RUSTAM S. SIDHWA, J.---This is a review petition filed by Terni S.P.A. Petitioner seeking review of the judgment of this Court, dated 24-11-1991 passed in civil appeal CA. No,154 of 1989, partly accepting the appeal of the petitioner and modifying the judgment of the Lahore High Court so as to enable the petitioner to recover interest at the rate of 12 per cent. Per annum on the decretal amount of Rs,740,828.45 from the date of institution of the suit till the date of recovery of the decretal amount, instead of at the rate of 6 per cent. Awarded by the High Court; the costs being also allowed to the petitioner-Company.
2. The brief facts of the case are that Batala Engineering Company (Pakistan) Limited, Lahore, the predecessor-in-interest of the present respondent, Pakistan Engineering Company Limited, Lahore, entered into an agreement with the petitioner Terni S.PA., an Italian company, on 12-12-1963, to work in collaboration with each other in the designing, fabrication and erection work for gates and gearing equipment for Quadarabad and Rasul Projects of WAPDA. Dispute touching payment on several counts arose between the parties. Correspondence was exchanged and negotiations Were held to settle the dispute, when, on 3-1-1972, the control, administration and management of the Batala Engineering Company Limited was taken over by the Government under the provisions of the Economic Reforms Order, 1972 (P.O. 1 of 1972). To manage the company the Government appointed its own officers in place of the original directors. Correspondence took place between the parties for settlement of accounts. It appears that due to lack of adequate information, the newly-appointed officers who managed the company could not properly handle the matter.
Ultimately, a senior executive of the petitioner, Mr. Maimone, came all the way from Italy, held meetings. And discussions with the officers of the respondent and sorted out the matters to some extent. However, no final solution of the dispute could be evolved. The petitioner had therefore to institute suit on 18-10-1980, to recover what it considered to be certain dues from the respondent.
The break-up of its claim was as follows:--- (1)Technical services US $ 34,558.10 (2)For acceleration of work US $ 105,882.31 (3)Replacement of damaged materials due to fire and employment of labour to carry out repairsUS $ 11,914.15 (4)Refund of guarantee deposit US $ 6,301.20 (5)Balance of first 20% payment US $ 914.88 (6)Interest at 15% p.a. from 18-10-1971 to 17-10-1980 on items (1) to (5) US $ 215,410.93 Total: US $ 374,976.47 Plus future interest on US $ 374,976.47 from date of suit till date of realisation.
3. The respondent denied the existence of the agreement with the petitioner. It also denied its liability to pay anything to the petitioner. However, when the correspondence, especially the letters sent by the respondent as well as by its predecessor, the Batala Engineering Company Limited, were placed on the record, it became clear from the very admissions of the respondent that quite a substantial amount was payable by the respondent to the petitioner.
4. The learned trial Court accepted the petitioner's claims in toto and decreed the suit with further interest at 12 per cent. Per annum from the date of institution of the suit till date of recovery of the decretal amount.
5. Being aggrieved by the above judgment, the respondent preferred a regularfirst appeal, which was allowed by a learned Division Bench of the Lahore High Court on 19-3-1989. The High Court only accepted the claims of the petitioner to the extent to which the respondent had admitted the same in its letters Exhs.P24 to P27 as follows:- (1)Technical services (US $ 30,561.8 Rs,1,45,532.25 (2)For acceleration of work(US $ 105,882.31)Rs,5,04,200.00 (3)Damage on account of fire.(US $11,914.15) Rs,56,733.95 (4)Refund of security (US $ 6,301.20) Rs,30,005.68 (5)Balance of 20% payment(US $ 914.88) Rs,4,356.57 Total: (US $ 155674.34 Rs,7,40.828.45 The High Court accepted the US dollars claim as above, but converted it into Pakistan Rupees at the exchange rate prevalent at the time when the amount became due and was payable by the respondent to the petitioner i.e, at the rate of US $1.00 equal to Pak Rs,4.719. The High Court did not allow interest from the date the debt became due to the date of suit, but allowed the same on the rupee claim decreed at 6 per cent. Per annum from the date of institution of the suit till the date of the recovery of the decretal amount. The petitioner was awarded the costs of the suit as well as of the appeal.
6. Being aggrieved by the above judgment, both the petitioner and the respondent preferred direct appeals to this Court. CA. No,125 of 1989 of the respondent was dismissed, but CA. No,154 of 1989 of the petitioner was allowed in terms stated in para. 1 above, by consolidated judgment of this Court, dated 24-11-1991.
7. Being aggrieved by the judgment passed in CA. 154 of 1989, the petitioner filed a petition seeking review thereof on the ground that there had been failure on the part of this Court to apply legal authorities which permitted a decree being passed in foreign currency and which also permitted recovery to be made in the said currency as on the date that the actual payment would be made by the judgment-debtor, and that past interest from date of payment of debt to date of suit had inadvertently been not allowed.
8. The review petition was admitted to reconsider these two grounds and we now have the case before us on these two matters.
9. On behalf of the petitioner it is submitted that there is no dispute between the parties that the payment under the contract had to be made by the respondent in US dollars and that the petitioner in paras. 6 and 8 to 12 of the plaint referred to its claims in US dollars. It is also submitted that in the heading of the suit it referred to its claim as one "for recovery of US $ 374,976.47 being equivalent to Pak. .Rs,3,749,764.00" and in the relief para. It prayed for the following relief:-- "a decree for recovery of US $ 374,976.47 equivalent to Pak Rupees amount of 3,749,764.00 at the present rate of exchange plus future interest at the rate of 15 per cent. Till the final payment is made."
It is urged that the petitioner in para. 5 also referred to the fact that according to Contract No,308 the respondent company initially was liable to pay the plaintiff in US dollars at the exchange rate of Pak Rs,4.7619 equal to US $ 1.00 and that actually the predecessor of the defendant had been making payments before in US dollars at that rate. It is submitted that whilst the petitioner was making all attempts to recover its dollar debt in the rupee equivalent then prevailing at the time each negotiation was held, but the respondent kept on delaying the matter, with the result that the petitioner had to keep increasing the Pak rupee equivalent when asserting its claim from time to time. In this connection it is submitted that when the contract was signed, the exchange rate was Pak Rs,4.7619 equal to US $ 1.00, whereas at the time when the suit was lodged the rate was roughly Pak Rs,10.00 equal to US $ 1.00, on the basis of which the relief para. Was drafted, and now it is submitted that the rate of exchange is Pak Rs,25.07 equal to US $ 1.00. It is next contended that the old rule that where a debt was payable in a foreign currency, a Court was only bound to permit the said debt being paid in the currency of the country at the exchange rate prevalent at the time when the debt became due or was payable, was overruled by the Court of Appeal in Schorsch Meir GmbH v. Henin (1975, 1 All E.R. 152), which not only held that the Court could give a money judgment in a foreign currency when that currency was the currency of the contract, but that it could also say that the plaintiff could have the foreign currency converted to sterling at the exchange rate on the date the final payment was made, instead of at the rate when the debt was actually payable. It is submitted that this rule was followed by the Queen's Bench Division in Miliangos v. George Frank (Textiles) Limited ((1975), 1 All E.R. 1076), which decision was affirmed by the House of Lords in Miliangos v. George Frank (Textiles) Limited ((1975) 3 All ER. 801). It is therefore contended that the petitioner is entitled to the judgment and decree in US dollars payable in Pak rupees equivalent at the rate of exchange applicable on the date actual payment is made by the respondent. It is submitted that the present rate of exchange of US dollar is roughly Pak Rs,25.07.
10. As regards the petitioner's claim for past interest it is submitted that the petitioner had claimed past interest in the suit at 15 per cent. Per annum from 18-10-1971 to 17-10-1980 (which was the date of suit), which worked out to US $ 215,410.93, which was stated in para. 12 of the plaint, and which was added to its money claim, thus making a grand total of US $ 374,976.47. It is submitted that though the Civil Court decreed the total claim with further interest at 12 per cent. Per annum from the date of suit till final payment, the High Court accepted the petitioner's debt of US $ 155,574.34, which it decided to decree at the rate of US $ 1.00 equal to Pak Rs,4.719, the exchange rate prevailing on the date the debt became due, and did not allow past interest from the date the debt had fallen due to the date of suit, but only allowed interest at 6 per cent. Per annum on the debt claim from the date of suit till date of final realisation. It is contended that though this Court increased the interest from 6 per cent. To 12 per cent. Per annum on the petitioner's claim of US $ 155,574.34, but forgot to award past interest thereon at 12 per cent. Per annum from the date the debt became due till the date of final payment. It is lastly urged that the respondent having flagrantly driven the petitioner from pillar to post for over twenty years to secure its valid dues, this Court should have allowed interest from the date the debt became due to the -date the suit was instituted, as had been done by the learned Civil Judge, which claim was pressed in this Court, but inadvertently omitted in its judgment.
11. On behalf of the respondent it is submitted that where a debt is payable in foreign currency in Pakistan, on the basis of established practice extending over many years, based again on English precedents, rupee equivalent of the same as on the date the debt is payable can alone be ordered by the Court. It is further submitted that the recent change of law in England in this respect was due to the European Communities Act, 1972, and Article 106 of the Treaty of Rome, which provided that each member State had to undertake and authorise payments connected with the movements of goods in the currency of the member State in which the creditor or the beneficiary resided, and as there is no such treaty here in this respect, the rule laid down by the Privy Council in Syndic in Bankruptcy of Salim Nasrullah Khoury v. Khayat 1943 A.C. 507 or by the House of Lords in United Railways of the Havana and Regla Warehouses Ltd. (1960), 2 All E.R. 332 is still good law, which is applicable here. It is urged that the old rule as prevailing in England that a foreign currency debt was payable in pounds sterling at the exchange rate as was prevalent on the date the debt was payable, should be applied here. In this connection learned counsel refers to Fletcher and others v. Tayleur 17 C.B. 973, Madeleine Vionnet et Cie v. Wills (1939) 4 All E.R. 136, Syndic in Bankruptcy of Salim Nasrullah Khoury v. Khayat 1943 A.C. 507, Mehmut Dogan Bey v. G.G. Abdeni (1951) 2 All. E.R. 162, In re: Russian Commercial and Industrial Bank (1955) 1,Ch. D. 148 and United Railways of the Havana and Regla Warehouses Ltd. (1960) 2 All E.R.
332.
12. As regards the petitioner's claim for grant of decree in US dollars, it is submitted that at the time the contract was executed, the Court could not have granted the decree in US dollars, as it would have violated the provisions of the Foreign Exchange Regulation Act, 1947, and therefore, this Court should not grant any decree now in US dollars.
13. On the question of grant of interest from 1971 to the date of suit in 1980, it is submitted on behalf of the respondent that the High Court's decision and this Court's decision which did not grant the said interest, should be sustained, as discretion was exercised correctly by the learned Judges of this Court, which should not be disturbed in review.
14. We have heard the arguments of the learned counsel for the petitioner and the respondent and have given our anxious consideration to the same. We have also gone through the record.
According to the West Pakistan Water and Power Development Authority Contract No,308, which was an invitation to tenderers for the construction of Rasool Barrage and connected works, which document was not exhibited, under para. 60(6) of the Conditions of Contract, the currency of account was stated to be Pakistan rupees. However, at page 111-3 in Appendix 'Ato the tender, the Estimate of Foreign Exchange Expenditures showed salaries and wages payable to non-Pakistani persons who had to come to Pakistan to complete the project, apart from payments for certain heavy and light plants, equipments, spare parts and materials required for the barrage, which had to be imported. Their separate components were given in US dollars, which WAPDA had to pay in the said foreign currency. Messrs Cogefar Astaldi, an Italian Corporation, tendered for the said Contract No,308 and was awarded the same by WAPDA. The said Corporation became the Contractor of WAPDA. The Batala Engineering Company and Terni S.P.A. Petitioner entered into an agreement to take up work as Subcontractors, with regard to construction and installation of gates and operating gear for the Rasool Barrage contract. Accordingly, the said two Subcontractors entered into an agreement with Cogefar Astaldi, the Contractor, with regard to the said matter, vide agreement dated 20-10-1965, which has been exhibited as Exh.P3. In accordance with para. 6(a) of the said agreement, Terni S.PA. Had to be paid directly by M/s. Cogefar Astaldi, the Contractor, for supply of the huge gates and operating gear, as fell to their share to import, fabricate and install; and under para. 6(b) all other payments to the Subcontractors were agreed to be made by M/s. Cogefar Astaldi, the Contractor, in accordance with the conditions of Contract No,308, also in US dollars. Both the learned Civil Judge and Judges of the High Court, on the basis of admissions contained in letters Exhs.P22 to P26, treated the petitioner's suit claim as payable in US dollars. The learned Civil Judge granted the decree in rupees at the rate of exchange payable on the date of institution of suit, whereas the learned Judges of the High Court granted the decree in rupees at the rate of exchange payable when the debt became payable, which this Court accepted. This Court also observed that the petitioner had also agreed to accept the claim in rupees in one of its letters.
15. The English Courts, in dealing with payments of debts and damages on contracts, use expressions, such as "currency of contract", "money of account or commodity" and "money of payment". Where the contract stipulates payment in pounds sterling, the English Courts refer to the currency of contract as legal currency, as that is the currency which is legal tender there. Where the said payment is in a foreign currency, the Courts refer to the same as "unit of account" or "unit of commodity". Thus, if payment under a contract executed in England is payable in US dollars, the same not being legal currency, the contract is treated as one payable in "unit of account" or "unit of commodity" -- the idea being that the contract provides for the supply and return in England of US dollars as a unit of a commodity or account, but not the legal currency of England. The Judicial Committee of the Privy Council in Aukland Corporation v. Alliance Insurance Co. 1937 A.C. 587 held: "Contracts are expressed in terms of unit of account, but the unit of account is only a denomination connoting the appropriate currency". The unit of account has to be applied to the appropriate currency which would vary from time to time. In Pyrmont Ltd. v. Schott 1939 A.C. 145 the Privy Council was dealing with the contract for the return of debt in Spanish pasetas which had to be made in Gibralter, a British colony, that being the place where the loan had been taken. The Privy Council held that the contract was for the supply and return in Gibralter of pasetas as commodity, not money; that the pasetas meant the unit of account in the currency of Spain and that the obligation was to pay in whatever at the date of repayment was legal tender and legal currency in Spain, the foreign country whose money was lent. The British Courts also distinguish between the "money of account" and the "money of payment". For instance, if under a contract, the goods are to be paid in Nigerian pounds and a request is made by the buyer that he be accommodated to pay it in pounds sterling, the Nigerian pounds would be treated as the money of account and the pounds sterling would be treated as the money of payment. Thus, if the value of pounds sterling depreciated, the seller could demand the payment in Nigerian pounds or its equivalent in pounds sterling. See Woodhouse AC Israel Cocoa Ltd. SA. v. Nigerian Produce Marketing Co. Ltd. (1971) 1 All E.R.
665.
16. Since the debt in the instant case was payable to the petitioner in US dollars, it could have been discharged by the purchase by the respondent of a draft or cash order in favour of the petitioner equal to that much number of US dollars as would have discharged the petitioner's debt, with the prior permission of the State Bank of Pakistan, as was the practice then in vogue, and by the delivery of the same to the petitioner, or the purchase of that much number of US dollars in the open market and delivery of the same to the petitioner, if the same was legally permissible, or the payment of its equivalent at the relevant rate of exchange in Pak rupees in Pakistan, as a last resort, that being the currency which was legal tender by which indebtedness in Pakistan could have been discharged.
17. The first question that arises is whether this Court, departing from the old practice, can order a decree to be passed in a foreign currency. In view of foreign exchange regulations prevailing in this country since its inception in 1947, which barred the public from openly dealing with or maintaining foreign currency accounts within the realm, it was clear and almost assumed that it could not be done. On the procedural plane, it was also assumed that a claim for recovery of a debt or damages on breach of contract in foreign currency could only be brought for a sum expressed in rupees. To compel return of foreign currency loans and repayment of interest thereon, figuratively in the same foreign currency, the Foreign Currency Loans (Rate of Exchange) Order, 1982 (P.O. 3 of 1982) was -enacted, which compelled debtors who had borrowed foreign loans for their projects from certain specific "financial institutions", as stated in the definition of that expression, to repay the said loans or any part thereof or interest in respect thereof, in rupees at the rate of exchange on the dates on which the loans, or part of the loans or interest were actually repaid or paid to the financial institutions. Notwithstanding the absence of such foreign exchange restrictions in England, it was also assumed in England till 1975 that procedural a decree in a foreign currency could not be passed. See the observations of the learned Law Lords in Miliangoscase (1975) 3 All E.R.
801. However, in several other countries, there are no such restrictions. In the Legal Aspects of Money, 3rd Edition, 1971, at page 351, Dr. FA. Mann gives a list of a number of countries, primarily European, in which payment of a sum of money in a foreign currency can be claimed and judgment given for it.
18. The assumption that judgments in money suits can only be given by Pakistani Courts in Pakistani currency is also due to procedural constraints. Form of Decree in Money Suits as provided in item 2 under Appendix D to the Code of Civil Procedure provides that the decree shall be as follows:-- "Claim for This suit coming on this day for final disposal before in presence of for the plainiff and of for the defendant, it is ordered that the do pay to the the sum of Rs, with interest thereon at the rate of per cent. Per annum from to the date of realization of the said sum and do also pay Rs, the costs of this suit, with interest thereon at the rate of per cent. Per annum from this date to the date of realization."
Since "Rs," have been mentioned in the form of decree, the Courts have felt reluctant to substitute foreign currency, for fear that if it was so stated the Bailiff may not be able to execute it. It was therefore treated as axiomatic that the judgment should be for a sum of money in Pale rupees.
Again, since restrictive foreign exchange regulations prevailing uptil 1991 precluded any form of dealing in foreign currency, the substitution of even words such as "US. Dollars, subject to permission of the State Bank of Pakistan", in the decree, was treated as something inevitably uncalled for.
19. A large part of the above reasons now do not exist. Amendments now made to Chapter VI headed "PRIVATE CURRENCY FOREIGN ACCOUNTS" of the Exchange Control Manual inter alia permit:- -
(i) Pakistani nationals residing abroad including those having dual nationality;
(ii) Foreign nationals residing abroad;
(iii) Foreign firms and corporations other than banks incorporated and operating abroad provided they are owned by persons who are otherwise eligible to open foreign currency accounts;
(iv) Foreign nationals residing in Pakistan and foreign firms and companies registered abroad and operating in Pakistan, provided that foreign exchange credited to such accounts does not represent their earnings abroad in respect of business conducted in Pakistan, or services rendered by such foreign nationals and firms/companies while in Pakistan;
(v) Pakistani nationals residing in Pakistan, subject to restrictions contained in Foreign Exchange Circular No,32 dated 23-2-1991; and
(vi) Charitable trusts, foundations, etc., which are exempt from payment of income-tax (see Foreign Exchange Circular No,64 dated 9-4-1991). to open foreign currency accounts. Under para. 1 (i), these accounts can be fed by remittances from abroad, travellers cheques, foreign currency notes and foreign exchange generated by encashment of Foreign Exchange Bearer Certificates in respect of which no questions can be asked by any authority in Pakistan about the source of acquisition of such foreign exchange. See Foreign Exchange Circular No,45, dated 14-3-1991. Under Federal Government Notification No,SRO- 219(I)/91, dated 16-3-1991 income derived from private foreign currency account held with an authorised bank in Pakistan is exempt from income-tax and the sums deposited in such an account are exempt from the tax net and under Notification No,SRO-220(I)/91 dated 16-3-1991 the sums deposited in such an account are exempt from payment of wealth tax. Under para. 1(ii) of Chapter VI of the Manual: "These accounts are free from all Exchange Control restrictions. In other words, account-holders have full freedom to operate on the account to the extent of the balance available in the accounts either for local payment in rupees or for remittance to any country and for any purpose or for drawal of foreign currency notes and travellers cheques." See Foreign Exchange Circular No,63 dated 6-4-1991).
This provision enables a foreign currency account-holder to draw out foreign currency in the form of notes. Though there are still some restrictions in Chapter VI, which restrict foreign currency payments being made to certain persons regarding certain matters, but the general trend obtaining in the market shows that foreign currency is now openly sold by such foreign currency account-holders in the open market, which has now become standard business.
20. To remove all doubts, on 11-8-1991, the Pakistan Government gazetted the Protection of Economic Reforms Ordinance, XXVI of 1991, to inter alia release the country from all unnecessary controls and regulations and to provide legal protection to all economic reforms, policies and programmes announced, prolnulgated or implemented after 7-11-1990. Under section 3, the provisions of this Ordinance have effect notwithstanding anything contained, in the Foreign Exchange Regulation Act, VII of 1947, the Customs Act, IV of 1969, the Income Tax Ordinance, XXXI of 1979, or any other law for the time being in force. Under section 4, all citizens of Pakistan resident in Pakistan or outside Pakistan and all other persons are entitled and free to bring, hold, sell, transfer and take out foreign exchange within or out of Pakistan in any form and are not required to make a foreign currency declaration at any stage nor can anyone be questioned in regard to the same.
Under section 5, all persons holding foreign currency accounts are immune from any enquiry as to the source of financing of the foreign currency accounts and balances in the foreign currency accounts and income therefrom are exempt from the levy of wealth tax and income-tax and compulsory deduction of Zakat.
21. Thus, a person can always go into the market and buy so many US dollars or other foreign currency in exchange for a given number of Pak rupees. By this process he can pay his debt in a foreign currency, if he desires to do so. Even if the words "the sum of US dollars or the Pak rupees equivalent thereof were substituted for the words "the sum of Rs, in the decree-sheet, the said decree would not create any hitch in its execution, for the Bailiff would be able to execute the same in terms of the equivalent amount in Pak rupees, assuming the judgment-debtor was not in a position to pay in foreign currency for any valid or other reason. Whilst the form of decree which is prepared under the Civil Procedure Code, as stated above, uses the word "Rs," at two places, one for the principalsum and the other for the costs, the relevant provisions of the Code dealing with money suits, such as the main claim, the interest payable, the costs of the suit, payment of decretal amount in instalments, the decree in suits for accounts, decree when set-off is claimed, or A the mode of paying money under a decree, do not contain the word "Rs,", but the words "claim of the plaintiff', "money payable", "amount of money due", etc., are referred. (See sections 34, 34-A & B and 35, Order XX, rules 11, 16, 17 and 19 and Order XXI, rule 1 of the Code). In section 35-A,C.P.C., however, the word "Rs," appears, but it is in respect of compensatory costs. Basically, therefore, the main provisions of the Code refer to the plaintiffs money claim in language which is open and can admit reference to a foreign currency. However, as already stated, if a decree is passed for US dollars or the Pak rupees equivalent thereof', it would cover the requirements of the Code fully, for which there need not be any objection. In any case, as pointed out in the Conflict of Laws by Dicey and Moris, 9th Edition (1973), page 883, an encroachment of the law of procedure upon substantive rights cannot be justified from the view-point of justice, convenience or logic.
22. One strong reason for deviation from the old rtile is the hectic fluctuations to which a currency is now subject. Some thirty years back, the English pound or the US dollar remained stable vis-a-vis the Pakistani rupee for a number of years, except minimal decimal fluctuations. World currencies then started becoming vulnerable to revaluation and devaluation. They are now "floating", their value changing from day to day, Where thirty years back there was hardly any worthwhile change between the rate of exchange on the date damages could be assessed for breach of contract or the date a debt was payable, to that on the date judgment was given, the erratic changes in currency value can now leave a gaping disparity. What previously was treated as a remote possibility, is now a reality. One certain way to remove this disparity is, as pointed out by Lord Wilberforce in Miliangoscase, "to order delivery in specie". The view deserves the highest respect.
Here the expression "delivery in specie" must be permitted to retain its essential character i.e, delivery of money in a foreign currency and not delivery of movables or goods. Brendon, J., in Halcyon the Great ((1975) 1 All E.R. 882) treated US dollars as "money" within the English procedural rules and held that the Courts could easily adapt their procedure so as to give effect to foreign money claims in specie, a view which Lord Wilberforce also noted as prompting reflection in Miliangoscase (1975) 3 All E.R.
801.
23. Apart from the above, cases are not wanting where Pakistani arbitrators have been making awards in this country in foreign currency, where such a foreign currency was the currency of the contract, leaving it to the party who had to make restitution to either pay the same to the creditor in foreign currency, after securing the permission of the State Bank of Pakistan, as was then in vogue, or leaving it to the party to pay the equivalent in Pak rupees, as a last form of discharge. As pointed out above, in 1982 the Foreign Currency Loans (Rate of Exchange) Order, 1982 (P.0.3 of 1982) was enacted to compel foreign currency loans being repaid in the rupee equivalent of the same foreign currency at the rate of exchange prevailing on the date the loan or any part thereof or interest thereon was paid. This Order applied to loans borrowed from certain stated financial institutions. Perhaps this was the first realisation of the Government to a control free economy, guaranteeing the return of a foreign currency loan in the same currency as on the date of payment. Again in 1991 the Protection of Economic Reforms Ordinance, XXVI of 1991, removed all unnecessary controls and regulations regarding foreign currency. If we move still forward and provide it as a general rule, considering that restrictive foreign currency regulations have almost been removed, we would be moving nearer the truth and laying good law.
24. However, with the removal of many restrictive foreign exchange control regulations, a new vista of commerce and trade has opened up between Pakistan and other foreign countries. There is a rush of foreign entrepreneurs wanting to invest in Pakistan. Heavy foreign investments are coming in. This is pursuant to the bold and courageous steps being taken by the present Government to invite foreign investment in this country. All this would be lost, if the Courts were to close their eyes to the requirements of the change that has set in. It would be most frightful for the foreign entrepreneurs, who have been invited from the well-known economic capitals of the world, to be told that they can bring heavy foreign investments here, do business as in other foreign countries and enter into all sorts of commercial contracts, inter alia, treating any foreign currency as the currency of contract, but that if they should desire to judicially enforce their money claims, they should receive Pak rupees and not the foreign currency, even though by receiving the money in rupees they would receive much less due to its depreciation in value than if they did in the foreign currency. If we supported such a rule, we would be acting contrary to our whole new commercial and economic policy. We cannot now enforce an archaic rule, if it would perpetuate injustice and inequity and set at naught the new changes that have come in.
25. Another reason why we should change with the time is that if we do not, the person claiming his debt in foreign currency could proceed in his own country to get judgment there in the said foreign currency, which he could then bring to Pakistan and enforce. In such a case the Pakistani Court would have to convert the said sum into Pak rupees on the basis of the rate of exchange prevailing on the date of the judgment delivered by the foreign Court.
26. The view of the learned counsel for the respondent that as the European Communities Act, 1972, and the Treaty of Rome were binding on England, as it was a signatory to the said conventions, the view in Miliangoscase (1975) 5 All E.R. 801 must be treated as being heavily based on these conventions and since these conventions have no application here, the old rule must be treated as still prevailing here, cannot be accepted. In fact the House of Lords did not treat these conventions as in any way affecting their revised view, which they took in Miliangoscase without drawing any support from these conventions. The absence of these conventions here does not advance the case of the respondent.
27. For all the above reasons, we consider that fresh considerations of a substantive nature have emerged which compel us to change the old view. Justice demands that the creditor should not suffer from fluctuations in the value of the Pakistani rupee. If his contract is for a foreign currency and he has bargained for the same, he should get that currency and no other. The observation in Milliangoscase (1975) 3 All E.R. 801 that if the proper law of the contract was the law of a foreign country and the money of account and money of payment was of the same country, the plaintiff could bring an action for a sum of money expressed in the currency of that foreign country, was not fully accepted by the Queen's Bench Division in Barclays Bank International Ltd. v. Levin Bros.
(Bradford) Ltd. (1976) 3 All E.R. 900, which held that even if the lex loci contractus, the lex loci solutionis and the proper law of acceptance of the bills of exchange were English, yet if the money of account and the money of payment were American, judgment could -be given in US- dollars. If the currency of contract is a foreign currency, or where under the contract the particular amount claimed is payable in a particular foreign currency and payment is demanded in that foreign currency, that is a substantive matter, and no procedural rule or regulation should, in principle, be allowed to affect the creditor's rights. If a judgment can be given "for so much in foreign currency or the Pak rupees equivalent thereof', it is giving effect to the substantive obligation of the contract and the Civil Procedure Code would not in any case stand in the way. This Court can depart from a previous rule or interpretation, if it feels that circumstances have changed and that not to do so would lead to injustice. The development of the law should not be permitted to be stifled. It should move with the time and articulate the changes coming in. We would therefore hold that a Pakistani Court can grant a judgment for "so much in foreign currency or the Pak Rupees equivalent thereof'.
28. The next question that arises is what should be the date which this Court should impose for converting into rupees the equivalent of the foreign currency. The old rule in England that where a debt was payable in a foreign currency, a Court was bound to permit the said debt being paid in the currency of the country at the exchange rate prevalent at the time when the debt became due or was payable, has been overruled by the Court of Appeal in Schorsch Meir GmbH v. Hennin (1975)
1 All E.R. 152, which not only held that the Court could give a money judgment in a foreign currency when that currency was the currency of the contract, but that it could also say that the plaintiff could have the foreign currency converted to sterling at the exchange rate when the final payment was made, instead of the rate when the debt was actually payable. This precedent was followed by the Queen's Bench Division in Milliangoscase (1975) 1 All E.R. 1076, which decision was affirmed by House of Lords in Miliangoscase (1975) 3 All E.R.
801. The Pakistani Courts have been following the old English rule. The impugned High Court decision before us is a case in instance. See also Mst. Khurshid Jamal v. Muhammad Asghar Qureshi PLD 1956 Kar. 47, Income Tax Assessment of the Khanewal Oil Mills Limited PLD 1962 Lah. 821 and Pakistan Industrial Corporation Limited v. Mehboob Industrial Limited 1980 CLC 249 and the observations of SA. Rahman, J., regarding rate of exchange applicable on the date of payment of a debt in The Central Bank of India Limited v. Muhammad Aslam Khan PLD 1962 SC 251 and S.M. Hanif (Dacca) Limited v. The Central Bank of India Limited PLD 1962 SC 376. However, in view of the change in the circumstances detailed above, it is necessary to also effect similar change here. In Syndic in Bankruptcy of Nasrullah Khoury's case (supra), Lord Wright, J., whilst calling attention to the date at which the rate of exchange should be calculated, referred to the fact that different views had been taken at different times and by different systems of laws. He stated that "indeed there are at least four different alternative rules which might be adopted. The rate of exchange might be determined as at the date at which payment was due, or at the date of actual payment, or at the date of the commencement of proceedings to enforce payment or at the date of judgment". However, he later found that there was no doubt that the first rule applied. In Marrache v. Ashton 1943 A.C. 311, in a suit brought on a debt payable in a foreign currency, the rate of exchange was calculated as on the date the plaintiff took out a writ of summons in the Supreme Court of Gibralter, which would correspond in our system to the date of institution of suit. Since the parties were not at dispute on this date, the Privy Council ordered the conversion in terms of that date. This case coming from high authority also shows that the date of the commencement of the suit can be treated as a material date for calculating the rate of exchange. In 1982, the Foreign Currency Loans (Rate of Exchange) Order, 1982, which was enacted in Pakistan, recognised the rule laid down by the House of Lords in Miliangoscase (supra). Therefore, in keeping with the moving trend and the sweeping changes in the economic field that have been ushered in and to support the same and be in line with the law in England, we would, for reasons stated in para. 27 above, hold that if a judgment and decree is given for "so much in foreign currency or the Pak rupees equivalent thereof at the time of payment", we would be articulating the correct law in keeping with the changing time. In stating this rule, we would like to make it clear that questions of cause of action or limitation must be treated separately, which shall continue to be governed by the law on those subjects and the application of this rule should be treated as without prejudice to these two matters. We would therefore, hold that where the money of account in respect of a contract is a foreign currency, or where it is not so but under the contract the particular account claimed is payable in a particular foreign currency, and demand is made for payment in that foreign currency, the Pakistani Courts can give judgment in "so much of that foreign currency or the Pak rupees equivalent thereof at the time of payment". Here it must be stated that where the decree is in such terms, the language of the decree, as stated in para. 18 above, would give the judgment- debtor the option to either make payment in foreign currency or in Pak rupees, and execution can always be taken out by the decree-holder if no payment is made by the judgment-debtor in respect of so many Pak rupees as equal the foreign currency at the rate of exchange prevalent on the date the payment is made.
At this stage we would like to record a note of caution. The rule stated above is based on the law as it stands today. Should any restrictive law or regulation covering foreign currency be introduced later, then if at the time of the passing of the decree or its execution such a law or regulation is found to be applicable, the rule stated would be subject to or stand modified by the said law or 'regulation.
29. The question of interest now arises for consideration. After, the House of Lords changed its earlier view in Miliangoscase (1975) 3 All E.R. 801, the case came back before the Queen's Bench Division for determination of the principles regarding the grant of interest. Bristow, J. In Miliangoscase (1976) 3 All E.R. 599 held that to determine the question whether the plaintiff was entitled to the interest, one had to look to the proper law of the contract to decide this substantive question, but to determine how much the Court could award, if there was such a right, he held that it was a matter of procedure, not of substantive law, and had to be decided in accordance with the lex for. In this respect, the learned Judge relied upon observations of Pilcher, J. In J.D Almeida Araujo Lda v. Sir Frederick Becker & Co. Ltd. (1953), 2 All E.R. 288 and of Dunn, J. In The Funabashi (1972) 2 All E.R.
181. Since the English law permitted the grant of interest, the plaintiff was held entitled to the same.
As regards the question how much the Court could award, Bristow, J. Opened the case for further inquiry to determine at what rate Swiss Francs could have been borrowed in Switzerland during the agreed period, considering that in this case under the contract the payment had to be made in Swiss Francs in Switzerland.
30. The Pakistan law provides for the grant of interest. The right to interest for the period prior to the date of suit has been held by the Privy Council and by the Supreme Courts of Pakistan and India to be a matter of substantive law and can be allowed if there is (a) a statutory provision, (b) an agreement, express or implied between the parties, (c) a mercantile usage, (d) or some equitable consideration to justify such a grant. B.N. Railway v. Ruttanji Ramji AIR 1938 P.C. 67; Mahabir Prasad Rungta v. Durga Datta AIR_ 1961 SC 990 and Ghulam Abbas v. Trustees of Port of Karachi PLD 1987 SC 393. The law with regard to the grant of interest prior to the date of suit on a debt or sum certain payable at a certain specified time or otherwise is dealt with by the Interest Act, XXXII, of 1839.
Section 1 of this Act provides that the Court in its discretion can allow upon any debt or sum certain payable at a certain time or otherwise, if such debt or sum certain is payable by virtue of some written instrument at a certain time, interest to the creditor at a rate not exceeding the current rate of interest from the time when such debt or sum certain becomes payable; or if such debt or sum certain is payable otherwise, then from the time when demand of payment has been made in writing, giving F to the debtor notice that interest would be claimed from the date of such demand until the time of payment: without prejudice to cases where interest is payable under any other law.
Since interest can be claimed from the date when such debt or loan becomes payable, if such time 'is specified in writing, or from notice of demand, if such time is not specified in writing, the claim of interest up to date of suit is thus covered by this section. See Arif Ali Shah v. Province of West Pakistan 1969 SCMR 690. In Maine and New Brunswick Electrical Power Co. Ltd. v. Hart AIR 1929 PC 185, the Privy Council treated the proviso to section 1 of the Interest Act, 1839, as permitting the grant of interest in cases where Courts of Equity had exercised jurisdiction to allow such interest.
What was not noticed was that the proviso kept open the doors for the grant of interest in all cases where any other provision of law then prevailing allowed such a grant. The words "in all cases" are used in the proviso to section 1 in contradiction to the words "interest in certain cases" used in the Preamble to the Act. In short, the proviso admits provisions of other enactments dealing with interest then being present, which would be applicable.
31. Section 34 of the Code of Civil Procedure allows the grant of interest from the date of institution of the suit till the date of decree and sections 34 and 34-B of the same Code allow the grant of interest from the date of the decree to the date of payment, or up to such earlier date as the Court thinks fit. The Court seldom by order grants interest during the pendency of a suit, though so many Courts refer to the grant of this interest at the time of decree as interest pendente lite, as if it has been granted pending the decision of the suit.
32. Section 34 confers a general discretion on the Court to allow interest where it considers the same just and proper in the circumstances of the case. See State of Madhya Pradesh v. Nathabai Desaibhai Patel AIR 1972 SC 1545.
33. What should be the rate of interest, the above sections provide some assistance, but the parties can and should give evidence to assist the Court in this respect.
34. We now turn to the review petition in hand. Both the learned Civil Judge and the learned Judges of the High Court on the basis of documentary and oral evidence, held the claim to be payable in US dollars. The Civil Judge granted the decree in Pak rupees at the rate of exchange payable on the date of suit, as was pleaded in the plaint and relief para. The learned Judges of the High Court however reduced the petitioner's claim by granting the decree in Pak rupees at the rate of exchange payable when the debt was payable, which this Court accepted. One thing is certain that the suit claim in any case was one which was payable in US dollars by the respondent, and to this extent figuratively the money of account and the money of payment in respect of the suit claim may be treated as US dollars. It is correct that the petitioner at one time, on the proposal of a representative of the respondent, agreed to receive payment in Pak rupees under its counsel's letter Exh. P29, but the matter aborted as the respondent showed no interest in living up to its proposal, but just kept quiet and slept over the matter. In this view of the matter, the petitioner cannot be held bound down to their letter, which even otherwise stated that if there was no response thereto, the respondent would have to pay in US dollars. The petitioner therefore has the right to demand the suit claim in US dollars.
35. The next question for determination is what should be treated as the date which this Court should impose for converting into rupees the foreign currency claim. In Schorsch Meir GmbH's case (supra), the plaintiff had claimed the foreign currency or its equivalent at the exchange rate at the time of payment. Likewise, in Milliangoscase (supra), the plaintiff had applied for amendment to claim the foreign currency or the pounds sterling equivalent thereof at the time of payment. In these circumstances, the Court in those two cases allowed the pounds sterling equivalent of the foreign claim as on the date of payment. In the instant case, the petitioner itself claimed the foreign currency or the Pak rupees equivalent thereof as on the date of institution of suit. No steps were later taken so as to amend the plaint to substitute the Pak rupees equivalent as on the date of payment. In these circumstances, the date which this Court should impose for converting the US dollars into Pak rupees should be the date which the petitioner itself chose, namely, the date of suit.
At the date when the suit was instituted the exchange rate was roughly US $ 1.00 equal to Pak Rs,10.
We would, therefore, grant judgment to the petitioner for US $ 155,574.34 or the Pak rupees equivalent thereof on the date of suit.
36. The only question that remains is that relating to interest. This matter was fully argued by both the parties when the appeal was heard. The claim of the petitioner for interest from the date of payment of debt to the date of suit was not allowed inter alia for the following reasons: (a) the respondent's own claims, which were tied up with the petitioner's, were held up for payment by their contractors, M/s. Cogefar Astaldi, and that till such time that they were received, they could not make over the petitioner's share and (b) the petitioner had considerably delayed institution of the suit. Though these reasons were not stated in the judgment, they were behind the decision taken. Since this matter was argued at length during appeal, we do not consider that the present review petition entitles the petitioner to re-argue the same matter. This claim is therefore rejected.
37. For the foregoing reasons, this review petition is accepted, the judgment of this Court, dated 24- 11-1991 passed in civil appeal CA. No,154 of 1989 is modified to the extent that the present petitioner shall recover US $ 155,574.34 from the present respondent, together with interest at the rate of 12 per cent. per annum from the date of institution of the suit till the recovery of the decretal amount, or the Pak rupees equivalent thereof at the rate of exchange payable on the date of suit i.e, US $1.00 equal to Pak Rs,10.00 as claimed by it in the suit. The present petitioner will get its costs of the appeal.
38. Before concluding, we would like to express our thankful appreciation to Mr. Yousuf Kazmi, Special Attorney for the petitioner, and Mr. Mansoor Khan, Advocate for the respondent, for their able assistance and our special gratitude to Mr. A.A. Bhojani, Senior Partner of M/s. Surridge and Beecheno, Advocates and Solicitors of Karachi, for rendering special assistance in providing valuable Pakistani case-law and English precedents on the subject.
(Sd.) Saad Saood Jan.
Abdul Shakurul Salam, J.-- I have added my own note.
(Sd.) Rustam S. Sidhwa, J.
ABDUL SHAKURUL SALAM, J.---I have gone through the scholarly judgment of my learned brother Mr. Justice Rustam S. Sidhwa. While I agree generally, I have to say that I express no opinion about the wisdom or otherwise of removal of restriction on foreign exchange nor about the new commercial and economic policies as these were not in issue. Secondly, I do not agree that the plaintiff-petitioner is only entitled to the equivalent amount in rupees at the rate of foreign exchange as it existed at the time, of the filing of the suit. The reason given is that the plaintiff- petitioner had "itself claimed thee foreign exchange or Pak rupees equivalent thereof as on the date of institution of the suit. No steps were later taken so as to amend the _plaint to substitute Pak rupees equivalent as on the date of payment". The plaintiff-petitioner had to ask for the equivalent rupees at the time of institution of the suit. But if the suit were to be dragged for a number of years the plainiff-petitioner was not required to amend it with fluctuation of the currency from time to time. When the Court was finally to decide the matter it was required to say how much is payable and direct that the payment be made. It has to be according to the exchange rate at the time.
Further if the decretal amount is not paid straightaway and the decree-holder is obliged to apply for execution and the execution proceedings are prolonged by the judgment-debtor for another decade and currency of payment has gone down many times more, would it be just that the decree-holder after twenty years of the suit is paid at the exchange rate which prevailed at the time of the institution of the suit. I do not think it would be fair or just. Therefore I am of the view that the plaintiff-petitioner is entitled to the decretal amount at the exchange rate as it would be prevalent at the time of the payment.
(Sd.) Abdul Shakurul Salam, J.
ORDER OF THE COURT In terms of the majority judgment of this Court, this review petition is accepted, the judgment of this Court, dated 24-11-1991 passed in civil appeal CA. No,154 of 1989 is modified to the extent that the present petitioner shall recover US $ 155,574.34 from the present respondent, together with interest at the rate of 12 per cent. Per annum from the date of institution of the suit till the recovery of the decretal amount, or the Pak rupees equivalent thereof at the rate of exchange payable on the date of suit i.e, US $ 1.00 equal to Pak Rs,10.00 as claimed by it in the suit. The present petitioner will get its costs of the appeal.