This suit is for a declaration and permanent injunction to restrain the taking of recovery proceedings for realizing the dues of the Government of Sind as arrears of land revenue, and for accounts.
2. The facts of this case are that the Karachi Steam Roller Flour Mills Co. Ltd., Sind Flour Mills Co. Ltd., and India Flour Mills (1936) Ltd., the plaintiffs Nos, 2 to 4 and Pakistan Roller Flour Mills, the defendant No. 5 owned Roller Flour Mills in Karachi. To facilitate joint dealings with the Government, they formed themselves into a partnership in 1950 under the name and style of Karachi Flour Millers Union (which will hereinafter be referred to as the "plaintiffs"). The Pakistan Roller Flour Mills retired from the partnership and was ultimately dropped from the suit. The defen--dant No. 2 is the Government of Pakistan in the Ministry of Food and Agriculture (Food Division), which controlled the production and distribution of .Foodstuffs, inter alia, wheat and wheat products as essential commodities, in the territory of Karachi through the Chief Commissioner's Directorate of Civil Supplies. The defendant No. 1 which was the Province of West Pakistan (and now the Province of Sind) took over the Food Department on 1-7-1962 after the merger of Karachi into West Pakistan.
The 3rd and 4th defendants are formal parties.
3. With effect from 1st July 1950, the Government of Pakistan entered into an arrangement with the plaintiffs for milling indigenous and imported wheat into atta, maida, suji and bran (hereinafter referred to as the "wheat products". The Government used to fix the issue price of wheat. Supply the same to the plaintiffs for milling into the wheat products in accordance with the extraction percentages prescribed from time to time and distribute the same at fixed prices to atta depots and ration shops and recover the sale proceeds. The wheat was supplied to the plaintiffs on credit and in the books of accounts maintained by the Director Civil Supplies, Karachi, the plaintiffs were debited with the cost of the wheat at the issue rate and were credited with lumpsum payments made to the Government on account. For these services, the plaintiffs were entitled to a milling remuneration which was represented by the difference between the issue price of wheat and the prices of wheat products fixed by the Government, which until it was revised on 25-5-1952 was at Rs. 124-6-0 per 100 maunds of wheat milled and was in--chisive of all miscellaneous expenses. It is common ground that this arrange--ment was entirely oral and that no written agreement was ever entered into between the parties incorporating the terms and conditions of the arrange-- ment relating to the milling of wheat and in particular the rate of the plaintiffs' milling remuneration. With regard to the milling of indigenous wheat, however, there was an agreement concluded by offer of the plaintiffs dated 27-9-1951. And acceptance of the Government dated 8- 10-1951. But even this agreement did not specifically mention the milling rate payable to the plaintiffs. The agreement though not formally extended, formed the basis of the arrangement for the milling of indigenous wheat during the subsequent years 1951-57, upon which the plaintiffs rely for claiming quality allowance, which will be discussed later.
4. On or about 25th May 1952, it became necessary for the Pakistan Government to increase the issue price of wheat from Rs. 11-9-0 per maund to Rs. 12-4-0 per maund especially as the Government had to pay higher prices for imported wheat. But as the Government had decided not to increase the retail price of atta, the Director Civil Supplies and other officers of the Ministry of Finance, persuaded the plaintiffs during discussions at joint :meetings, to agree to reduce their milling charges to Rs. 91-12-0 for a period .Of 3 months in the first instance, after which the matter was to be reconsidered ,in the light of the facts then prevailing. After the expiry of the period of 3 months, the plaintiffs repeatedly pressed the Government to restore their original milling charges of Rs. 124-6-0, but the Government did not do so (except for a nominal increase of Rs. 2-8-0 on account of corresponding rise in establishment charges), as a result of which the plaintiffs say that they went on suffering losses. The case of the plaintiffs is that the original milling :charge of Rs. 124- 6-0 included milling loss of --%. The plaintiffs say that in the process of milling wheat, there is always a loss in production called milling loss because of excessive moisture in the wheat and also impurities, such as foreign matter. More particularly, their case is that in order to ,produce 100 maunds of wheat products, they had to mill 101-- maunds of ,clean wheat and that while the Government was recovering from them the Frost of 100 maunds of wheat, they were in fact, consuming and paying for 101--maunds of wheat to produce 100 maunds of wheat products. That the .Denial to them of this milling loss of 1--%, as well the failure by the Govern--ment to restore their original milling charges, was causing them immense losses. On 14-5-1965 the plaintiffs sent a legal notice (Exh. P. 109) addressed ,to the Director Civil Supplies, Karachi, demanding compensation of Rs. 66,.87, 932-3-0 for the losses suffered by them.
5. The question of revising the milling rate payable to the plaintiffs as well as their claims for milling loss continued to engage the attention of the Pakistan Government. With this objective in view, several meetings and negotiations took place between the Officers of the Ministry of Food, Government of Pakistan, the Karachi Administration and the plaintiffs representatives. Thus, a joint meeting was held on 27-6-1955 and the minutes Exh. 12/28 show that the plaintiffs had agreed to accept milling rates -for imported wheat at the rate of Rs. 102-11-0 for the period 1-9-1952 to 30-6- 1955 and at the rate of Rs. 104-4-0 with effect from 1-7-1955 onwards and with regard to the indigenous wheat, the plaintiffs agreed to mill at the rate of its. 91-12-0 for past milling but were to get the quality allowance on ,the basis of the specifications already agreed to by the Director of Civil Supplies, Karachi. The plaintiffs say that instead of implementing these ,decisions, the Government appointed a Cost Accounts Officer, Mr. E. K. Mumford to examine and report on the plaintiffs' cost of production of the wheat products in their flour mills. He submitted his report on 20- 12-1955 re-- commending payment of milling charges of Rs. 100 for indigenous wheat and Rs. 115 for imported wheat. That the Government also did not accept his report and on 1-12-1958 appointed a High Power Committee of 4 persons to -enquire into the working expenses of the mills and to recommend the rate at which milling charges should be paid to the Millers. The Committee after making due enquiries and carrying out test milling in one of the plaintiffs' mills, recommended that the milling rates be paid at the rates agreed to at the meeting held on 27-6-1955 upto 30-4- 1960 and after 1-5-1960 at an increased sate of annas 13 per maund for milling only, and in addition to milling loss of 1-- percent. From 1-5-1960. The recommendations of this Committee were :also not accepted by the Government and, as the plaintiffs pressed for finalization of their claims, a meeting was finally convened on 31-12-1960 with the Joint Secretary, Ministry of Food and other Authorities including' the Director of Civil Supplies. The final settlement recorded in the minutes were that (1) the plaintiffs had agreed to accept milling rates at Rs. 102-12-0 for 100 maunds from 1- 9-1952 to 30-6-1955 and (2) at Rs. 104-4-0 from 1-7-1975 to 30-11-1958 and (3) from 1-12-1958 onwards, to the recommenda--tion of the 4-man Committee which, as stated earlier, had recommended payment of 1-- percent. Milling loss on imported wheat. That, despite this final settlement, the Government of Pakistan informed the plaintiffs by letter dated 8-7-1961 Exh. P. 207 that having fully considered their claims, it had been decided to fix the milling charges payable to the plaintiffs, (1) at the rate of Rs. 102-69 for the period 1-9-1952 to 30-6-1955, (2) at the rate of Rs.
104-25 for the period 1-7-1955 to 30-4-l960 and (3) from 1-5-1960, the date from which wheat was decontrolled, no milling charges were to be allowed so long as the millers complied with the Government instructions --regarding extraction percentages and sale of wheat products at fixed prices. Accordingly, the plaintiffs were afforded credit of Rs. 37,05,127/1/9 on account of the said increased rates finally decided by the Government for the period of milling from the commencement until 30th April 1960. The-- plaintiffs accepted this credit under protest by their letter dated 7-9-1961 (Exh. P. 215).
6. With effect from 1-5-1960, the Pakistan Government decontrolled. Wheat products and removed restrictions on their movement between Karachi and West Pakistan. The extraction percentages of the wheat products as well as maximum ex-mill prices were fixed by Notification dated 30-4-1960.
Accordingly, there was a book value appreciation of stocks of wheat and wheat products lying in the plaintiffs' mills on the morning of 1-5-1960,. Amounting to Rs. 16,32,88-3-0 which the plaintiffs were directed to pay to the Government by letter dated 17-5-1960 (Exh. P. 183) and this sum was debited: to the plaintiffs' account. The plaintiffs dispute this amount and deny liability for the same.
7. On 1st July 1962, the Government of Pakistan ceased to supply wheat to the plaintiffs consequent upon the transfer of the Food Department to the Government West Pakistan. On that day, an amount of Rs. 69,29,347.59 stood as the debit balance against the plaintiffs. The plaintiffs accept this figure as correct, but they say that they are entitled to adjustment of their claims and to claim credit against this amount. The plaintiffs' claims set out in paragraph 22 of the plaint may now be summarised. They comprise of 3 main beads of claims, namely, (1) quality allowance on, indigenous wheat, (2) difference in milling charges on imported wheat for the period 1-9-1952 to 30-6-1962 on the basis of the final settlement reached at the meeting held on 31-12-1960 including milling loss at 1-- %. On imported: wheat with effect from 1-12-1958 to 30-6-1962 (3) reversal or deletion of entry of Rs. 16,32,888-19-0 wrongly debited in the account on account of appreciation of the value of stocks of wheat and wheat products lying in the plaintiffs' mills on 1-5-1960, the date on which the wheat was decontrolled. The breakup of these figures is mentioned in statement Exh.
12/4 submitted to the Court by the plaintiffs during the course of arguments in lieu of the statement Annexure 'H' to the plaint (Exh. 12/3). According to the revised, statement, after deducting the amount of Rs.36,05,127/l/9 which was credited to plaintiffs' account on account of increase in milling charges --finally allowed on 8-7-1961, and also after deducting the admitted amount of Rs.
69,29,347.59, a sum of Rs. 45,89,008.93 would become due and payable to the plaintiffs.
8. The plaintiffs further state in the alternative, that as the Pakistan Government has pleaded that the settlement reached at the meeting on 30-12-1960 was not confirmed and, therefore, was not binding on the Government, the plaintiffs would be entitled to claim milling charges at the original rate of Rs. 124-6-0 per 100 maunds from the commencement viz. 1-9-1952 to 30-6-1962 or in any case, reasonable milling charges including 1-- % milling loss, as may be fixed by this Court and for ascertaining which, the Court may order the taking of accounts against the Government of Pakistan.
9. After 1-7-1962, the Department of Food was taken over by the Government of West Pakistan and wheat was being supplied to the plaintiffs from time to time under various agreements, two of which are on record as --Exh. 12/64 dated 6-7-1964 and Exh. 12/6 dated 2-10-1965. The plaintiffs used to make payments on account of wheat supplied from time to time. Against the cost of the wheat supplied, the plaintiffs claim credits in respect of the for amounts totalling Rs. 48,36,71.2.82 mentioned in paragraph 26 of the plaint and, more particularly, in Annexure'K' thereto (Exh. 12/5). In addition, the plaintiffs claim milling charges at such reasonable rates as this Court may allow for the total quantities of wheat milled by the plaintiffs from 1-7-1962 to 30-6-1966. The plaintiffs say that if their claims are allowed to be adjusted against the dues of the Provincial Government, it would be found that a large sum of money would be due and payable by the Provincial Government to the plaintiffs.
10. That plaintiffs say that the Government of West Pakistan continued the same arrangement with the plaintiffs for milling wheat, and carried for--ward in its own accounts, the book balance of wheat and the debit balance of Rs. 69,29,347.59 standing against the plaintiffs in favour of the Pakistan Government on 1-7-1962. Thereby, the Provincial Government treated the entire account as one running and continuous account. Therefore, the --plaintiffs are entitled to have the whole account settled and taken from the commencement as one continuous and running account and to have their --various outstanding claims against the Government of Pakistan also settled and credited in the said accounts.
11. On 9-4-1966, the plaintiffs reported shortages of wheat stocks. By their undertaking dated 8th .Tune 1966 they agreed to replenish the shortages of some 17,793.5 tons of wheat or 4,84,378 maunds valuing Rs. 77,50,058.00 within a period of 3 months by the purchase of indigenous wheat from the open market. After further supplies were made to the plaintiffs, physical verifi--cation of the stocks was conducted by the Inspectorate of the Food Department on 21-6-66 and on 22-6-66 when it was found that there was a shortage of 5 72,555-15-12 maunds of imported wheat valuing Rs. 98,76,588.44 at the rate of Rs. 17.25 per maund. Accordingly, the Provincial Government demanded a revised bank guarantee for Rs. 99 lakhs and as the plaintiffs failed to furnish the same, the bank guarantee for Rs. 35 laks which had been previously furnished as security against the stocks under the agreement dated 2-12-1965, was realised, leaving a balance of Rs.
63,76,588.44 due and payable by the plaintiffs. On 26-10-1966, the Government of West Pakistan passed an order Annexure 'O' to the plaint, directing that the said balance amount be recovered from the plaintiffs along with penal interest at 10 per' cent. Per annum, as arrears of land revenue in pursuance of clause 7 of the-, agreement dated 2-12-1965 (Exh. 12/6) and under the West Pakistan Govern--ment Dues Recovery Ordinance, 1962. Recovery proceedings were instituted by the City Deputy Collector, Karachi (the defendant No. 4) through his -notice dated 29-10-1966 Exh. 12/62.
The plaintiffs have, therefore, filed the present suit on 21-11-1966 praying for a declaration that the order dated 26-10-1966 passed by the Government of West Pakistan directing recovery of Rs.
63,76,588.44 as arrears of land revenue is illegal and ultra vires and also praying for a permanent injunction to restrain the taking of recovery proceedings. They also pray for an order against the Pakistan Government to supply all the inspection notes and wheat notes in respect of indigenous wheat supplied to the plaintiffs from Punjab, Bahawalpur and Sind between the year 1951-57 in order to work out the quality allowance payable to the plaintiffs. The plaintiffs further pray for rendition of accounts by the Government of Pakistan and the Government of Sind in respect of their respective dealings with the plaintiffs either as one account or separately if the Court so orders and that all the claims of the plaintiffs be worked out and the amount due on each such account to the plaintiffs be finally determined and ascertained.
12. The Government of Pakistan filed a written statement denying the claims of the plaintiffs. Therein it pleaded that the plaintiffs had agreed to reduce their milling charges for a period of three months but denied that they were to be restored automatically to their original rate after the expiry of three months. That the decisions recorded at the meeting held on 27-6-1955, the recommendation of Mr. Mumford, and those of the 4 man Committee and those recorded at the final meeting on 31-12-1960, were not accepted; nor were they binding on the Government. That the milling charges were finally determined by the Government by its letter dated 8-7-1961 which were at the rate of Rs. 102-69 per 100 maunds for the period 1-9-1952 to 30-6-1955 and at the rate of Rs.
104.25 for the period from 1-7-1955 to 30-4-1960. That from 1-5-1960. On which date wheat was decontrolled, no milling charges were payable so long as the millers complied with the Government instructions regarding extraction percentages and sale of the wheat products at the fixed prices. It was further denied that the plaintiffs were entitled to any accounting against the Government and that the claims of the plaintiffs were barred by limitation.
13. In their joint written statement filed on behalf of the defendant Nos. 1, 3 and 4, the Provincial Government submitted that it had no concern with the alleged claims of the plaintiffs against the Pakistan Government pertaining to the period prior to 1-7-1962, except the book value of the stocks which it had taken over from the Pakistan Government on that date It was denied that the plaintiffs were entitled to claim milling charges including milling loss as alleged. It further submitted that it was entitled to recover from the plaintiffs the sum of Rs. 98,76,588.44 as the value of the shortages .Of wheat found in stock, both under the agreement dated 2-12-1965 as well as under their undertaking to replenish the same by purchase from the local market. It denied that the plaintiffs are entitled to claim the amounts mentioned in Annexure `K' to the plaint, which it denied. It further denied that the plaintiffs are entitled to ask for accounts from it or that the plaintiffs had any cause of action and prayed that the suit be dismissed.
14. The following issues were framed. Two legal issues, namely, issues Nos. 10 and 11 were added by consent after the evidence was closed.
(1) (a) Was any meeting held on 31-12-1960 between the plaintiffs and the representatives of the Central Government?
(b) Was any decision taken at this meeting for payment to the plaintiffs of milling charges and milling loss allowance on the lines mentioned in para. 17 of the plaintiff?
(c) Does this decision constitute an agreement binding on and enforceable against the Central Government?
(2) Are the plaintiffs not liable for payment of Rs. 16,32,888.19 to the Central Government on account of the appreciation of wheat prices for the reasons stated in paragraph 15 of the plaint?
(3) (a) Was there any agreement between the plaintiffs and the Central Government for payment to the plaintiffs of quality allowance on the lines mentioned in paragraphs 22 and 29 of the plaint?
(b) If so, what is the amount of this quality allowance.
(c) Is the claim for quality allowance not barred by limitation?
(4) Have the plaintiffs been wrongly debited with items (i) and (ii) of paragraph 26 of the plaint? If so, are these entries liable to be reversed ?
(5) Are the plaintiffs entitled to payment by the Provincial Government of Rs. 12,00,000.00 as allowance for supply of inferior quality of wheat as from the period commencing from the date of the Govern--ment's letter dated 12-10-1962?
(6) Are the plaintiffs entitled to claim any allowance from the Provincial Government on the basis of any agreement between the plaintiffs and the Central Government allegedly reached at the meeting held on 31-12-1960? If so, in what amount?
(7) Whether the Provincial Government is entitled to recover from the plaintiffs Rs, 63,76,588.44 as arrears of land revenue?
(8) Has the defendant No. 5 any share in the amount claimed by the plaintiffs from the Provincial Governments? If so, is this amount recoverable in the present suit?
(9) Whether the plaintiffs are entitled to claim milling charges for wheat consumed at the original rate of Rs. 124/6 per 100 maunds or in the alternative such reasonable milling charges including 1-- % milling loss as may be fixed by this Honourable Court from 1-9-1952 and upto the final decree in the suit and if so from which of the defendants?
(10) Whether the dues demanded by defendant No 1 in this case are covered by the provisions of Revenue Recovery Act 1890 read with the West Government Dues Recovery Ordinance 1962? If so, whether the suit is barred under the provisions of the said Act and Ordinance?
(11) Whether the suit for accounts is maintainable against defendants?
15. The plaintiffs examined two witnesses namely, Fakhruddin Tawawalla (P. W. 1), the Managing Director of India Flour Mills (1936) the plaintiff No. 4 and the Secretary of the Union, the plaintiff No. 1.
The second witness of the plaintiffs was Ahmed Tamizuddin who retired as Director of Accounts in the Ministry of Food, Government of Pakistan. He was a member of the 4 man Committee appointed by the Chief Commissioner on 1.12-1958 to enquire into the milling charges of the plaintiffs. He was examined to prove the report of the Committee. One witness Irshad Mohammad Baig, an Officer on Special Duty in the Ministry of Food and Agriculture was examined on behalf of the Government of Pakistan, while the Government of Sind examined Noor Mohammad Memon, an Assistant .Accounts Officer, Food Department.
16. After giving my anxious consideration to the documentary and oral evidence on record and after hearing arguments of counsel for several days, k have come to the following conclusions on the issues:
17. Issues Nos. 1, 6 and 9.-These three issues may conveniently be considered together. On issues Nos. 1 and 6, Mr. Ajmal Mian learned counsel for the plaintiffs conceded, and rightly so, that although a meeting was held on 31-12-1960 between the plaintiffs and representatives of the Pakistan Government, the decisions taken as recorded in the minutes of the meeting Exh. D/3 were in the nature of recommendations and did not con--stitute a binding and enforceable agreement.
As stated in the minutes, although certain proposals offered to the plaintiffs were reluctantly accepted by them, nevertheless, they yet needed the "final concurrence of the Financial Adviser, so that this outstanding issue is settled once for all". It is not in dispute that the required final concurrence of the Financial Adviser was not ,I given. Therefore, in the absence of a concluded agreement, the plaintiffs claims on the basis of the decisions recorded in the minutes against the hot the Government of Pakistan as well as the Provincial Government cannot be sustained.
Accordingly, my findings on issues Nos. 1 and 6 are as follows: Issue No, 1(a) Yes, 1(6) No, 1(c) No, Issue No. 6 No.
18. Turning now to issue No. 9 on the first part, the main question is whether the plaintiffs have established a concluded agreement on the part of the Government of Pakistan to pay milling charges at the rate of Rs. 124-6-0 per 100 maunds to the plaintiffs for milling wheat on behalf of the Govern--ment. As stated in the narration of the facts, no written agreement was con--cluded and none has been produced by the plaintiffs. Indeed Mr. Fakhruddin Tawawalla (P. W. 1) candidly admitted in his examination by the Court under Order X, C. P. C. As follows: "There was no separate agreement by which the Central Government fixed Rs. 124-6-0 per 100 maunds as milling charges."
As stated earlier, the milling charges of the plaintiffs were the difference between the issue price of wheat and the prices fixed for the respective wheat products extracted in accordance with the extraction percentages prescribed from time to time, taking 100 maunds of wheat as the unit for computation of the price structure which was supposed to produce 100 maunds of wheat products. In the beginning, in agreement with the plaintiffs, the price structure was so worked that it gave the plaintiffs a milling remuneration of Rs. 124-6-0 per 100 maunds, and it is contended by the plaintiffs that this rate was to apply to all future milling on behalf of the Government. But I find that this contention of the plaintiffs is not supported by the evidence. Neither the plaintiffs' solitary witness Mr. Fakhruddin Tawawalla (P. W. 1)--has so stated categorically in his evidence, nor is there any documentary evidence in support of the contention. On the contrary, the plaintiffs had accepted a reduction in their milling charges which they would not have done bad there been a binding and concluded agreement that the original rate of Rs. 124-6-0 was always to apply. On 25- 5-1952 when the price structure was revised by the Government, the plaintiffs agreed to accept the reduced rate of Rs. 91-12.0 in order to accommodate the Government who did not wish to pass on the burden to the public of having to pay a higher price for atta, despite the extra cost to the Government of the imported wheat. The plaintiffs' contention is that they had agreed to the reduction provisionally for a period of 3 months only and that after the expiry of this. Period, the original rate was automatically restored. This contention is not borne but by the minutes of the meeting dated 25-5-1952 Exh. 12/1, paragraph 8 of which stated that after the period of 3 months "the matter will be reconsidered in the light of the facts then prevailing". As stated earlier, the - reconsideration of the plaintiffs' milling charges had engaged the attention o --the Pakistan Government for some time and several meetings and negotia--tions had taken place and a Cost Accountant and a Committee had also been appointed to enquire into the same. But, despite their recommendations, no agreement was concluded with regard to the milling charges and the `'
Government, on its own, finally fixed the charges on 16 5-1961 under letter Exh. D/8 and informed the plaintiffs by its letter dated 8-7-1961 Exh. P/20T Therefore, in the absence of a concluded contract, my finding on this part of this issue is in the negative.
19. On the second part of this issue, the contention of Mr. Ajmal Mian is that conceding the absence of a concluded contract regarding the milling rate, the plaintiffs are entitled to be paid a reasonable rate on the basis of an implied contract to pay a reasonable remuneration for services rendered on request. In my opinion, this contention has no force. There can be no question of an implied contract where the milling charges are fixed under statutory powers. The power to fix milling charges for milling wheat had been vested in the Controller of Flour Mills under paragraph 4 of the Flour Mills Control Order 1950 made under section 3 of the Essential Supplies (Temporary Powers) Act, 1946. Under it, every producer was required to comply with the directions of the Controller regarding the production, sale and delivery of wheat products, as also the fixation of milling charges, and any producer who was aggrieved by such directions, had a right of appeal to the Central Government under paragraph 10 of the said Order. I am of the view that the Court cannot review the reasonableness of the milling charges duly fixed under law in a suit like the present, for to do so would be to substitute the Court's view of reasonabless for that of the authority concerned. In my opinion, this is a complete answer to the plaintiffs' contention that the Court should award a reasonable remuneration in the circumstances.
20. On merits also, I am not satisfied that the plaintiffs have made out .a case for the exercise of the equitable jurisdiction of the Court. Whether a charge is reasonable or not, is a question of fact and there is no evidence on record as to what is a reasonable charge. Mr. Ajmal Mian submitted that the opinion of the 4 man Committee recommending the payment of 1-- % H milling loss with effect from 1-12-1958 to the plaintiffs, which was also -accepted at the final settlement dated 31-12-1960, should be accepted as evidence of its reasonableness. The opinion of these persons cannot be .Accepted in the absence of their cross-examination in Court. Tamizuddin Khan (P. W. 2) a member of that Committee who was examined said nothing with regard to the reasonableness of the alleged milling loss of 1-- %, No doubt. The plaintiffs were pressing their claim to milling loss allegedly suffered by them and were sending statements showing the extent of such losses Sus-- trained by them from time to time, vide statement Exh. P. 163 dated 26-2-1959, claiming approximately Rs, 70,00,000.00 for the period from 1-5-1952 to 31-1-1959. It may not be out of place to mention here that the constituent mills of the plaintiffs were simultaneously claiming the milling losses as "losses against profits before the Income-tax Officer, for which they requested the Government to give a certificate for production to the Income-tax Office that their claim for milling losses was pending, vide plaintiff's letters Exhs. P. 203 and P. 206. The figures of the alleged milling losses mentioned in this statement have not been proved as the plaintiffs have failed to produce their books of accounts. I have no doubt that by increasing the milling charges of the plaintiffs finally to Rs. 104.25 (which plaintiffs themselves had accepted earlier) and by giving them a credit of Rs. 36,05,127.11 for the in----crease for the full period of milling from 1-9-1952 to 30-4-1960. The Government had taken into account and conceded in principle the plaintiffs' claim to milling loss, which was the bone of contention for many years, although plaintiffs appear to think that what was given to them was not reasonable.
21. There is also evidence that after 1-5-1960 when wheat and wheat products were decontrolled and ceased to be provisioned commodities, the --Government was not concerned with fixing the price structure and accordingly, there was no question of allowing milling charges including milling loss to the, plaintiffs. All reference to wheat and wheat products in the Karachi Food--stuffs Distribution Control Order 1958 under which their wholesale and' retail issue prices were fixed, were deleted with effect from 1-5-1960 by Notification No. MB/396/70/811 dated 24-3-1960. But the Government. Continued to fix the extraction percentages of the wheat products and their maximum ex-mill prices under notification dated 30-4-1960 Exh. P.
178. The: effect of this change was that the plaintiffs were free to purchase indigenous.. Wheat at prices prevailing in the open market and sell the wheat products at any price they liked, but not exceeding the maximum ex-mill prices. The. Issue price of imported wheat, however, was fixed by the Government at Rs. 16-1-3 per maund. Which was required for mixing with indigenous wheat. The position was so understood and explained by Mr. Fakhruddin Tawa--walla (P. W. 1) and by Mr. A. G. Dinshaw of the plaintiffs in their respective. Letters to the Director of Civil Supplies, Karachi, dated 17th May 1961 and 22nd July 1961 Exhs. P. 197 and P. 210. The plaintiffs, in fact, purchased some 5,07,655 maunds of indigenous wheat in the open market at lower prices ranging from Rs. 13 to Rs. 14-8-0 per maund for mixing with imported., wheat vide Exh. P. 185 dated 15-7-1960. With effect from 15-5-1961, the maximum ex-mail prices of maida, suji and bran were altogether abolished,. Although the ex-mill price of atta was maintained. That no milling charges were payable to the plaintiffs after 1-5-1960 is also borne out by the fact that. The savings which accrued on the milling done during the months of May and June 1960 amounting to Rs. 2,15,832.56, calculated on the basis of the price. Structure worked out for milling imported wheat (mistakenly after the decon--trol) by the Director of Civil Supplies, Karachi, in his letter dated 30-4-1960, Exh. P. 179, was refunded to the plaintiffs. Whereas in the past, all savings, which accrued on revision of the price structure were credited to the Govern--ment and any loss occurring was debited, as is clear from the corres--pondence. Concluding the discussion, my finding on this part of the issue, is, in the negative.
Finally, Mr. Shah Jamil Alam,- the learned Deputy Attorney General raised the plea that the claim under discussion was also barred under Article 83 of the Limitation Act. I am in agreement with this sub--mission for the reasons discussed under issue No. 3(c) relating to quality allowance.
22. Issue No. 2.-As stated earlier, on 1-5-1960 wheat and wheat pro---duets were decontrolled and the issue rate of imported wheat and the maximum, ex-mill prices of wheat products were revised.
As a result of which there was. a book value appreciation of the wheat and wheat products lying in stock, with the plaintiffs' mills on the morning of 1-5-1.960 amounting to Rs. 16,32,888.19, the details of which have been worked out in letter --Exh. P. 183 dated 17-5-1960 Annexure 'E' to the plaint. It is not disputed; that up to the date of decontrol, the plaintiffs were milling wheat and selling; the wheat products to ration depots for and on behalf of the Government of' Pakistan, for a milling remuneration and that the relationship was that of` principal and agent. It is not disputed that the stocks were the property of the Pakistan Government and, therefore, the Government was rightly entitled to the appreciation of the value of unsold stocks. Mr. Ajmal Mian for the plaintiffs, therefore, rightly did not press this issue.
23. Issues No. 3(a) and (b).-The quality allowance has been claimed at the rate of 3.5 % on the value of the indigenous wheat of Punjab, Bahawalpur and Sind origin supplied to the plaintiffs during the years 1951 to 1957. The total amount of the quality allowance claimed including its breakup is mentioned in statement of claims Exh. 12/4 at Rs. 36,49,006.18. In support of their claim, the plaintiffs rely on an agreement concluded by offer dated 27-9-1951 and acceptance dated 8- 10-1951. This agreement related to the milling of indigenous wheat procured by the Pakistan Government out of the 1951-52 wheat crop from Punjab. Bahawalpur and Sind and, although this agreement was not formally extended in respect of the subsequent years, it is not disputed that the agreement continued to apply upto 1957. Under the agreement, the Government had agreed to supply wheat which was to conform to the specifications mentioned in the appendices setting out the percentages of the tolerance limits of impurities and the rate of allowances deductible from the price in case the percentage of impurities exceeded the tolerance limits. Whereas the Punjab wheat was to be inspected as to weight and quality at the place and time of despatch by the Inspection Organization of the Punjab Government, which inspection reports were to be final and binding on the parties, the Bahawalpur and Sind wheat was to be inspected on arrival at the Karachi City Railway Station and analysed by the Inspec--torate, Ministry of Food and Agriculture (Food Division) whose report was to be final and binding on the parties. Plaintiffs' case is that the agreed, analysis reports as to the quality and weight were not being supplied to the plaintiffs except a few, despite several reminders and, as the quality of the wheat supplied was generally inferior and of short weight, the plaintiffs have suffered losses which they estimated at Rs.
36,49.006.18 as stated earlier; The notice to produce Exh. 14/1, however, did not mention any specific analysis reports and, in cross-examination, Irshad Mohammad Beg (D. W. 1) on behalf of the Government stated that it was not possible to produce these analysis reports, from which it must be inferred that, except on a few occa--sions, the wheat was never analysed for quality, perhaps because it was to be inspected by another Department of Directorate of Procurement & Distribu-- tion, of the Food Ministry. The statement of Mr. Fakhruddin Tawawallas (P. W. 1) in his evidence that certain payments were already made for quality allowance is not borne out from the plaintiffs' own statement of account Exh. 12/4. As the wheat has been consumed, the material evidence has disappeared. Therefore, it is not possible to say whether the tolerance limits had been exceeded.
Moreover, the plaintiffs have produced no accounts-- books to prove the actual quantities (in maunds) and the percentages of the alleged impurities and the claim now put forward for quality allowance at the rate of 3.5 % can only be a vague estimate, so much so, that in their petition to the Minister Exh. 12/8 dated 19- 7-1966, they claimed at the rate of 1 % only. In their original statement of claim Annexure `H' to the plaint they claimed no more than Rs. 15,84,777.44 which figure was more than doubled in the revised statement of claims Exh. 17/4 submitted during the course of arguments. It appears that in respect of the supply of Sind wheat, the Deputy Director of Food, Hyderabad had agreed to pay a quality allowances to the Karachi Administration of Rs.
15,84,777.44. But there is no evidence that this amount has actually been realized by the Pakistan Government to which the plaintiffs may be entitled as money had and received on its behalf.
24. Issue No. 3(c).-Mr. Shah Jamil Alam, the learned Deputy Attorney General, appearing on behalf of the Government of Pakistan submitted that the plaintiffs' claim for quality allowance was barred by limitation under Article 83 of the Ist Schedule to the Limitation Act, 1908. According to him, a suit to recover losses alleged to have been sustained by the plaintiffs on account of alleged defective quality of wheat supplied to them, is a suit for indemnifying losses suffered by the plaintiffs and is barred after 3 years from the date when the plaintiffs were actually damnified. The reply of Mr. Ajmal Mian is that the Provincial Government having carried over the balance of the wheat account of the Pakistan Government in its own books, treated the entire account as one running account and that it is a mutual, open and current account. Therefore, according to him, Article 85 of the Limitation Act applies and, for the terminus a quo to save limitation, be relied on a letter dated 6th August 1.966 Exh. P. 244, said to be an entry made in the account by the Provincial Government on 6-8-1966 debiting the plaintiffs with the sum of Rs 98,76,580.22 in the wheat account as the value . Of the shortages of imported wheat detected on physical verification. This, .According to him was the last item in the account and as it was made in the year 1966, the suit filed on 21-11-1966 was well within time. I have consider--ed this submission of Mr. Ajmal Mian and case law cited by him and I find -no substance in the submission that it was a mutual, open and current account. The question whether the account is mutual, open and current is a question of fact. It has not even been pleaded by the plaintiffs; nor is there any issue on it. Therefore, the plaintiffs ought not to be allowed to plead the point in P arguments. In this connection see Sundar Singh and others v. Ram Saran Das (AIR 1933 Lah. 61) and Hindustan Forest Company v. Lal Chand and others (AIR 1959 SC 1349). More--over, the plaintiffs have chosen not to produce any accounts of their dealings with the Central Government and the Provincial Government. Therefore, I fail to see how, in the absence of accounts, the plaintiffs can possibly succeed in discharging the burden of satisfying the Court that the account is mutual, open and current or even that it was a running account continued by the Provincial Government and treated as such.
25. I had repeatedly called upon the plaintiffs to show me their accounts, but they only produced one or two books which were altogether irrelevant. On my directions, the representative of the Sind Government produced the wheat account books, which I have examined. I find no such entry in their books on 6-8-1966, of the alleged last item. However, on merits, I am also not satisfied that there was any mutuality of dealings or that there were transactions on each side creating independent obligations on the other. The judicial test with regard to a mutual account has been laid down by their Lordships of the Supreme Court in Robert Cotton Associates Ltd., Khanewal v.
Khan Karam Hussain Khan and 2 others (PLD 1972 SC 109) Mr. Ajmal Mian has not satisfied me as to what were the transactions to be performed by or on behalf of the Pakistan Government which created independent obligations in favour of the plaintiffs. As I see it, the Government supplied wheat on credit to the plaintiffs and debited them in its account with the cost of the wheat at the issue prices, against which were credited lump sum payments made by the plaintiffs from time to time on account, in discharge of the debit. That plaintiffs have not shown by producing their accounts that they were crediting the Government with the actual sale proceeds of the wheat products realised by them and, after deducting their milling charges from it, were adjusting the balance against the cost of wheat supplied to them. The facts on the con--trary, show that they were merely making payments of lump sum amounts against the coat of wheat supplied to them.
However, in few instances, the Government was claiming and getting credit theoretically for the savings which plaintiffs were to realise in the future on sale of wheat products when--ever prices and extraction percentages were revised from time to time, and giving credit to the plaintiffs on a loss. But these in my opinion do not con--stitute mutuality of transactions. Again, it is doubtful whether the account was open and current, when admittedly, upon the transfer of the Food Department to the Provincial Government on 1-7-1962, the Government of Pakistan ceased to have any dealings with the plaintiffs and the account was closed, which showed on that date a final debit balance against the plaintiffs of Rs. 69,29,347.59.
26. Mr. Ajmal Mian finally submitted that even if it is held that the account is not a mutual, open and current account, nevertheless, being a running and continuous account, the plaintiffs were entitled to adjust the item of quality allowance in the running account to give plaintiffs a cause of action within time. This submission is, in my opinion, quite misconceived. The principle of a running and continuous account is that where a tradesman or supplier supplies goods to a person on different dates, and the items are so connected together that the dealings are not intended to terminate with one contract, but were to be continuous, so that one item if not paid, shall be united with another and form one continuous demand, that would give a right to one cause of action. The cases cited by Mr. Ajmal Mian which illustrate this principle, namely Kedar Nath Mitter v.
Denobandhu Shaha and others (AIR. 1916 Cal. 580) and Najan Ahmed Haji Ali v. Sakh Mahoraed Peer Mahomed (AIR 1923 Bom. 113), are clearly distinguishable. In the instant case, the quality allowance is nothing but a claim set up by the plaintiffs for alleged defective quality of wheat supplied to it. For these reasons, I am of the opinion, that the claim for quality allowance is barred by limitation under Article 83 of the Limitation Act. My findings on this issue are: 3(a) Yes; 3(b) not proved; 3(c) Yes, barred by limitation.
27. Issue No. 4.-The amount of Rs. 2,65,262.90 was recovered from the plaintiffs by the Provincial Government on 15-6-1966 as 10 per cent interest under clause 6 of the agreement dated 2-12-1965 Exh. 12/6 for failure by the plaintiffs to make daily payments for wheat actually milled on previous day. The only point urged by Mr. Ajmal Mian is that as the plaintiffs had counter claims against the Provincial Government, they were entitled to withhold payment of the price of wheat supplied and, therefore, no interest was recoverable. Not only is there nothing to support this plea in the correspondence, but also it is not maintainable. My finding is that the plaintiffs have not wrongly debited this item.
28. With regard to item (ii) Mr. Hafiz Lakho, learned Additional Advocate-General, conceded that there was no justification for claiming difference in appreciation in the prices of stocks of wheat and wheat products on 1-6-1966. Accordingly, this entry is liable to be reversed.
29. Issue No. 5.-The plaintiffs' claim is based upon the alleged letter No. MB/595/62 dated 12-10- 1962, alleging that some 14,000 tops of wheat supplied was bad. Some of which had to be destroyed. The reference of this letter appears in paragraph 26(N) of the plaint. This letter however, has not been exhibited; nor has the plaintiffs proved that specific quality of wheat was actually destroyed. The plaintiffs are merely estimating the loss at between 25 to 30%. In the absence of material evidence, this item is disallowed.
30. Issues Nos. 7 and 10.-The recovery proceedings were initiated by the Provincial Government in pursuance of clause 7 of the agreement dated 1-12-1965 Exh. 12/6 entered into with the plaintiffs, as well as under the provisions of West Pakistan Government Dues Recovery Ordinance, 1962 In so far as the recovery proceedings have been taken under clause 7 of the agreement is concerned, in my opinion, no exception can be taken because the plaintiffs themselves had agreed that if the arrears be not paid within 4 days, they would be recoverable as arrears of land revenue. Mr. Ajmal Mian has not satisfied me why such an agreement should not be enforced. The plaintiffs were notified of the precise amount claimed against them as it was communi--cated under letter Exh. P.
244 dated 6-8-1966 and also by the notice of the City Deputy Collector, Karachi dated 29-10-1966 Exh. 12/62 requiring the plaintiffs to pay the amount within 10 days. Therefore, the contention of Mr. Ajmal Mian that the recovery proceedings were taken ex parts without the amount due being determined, has no force. The decision reported in Abul Latif v. The Government of West Pakistan and others (PLD 1962 SC 384) is clearly distinguishable, as in that case, the amount was sought to be recovered as arrears of land revenue without serving any show-cause notice.
31. The next objection is that the amount included dues payable to the 'Government of Pakistan and after merger of Karachi, they could not be the subject-matter of recovery proceedings by the Provincial Government. The stocks of wheat and wheat products in the mills on 1-7-1962 were taken over by the Provincial Government upon transfer of the Food Department to it and, under the agreement with the plaintiffs dated 2-12-1963 Exh. 12/6, as also under the previous agreement dated 6-7-1964 Exh. 12/64, the plaintiffs had agreed to be responsible for the stocks. In fact, the plaintiffs themselves had given an undertaking to replenish the shortages of stocks which they alleged had occurred during their dealings with the Pakistan Government on account of milling losses and defective wheat. Therefore I am of the view that the recovery proceedings taken under the agreement were valid.
32. With regard to the recovery proceedings taken under the provisions of the Revenue Recovery Act, 1890 read with West Pakistan Government -Dues Recovery Ordinance, 1962, their validity would depend on a strict compliance with these two statutory enactments. The required notification declaring that dues shall be recoverable from the plaintiffs as if such due were arrears of land revenue, was never published in the official Gazette, as x required under section 3(2) of the said Ordinance, which in my opinion was mandatory. Again, in the absence of a certificate from the Collector of Lahore as was required under section 5 of the Revenue Recovery Act 1890, it would appear that the recovery proceedings initiated by the City Deputy Collector, Karachi, was invalid.
Mr. Ajmal Mian is supported in his sub--mission on this point by a decision from the Indian Jurisdiction in T. B. Subramonia Iyer v. Income-tax Officer, New Delhi and another (AIR 1957 Kar.
190). My finding on issue No. 7 is in the affirmative and on issue No. 10 is in the negative. The suit challenging the recovery proceedings is not barred.
33. Issue No. 8.-Dropped, as the suit has been withdrawn against the defendant No. 5.
34. Issue No. 11.-As far as the suit for accounts against the Pakistan Government is concerned, it is a suit by an agent against principal. It is not disputed that the plaintiffs acted as agents for lifting wheat and milling it into wheat product for ultimate distribution on behalf of the Pakistan Government. The plaintiffs requested for such a certificate for producing to the Income-tax office vide Exh. P. 235 dated 20-6-1966, which was given under Exh. P. 237 dated 22-6-1.966. An agent, unlike his principal, has no statutory right to sue for accounts, and must sue for a sum certain upon a balance due to him on the accounts. But an agent has been permitted to sue his principal for L accounts in exceptional cases, such as, for example, that the accounts were being maintained by his principal and hence a suit for recovery of a sum certain is impossible. The case-law has been reviewed by a Division Bench of this Court in Province of West Pakistan v. Allaha Ditta and others (PLD 1972 Kar. 8). The contention of Mr. Ajmal Mian is that the Government of Pakistan had to account to the plaintiffs for the quality allowance and until the analysis reports were furnished to the plaintiffs, they could not sue for a definite sum. I have considered the agreement dated 27-9-1.951: Exh. P.
7. I do not find any obligation on the Government to account for the alleged quality allowance. Under the agreement, the Inspectorate of the Ministry of Food was to inspect the wheat on arrival at the railway station and give a report on quality as well as its weight. Under paragraph 6, if the report disclosed that the wheat contained impurities beyond the tolerance limits mentioned in the appendices, then the plaintiffs would be entitled to deduction, which was to be accounted for at the end of each calendar month and the credit for it was to be given separately.
But, before the Government can be made to account, it must be established that the inspections were made and that the reports of the in--spection disclosed such impurities as would have entitled the plaintiffs to deduction. It is the case of the plaintiffs that except on a view occasions, the inspection reports were not supplied to them, from which I would infer, as discussed above under issues Nos. 3(a) and 3(b) that the wheat was not being in--spected for quality and after sometime, it would appear that the parties acquie--sced in the omission. Moreover, the plaintiffs themselves were maintaining accounts of the milling of the wheat and all the material evidence with regard to the alleged defective quality and quantity was in their possession. The plaintiffs have even claimed specific amounts on account of quality allowance in their statement Annexure `H' to the plaint as well as in the statement Exh. 12/3. 1 would, therefore, hold that no special circumstances have been made out which justify making an exception to the rule that the agent's suit for accounts against his principal is not maintainable. I have also held that the claim for quality allowance is barred by limitation. For these reasons, I am of the opinion that the plaintiffs' suit for accounts is not maintainable against both the Government of Pakistan as well as against the Provincial Govern--ment. With regard to the latter, Mr. Hafiz Lakho rightly submitted that no agreement was entered into with the plaintiffs for inspection of wheat as to quality and, therefore, no question of accounting can arise. This issue is accordingly, decided in the negative.
35. Finally, I would observe that as the sum of Rs. 1,33,415.95 has been wrongly claimed by the Provincial Government, which was also conced--ed by Mr. Hafiz Lakho, the amount due and payable by the plaintiffs comes to Rs. 62,43,172.49.
36. In the result, and for the foregoing reasons, I would dismiss the suit with costs subject to the above observation.