' This is an application by the plaintiff for mandatory injunction directing defendant No, 1 to deliver to the plaintiff 23,847.40 metric tons of Pakistani Long Grain Irri-6, 40-45% broken, white rice, or, in the alternative, for temporary injunction restraining defendant No,1 from alienating, removing or parting with possession of the abovementioned rice to any person except the plaintiff.
2. By contract dated the 27th August, 1989, the defendant No,1 agreed to sell and Administracao General Do Acucar E Do Alcool (AGA) of Lisbon, Portugal, agreed to purchase, for export out of Pakistan, certain quantities of rice, on the terms and conditions contained therein. The agreement provided, inter alia, that AGA would furnish a Performance Bond for U.S. $ 1,000,000/-in favour of the defendant No,1, which would be forfeited in the event of AGA's failure to adhere to the terms and conditions; that in the event of breach of certain stipulations in the contract the defendant No,1 may forfeit security deposit; and that AGA would open Letter (s) of Credit as provided by clause 1 of Annexure 1 to the contract. By clause (g) of Annexure 1 to the contract it was provided that AGA would "not sell rice to any local parties on the basis of Letter (s) of Credit established in favour of those parties.'; and clause II(a) of the Annexure provided that the property in the rice shall pass to the buyers after the bag is tied to the ship's tackle/shore crane. The contract was subsequently amended by various Addenda. Addendum I, dated the 8th March, 1990, provided, inter alia, that, as security for the buyers' obligations under the contract, the Performance Bond for U.S. $ 1,000,000 would be replaced by cash security deposit of the same amount and that the "security deposit shall be only and automatically forfeited in the event that in respect of any unprepaid quantities made available for shipment under the Agreement ships are not nominated and/or such quantities are not lifted by agreed shipment schedule (s) The security deposit shall be the comprehensive mode of settlement in respect of any claim arising under or out of this Agreement "
Amendments effected by Addendum II, dated the 19th June, 1990, are not relevant to the present application. Addendum III, dated the 12th November, 1990, provided, in relevant parts, as follows:-- "(1) The validity of the agreement for shipment is extended up to 30th April, 1991.
(2) The buyers shall establish Red Clause L/C for the cost of the entire quantity (62,000 + 58,000 10% + 78,124 10%) stipulating advance payment of U.S. $ 5.00 million to be made to the sellers by first December, 1990. The said amount of 5.00 million will be adjusted against shipment of rice to the buyers who will lift rice of value of US. $ 5.00 million against the said advance payment by 31st December failing which storage charges at Re.1 per ton per day will be charged on such quantity as covered by this advance payment.
(3)...........................................
' The red clause L/C shall also stipulate that RECP may draw on 30th April, 1991 advance payment for any quantity of rice which had to be shipped (62,000 + 58,000 + 78,124) under the contract remaining unshipped by 30th April, 1991. Storage charges @ of Re.1 per ton per day will be charged from 30th April till completion of loading of such quantities."
3. On the 16th November, 1990, AGA entered into contract with Mercuria Sucden, the plaintiff, for sale of 60,000 metric tons of rice out of the rice agreed to be sold by defendant No,1 to AGA. Out of 60,000 metric tons, the price of 30,035,45 metric tons rice was fixed at U.S. $ 170 per ton to be paid as follows:- "Since pursuant to AGA's own purchase from its suppliers (Rice Export Corporation of Pakistan-- RECP) AGA is to effect advance payment within Red Clause Letter of Credit amounting to U.S. $ 5 million by Ist December 1990 covering the abovementioned 30,035.45 metric tons and since it is not in AGA's possibilities, as a State-owned Corporation, to obtain from banks funds in order to effect advance payment, Mercuria Sucden shall not later than 1st December, 1990 either (1) pay to AGA an advance payment of U.S. $ 5 million on such tonnage or (ii) otherwise place AGA in a position to be able to fulfil its own prepayment obligations to RECP to the extent of U.S. $ 5 million under its contract with RECP. The foregoing to be effected against AGA's irrevocable undertaking to remit to Mercuria Sucden in Paris the same documents to be presented by RECP under the Red Clauses of the Letters of Credit to be opened by AGA in RECP's favour under its purchase from RECP, including but not limited to warehouse receipts covering the entire quantity of 30,035.45 metric tons of rice made out to order and blank endorsed and the irrevocable undertakings given by RECP to load and to ship the rice."
' The cost of the remaining quantity was to be paid in cash in Paris against specified documents.
4. Consequent upon the above agreements, AGA established two Letters of Credit in favour of the defendant No,
1. The first is L.C. No, NR 82/7663, dated the 26th November, 1990, issued by Bank Indosuez, Paris. The relevant part of the Letter of Credit is reproduced below:- "(3) If so required by the beneficiaries an advance payment of U.S. $ 2,500,000.00 representing 10,504.2017 net metric tons of Pakistan Long Grain Irri-6 (Sindh) white rice 40/45 pet broken at the unit price of U.S. Dollars 238.00 per net MTFOB stowed Karachi/Port Qasim to be loaded during December, 1990 may be drawn under the present credit on 29th November 1990 against presentation at the counters of Banque Indosuez, Karachi, of the following documents:
(1) Warehouse receipt issued by RECP made out to order and blank endoresed.
(2) RECP certificate attesting that goods have been insured.
(3) Duly signed certificate from RECP confirming that the goods are exportable commodities and their irrevocable undertaking to the effect that the goods will be shipped.
(4) Formal signed commitment by RECP in writing to load upon Mercuria Sucden nomination of corresponding vessel during December, 1990 rice FOB stowed as per their contractual obligations when called upon by openeRs,
(5) Invoice certifying that all. Duties taxes in Pakistan on this transaction are for sellers account.
(6) Undertaking from RECP stating that they will present to Banque Indosuez, Karachi the shipping documents required in our opening L/C within 15 days after the shipment date.
(7) Irrevocable undertaking from RECP to reimburse Banque Indosuez, Karachi for further transfer to issuing bank the full U.S. Dollars amount received in case they cannot present documents as stipulated in point NR 6 above."
' The second Letter of Credit is No, C. 90/4026 issued by Banque Sanpaolo, Paris, in favour of defendant No,1. It contains Red Clause for U.S. $ 2,500,000 representing 19,531.25 metric tons rice and called for documents similar to the ones mentioned in the first Letter of Credit mentioned above.
5. The defendant No,1 received the amount of U.S. $ 5 million in terms of the clauses of the Letters of Credit, reproduced above, and issued the documents required thereunder. Copies of these documents have been filed as Annexures P-4 to P-10 to the plaint (in respect of 19,531.25 metric tons rice) and Annexures P-11 to P-16A (in respect of 10,504.2000 metric tons rice). Out of these documents, the authenticity of Annexure P/14 is denied on the ground that no such document is available on the record of defendant No,
1. The denial does not carry much weight because, firstly, the defendant No,1 would not have been able to receive advance payment without issuing such a document and, secondly, it has not denied that Annexure P/14 bears the signature of its officer.
6. The documents (Annexures P-4 to P-16A to the plaint) issued in pursuance of the red clauses in the Letters of Credit have been and are in the possession of the plaintiff as certified by the banks vide photo copies of certificates which are Annexures P/22 and P/23 to the plaint.
7. The plaintiff nominated vessels for carrying the rice and gave notices of readiness of the vessels for loading on the Ist, 4th and 8th December, 1990, to the plaintiff; and a part of the 30,035.45 metric tons of rice was loaded before the 20th December, 1990.
8. On the 20th December, 1990, the defendant No, 1, in exercise of its right under clause 8 of the Agreement, cancelled its contract with AGA "due to the events which have taken place and the breach committed by your good-self." Neither the "events" nor the particulars of the alleged breach were specified in the telex a photo copy whereof is Annexure 'E' to the written statement. Clause 8 of the Agreement provides as follows:-- "The Sellers have made known to the Buyers that rice procured by the Sellers is out of finance provided by the scheduled banks in Pakistan on the basis of mark up and that the Sellers incur storage charges on the rice stored in their godowns and that if the Buyers fail to observe the stipulations as to time for opening of Letter (s) of Credit and/or for making of payments and/or as to procuring ships and/or shipping space and/or as to taking delivery and/or making of exports, the Sellers may, without prejudice to their rights and remedies under the Agreement, or any law or regulations in force, forfeit the security deposit."
9. According to the affidavit-in-rejoinder filed by the plaintiff, some more quantity of rice was loaded on the ships even after the 20th December, 1990. This allegation was not controverted during the hearing of the application.
10. After loading a total of 6188.05 metric tons rice, the defendant No, 1 have refused to load the remaining 23,847.40 metric tons of rice. The plaintiff, therefore, caused notices (Annexures P/25 and P/26 to the plaint) to be addressed to the defendant No, 1 calling upon it to load the remaining quantity of rice.
11. The case of the plaintiff is that it is bona fide purchaser for value of the 30,035.45 metric tons of rice and has acquired vested and indefeasible legal right, title and interest therein and is entitled to the delivery thereof. It is further alleged by the plaintiff that it has made forward sale of the rice to third parties and that rice purchased by it is not available elsewhere and that if the plaintiff cannot fulfil its obligations to third parties it will be liable to heavy damages. The damages and loss which the plaintiff will suffer are stated to be such as cannot be compensated in terms of money. The plaintiff, therefore, has filed this suit for obtaining delivery of 23,847.40 metric tons of rice and for permanent injunction restraining the defendant No,1 from selling, transferring, alienating or parting with possession of that quantity of rice to any other person.
12. The case of the defendant No,1 is that (1) its contract with AGA was cancelled because AGA failed to establish Red Clause Letter of Credit for the entire quantity of rice and "also committed breach of other terms and conditions of the agreement; (ii) it was not possible for it to ship portion of rice under the contract without guarantee and assurance for payment of the price in respect of other variety of rice under the contract, as the entire contract was a package deal; (iii) the certificates issued by it do not prove that the goods were in exportable condition and that, in fact, the goods had to be made exportable, by various processes, at the time of export; and (iv) property in the rice was to pass in favour of AGA after the bags were tied to the ship's tackle/shore crane. The allegations by the plaintiff as to its title to the rice and as to likelihood of irreparable damages have been denied.
14. Mr. Liaquat Merchant, the learned counsel for the plaintiff, contended that by virtue of the warehouse receipts and other documents issued by defendant No,1, the plaintiff is entitled to delivery of the rice in question and that the defendant No,1 is in the circumstances of the case, estopped from denying the plaintiff's right to delivery of the rice. He relied on section 27 of the Sale of Goods Act, 1930, and. Commonwealth Trust Limited v. Akotey (1926 AC 72).
15. Mr. Arif Hussain, the learned counsel for the defendant No,1, submitted that as the goods in question are unascertained, the property in the goods did not pass to the original buyer, AGA, or to the plaintiff even though, as he conceded, the effect of the warehouse receipts was that the holder thereof was entitled to delivery of the quantity of rice mentioned therein. For the proposition, he sought support from Emperor v. Konverji Kavasji Kavarana (AIR 1941 Born. 106), Arun (1953) (Private)
Ltd. v. State of Madras (AIR 1961 Mad. 216) and Rajenra Narayan Ghosh v. The State of West Bengal (AIR 1978 NOC 208 (Cal.). He further contended that as AGA committed breach of the contract, the defendant No, 1 had cancelled the contract and is not bound to deliver any more quantities of rice thereunder. This last contention would not appear to be relevant for the purpose of deciding whether or not the plaintiff is entitled to claim delivery of the rice in question, particularly in view of the fact that even after the alleged cancellation of the contract the defendant No,1 made delivery of a part of the rice to the plaintiff. It, therefore, remains to be seen whether the defendant No, 1 is entitled to refuse to deliver the rice to the plaintiff on the ground merely that property therein had not passed to AGA.
16. It is no doubt true that in a contract for sale of unascertained goods, no property in the goods passes unless and until the goods are ascertained; but, the question in this case is, assuming that the property in the rice in question in the suit did not pass to AGA, is the plaintiff not entitled to delivery thereof and is the defendant No,1 entitled, for that reason, to refuse to deliver the rice to the plaintiff. The defendant No,1 has, in terms of its contract with AGA received a sum of U.S. $ 5 million as advance payment for the rice in question and, in consideration thereof, issued various documents, under the red clauses in the relative Letters of Credit. Among those documents are (i) warehouse receipts issued "To The Order"; (ii) Certificates that the goods are "exportable commodities" and (iii) formal commitments in writing "to load. Upon Mercurial Sucden nomination of vessel". That the plaintiff purchased the rice in question and obtained the aforesaid documents as bona fide purchasers for value has not been denied by the defendant No,1. The defendant No,1, thus, represented that the rice represented by the warehouse receipts and the accompanying documents issued by it would be supplied to the order of the plaintiff or a person holding the same and would be loaded on a vessel or vessels nominated by the plaintiff; and further that the goods were "exportable commodity"; and it was on the basis of this representation that the defendant No,1 was permitted to draw the sum of U.S. $ 5 million. The plaintiff obviously acted on the representation of the defendant No,1 in allowing payment (through AGA) of U.S. $ 5 million to it and in entering into forward contracts with other parties. In the circumstances, the defendant No,1 is estopped from denying the right of the plaintiff to delivery of the rice or the authority of AGA to sell the rice, as provided by section 27 of the Sale of Goods Act, 1930, which, in relevant part, provides as follows:- "Section. 27 Sale by person not the owner.--Subject to the provisions of this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owners of the goods is by his conduct precluded from denying the seller's authority to sell." (Emphasis added; herein underlined).
17. In the case of Commonwealth Trust Limited v. Akotey (1926) AC 72), the respondent, a grower of cocoa in the former Golf Coast Colony, consigned by railway 1050 bags of cocoa to Laing. Before a difference as to the price had been settled, Laing sold the cocoa to the appellants and handed the consignment notes to their agent, who reconsigned the cocoa to the appellants. The appellants bought in good faith and for the full price. It was held by the Privy Council that the respondent, by his conduct, was precluded from setting up his title against the appellants. It may be noted that in that case the price of the goods had not been settled between the seller and the original buyer and that, therefore, the property in the goods had not passed to the original buyer and yet the seller was estopped from denying the right of the ultimate purchaser or asserting its own title. Lord Shaw, who delivered the judgment observed, at page 76 of the report, as follows:-- "It was further argued before their Lordships that although the property in the cocoa had not passed from the respondent, yet that the respondent had so acted as to stop him from setting up his title in answer to the claim of the appellants. Reliance was placed on the well-known statement of Ashhurst, J. In Lickbarrow v. Mason (2 T.R. 63, 70), 'that wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss, must sustain it.' Their Lordships are clearly of opinion that the present is a plain case for the application of that principle."
18. The same principle was affirmed in the case of Anglo-India Jute Mills Co. v. Omademull (10 I.C.
859). There the defendant sold certain Hessian cloth to M/s. Janki Dass & Co. Payment was to be made in cash in exchange for delivery orders; and delivery was to be given and taken on terms "Ready payment against pucca delivery order." The defendant issued delivery orders to Janki Dass & Co. Who, in turn, assigned them to the plaintiff who were bona fide purchasers for value. The cheque issued by Janki Dass & Co. To the defendant having been dishonoured, the defendant refused to give delivery to the plaintiff who presented the delivery order. It was held by a Division Bench of Calcutta High Court, inter alia, that the defendant intentionally caused the plaintiff to believe that the cash payable in respect of the goods to which the delivery orders related had in fact been paid, that the plaintiff acted on that belief, and that the defendant could not be allowed to deny that such cash was paid and, therefore, they could not claim to be entitled to lien as against the plaintiff. The argument that the property in the goods had not passed since there was no appropriation of them to the delivery order in question, was considered to be not relevant; and it was observed that' it must be home in mind that we have not to consider whether property passed as between the original sellers and buyers, but whether, in the events that have happened the sellers can assert this against the plaintiffs who have acted on the faith of the seller's representation that no lien existed and that they held goods to answer the delivery order".
19. Mr. Arif Hussain contended that, in any case, delivery of the rice in question could not be claimed as no rice has been appropriated to the warehouse receipts. It was, however, not denied that rice applicable to the warehouse receipts is available in the defendant's godowns; and, indeed, the Commissioner's report makes it clear that such rice is available. In the facts and circumstances of this case, outlined above, it is not open to the defendant No, 1 to rely on this plea. It has not only issued formal commitments to load the rice on a vessel nominated by the plaintiff but has in fact loaded part of the rice on such vessel; and is, therefore estopped from denying that it has appropriated rice of the required quantity and description to the warehouse receipts in question.
20. The plaintiff has, thus, established a very strong prima facie case that it is entitled to the delivery of the rice in question. The balance of convenience A is in favour of the plaintiff inasmuch as if the injunction is not granted and it is ultimately found that it is entitled to delivery of the rice, it will in the meantime have been exposed to damages for non-fulfilment of forward contracts of sale and will have been deprived of the use and benefit of U.S. $ 5 million which it has paid for the rice; while on the other hand, the defendant will not suffer any inconvenience by the grant of injunction because it has not only received U.S. $ 5 million in advance payment but is also holding a sum of U.S. $ 1,000,000 by way of security deposit for due performance of its contract with AGA.
On the contrary, if an injunction is not granted the defendant No,1 will have the benefit not only of the advance payment but also of the rice for which advance was made in consequence of the defendant's undertaking and commitment to deliver it and to load it upon a vessel nominated by the plaintiff. The plaintiff is, therefore, entitled to interim relief by way of an injunction; and the only question is whether , in the circumstances of the case, the plaintiff is entitled to mandatory injunction for delivery of the rice pending the hearing and disposal of the suit.
21. Mr. Liaquat Merchant submitted that mandatory injunction to deliver the rice ought to be issued against the defendant No,1 as provided by Order 39, Rule 10, C.P.C. Order 39, Rule 10, C.P.C. Provides as follows:- "Deposit of money. Etc. In Court.--Where the subject-matter of a suit is money or some other thing capable of delivery, and any party thereto admits that he holds such money or other thing as a trustee for another party, or that it belongs or is due to another party, the Court may order the same to be deposited in Court or delivered to such last-named party, with or without security, subject to the further direction of the Court."
' The defendant No,1 has not admitted that it holds the rice in question as a trustee for the plaintiff or that the rice belongs to the plaintiff. It is, therefore, clear that mandatory injunction cannot be granted under the provisions of Rule 10 of Order 39, C.P.C. Mr. Merchant then invited me to exercise the power of the Court under section 94, C.P.C. For issuing mandatory injunction. That section provides, inter alia, that the Court may make such interlocutory orders as may appear to it to be just and convenient to prevent ends of justice from being defeated. However, mandatory injunction can only be granted to restore status quo on the date of the institution of the suit and not so as to bring about a new state of things. Sec Adamjee Paper and Board Mills Ltd. v. Maritime Agencies, 1984 CLC 440 and 446. In Nelson's Law Of Injunctions (2nd Edition), it is stated that on accepted principle and according to practice of the Courts:-- "It would appear that if mandatory injunction is granted at all on an interlocutory application, it is granted only to restore the status quo and not granted to establish a new state of things, differing from the state which existed at the date when the suit was instituted." (P. 162).
' In the same book, it is stated at page 167:-- "It is clear, therefore, that there is no real distinction between injunctions restrictive and mandatory, beyond this, that the order in the former is negative, and in the latter it is positive, in the one a wrongful act is forbidden, in the other the performance of some act is enjoined, but the purpose and effect of both is identical, viz. Restoration of the status quo ante."
22. I would, therefore, restrain the defendant No,1, pending the hearing and disposal of the suit from alienating, removing or parting with possession of the balance quantity of 23,847.40 metric tons of Pakistani Long Grain Irri-6, 40-45% broken, white rice to any other party except the plaintiff. Let injunction issue accordingly.