, to manufacture, sale and exploit all and these products on the American continent. The above agreement contained no provision of its determination, However, by another agreement between M. B. And M. R. M. B. Appointed M. R. Their sole selling agent for their products on the American Continent. Under clause 4 (o) of the subsequent agreement, it was provided that "without prejudice to any other remedy which either party may have against the other for the breach of the non---observance of the provisions of the agreement either party shall be entitled summarily to determine this agreement. M. R. Brought suit for declaration that the above agreement was terminable by a reasonable notice. After reviewing the case, law Mackniair. J held that a notice of 12 months would be a reasonable notice for terminating the above agency agreement notwithstand--ing the above clause 4 (o) in the aforesaid second agreement.
(iii) Whereas in the second case reported in (1970) A E R 326, it was held by Megary, J. That the plaintiff borough council was not entitled to obtain an injunction for restraining the contractor from entering upon the premises for the execution of the contract or execution of the work. It was held that the licence given to the contractor to carry out the work on the site was not a separate entirety, but was created by and form part of the contract and it was by its turn irrevocable, in that there was an implied obligation on the part of the borough council not to revoke while the period of the contract was running and enquiry would not assist the borough to revoke the licence in breach of the contract. It was also observed that if the contractor would have brought this suit, the Court might have granted an ad interim injunction in his favour.
(b) It may be observed that the above two English cases indicate that in England the Court has been granting interlocutory injunctions even in those cases where the previous view of the English Courts was contrary. However, in my view the above English Cases have -no direct bearing to the instant case for the reason that in England the law of contract is based on common law i. e. on the principle embodied by the decisions of the Courts except that there are certain special enactments like Sale of Goods Act, or the Marine Insurance Act etc. Which deal with the special subjects, whereas in Pakistan we have codified contract law inter alia in the form of Contract Act, 1972. It may be advantageous to quote hereinbelow sections 20'2, 205 and 206 of the latter Act, which read as follows; "202. 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-
(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.
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204. -------------------..
205. Where there is an express or implied contract that the agency should be continued for any period of time then principal must take compensation to the agent, or the agent to the principal, as the case may be for any previous revocation renunciation of the agency without sufficient cause.
206. Reasonable notice must be given of such revocation or renuncia--tion ; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other."
It may be noticed that section 205 of the Contract Act provides that where there is express or implied contract that the agreement should be continued for any period of time the principal may make compensation to the agent or the agent to the principal as the case may be for and premature revocation or renunciation of agency without sufficient cause, whereas section 206 provides that reasonable notice must be given of such revocation or renunciation otherwise the damage thereby resulting to the principal or to the agent as the case may be must be made good by one to the other. The above two sections contemplate payment of damages. Whereas section 202 provides that where agent has himself an interest in the property which form subject-matter of the agency, he cannot in the absence of an express contract be terminated to the prejudice of such interest.
(c) In my view it is not necessary at this stage to adjudicate even tenta--tively whether franchise or licence in favour of plaintiff No. I granted by defendant No. 1 was coupled with interest. The Supreme Court in the above---cited and discussed case has not held that the licence in respect of agency in respect of M/s. Egypt Airways was coupled with interest, but it has been observed that inter alia question, whether section 202 of the Contract Act could be pressed into service was substantial question, which required a detailed examination and till such detailed examination (i. e. till the disposal of suit) the agency is to be kept intact.
It has been vehemently urged by Mr. Sharif that because of the conduct on the part of plaintiffs, namely, that their performance was not satisfactory inasmuch as in the years 1977, 1978 and 1979 they have not done any business and that they were in fact negotiating with defendant No. I's competitor to assemble and manufacture in Pakistan Hino vehicles to the exclusion of defendant No. 1's products and because of the fact that the defendant No. I have been writing in the past that they eventually to grant intended franchise to a private party, it is not a fit case for granting of any ad interim injunction. In furtherance of the above argument Mr. Liaquat Merchant has invited my attention inter alia, to documents Nos. 2 and 4 to the counter affidavit of defendant No. 1 of the years 1979 and 1980 in order to indicate that as a matter of fact the plaintiffs had sufficient and reasonable notice before the termination of their letter of intent. It will suffice to observe that the respec--tive contentions of the learned counsel for the parties will require a detailed examination and evidence which is to be recorded on some of the points and therefore, it will not be proper to make any observation. However, it will suffice to point out that defendant No. I in their letter dated 17-12-1980 had themselves mentioned that plaintiff No. 2 by August 1981, would run out their Orders and existing stocks etc. It may be advantageous to quote hereinabove the above letter of defendant No. 1 (Annex. C to the plaint), which reads as follows; "JIC/cc October 17, 1980 Private and Confidential Mr. M. Jalaluddin Chairman, Pakistan Automobile Corporation Ltd.
6th Floor, N.S.C. Building, Moulvi Tamizuddin Khan Road, Karachi (Pakistan).
Dear Mr. Jalaluddin, I refer to our meeting of October 15, 1980 when we discussed the future of Isuzu in Pakistan.
I confirm that, in view of the impending changes in your future pro--grammes, the Isuzu franchise will be granted, eventually, to a private sector company. I also confirm our mutual agreement that Republic Motors will run out their Isuzu orders and existing stocks by August 1981. 1 would like to take this opportunity to thank you for the co-operation you have given us and for the friendly and gentlemanly way have handled our mutual affairs.
Yours sincerely, (Sd.) J. L. Czarski Director of Sales Middle East.".
It is evident from the contents of the above letter that it was allegedly agreed between the parties (which allegation was denied by plaintiff No. 1 in their subsequent letter dated 4-1-1981 Annex. D to the plaint) that by August 1981 the arrangement under letter dated 21-8-1973 would continue and thereafter it would be discontinued. In this view of the matter, it is clear that defendant No. 1 terminated the letter of intent before the expiry of the period mentioned by them in their above letter dated 17-10-1980. In other words defendant No. 1 terminated the above letter of intent 5 months prior to the expiry of the period mentioned in their above-quoted letter. This letter corroborates the contents of para. 4 of defendant No. 2's Managing Director's counter affidavit quoted hereinabove in para. 6, which indicate that the substantial amount of the capital of plaintiff No. 2 would be blocked on account of the non-clearance of the existing stocks etc. In their possession in respect of Isuzu vehicles. It will, therefore, be appropriate to suspend the operation of the above termination notice dated 30-3-1981 till the disposal of the above suit, subject to the condition that the above suit shall be fixed for regular hearing within a period of 4 months and that upon the expiry of 5 months' period, it will be open to defendant No. 1 to apply to the Court for vacation of the above suspension order in case they can make out a prima facie case for that purpose.
12. I accordingly grant plaintiffs' application to the extent that the operation of the above defendant No. 1's notice dated 30-3-1981 is hereby suspended. It is ordered the above suit shall be fixed for regular hearing within a period of 4 months before a learned Single Judge sitting at the original side and it will be open to defendant No. 1 to apply for the vacation of the above stay order after the expiry of 5 months period, on showing sufficient ground if the suit is not disposed of before the expiry of 5 months. Before parting with the above discussion, I may observe that the observations contained hereinabove are tentative, and the same are to be ignored at the time of the regular hearing of the suit.
There will be no order as to costs in respect of the above application. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.