ORDER RASHEED AHMAD RAZVI, J. - This is an application filed by the plaintiff under order XXXIX, Rules 1 and 2, C.P.C, read with section 151 C.P.C, in the suit for perpetual injunction. It is prayed by the plaintiff that the defendant No. 1 and/or its agents, managers^ representatives may be restrained from giving any effect to the letters/notices dated 21.12.1986, 28.12.86 and 31.12.1986 (Annexures B' B'& D' of the plaint). It is also prayed that the defendants be further restrained from taking any Step for appointing other agent for Hyderabad.
2. The plaintiff is the successor-in-interest of M/s. Muhammad Farooq & Company, which, as claimed in the plaint, was also sole distributor/agent of defendant No. 1 for Hyderabad, in respect of all brands of the defendant No. 1's cigarettes. Subsequently, on 12.4.1981 it was incorporated as a private limited company, under the provisions of the then Companies Act, 1934. The case of the plaintiff, in brief is that at the request of defendant No. 1. With the purpose of expanding' and creating new markets for the products of defendant No. 1, the plaintiff incurred huge expenditure and. Therefore, the rights of agency created in favour of the plaintiff are coupled with interest and cannot unilaterally be cancelled, taken- away partly or otherwise modified to the prejudice of the plaintiff's interest. The grievance of the plaintiff is that it has the right for the sole distribution of the products of defendant No. 1 on the basis of oral agreement; that the defendant No. 1 for the last two
(2) years (prior to the year 1987) is attempting to divide the rights of distribution of cigarettes to some other persons but decision was deferred at the request of plaintiff's representation. Although the plaintiff has mentioned about his efforts, substantial consideration and about huge investment in its. Plaint but has not described in detail about such efforts or investments. The present controversy arose on 21.12.1986 when the plaintiff was informed by the defendant No. 1 (vide Annexure 'B' to the plaint' that they have appointed defendant No. 2 as their distributors with effect from 1.2.1987. The defendants in addition to its legal objection to the maintainability of suit, have denied that in past, the plaintiff was absolute and exclusive distributor of all its products for the city of Hyderabad. According to the written statement of defendant No. 2, Messrs Shakeel & Brothers was also one of the distributor for Hyderabad from the year 1948 upto 1962. The defendant No. 1 have also challenged the creation of agency rights in favour of plaintiff and have described the procedure for the distribution of cigarettes by the plaintiff. It is the defence of the defendant No. 1 manufacturer that the manner through which the cigarettes were being distributed in Hyderabad does not create any perpetual right of plaintiff company to continue as its sole distributors. The procedure for distribution of cigarettes is described in paragraph 4 of the written statement of the defendant No. 1. Relevant portion whereof is reproduced hereunder:- "......It needs to be emphasised that the plaintiff has not filed any written agreement of any written agreement of any nature whatsoever establishing that it has or has any agency of any sort from the defendant No. 1. It may be clarified that it is the practice of the defendant No. 1 to appoint distributors but not agents. The concept of a distributor in commercial parlance and as used by the answering defendant in any manner whatsoever. Furthermore, the distributors do not even make sales for and on behalf of the answering defendant. The distributors merely purchase cigarets from the answering defendant against advance payment and thereafter sell them in the market on their on account. Thus it can be seen that the distributors are carrying on business for and on their on behalf. Any investments that are made by them are with the object of maximising their sales and correspondingly their profits." In support of their contention that the defendant No. 1 is entitled to further grant and divide the rights of distribution of cigarettes in Hyderabad, reference is made to the incident occurred in the years 1973 and 1974 when the Monopoly Control Authority inquired into the methods of distribution of cigarettes. The defendant No. 1 described the procedure for distribution as quoted hereinabove to the Monopoly Control Authority and clarified that they do not appoint sole distributor. The proceedings were initiated under section 12 (1) (c) (ii) of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970, which was numbered as 2(9) MCA/R & 1/74, but was subsequently dropped as the defendant No. 1 satisfied the said Authority that the question of monopoly in distribution of cigarettes.Was not involved. It is pertinent to note that the defendant No. 1 has not filed any order for their discharge from the said proceedings before Monopoly Authority but Mr. Khalid Anwar has referred to para 26 of their reply filed before the said Authority, in support of his contention that this forehand satisfaction of the Monopoly Control Authority which resulted in termination of proceedings against the defendant No.
1. The same is reproduced as fol lows:- "26. That the distributors of the respondent's products including the three recited in the notice do not have exclusive territories allotted to them but each such distributor has primary responsibility for sales in the geographical area to which his operations extend. The respondent does not impose any penalty on a distributor for sales to any one outside his area or compensate any distributor for sales made by the respondent or any other person within the area for which such distributor is primarily responsibly. It is respectfully submitted that none of the respondent's distributors is an exclusive distributor in the sense of the respondent being bound by contract to supply any territory through the distributor alone or of the distributor being bound to sell only within a specified territory. As a matter of practice, however, and consistent with the practice in vogue in the tobacco industry and indeed in industries engaged in consumer articles generally, the respondent channels the bulk of requirements of any area through the distributors primarily responsible for servicing that area."
4. I have heard Mr. Mushtaque Memon, for the plaintiff and Mr. Khalid Anwar for the defendants. Mr. Mushtaque Memon has contended that the plaintiff being sole distributor has the exclusive right of distribution of defendant No. 1's products for the city of Hyderabad and that such transaction amounts to agency coupled with interest and, therefore, the act of defendant No. 1 to appoint defendant No. 2 as a joint distributor for the said city amounts' to violation of such agreement. He has further argued that all the three ingredients for grant of interim injunction are available in the plaintiff's case. Mr. Mushtaque Memon, in support of his arguments has referred following cases:
(i) Muhammad Aref Effendi v. Egypt Air (1980.S.C.M.R.. 588);
(ii) Muhammad Matin v. Mrs. Dino Manekji Chinoy and others (PLD 1983 Karachi 387); (i.e) Noor Muhammad v. Civil Aviation Authority (19987 CLC 393);
(iv) Zubair Ahmed v. Pakistan State Oil Co. Ltd. And another (PLD 1987 Karachi 112);
(v) Mrs. Kino Manekji Chinoy and 8 others v. Muhammad Matin (PLD 1983 S.C.693);
(vi) Messrs Universal Trading Corpn. Pvt.) Ltd. v. Messrs Beecham Group PLC and another (1994 CLC 726);
(vii) Mrs. Shahzadi Baber v. Hina Housing Project (Pvt.) Ltd. And others (1994 CLC 1601); (viii)Karachi Catholic Cooperative Housing Society' Ltd. v. Mirza Javad Baig (PLD 1994 Karachi 194 ); and (ix) Beecham Group PLC & another v. Universal Trading ' Corporation (Pvt.) Ltd. (HCA No. 145 of 1993).
Mr. Khalid Anwar, learned counsel for the defendants has argued that the claim of plaintiff for agency rights is based on mere oral contract, the terms of which cannot be determined without process of recording evidence. He has further contended that the plaintiff has not specifically stated the terms and conditions of such oral contract in plaint and, therefore, in absence of clear terms he cannot claim that it was an agency coupled with interest. He has further emphasized on the distinction' between agency and the distribution rights and contended that plaintiff was assigned work of distributing cigarettes with no authority to represent the defendant No. 1. He has denied that the plaintiff was having any absolute distribution rights for Hyderabad district. It was further argued (on behalf of defendant No.1) that the plaintiff had never acted as an agent as defined in Section 182 of the Contract Act. 1872. Mr. Khalid Anwar has also argued, in alternate, that it is not termination of an agency as alleged by the plaintiff but the defendant No. 1 has divided the rights of distribution of its products in the city of Hyderabad which is now to be distributed by both the plaintiff and the defendant No. 2; that this arrangement has been acted upon and is in continuation for last more than 10 years. It was further argued that the plaintiffs case is not covered under section 202 of the Contract Act. He has referred to the case of Messrs World Wide Trading Co. v. Sanyo Electric Co. Ltd, and another ( PLD 1986 Karachi 234) and Muhammad Riaz r. Federal Construction Corporation Limited and 4 others (1987 CLC 345).
6. It is an admitted position that the plaintiff has not placed on record any written agreement in order to show that what was the exact nature of such agreement and its terms or conditions between the plaintiff and defendant No.1. Though the plaintiff has attempted to define the established method of distributing cigarettes in the city of Hyderabad and has also claimed investment of huge amount, but the plaint is silent on the point that what were the exact terms and conditions between the plaintiff and defendant No. 1 for distribution of the cigarettes and what is the nature of huge investment which creates permanent interest of the plaintiff in the agency, it is pertinent to note that the present suit was filed on 31.1.1987 and the same day order for maintaining status quo was also granted. Lastly, on I 9.1987 the status quo was ordered to be continued till next date by this Court. Thereafter, it was never extended. None of the parties have argued on this point as to what is the effect of non- extension of this order and whether, in such circumstances, laches can be attributed to the plaintiff?
7. The cases cited by Mr. Mushtaque Memon arise out of written contracts. The ratio laid down in these reported cases are based on the interpretation of admitted contracts which is absent in the instant case. In the famous case of Egypt Air (1980 S.C.M.R. 588) there was a general sales agency agreement dated 21.9.1973 in respect of looking after the business of Egypt Airline which was before the Court for interpretation. The cases of Muhammad Matin (FED 1983 S.C. 693) are of no help to the plaintiff as the rule laid down by a learned Division Bench of this Court as well as by the Hon'ble Supreme Court arises from a suit for specific performance of a contract. The case of Noor Muhammad (1987 CLC 393) deals with the question of lease and licence. In this reported case, the question involved was, whether the plaintiff who was running a shop at the Airport lounge, Karachi which was given by the Civil Aviation Authority was in the nature of lease or licence? In the present suit, the plaintiff is asserting their right to continue agency and, therefore, the; case of Noor Muhammad is again of no help to them. The dispute which was involved in the case of Zubair Ahmed (PLD 1987 Karachi 112) arose out of termination of a dealership (Petrol Pump). The tacts of this reported case are that by a written agreement the Pakistan State Oil Company appointed the plaintiff as their dealer to sell different petroleum and lubricants items produced by the defendants as well as to sell batteries, tyres Qnd other automobile parts on a premises whereupon the plaintiff hi|d also built a petrol pump/sjervice station equipped with machinery and other facilities. It was in the background of these facts that a learned Judge of this Court came to the conclusion that the agency created in favour of plaintiff was coupled with interest and accordingly an interim injunction was granted, inter Alia, on the grounds that the plaintiffs have earned a goodwill among their customers anchtermination would amount to up-rooting their established business: that investments were imade with the consent of the defendants. Reliance was placed on the case of Egypt Air. The case of Arif Effendi v. Egypt Air was also followed by another learned Judge in the case of M/s. Universal.
Trading Cooperation (Pvt.) Ltd. (1994 CLC 726) wherein the plaintiff filed a suit for declaration and injunction after being aggrieved of the termination of its distribution rights by the defendant, who, by a contract, appointed the plaintiff as exclusive distributor/agent of Horlicks in Pakistan, The plaintiff was also required to promote and increase sales of Horlicks in terms of the said written contract. The defendant No. 1 did not file any counter affidavit to the sinjunctions application, in.
Absence of rebuttal and after referring to several reported cases including Muhammad Arif Effendi (1980 S.C.M.R. 588), sohrabji (.AIR 1946 P.C.6) and Balagamwala Oil Mills Ltd. (PLD 1990 Karachi 11 interim injunction was issued by a learned Judge of this Court. Against the said order, the defendants filed Inter Court APPEAL bearing HC A No. 140/93 which was dismissed by a learned Division Bench of this Court. Some similar points as of the. Instant case were also argued before the learned Division Bench in the above referred unreported case of M/s. Beecham Group PL(' which were answered in the following manner:
8. The first question presented for determination in this case is whether the respondents were sole distributors of the appellants or not. Contracts with sole distributors or agents do not follow a single pattern and the primary necessity'in each case is to ascertain with precision what are the express terms of the particular contract under discussion.
9. It is well-settled that while interpreting tW terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the words "agent" or" Agency" or sole distributor" are used to describe the status of the parties concerned, is not sufficient to lead to the irresistible infe hence that the parties in fact intended that such status would be confirmed. Thus, mere formal description of a person as an agent or sole distributor or buyer is not conclusive unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent or sole distributor.
10. We are of the view that extrinsic evidence to determine the effect of an agreement is permissible where there remains a doubt as to its true meaning. Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done shortly after the date of t he agreement.".
The cases of Shahzadi Baber (1994 CLC' 160.1) and Catholic Cooperative Housing Society Ltd. (PLD 1994 Karachi 194) arise out of different facts. In Mrs. Shahzadi Baber the dispute was between an allottee of a flat in a huge building being constructed in the name of Rabia Garden by the defendants. The plaintiff being allotted was seeking injunction against tin1 builder restraining them from converting open space into flats. In Karachi Catholic Cooperative Housing Society the dispute arose on the disposal of an immovable property on the basis of a power of-attorney and its revocation subsequently. The rule laid down by the Hon'ble Division Bench of this Court on both these cases does not in any manner advance the case of the plaintiff. No doubt, section 186. Of the Contract Act provides that an agency can be created by express, or implied terms. In all the cases cited by Mr.Mushtaque Memon there was an express authority which resulted in creation of an agency or licences. In the present case, there is no express term or condition on record.
Therefore, in such circumstances the Creation of agency by implied terms is to be inferred from the facts and circumstances of the case, conduct of the parties and the ordinary course of dealing and transaction between them (See Section 187 of Contract Act, 1872).
8. Mr. Khalid Anwar has also invited my attention to the two reported cases of this Court. In Messrs World Wide Trading Company (PLD 1986 Karachi 234) the plaintiffs application under Order XXXIX Rules 1 and 2, ('.P.C. Was dismissed through which it was prayed that the operation of notice of termination issued by the defendant No. 1 be suspended. In this reported case, a memorandum of agreement was executed between the parties, on two occasions i.e. In the years 1977 and 1981 through which the plaintiff was appointed exclusive agent for Pakistan by the defendant No. l for sale-, marketing and distribution of freezers and refrigerators etc. Etc. It was argued in the reported case, from the plaintiffs side that since there existed express contract of agency with int erest in favour of plaintiff, such agency cannot be terminated unilaterally by defendant No. 1 and that such termination is malafide. On behalf of defendant No. 1 it was argued that, there did net exist agency contract between the parties; that there is no mala fide on the part of defendant No.1; that the plaintiff can be reasonably.Compensated in terms for the alleged breach of contract and that the balance of convenience lies in favour of defendant No.1. Again, the1 case of Arif Effendi v. Egypt Air was relied upon by the plaintiff. A learned Single Judge of this Court Mr. Tanzee.Lur Rehman's, J. (as he then was) answered the parties contention, after referring to various provisions of the Contract Act in the following manner: However, I am afraid, the mere investment doei- ring no bell unless the interest which is alleged!) involved fulfils the condition that it forms part of th< subject-matter of the contract as provided in section 202 of the Contract Act. After all, the plaintiff had t( make certain investment in the business, fm example, on hiring the shops/offices at several places, setting up of a service centre, employing staff etc... If it is to acquire sole-selling rights of the predicts of defendant No. 1, to the exclusive of all ot hers, but such investment does not necessarily fall within the scope of "interest" as mentioned in the said section.
19. To my mind, the two statutory illustrations given at the end of section 202 contemplate that the interest of the agent, farming subject-matter of the agency, is to be some sort of an adverse nature qua the principal. So, according to the true construction and scope of section 202 the agency can be said to be coupled with interest where the authority of an agent is given for the purpose of effectuating a security or of securing an interest of the agent. This can be inferred from the documents forming the basis of agency or from the course of dealings between the parties and from the other surrounding circumstances.
Kven otherwise, the contract with interest" is terminable if it is so provided in the contract itself. The contract, in the instant case, provides a period of 3 months' notice before expiration date of the contract, which remains in force till 13-4-1987, as having been already extended automatically on the last expiration date, under the terms of the contract. The question which is now agitating my mind is whether the plaintiff is entitled in law to an injunction, by way of suspending the operation and effect of-the termination notice dated 25-10-1985 till 13- 4-1987. During the course of arguments on 18-2- 1996, Mr. Khalid Anwar, learned counsel for defendant No. 1 referred to Section 21 of the Specific Relief Act, 1877 with illustration to clause (b) that a contract to supply with all the goods of a certain class which may be required under the contract cannot be specifically enforced. I agree with the submission of the learned counsel that the contract dated 14-7- 1977 is, in its nature, revocable subject to notice." In Muhammad Riaz (1987 CLC 345), the plaintiff who was an Engineer by profession joined service with the defendant No. 1 and a general power of attorney was executed in favour of plaintiff on 2-3-1981 and vide agreement dated 1-9-1981 the plaintiff w as appointed by defendant as its representative, sole and exclusive authorised agent for preparation and submission of bides, participation in meetings and discussion etc, and to accept award of any work supervision etc. Again the case of Arif Effendi was referred by the plaintiff to obtain relief under Order XXXIX, Rules 1 and 2, C.P.C which was dismissed. It was held by a learned single Judge of this Court Mr. Saleem Akhtar, J. (as he then was) that the plaintiff has a pnma facie case but since the other two ingredients i.e. Balance of convenience and suffering irreparable loss were not established by the plaintiff, his application for interim injunction could not be granted. It was further held in the last 'reported case that in case any breach is committed, the plaintiff would be entitled to claim damages which can always be quantified.
10. There is another case of this Court wherein the impact of lermination of franchise as well as the case of Arif Effendi. r. Egypt Air was also considered. In this case it was argued before a learned Judge of this Court, Mr. Ajmal Mian (as his Lordship then was) that the Hon'ble Supreme Court has not laid down a general rule that in every case, in which a party alleges that the agency agreement in his favour is coupled with interest, the Court is obliged to grant ad interim injunction, was held to be correct view. Therefore, in my view the present plaintiff, to obtain relief as prayed in the instant application is required to show, for the rights of agency granted to the party is coupled with interest. The plaintiff is further required, in addition to a good prima facie case, to show that the remaining two ingredients i.e. Balance of convenience and causing irreparable loss/injury are also present in favour of plaintiffs case.
11. Lam conscious of the rule that it is not permissible to finally adjudicate the issue of existence of agency contract during hearing of an interlocutory application. I am.Equally conscious of the well established rule for the grant or refusal of an interim injunction. The plaintiff is required to show even at this stage that the oral contract was in the nature of an agency coupled with interest. In absence of a written contract, it is duty of the plaintiff to show that from the circumstances of the case1 and from the conduct of the parties there emerges relationship of agent and principal. All such ingredients which may lead to infer existence of agency in the case are absent. It is not the case of the plaintiff that it was acting as an agent on behalf of the defendant No. 1 for Hyderabad region and that interest of permanent nature' was created.. Mere establishment of warehouse is not sufficient to establish an interest of permanent nature. It is not alleged that such investments were made as result of an agreement between the parties. Any investment made or construction of any structure of permanent nature by the plaintiff out of its on will, in older to improve its business did not amount to show existence of an agency contract.
12. In Iife facts and circumstances discussed above, I am of the tent alive opinion that the plaintiff does not have a good prima fane case. The plainteffs case also suffers from laches as the interim to maintain status-quo, which expired on 1.9.1987, was riot got extended. The plaintiff in the circumstances cannot with any justification argue that if injunction is not granted now, he would suffer irreparable loss. In the circumstances and in the interest of justice, I direct that' the defendant No. 1 shall keep account of goods distributed through the defendant No. 2, namely.
Messrs Marketing Services (pvt.) Limited and shall file the same every quarterly in Court with the Nazir, in view of the above.' directions, the plaintiffs application (CMA 494/1987) stand dismissed.