' The instrument, on which this revision petition has been based, is a contract of agency dated 17-2- 1979 whereby Pakistan Railways permitted the petitioner to run a Booking Agency at Faisalabad Railway Station for the purpose of outward booking of passengers, their luggage therefrom and also for booking and convincing of the parcels and goods (except livestock, coal, goods in bulk, dangerous explosive goods, arms and ammunition) from that station to other Railway Stations of Pakistan Railways. Petitioner, so, became agent and Pakistan Railways Principal. Consequently the petitioner set up its office and employed necessary staff to carry on business of, so, given assignment. It was on 30-10-1995, when the respondents gave a notice to the petitioner firm/calling upon it to accept the new proposal of fixing the term of agency to one year and its renewal by Pakistan Railways each and every year; that in case of non-acceptance, the agency would stand terminated with effect from 3 months of the receipt of the said notice.
2. Feeling aggrieved, the petitioner brought an action under section 42 of the Specific Relief Act for seeking declaratory judgment to the effect that the notice, so, given was illegal, based upon mala fide and so was a nullity in the eye of law. Alongwith the suit, an application under Order XXXIX, Rules 1 and 2, C.P.C. Was moved/praying for grant of interim injunction restraining the respondents from implementing the above notice till the decision of the suit. The suit as well as the application was resisted. The learned Civil Judge, vide order dated 18-3-1996, allowed the application and granted requested injunction. Against this order, the Pakistan Railways preferred an appeal which was allowed by the learned Appellate Court vide order dated 13-5-1996. This is how this revision petition has come to this Court.
3. The learned counsel for the petitioner, in support of this petition, inter alia, urged as under:-- Firstly; that the learned Appellate Court, while accepting the respondents' appeal, wholly overlooked the rule laid down in Muhammad Arif, Afandi v. Egypt Air (1980 SCM R 588) applicable to the facts and circumstances of this case. According to the learned counsel, the question is as to whether the challenged notice was malicious in nature; that it was total nullity in law; that petitioner had expended huge amount of money in setting up office with necessary infrastructure.
On these allegations, it was urged that above questions were substantial question of law and fact and required to be tried. The learned counsel, so argued that the petitioner had a very strong prima facie case coupled with balance of convenience and so the learned Appellate Court erred in law in allowing the appeal and in dismissing application for grant of preventive relief.
' Secondly; that the impugned notice combined two edicts of respondents, i,e, (i) that the petitioner must accept respondents' proposal of curtailing term of contract to one year, (ii) that in case of refusal, the agency shall stand terminated with effect from 1-1-1996. On the strength of this argument, it was suggested that the agency, so, was revoked on highly unfounded and arbitrary grounds.
' Thirdly; that the deed of agency dated 17-2-1979 embodied a concluded contract; that the petitioner had been carrying on its business for a period of more than 15 years and had invested huge amount in setting up the office and necessary infrastructure, so the agency was with interest and was irrevocable.
4. The learned counsel, while appearing for respondents, supported the impugned order. According to him, the contract dated 17-2-1979 had clause (6) which clearly postulated that either party to it had a right to terminate it subject to serving of three months' notice. On the strength of this clause, it was stressed that the Agency stood revoked with effect from 1-1-1996. The agreement was personal in nature and so was incapable of performance under section 21(d) of the Specific Relief Act. No temporary injunction could be granted under section 56 of the Specific Relief Act. Reliance was placed on West Pakistan Industrial Corporation, Karachi v. Aziz Qureshi (1973 SCM R 555), Pakistan Automobile Corporation v. General Motors Overseas Distribution Corporation (PLD 1982 Kar. 796), Huma Enterprises and others v. S.Pir Ali Shah (1985 CLC 1522) and M/s. World Wide Trading Co. v. Sanyo Electric Trading Co. (PLD 1986 Kar. 234). It was further argued that the setting up of office and employment of necessary staff, for carrying on business, were not circumstance interest in favour of agent.
5. From the foregoing narration of facts, circumstances and rival contentions of the parties, two questions arise for decision. (i) Whether the notice dated 3-10-1995 given by third respondent was mala fide and was so nullity in the eye of law? (ii) Whether the relationship of principal and agent created between the parties under deed dated 17-2-1979, was revocable and stood terminated under notice dated 3-10-1995. The above questions are inter-twined and pertain to doctrine of Agency. This concept has roots in English Common Law. It is based upon Latin maxim "Qui per alium facit, per septum facere videtur i,e, "He who does an act through another is deemed in law to do it himself". This may also be stated shortly thus: qui facit per alium facit per so i,e, "He who acts by another, acts by himself." Under the Common Law a person can authorise another to contract for and to bind him by an authorised contract". See Law of Agency V.G. Ramachandran at page 1.
6. Agent is, so, a person employed by another person to transact on his behalf with third person.
The donor, of so given authority, is known as Principal, while donee of the authority is agent. In the words of Cheshire: "Agency" is a comprehensive word which is used to describe the relationship that arises where one man is appointed to act as the representative of another. The act to be done may vary widely in nature. It may for example be the making of a contract, the institution of an action, the conveyance of land or, in the case of a power of attorney, the exercise of any proprietary right available to the employer himself". The agent is so an intermediary, who is authorised by principal to deal with the third person and acts done by him are binding upon the principal. The agent so creates a jural relationship between principal and third person. The nature of this authority is personal, non-transferable and essentially revocable. However, this may be subject to certain terms created by contract and recognized by law.
7. The notions of agency are incorporated in sections 182 to 238 of the Contract Act (No,IX of 1872). It shall be hereinafter referred to as the Act. Sections 201 to 210 of Chapter "X of the Act" deal with revocation of the agency. A bare reading of section 201 makes it clear that an agency may be revocable by the act/declaration of the principal or by renunciation of the same by the agent.
Dealing with this question, Chitty in his celebrated book Law of Contracts, says:-- "(i) By the express revocation thereof by the principal; or by renunciation of the agency on the part of the agent himself. Such revocation or renunciation is effective notwithstanding that the agency was created by deed or for valuable consideration, and may be verbal even though the appointment may be by deed. But though it determines the authority it does so without prejudice to any right that either party may have against the other to damages for breach of contract.
(ii) By principal's death; or by his becoming bankrupt or mentally disordered so as to be incapable of consenting to the agency, whether or not these facts are known to the agent; by the death of the agent or his becoming similarly mentally disordered or by his bankruptcy, if this makes him unable to perform his duties.
By efflux of time, where a specific period is fixed either by express agreement or by the usage of trade, for the execution of the act to be done by the agent.
(iv) By the execution of his commission, whereby the agent becomes functus officio; by the destruction of the subject-matter of the agency; or by the happening of an event which renders the continuance of the agency impossible or unlawful. Thus, the retainer of a solicitor normally ceases when his client becomes an alien enemy; though not merely because he becomes an enemy alien."
' In fact, the above statement has been embodied in section 201 of the Act. Section 202 ibid is an exception to the above rule. It states that when agent has an interest in the subject-matter of the contract, the principal cannot terminate such agency. This is the reincarnation of what was stated by Wilde, C.J. In "Smart v. Sanders (1848) 5 CB 895. In this case, the learned Judge said:- " Where an agreement is entered into on a sufficient consideration whereby an authority is given for the purpose of securing some benefit to the donee of the authority, such an authority is irrevocable. That is what is meant by an authority coupled within interest, which is commonly said irrevocable. We think this doctrine applies only to cases where the authority is given for the purpose of being a security or as Lord Kenyan in Walsh v. Whitcomb, expresses it, as a part of the security, not to cases where the authority is given independently and the interest of the donee of the authority arises afterwards and incidentally, only as for instance, in the present case, goods are consigned to a factor for sale. This confers an implied authority to sell. Afterwards the factor makes advances. This is not an authority coupled with an interest; but an independent authority, and an interest subsequently arising. The Making of such an advance may be a good consideration for an agreement the authority shall be no longer revocable, but such an effect will not, we think, arise independently of the contract."
' The learned Judge further explained this notion as follows: "Where an agreement is entered into on a sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority, such an authority is irrevocable. This is what is usually meant by an authority coupled with an interest, and which is commonly said to be irrevocable. The simplest case of such agency occurs when the principal owes something to the agent and authorises him to sell the principal's goods and pay himself out of the sale proceeds. But an authority to pay the debts which the principal owes to some third person does not make the agency irrevocable. In a case before the Madras High Court, a person was entitled to be maintained out of the income of a property, known as tarwad property. He was subsequently given the authority to collect rents of the property. The authority was held to be not revocable. In another case before the same High Court, in consideration of advances made by the plaintiff, all the properties of a devason were given over to him on lease for 18 years with authority to receive rents. That was held to be an authority coupled with interest and, therefore, irrevocable.
Thus, the essence of the matter is that the agent has, as it were brought his authority in order to ensure the payment of a debt due from the principal."
7-A. Section 206 postulate that where time is not specified in the contract, there must be a reasonable notice of revocation by Principal or Agent and in case no notice is given the effectee is entitled to compensation. This is all relevant applicable law with regard to in controversy. The ratio deducible from whatever has been stated above, is--
(i) that the term 'agency' in law is used to describe relation wherein one person has authority/capacity to create a jural relationship between a person i,e, Principal and the third party.
This relationship is created when donee of such authority has capacity to act on behalf of his Principal who consents to that act. The essence of agent's position is that he is an intermediary between the two parties. So, it is essential to an agency that a third party should be in existence;
(ii) that the agreement of agency is personal in nature. It is non-transferable c and it is revocable summarily subject to the terms of the agreement;
(iii) that if an agent has an interest in the subject-matter of the contract such agency is permanent and is not revocable. The interest, in the subject-matter, must be anterior to agency and it must not arise subsequently or incidentally. In other words, if an agency is created with adequate consideration and is designed to serve as security for some interest of agent, such agency is irrevocable. Halsbury aptly describes such agency in following words: "868. Authority coupled with interest.--Where the agency is created by deed, or for valuable consideration, and the authority is given to effectuate a security or to secure the interest of the agent, the authority cannot be revoked. Thus, if an agreement is entered into on a sufficient consideration whereby an authority is given for the purpose of securing some benefit to the done of the authority, the authority is irrevocable on the ground that it is coupled with in interest. So, an authority to sell in consideration of forbearance to sue for previous advances, an authority to apply for share to be allotted on an underwriting agreement a commission being paid for the underwriting, and an authority to receive rents until the principal and interest of a loan have been paid off or to receive money from a third party in payment of a debt, have been held to be irrevocable. On the other hand, an authority is not irrevocable merely because the agent has a special property in or a lien upon goods to which the authority relates, the authority not being given for the purpose of securing the claims of the agent."
7-B. Applying these principles to the facts and circumstances of the case, it is quite clear that the contract of 1979 is a contract of agency between parties; that it contains clause (6) wherein both the parties covenanted that the petitioner as well as the respondents will have a right to terminate it by serving three months' notice. The learned counsel for the petitioner even was not able to controvert that Pakistan Railways had unfettered right to revoke the agency by giving three months' notice to the petitioner. He, however, maintained that revocation was preceded by proposal which was wholly arbitrary, unlawful and without any lawful consequence and so consequential termination was illegal and declaratory action was competent. I am unable to accede to this argument. The remedy of the petitioner, in fact, lay under section 206 of the Contract Act. The Agency created under the agreement of 1979 is in my view was clearly revocable and the Pakistan Railways had the full authority to terminate it. From the perusal of the notice it is quite clear that the agency stood revoked with effect from 1-1-1996. The relationship of principal and agent created under the contract, so came to summary end and cannot be maintained through medium of preventive relief under Order XXXIX, Rules 1 and 2, C.P.C. Even if it is assumed that the proposal made by third respondent was illegal, it cannot help the petitioner who had right, in such eventuality to claim damages from the respondent from illegal termination. See Premji Damdar v. Govindji & Co. (AIR 1943 Sind 197).
8. As regards the contention that the petitioner had invested colossal amount of funds in setting up of office and necessary infrastructure and so the agency was irrevocable, suffice it to say that setting up of office and employment of necessary staff was essential for carrying on the business of the agency. These acts were not anterior to the contract. These were not consideration to any right of petitioner. Under no circumstance they can be considered as security for any interest of the agent under the agreement of agency. On this state of affair, it is quite clear to me that the conditions postulated in section 202 of the Act are not attracted to the facts and circumstances of the case in hand. Reference be profitably made to Palani Vannan v. Krishnaswami Konar (AIR 1946 Madras 9).
7-D. Having answered the question noted above, now the only question left for examination is whether the proposal made by third respondent is sound or not, apart from its legal efficaciousness. I am clear in my mind that it does not conform to settled concepts of proper exercise of authority vested in the functionary of State. Even the learned counsel for the respondents was not able to support this proposal. The question of similar nature, but in somewhat different circumstance, was replied by the Supreme Court of India in Romana Dayaram Shetty v.
The International Airport Authority of India (AIR 1979 SC 1628). Speaking for the Bench Mr. Justice P.N.
Bhagwati, said: "Today the Government in a welfare State is the regulator and dispenser of Special Services and provider of a large number of benefit, including jobs, contracts, licences, quotas, mineral rights etc. The Government pours forth health, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one charateristic. They are, steadily taking the place of traditional forms of wealth. These valuables which derive from relationship to Government are of many kinds. They comprise social security benefits, cash grants for political suffers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Government and local authorities. Licences are required before one can engage in many kinds of business of work. The power of giving licences means power to withhold them and this gives the control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largess in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources (?) are available for utilization by private corporations and individuals by way of lease of licence. All these mean growth in the Government largess and with the increasing magnitude and range of Governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these Forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account can it be said that they do not enjoy any legal protection?. Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver?. We do not think so. The law has not been slow to recognize the importance of this new kind of wealth and the need to protect individual interest in it, and with that end in view, it has developed new forms of protection. Some interests in Government largess, formerly regarded as privileges, have been recognized as rights while' others have been given legal protection not only by forging procedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largess in its arbitrary discretion or at its sweetwill. It is insisted, as pointed out by Professor Eich in an especially stimulating article on ' The New Property' in 73 Yale Law Journal 733, ' that Government action be based on standards' that are not arbitrary or unauthorised' . The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual."
' The learned Judge continued that: "It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweetwill and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts, quotas, licences, etc., must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory."
' The rule enunciated above was followed by a Division Bench of this Court comprising of myself and Sharif Hussain Bokhari, J., Flying Board Paper Production Ltd. v. M/s. Lab. Aids Corpn., Lahore 1996 M LD 1238 and following amongst others principles of judicial review were deducible:
(i) With the march of time the sphere of Governmental powers has been considerably widened.
Public functionaries had to perform multidimensional activities i,e, giving jobs, entering into contracts, issuance of quotas, licences, so on and so forth, dealing with State Largesse. These functionaries are the actual trustees of State and are enjoined under the law to act with reasonableness, neutrality and safeguard the State largesse and must not squander/waste it by their capricious unfair actions. Their such actions are subject to judicial review of this Court.
(ii) Our Governments are the Government of Laws. The State functionaries derive their powers from the Constitution and laws and are enjoined to act clearly within the sphere of their powers.
Furthermore, the Governmental power, residing in such functionaries is a sacred trust. Whenever the action/order or decision of State functionaries do not conform to above principle, this Court has power, under Article 199 to strike down such orders. In short, the Constitutional scheme leaves no room for arbitrariness, capriciousness; nepotism and jobbery. The jurisdiction, embodied in Article 199 of the Constitution is sparkling jewel in the Scheme of balancing the various organs of Sate. It is designed to keep the mighty functionaries of the State within the ambit of their authority.-4n the word of Alpheus Thomas Mason, it brings the mighty officers of the State howhighsoever may be, to their heels. See Judicial Activism: 55 Virginia Law Review 411 (1969), It is designed to foster justice between the parties and is not aimed to help unscrupulous, greedy persons who might invoke this jurisdiction with ulterior motive."
8. Guided by the above principles I hold that the proposal embodied in the questioned notice dated 3-10-1995 does not conform to above tests. The third respondent had to award contract, issue licence and so on and so forth as a trustee of State and so had to act with reasonableness, neutrality, without any tinge of arbitrariness. He must act with transparency. The third respondent is required to safeguard the State largess and must not squander/waste it by his surreptitious and arbitrary actions. If that proposal is allowed to be continued, I am sure, it will entrance the area of discretionary powers of State functionaries and so lead them to deviant/proper behaviour. Seen from this angle, I hold that the proposal made by third respondent is not sound and should not be pursued by the said respondent in future. The third respondent, while allotting the contract, shall adopt the procedure of fairness and transparency by holding open auction or open tender and the agency shall be awarded to the highest tenderer.
9. As a result of above discussion I have no difficulty in coming to the conclusion that the decision rendered by the learned Appellate Court is eminently correct and just. No circumstance was shown by the petitioner for the grant of temporary injunction. This being the position, this revision petition is found to be destitute of any merit and is accordingly dismissed in limine. The authorities cited by the learned counsel for the petitioner proceed on distinguishable facts and are not applicable to the case in hand. The rule laid down in Muhammad Arif Afandi v. Egypt Air (1980 SCM R 588) is also not attracted to the facts and circumstances of this case because there was no provision in the agreement for revocation of the agency. While parting with this order, it is made clear that the assessm ents made by this Court while deciding this revision petition, are wholly tentative in nature and shall not be binding on the learned trial Court while deciding the plaintiff's suit.