(a) This is a suit for the recovery of Rs, 33,213. The facts leading to the filing of the suit shortly, are that with the object to enter into contracts with the Government of Pakistan for the procurement of rice for export, a limited company under the name of the Pakistan Rice Merchants' Syndicate Ltd.
(hereinafter referred to as the Syndicate) was incorporated in 1964. Under Article 30 of the Article of Association, the distribution of contract for the performance and for export of rice was to be made among its members/ directors at the ratio mentioned therein Exh. 6/1. The above syndicate inter alia entered into a contract dated 25-6-1964 with the Government of Pakistan for exporting the quantity of rice at the rates specified therein, Exh. 7/1. It has been averred that the syndicate used to allocate quotas for the export of rice to its members and that each member was to obtain a foreign buyer and was to receive letter of credit from the foreign buyer and that upon receiving the L/C from the foreign buyer, the member concerned used to contact the syndicate with the request to release the required quantity of rice, which in turn used to issue a letter of request to the Government. It has been averred that upon the receipt of a letter of request, the member would open L/C in favour of the Government of Pakistan for the quantity involved at the rates specified in the contract and that the aforesaid L/C was to correspond with the foreign L/C in all details except the amount and that upon the opening of the aforesaid back to back L/C, the Government, would export the quantity to the foreign buyer. It has been further averred that the Government was to receive the payment upon the presentation of the documents in pursuance of the back to back L/C and that the bank concerned after making payment to Government, would tender the documents to the member, who in turn would alongwith the new invoice hand over to the bank against the foreign L/C, and that at the time of negotiating of the above documents, the bank would issue a proceed certificate in favour of the member and that the Government would allow issue of export bonus through the State Bank of Pakistan in favour of the concerned director/member of the syndicate in accordance with the terms of clause 8 of the contract. It has further been averred in February, 1965, defendant No, 1 proposed to the syndicate to purchase 7,000 long tons of Basmati rice for export outside Pakistan against irrevocable L/Cs and that in part performance of the syndicate's obligation to the Government under the original contract by an agreement dated 16-2- 1965, the syndicate delegated the performance of its obligation under the original contract to the extent of purchasing for export 7,000 tons of Basmati rice' to defendant No, 1 and as understood and agreed as aforesaid assured and was assigned all corresponding rights in respect of the export of the said quantity of rice under the original contract in favour of defendant No,
1. It has also been averred that in February, 1965, at the instant, knowledge and with the consent of the syndicate as mutually and internally agreed to between the directors and members of the syndicate including the plaintiff, and defendant No, 1, defendant No, 1 re-delegated to the plaintiff the performance of a sub-contract with the syndicate to the extent of purchasing (among other quantities) 90 tons of rice for exporting to Messrs Ali Hamad Abulmohsin Albassam of Dammam (hereinafter referred to as the said foreign purchaser) to whom defendant No, 1 contracted to sell and export the said quantity of rice, against an irrevocable L/C established at the aforesaid foreign purchaser's instance by Messrs Arab Bank Ltd. For the price of 7,110 and also assured and/or assigned to the plaintiff all rights and benefits arising from the export of the said quantity of rice to the said foreign purchaser in accordance with the terms and conditions of the original contract and his sub-contract with the syndicate. It has also been averred that defendant No, 1 on his part agreed to establish bank L/C in the sum of 6,642 (i,e, the price of the said quantity of rice according to the original contract) in favour of the plaintiff against the foreign irrevokable L/C opened in his favour by the aforesaid Arab Bank Ltd. At the request of the said foreign purchaser of Dammam and that the plaintiff on his part agreed to open a back to back L/C infavour of the Government against in identically in terms of the back to back L/C opened at the instance of defendant No, 1 in favour of the plaintiff.
(c) It has also been averred that defendant No, 1 representing to the plaintiff and defendant No, 2 that the said foreign purchaser had agreed to extend the date of bill of lading originally specified in the irrevokable L/C established in his favour for payment of the price of the said consignment of rice, by necessary modification therein, and that an amendment advice was accordingly issued and the date of shipment was substituted as not later than 22nd March, 1965, in place of 28-2-1965 and 30-3-1965 in place of 8-3-1965 as the last date of L/C. On the basis of the above-amended back to back L/C of defendant No, 1 the plaintiff got the aforesaid consignment of rice shipped by the Government under a bill of lading, dated 13-3-1965 and that upon the shipment of the said quantity the Government tendered the necessary documents to the plaintiff's banker, Messrs National and Grindlays Bank Ltd. For negotiating which were duly negotiated and that thereafter Messrs National and Grindlay's Bank Ltd., on or about 23-3-1965 presented the aforesaid documents under the aforesaid defendant No, l's back to back L/C opened by defendant No, 2 at the instance of defendant No, 1, which documents were duly negotiated. However, defendant No, I declined to issue proceeds certificate on the plea that the said foreign purchaser refused to accept the goods on account of the expiry of the foreign L/C before the shipment of the goods. It has further been averred that defendant No, 1 after the expiry of the considerable period on or about 11- 5-1966 with the permission of the Government and the State Bank of Pakistan entered into a fresh contract with Messrs Orejtn International Traders of Bahrain for the sale of the above consignment at the reduced rate and that also after authorising by the State Bankf Pakistan defendant No, 1, paid half of the demurrage amounting to 3,465 and that consequently only 3,465 was remitted to Pakistan against the aforesaid consignment, It has been averred that defendant No 2 issued the proceeds certificate for the above amount and that when the plaintiffs applied to the Government for getting the bonus voucher against the aforesaid proceed , certificate, the Government declined to cause the issuance of a bonus voucher on the plea that the full amount of the foreign exchange was not brought in I against the aforesaid consignment. It has further been averred that defendants 1 Nos. 1 and 2 by their illegal and wrongful act and in breach of the contract ' have caused loss of the bonus vouchers to the plaintiff, valuing Rs, 33,213. The plaintiff has claimed the above amount.
2. Defendant No, 1 has filed a written statement, in which it has been 'averred that there was no understanding between the syndicate and the Government or internally between the directors and the members of the syndicate as alleged in para. 3 of the plaint. It has further been averred that answering defendant agreed to purchase 7,000 tons of rice and that the syndicate delegated the performance of the obligation under the original contract or assured or assigned all corresponding benefits and that syndicate retained its right and private of contract with the Government and decided that the shipment of 3,295 tons out of the said 7,000 tons would be exported by the 6 members of the syndicate instead of the answering defendant alone and requested the answering defendant to make the benefits of the latters of credits issued by the foreign purchasers in favour of the answering defendant to the aforesaid members/directors including the plaintiff. It has also been averred that the plaintiff had private of contract with the syndicate but not with the answering defendant and that the plaintiff was unable to make the shipment by the date stipulated in the foreign L/C and, thereupon, he requested the answering defendant to secure the extension of the shipping date and of the last date of the foreign LC from the foreign purchaser and that the answering defendant showed his inability to procure the extension, but the plaintiff requested the answering defendant to exert his influence with the foreign buyer and to order defendant No, 2 to extend its back to back L/C in anticipation of obtaining the said extension of the foreign L/C. It has further been averred that answering defendant, thereupon, agreed to extend the date of shipment to 22-3-1965 and the date of expiry of letter of credit o 30-3-1965 on his guarantee to defendant No, 2, but made it clear to the plaintiff that it was not certain that the foreign buyer would extend the foreign L/C. It has also been averred that the answering the defendant has not committed any illegal act or committed breach of any alleged contract and that the back to back L/C was amended at the plaintiff's request on the understanding that the foreign L/C may not be amended in spite of the answering defendant's best efforts. Thus, the defendant No, 1 has denied his liability to pay any amount.
3. Defendant No, 2 has also filed its written statement, wherein it has been admitted that back to back L/C was opened at the request of defendant No, 1 against the irrevokable L/C opened by the Arab Bank Ltd. In favour of defendant No,
1. It has been averred that in conformity with the Exchange Control Regulation banks are precluded from issuing proceed certificates for the purpose of obtaining export bonus vouchers in respect of the documents which contain discrepancies and which are negotiated under a guarantee from the shipper as was done in this case. It has further been averred that the terms and conditions of back to back letter of credit do not conform in other details with the terms and conditions of L/C against which it is being shipped. It has been denied that the plaintiff has any cause of action against defendant No, 2.
9-2-1976 and defendant No, 3 was impleaded, wherein he denied his liability.- He has also adopted the written statement of defendant No,
1. On 24-2-1969 and thereafter an additional issue was framed on 9-8-1976. 114 above issues read as follows:- ship concern owned by late Hussain Bhai R. Goawalla, who expired on 7-1-1975 and; thereupon, C.
M. A. 57 of 1975 was filed for bringing on record his sole legal heir i. e. His son which application was allowed by an order dated "(1) Whether there was agreement between the Government and Syndicate that On the basis of the above pleadings consent issues were adopted)
4. It may be observed that defendant No, 1 firm was a sole proprietor-that the contract would be delegated to the members and directors Sayndicate for performance?
(2) Whether there was agreement between Syndicate and members and directors that members and directors will perform the delegated contractual obligations of the Syndicate?
(3) Whether there was private of contract between the plaintiff and the defendant (covers paragraphs 8 and 9 of the Written Statement).?
(4) Whether the plaintiff requested the defendant to obtain extension of the shipment date in the foreign letter of credit and whether the defendant agreed to extend the shipment date to 22-3- 1965 and validity date of letter of credit to 30-3-1965 without any commitment or definite promise that the foreign buyer will agree to extension?
(5) Whether the plaintiff made shipment and negotiated letter of credit within the extended dates?
( ) Whether the documents of the plaintiff were free from discrepancies and whether the defendant No, 2 was bound to issue proceed certificate?
(7) Whether the plaintiff was bound to process his claim through the Syndicate?
(8) Whether the plaintiff was bound to surrender bonus vouchers for the shortage of foreign exchange and then to make claim on the close of the year for bonus vouchers earned by the Syndicate in excess of its obligations under the main contract. If so, what is its effect?
(9) Whether the average sale price in foreign exchange and the bonus voucher surrendered and the bonus voucher the plaintiff was to surrender exceeded the foreign exchange part of the price of total quantity of rice exported by the Syndicate during the relevant year?
(10) Whether the plaintiff did not claim the benefit of foreign exchange earned by other members of the Syndicate for shipment made on s. s. MARIHORA. If so, what is its effect?
(11) Whether the plaintiff has any cause of action against defendant No, 2.
(12) To what relief if any the plaintiff is entitled." Additional Issue "Whether the plaintiff is entitled to any relief against defendant No, 3?" My findings on the above issues are as follows:
6. Issues Nos. I and 2.-The agreement entered into between the Government of Pakistan and the syndicate is Exh. 7/1. Whereas the Memorandum and Articles of Association of the Syndicate is Exh.
6/1. Article 30 of the Articles of Association contemplates the performance of contract for export of rice by the members of the syndicate in the ratio mentioned therein. From the oral evidence of P. W.
1,, D. Ws. 1 and 2 and also from the documentary evidence brought on the record, it is evident that the contract was performed by the members of the syndicate as the nominees of the syndicate.
My finding on these issues are in the affirmative.
7. (a) Issues Nos. 3 and 4.-It has been urged by Mr. Mohsin Tayaballi, learned counsel for the plaintiff that defendant No, 1 by making available foreign L/C for the export of 90 tons of Basmati rice to the plaintiff on the condition that he would provide a back to back L/C against the foreign L/C in favour of the plaintiff had in fact entered into an agreement with the plaintiff. Whereas it has been urged by Mr. Hanif, learned counsel for defendant Nos, 1 and 3 that there was no private of contract between the plaintiff and defendant No, 1 inasmuch as the plaintiff as well as defendant No, 1 were acting as the nominees of the syndicate and that there was no agreement inter se between the plaintiff and defendant No,
1. From Exh. 7/2, it seems that defendant No, I made an offer to the syndicate to export 7,000 tons Basmati rice on the terms and conditions contained therein. However, the syndicate through its letter, dated 18-2-1965 Exh. 7/3 addressed to the Section Officer Ministry of Agriculture and Works, allocated various quantities for export to its members named therein. It may be advantageous to reproduce hereinbelow the contents of the above letter, which reads as follows:- {{TABLE TEXT}} "Pakistan Rice Merchants' Syndicate Limited 39, Garden Road, Karachi.
' No, RO/69 Date February 18, 1965.
' The Section Officer, ' Ministry of Agriculture & Works, ' Food & Agriculture Division (Food Wing), Karachi. Dear Sir, ' Kindly arrange to issue Release Order for 3,295 long tons of Basmati Rice 1966 crop for shipment to Demmam, Kuwait, Behrain, Ummsaid, Dubai, Abu Dhabi and Beirut, favour of the following parties for quantities mentioned against their names to be shipped by S:{{TABLE TEXT}} Name Local Qty and Quality Name of Port
1. M/s. Syed 875 475 long tons Kuwait Hasan Mahmud 400 Behrain & Co.
2. M/s. Badruddin 700 500 Dammam, 200 Kuwait H. Mawani & Co.
3. M/s. H. H. 475 245 Kuwait 100 Behrain Pirbhoy & Co. 100 Dubai, 30 Beruit
4. M/s. Habib 1025 500 Dammam, 525 Ummsaid Rice & Co.
5. M/s. R. B. 140 90 Dammam, 50 Kuwait Awari & Co. Ltd.
6. M/s. Adam 80 Abu Dhabi Vayani & Co.
' The above cargo of 3,295 long tons of Basmati rice 1966 crop may be released against our Contract No, KR 11/2 (25), dated the 25th June, 1964.
Thanking you.
Yours faithfully (for Pakistan Rice Merchants'
Syndicate Ltd.)
(Sd.)
(Syed Hassan Mahmud)"
Chairman {{TABLE}} ' It may be noticed that defendant No, 1 was allocated 700 tons for export whereas the plaintiff was allocated 140 tons i. e. 90 tons for Dammam and 50 tons for Kuwait.
(b) From the documentary evidence namely, Exhs. 6/3 to 13 it is apparent that the foreign L/C for the import of 90 tons of rice into Dammam from Pakistan was opened by Messrs Ali Hamad Abdul Hussain Albassam (i. e. The said foreign purchaser) through Messrs Arab Bank Ltd., routed through Messrs Habib Bank, Karachi in favour of defendant No,
1. It may be observed that the copy of the above L/C has not been filed by any of the parties to the above suit. However, there is no controversy on the question that the above foreign L/C was in favour of defendant No, 1 and that the shipping period specified therein was up to 28-2-1965. Defendant No, 1 opened back to back L/C dated 17-2-1965 through defendant No, 2 in favour of the plaintiff in respect of 90 tons of Basmati rice Exh. 8/3 (equivalent to Exh. 9/1) for a sum of 6,642 F.
0. B. In the column of the additional condition the following was provided :- "A complete set of three original bill of lading alongwith four copies of non-negotiable bill of lading to accompany the documents. Certificate in triplicate in respect of quality weight and country of origin issued by the Government Laboratory to accompany. Stalls bill of lading acceptable. Freight will be paid by Commerce Bank Limited, Karachi on presentation of initialled or stamped copy of bill of lading by the Steamer Company. Marks: Albassam Dammam. This L/C is being opened back to back against Foreign L. C. No, K-65/57 dated the 30th January, 1965, of Arab Bank Limited, Alkhobar for Stg. 7,110 C & F for 90 tons. Notify: Messrs All and Hamed Albassam, Alkhobar."
' Whereas in turn the plaintiff got a back to back L/C, dated 22-2-1965 opened through Messrs National and Grindlay's Bank Ltd. In favour of the Section Officer, Ministry of Goods and Agriculture (Food Division) for a sum of 6,682/10/0 plus Rs, 13,500, F.
0. B. Karachi, Exh. 6/15. In the column of Mark the words "Albassam Dammam" were written, whereas the documents mentioned therein were to be negotiated with Messrs Commerce Bank Ltd. i. e.
Defendant No,
2. Furthermore, under the caption 'Special Instructions) it was provided that the payment would be made in Pak. Rupee at the rate ruling on the date of the payment. It is an admitted position that in pursuance of the aforesaid back to back L/C opened by the plaintiff, the Government of Pakistan shipped the goods for Dammam showing the said foreign purchaser as the consignee. Upon presentation of the shipping document, by the Government of Pakistan in pursuance of the aforesaid back to back L/C Messrs National and Grindlay's Bank Ltd. Paid the amount mentioned in the L/C through the retirement memo. Exh. 6/16. Whereas in turn defendant No, 2 upon presentation of the documents by the plaintiff's aforesaid bank paid the amount mentioned in the back to back L/C caused to be opened by defendant No, 1 in favour of the plaintiff. It may also be pertinent to refer to Exh 9/2, which is defendant No, l's letter dated 20-2-1965 addressed to Messrs Habib Bank Ltd., Bunder Road, Karachi, intimating to them that the shipment in question belonged to the plaintiff and requesting them to issue all necessary letters according to the request of the plaintiff for getting bonus vouchers etc. It has also been mentioned that the plaintiff is a member of the syndicate. It has been pointed out, by Mr. Mohsin Tayab Ali that the amount of the L/C issued by the plaintiff in favour of the Government Exh. 6/15 is more than the amount of the back to back L/C opened by defendant No, 1 in favour of the plaintiff and that defendant No, 1 was to receive pecuniary benefit out of the above transaction. There is no document on the record to indicate that defendant No, I had provided the aforesaid facility of making his L/C available to the plaintiff at the request of the syndicate to a co-member without any consideration. In my view from the above documents, it has been established there was inter se agreement/arrangement between the plaintiff and defendant No, 1.
(c) It has been urged by Mr. Hanif learned counsel for defendants Nos. 1 and 3 that all the members of the syndicate were in fact acting on behalf of the syndicate inasmuch as they were to render accounts to the syndicate and that in case of any deficit in the foreign exchange, which was brought in against a particular consignment, the syndicate was to make good to the Government and that in case of excess the syndicate was to be given additional bonus voucher on the excess amount of foreign exchange so earned. In this regard he has drawn my attention to the statement of D. W. 3 Irshad Mohomed Beg Exh. 12 and also to Exh 10/6 which is a letter from the Section Officer Government of Pakistan addressed to the State Bank of Pakistan stating therein, that after taking the account in respect of the rice exported by the syndicate through its members, it transpired that the syndicate members were entitled to bonus vouchers for the additional amount of 40,269, the break up of which is given in para. 2 of the above letter and which indicates that the plaintiff was allocated a sum of 1,611/76 for obtaining bonus voucher. It is true that the syndicate was responsible for the performance of the contract with the Government, but the above contract was to be performed through its members/directors and that under the arrangement agreed to between the syndicate and its members with the 'consent and knowledge of the Government each member was entitled to appropriate the bonus vouchers to the extent of his entitlement against the rice exported by him though he was to intimate about the amount to the syndicate.
' The plaintiff through the letter dated 25-2-1965 addressed to defendant No, 1 Exh. 8/9 requested defendant No, 1 to send the amendment extending the shipment dates and the expiry L/C's dates of the three consignments mentioned therein including the consignment in question of 90 tons, which was intended to be exported to Dammam. P. W. 1 in his statement at one place has deposed that he did not request defendant No, 1 to extend the shipment period, whereas at another place in the cross-examination, he has stated that he requested defendant No, 1 on the telephone to get the shipment period extended. It may be observed that in Exh. 8/9 the extension requested for is in respect of defendant No, l's back to back L/C, namely, furnished by defendant No, 2 on behalf of defendant No, 1 in favour of the plaintiff. There is no reference to the foreign L/C in this letter. It is evident that defendant No, 1, in response to the plaintiff's above request got the aforesaid back to back L/C extended through defendant No, 2's amendment advice dated 27-2-1965, Exh. 8/4, wherein the shipment period was extended to the latest upto 22-3-1965 and expiry date of the L/C was extended up to 28-3-1965, but all terms and conditions of the above Jack to back L/C remained unchanged. From the plaintiff's statement as well as from Exh. 6/19, it is clear that defendant No, 2 amended the L/C Exh. 8/3 not on the basis of the foreign L/C of the said foreign purchaser, but on the personal guarantee of defendant No,
1. In other words, the amended date of shipment and the last date of L/C were not substituted in pursuance of any amendment in the foreign L/C but because of personal guarantee provided for by defendant No,
1. It is evident that at the time when the plaintiff requested for the amendment of defendant No, l's back to back L/C through letter dated 25-2-65 Exh. 8/9 the then available time was not sufficient to obtain the amendment in the foreign L/C as the shipment period was to expire on 28-2-1965. Defendant No, 2 issued amendment advice on 27-2-1965 Exh. 8/4.
(c) It is, therefore, apparent that by the time the amendment was made by defendant No, 1 in the aforesaid back to back L/C the foreign buyer had not amended the foreign L/C. It may be observed that there is no reliable evidence on the record either oral or documentary to conclude that the defendant No, 1 held out any express assurance to the plaintiff that he would obtain the necessary amendment in the foreign L/C by the said foreign purchaser, nor there is any evidence on the record to indicate that efforts were made by defendant No, 1 to obtain the amendment of the foreign L/C. However, the act on the part of defendant No, 1 to get his back to back L/C amended on the basis of his personal guarantee to defendant No, 2 to ensure the remittance of the foreign exchange involved, in my opinion constitutes sufficient representation to the plaintiff to the effect, that he would get the foreign L/C amended, which was admittedly in favour of defendant No, 1.
' In view of the above discussion my findings on Issue No, 3 and first part of Issue No, 4 are in the affirmative. I further hold that there was representation on the part of defendant No, 1 to get the foreign L/C amended.
9. Issue No, 5.-Exh. 8/7 is the bill of lading dated 13-3-1965 for 90 long tons of Basmati rice in favour of Albassam Dammam. From the above document, it is evident that the plaintiff had shipped and negotiated back to back L/C furnished by defendant No, 1 in favour of the plaintiff within the period specified therein. My finding accordingly is in the affirmative.
9. Issue No, 6.-It is admitted position that the foreign L/C was not amended and that by the time the consignment was shipped it had already expired. So, there were discrepancies between the documents tendered by the plaintiff against the defendant No, l's back to back L/C and the foreign L/C, It is also admitted position that defendant No, 2 did not receive the remittance for the original amount but had received half of the amount after the expiry of more than one year, in respect of which they had issued proceed certificate in favour of the plaintiff. My finding on this issue is accordingly that there were discrepancies between the plaintiff's document and the foreign L/C and that defendant No 2 was only bound to issue proceed certificate in the above case after the receipt of the remittance from the foreign country.
10. Issue No, 7.-While discussing Issues Nos. 3 and 4 I have already held that there was inter se an agreement between the plaintiff and defendant No, 1, my finding on this issue is in the negative for the reason that the suit claim is based on the aforesaid agreement between the plaintiff and defendant No, 1.
11. Issues Nos. 8 and 9.-According to the learned counsel for the plaintiff nothing turn on the above issues, whereas according to learned counsel for defendant No, 1 the above issues are relevant to show the working of the syndicate in relation to the performance of the contract with the Government. In my view the above issues are not relevant for the purpose of adjudicating upon the dispute between the plaintiff and defendant No, 1 on the basis of the contract between them.
However, it is correct that according to the contract between the Government and the syndicate, the latter or its member was to surrender bonus voucher for the shortage of foreign exchange and then to take claim from the syndicate and that after the completion of the contract the accounting was to be made, and that on the basis of the settlement of the accounts, the members of the syndicate were entitled to claim bonus voucher on the amount of the foreign exchange earned in addition to the amount mentioned in the contract. In this regard reference can be made to Exh.
10/6. Accordingly my finding on the above issues are in the affirmative with the qualification that the above two issues are not relevant to the dispute in issue.
12. Issue No, 10.-The wording of the above issue is somewhat ambiguous. Mr. Hanif learned counsel for defendant No, 1 has referred to the aforesaid Exh. 10/6 in order to show that the plaintiff was allocated a sum of 1,611.76 for obtaining bonus voucher as a share of the excess amount of foreign exchange earned by the syndicate in performance of the contract with the Government. However, Mr. Hamf was unable to point out how the above issue has any bearing on the dispute in suit. My finding on the above issue is that the plaintiff was allocated their share out of the excess foreign exchange earned by the syndicate on the performance of the contract.
13. Issue No, 11.-It has been urged by Mr. Mohsin Tayab All that the plaintiff has an independent cause of action against defendant No, 2 inasmuch defendant No 2 by amending the L/C Exh. 8/3 by Exh. 8/4 represented that the foreign L/C would also be amended accordingly. Whereas Mr. Mr. Z. C. Valiant has urged that the aforesaid back to back L/C provided by defendant No, 2 was not amended in pursuance of any amendment in the foreign L/C but it was amended on the basis of a personal guarantee of defendant No, 1 to the knowledge of the plaintiff. P. W 1 in his statement, as pointed out by me earlier while discussing the other issues, admitted this position that defendant No, 2 amended the aforesaid back to back L/C in pursuance of a personal bank guarantee of defendant No, 1 and not in pursuance of any amendment in the foreign L/C. Mr. Mohsin Tavab Ali has referred to Paget Law of Banking 7th edition, at page 625, Law of Bankers' Commercial Credit by H. C. Guttering and Maurice Megrab, 4th edition, at page 13 and the Commercial Banking Law by R. P. Pennington and A. H. Hudson, in support of his contention that furnishing of a back to back L/C implies that it shall correspond with the foreign L/C. It is true that the learned authors of the above books support Mr. Mohsin in Tayab Ali's above contention to some extent. It may be advantageous to reproduce hereinbelow extracts from Paget on Banking, at page 625, from Law of Bankers Commercial Credit by H. C. Guttering and Maurice A Megrab, 4th edition, at page 13 and from the Commercial Banking Law by R. R. Pennington and A. H. Hudson at page 323, which read as follows:-
(i) "Paget's Law of Banking, 625 : Back to back credit. A means of achieving much the same purpose as a transfer above credit is what is known as a back to back credit, which arises where the beneficiary is not the supplier and has no authority to transfer. By producing his credit to his own banker the beneficiary may, on the strength of it, obtain a credit in favour of the proposed supplier. No further legal problems arise, however, from this method of meeting much the same situation as is met by a transferable credit, but the banker issuing the back to back must obviously be in a position to satisfy himself that the conditions of the 'original' credit will be met, which means, virtually, issuing the second credit in precisely the same terms and satisfying himself that the documents tendered. To him are such as exactly to meet the requirements of the first credit.
(ii) H. C. Gutteridge and Maurice Megrah on the Law of Bankers' Commercial Credits, at page 13.-A 'back to back' credit (i) is the term given to an ancillary credit, which arises where the seller- beneficiary uses the credit granted to him by the intermediary or issuing banker to support another (the ancillary) credit granted by the seller' banker to his supplier. Such credits are not common or popular in the United Kingdom largely because of the difficulty in matching the two credits, as where for instance, the beneficiary is buying F.
0. B. And selling C. I. F. As the credits are intended to cover the same goods, it is important that they should be in virtually identical terms, except for such variations in price, amount and time validity as are required to meet the slightly different circumstances of supplier and seller. It is obviously essential that the banker issuing the second credit must be in a position to comply with the terms of the first credit, or he may find himself in possession of documents of title to goods which have been rejected by the original buyer and to which he will- have to resort if he cannot for any reason look with safety to his own customer.
(iii) R. R. Pennington and A. H. Hudson on Commercial Banking Law, 323.-In form a back to back credit is an ordinary acceptance credit, but the obligation of the customer on whose behalf it is issued to reimburse the issuing back for sums paid to the beneficiary is secured by a mortgage or pledge over another credit which has been opened in favour of the customer by another bank.
Hence the credit issued at the customer's request is backed by a credit to which he is entitled. For example, if A sells goods to B, and B sells the same goods to C. And C to D, D's bank may open a credit in favour of which he uses as security to induce his own bank to open a credit in favour of B, and B in turn may use this credit as a security for his own bank to open a credit in favour of A. If a customer who has given such a security to his bank, does not put it in funds to pay bills of exchange which it has accepted under the credit issued by it at his request, the bank may (if it is able) present the documents required under the credit pledged to it as security, and may obtain the acceptance and payment of bills drawn under that credit by its customer. By this means the bank may reimburse itself for its outlay under the credit it has issued. It must be remembered, however, that unless the credit pledged to the bank is a transferable one, it cannot itself draw bills under it, and so it should either take delivery of bills drawn by its customer under that credit, or obtain his written authority or draw such bills on his behalf. In either case it should also notify the bank which issued the credit so as to prevent its customer availing himself of it without revealing the fact that the credit has been pledged."
From the above quotations it seems that a back to back L/C is used to provide as a guarantee against the credit facility extended by a bank. Generally a back to back L/C is to correspond with the original L/C and with B the back to back L/C, if any preceding to it.
' Even on the basis of the above legal propositions defendant No, 2 cannot be held liable to the plaintiff for the reason that defendant No, 2 amended back to back L/C to the knowledge of the plaintiff on the basis of a personal guarantee of defendant No, 1 and not in pursuance of any amendment in the foreign L/C. If that would not have been the case, the plaintiff would have definitely a cause of action against defendant No,
2. In view of the above discussion my finding on issue No, 11 is in the affirmative.
' Issue No, 12.-(14) (a) While dealing with issues Nos. 3 and 4, I have held that the act of defendant No, I to get his back to back L/C amended on the basis of his personal guarantee to defendant No, 2 for ensuring the remittance of the foreign exchange involved in the consignment in question constitutes sufficient representation on his part to give a cause of action to the plaintiff. It is also an admitted position that defendant No, 1 sold the consignment in question to another firm after paying demurrage with the permission of the Government and the State Bank of Pakistan, resulting into remittance or half of the original price of the consignment. If defendant No, 1 had nothing to do with the transaction in question, he would not have take the trouble of disposing of the above consignment. It is no doubt that defendant No, 1 has also suffered some loss on account of the above consignment as defendant No, 2 debited defendant No, l's (ape) upon honoring the back to back L/C furnished by them on behalf of defendant No,
1. But at the same time, it cannot be denied that because of the non-amendment of the foreign L/C, the plaintiff suffered loss to the extent of the value of the bonus voucher, which the plaintiff was entitled to receive and to appropriate the same to their use.
(b) It was pointed out by Mr. Hanif that the plaintiff as a prudent businessman before shipping the consignment should have ascertained as to whether the foreign L/C was amended or not. My first impression was the above lapse on the part of the plaintiff was fatal to the claim in suit, but when 1 analysed the above contention, I found that it is not so, for the reasons that the goods were shipped by the Government of Pakistan and not by the plaintiff against the L/C provided by the plaintiff, secondly defendant No, 1 was in fact the shipper or the consignment as the foreign L/C was in his favour, thirdly under the personal guarantee furnished by defendant No, 1 for getting the back to back L/C amended he was bound to ensure, the remittance of the foreign exchange (involved in the consignment) to Pakistan and fourthly under the contract with the Government of Pakistan the quantity of the rice involved in the transaction in question was to be exported on any case.
' It may be observed that D. W. 1 in his cross-examination has admitted the bonus voucher rate at the material time was Rs, 175 to Rs, 185.
' The plaintiff has also claimed the suit amount at the rate of 180 %. So, I am, therefore, of the view that the plaintiff is entitled to a decree of Rs, 33,213 against the estate of late Hussain Bhai Goawalla.
' Additional Issue.-Defendant No, 3 as the legal heir of the deceased Husain Bhai is liable to the extent of the estate of the deceased in his hand.
' I accordingly decree the suit for Rs, 33,213 with 6 % simple interest thereon from the date of the suit till payment with no order as to costs against defendant No, 1 and defendant No, 3 to the extent of the estate of the deceased Husain Bhai Goawalla. However, suit against defendant No, 2 is dismissed with no order as to costs.