SOBIHUDDIN AHMAD, J.- This is an Application for interim relief wherein the plaintiff have sought to restrain the defendant from giving effect to two letters dated 4.4.1 97, purporting to terminate the agreements between the parties dated 1.3.1992 an 1.9.1994. The plaintiff have further prayed for direction that the normal business affairs between the parties, as existing prior to the issuance of the above letters, bi continued till final disposal of this suit.
2. By was of necessary background, it may be stated that the defendants are an Intemational Company engaged in the sale and marketing of IBM Computers. Through a business partner Agreement dated 1.3.1992 entered into between the parties the plaintiff were required to sell IBM Computers to different consumers in Pakistan upon terms and conditions elaborately set out in the agreements, through a separate agreement dated 1.9.1997 the plaintiff were required to render services in fulfilment of warrantees hold out to consumer in respect of IBM Computers upon terms and conditions stated in the Agreement. By letter dated 4.4.1997 (Annexure 'P-34'), the defendant informed the plaintiff that during the course of business between 1992-96 an amount an amount of Rs. 11 millions 75 thousand 3 hundred eighty-six had become outstanding against the plaintiffs and despite repeated requests and reminders they were not honouring their contractual commitments and owing to such continued default, the plaintiff were terminating the business. By another letter of the same date, the defendants informed the plaintiff that for business reasons they had decided to terminate the warrantee services agreement dated 1.9.1994 and were giving sixty days advance notices for termination whereby the agreement shall stand terminated on 2.6.1997. Ln the suit the plaintiff have sought a declaration to the effect that the aforesaid letters are of no legal effect and the agreement still enforced and pending on the parties. They have also sought the permanent injunction seeking to restrain the defendant from giving effect to the aforesaid letter. In the alternative the sum of rupees fifteen millions has been claimed as damages and compensation.
3. In support of and laying the foundation for this application for interim relief Mr. Gulzar Ahmad, learned counsel for the plaintiff argued in great detail that (a) the relationship between the parties was that of a principle and agent and (b) that the agency, being coupled with an interest of the agent, was not revocable in terms of section 202 of the Contract Act. Mr. Manzoor-ul-Arfin on the other hand contended that the dealing with the parties was in the position of principle to principle and no element of agency was involved. He further contended that in any event the relationship between the parties could not be treated as an agency couple with interest of the agent.
4. With respect of the first of Mr. Gulzar Ahmed's submission, both the learned counsel extensively referred to several provisions of the agreements between the parties and other documents in support of their respective contentions. Nevertheless, it not necessary to discuss them as upon an over all construction of the documents placed oh record and the agreement advanced, I am inclined to hold- that prima facie the plaintiff was agent of the defendant. The crucial question in this context, however, is Whether the agency was coupled with an interest of the nature which attracted the application of section 202 of Contract Act. On this aspect Mr. Gulzar Ahmad contended that the plaintiff had invested millions of rupees in setting up offices, employees personnel and rendering various services towards fulfilling responsibility entrusted to him in respect of sale and marketing of defendant product and rendering after sale services to the consumers. Mr. Manzoor-ul-Arfin on the other hand urged that certain investments have to be made by any person carrying on business for consideration and by merely doing so his agency, if any, does not become irrevocable. He further contended that the contract between the parties was not specifically enforcement and, therefore, no interim injunction ought to be granted.
5. In support of his case, Mr. Gulzar Ahmed relied upon the order of the Hon'ble Supreme Court in the case of Muhammad Arif Effendi v. Egypt Air (1980 S.C.M.R.588) where leave to appeal was granted to a general sales agents of an Airlines against an order of this Court refusing the temporary injunction against the cancellation of this agency. He pointed out that while granting leave, the Hon'ble supreme court had also granted interim injunction to the petitioner upon certain terms and also ordered that the business should continue under the terms of the contract. He also relief upon the judgment of this Court in the case of Universal Trading Corporation v. Beecham Group PLC and Another (1994 C.L.C. 426). In this case, the plaintiffs were the exclusive Distributor/Agent of the defendant for marketing and promoting sale of milk powder "Horlicks" and contended that they had to incur huge expenditure to permanent nature for promoting popularity and goodwill of the products. Calling in question the termination of their agency by the defendant it was contended that matter of was covered by section 202 of the contract act and termination was being effected in violation of the terms of the Agreement between the parties. Mukhtar Ahmed Junejo, J (as his lordship then was) passed an interim order restraining the defendant from doing so. Mr. Gulzar Ahmed further pointed out that this decision was upheld by a division Bench of this court in HCA No. 145 of 1993 (unreported). I called for the file and have also gone through the judgment of the division Bench.
6. Mr. Manzoor-ul-Arfin on the other hand referred to judgment of this Court in the case of Worldwide Trading Co. v. Sanio Electric Company (PLD 1986 Karachi 234), and a judgment of Lahore High Court in the case of Farooqui & Co. v. Federation of Pakistan (1996 CLC 2030). In the first case, the plaintiffs who were the sole distributors Agent for goods manufactured by the defendant and it was contended inter alia that the plaintiff had acquired an interest in the subject matter of the Agency by setting centers for after sale services and had also issued personal warrantee/guarantee to the purchaser of the goods. Both these factors, however, were considered not sufficient for bringing the case within the requirements of section .202 of the contract Act. Mr. Mansoor-ul-Arfin further pointed out that in the circumstances of this case, the plaintiffs were not the exclusive distributor/marketing agent of the defendants product and as such the defendants have better case on merits as compared to the above precedent. It may also be interesting to note that in the circumstances, warrantee to costumer have been held out by the defendants themselves and the plaintiffs were only required to render certain services in terms of the warrantee services of agreement dated 1.9.1994.
7. In the case of Messrs Faruq and Co. V. Federation of Pakistan and 3 others (1996 CLC 2030), the petitioner was running a Booking agency at Faisalabad Railway Station and sought an injunction against termination of his Agency. After examining the law in detail, Mian Allah Nawaz, J- made the following relevant observations "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 circumstances they can be considered as security for any interest of the agent under the agreement of agency. On this state of affairs, 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)."
8. The concept of an agency coupled with interest of the agent has been well recognized in the English Law. The statement of law to this effect has been made in para 868 of Halsbury's Laws of England in the IV Addition Volume I to the following effect (page 2036).
"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 security or to secure the interest of the agent; the authority cannot be revoked. Thus, if an agreement is enured into on a sufficient consideration whereby an authority is given for the purpose of securing some benefit to the donee of the authority, the authority is irrevocable on the ground that it is coupled with an 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 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 purpose of securing the claims of the agent."
9. In our legal system, this concept has been stated in Section 202 of the Contract Act which reads as under:- "Termination of agency where agent has an interest in subject-matter. Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interests."
It may be seen that the above section lays down an exception to the general rule. A contract of agency by its very nature is personal to the parties and revocable at their volition subject to agreed terms. It does not create eternal legal relations. Under this Section in certain exceptional circumstances, such contracts can be considered irrevocable the most common examples of such contracts are when the owner of certain goods appoints his creditor as agent to sell the goods and recover the amount advanced or where the owner of immovable property, having agreed to transfer such property appoints, before formal title is passed, the vendee as his agent to manage the property or effect the final transfer of title. In such cases interest in the property has already been created in favour of another who is appointed agent primarily t6 secure such interest. The principal is precluded from revoking the authority of such agent unless other-wise agreed, because the main interest in the property is not retained by him but passed on to the agent. This concept has been lucidly explained by Tanzil-ur-Rehman, J, in the case of Worldwide Trading Company v. Sanio Trading Company (PLD 1986 Kar. 234) cited above to the following effect:- "The interest of the agent, forming subject matter of the agency, is to be some son of an adverse nature qua the principal. So. According to the true construction an4 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 a basis of agency or from the course of dealings between the parties and from the other surrounding circumstances."
I may further add, that in the case law cited by Mr. Gulzar Ahmed i.e. The Egypt Air Case (1980)
SCMR-580) Beecham case (1994 CLC 726) and the unreported judgment HCA No. 145/93, though a contrary view has been canvassed, no authoritative pronouncement of the Court as to the scope of Section 202 has been made.
10. In fairness to Mr. Gulzar Ahmed however, one may mention that a contrary view appears to have been taken in the case of Muhammad Riaz v. Federal Construction Corporation where an injunction seeking to restrain the defendant from terminating a contract for execution of engineering works was sought. The following observation of Sale Akhtar, J, (as his lordship then was) in this case (which was incidentally cited by Mr. Mansoor-ul-Arfin albeit in a different context) indeed tend to support Mr. Gulzar Ahmed contention:- "Mr. Khalid M. Ishaque the leamed counsel for the defendant contended that as no property is involved in the agreement section 202 will not apply. The property as contemplated in this section is not restricted to immovable or movable property. In includes interest in a contract which may be substantial tangible or intangible. In the present agreement the parties have to execute several projects which may involves millions of rupees and therefore the agreement involve property in which substantial interest of the plaintiff has been created."
11. Nevertheless in the first place it may be mentioned that these observations were by way of obiter only as in this case, injunction in the form of restraining the defendant from terminating the agency was declined. Moreover with profoundest respects and despite the admiration that I have always had for his lordship's learning and sagacity. I am unable to subscribe to the view that Section 202 gets attracted merely because the agent has acquired substantial interest in the returns arising from the agency. Apart from the observations in the cases of Worldwide Trading Co. (PLD 1986 Kar.
234) and Faruq & Co.. (1996 SLC 2030) cited above, a comparison between Section 202 and 206 may clarify the legal position. Under Section 206 when the contract of agency does not contain a specific stipulation as to termination, it may be terminated upon reasonable notice. In the absence of such notice the damage resulting to one party must be made good by the other. If the principal terminates the agency without notice, he must compensate the agent. It obviously follows that the agent must be having an interest which must be compensated for. Therefore it is not possible to say that wherever an agent has an interest in the continuance of an agency Section 202 gets attracted. I an therefore clearly of the opinion that Section 202 applies only where an agent has a special kind of interest i.e. a pre-existing interest in the subject matter of the agency which is sought to be protected through creation of the agency and not an interest arising therefrom.
12. At the same time I would add that concept of an agency coupled with an interest of the agent is a special concept and its contours have been clearly spelt out in Section 202 of the Contract Act.
There is no basis for drawing analogies from Section 59 of the Easements Act relating to irrevocable licenses. Therefore I entirely agree with the observations of Tanzil-ur-Rehman, J, and Allah Nawaz. J, business of agency would not make the agency irrevocable, lt is difficult to see how an agent can tie down his principal into an eternal bond by making some investment with a partner contributing a major part of the capital of a firm and tying down his assets cannot do so.
13. Nevertheless I may not be taken to hold that no injunction can not be granted to prevent termination of an agency unless Section 202 of the Contract Act is found to apply. In fact in none of the cases where injunctions have been granted a finding as to application of Section 202 has been recorded. Apart from the judgments of the Superior Courts cited by Mr. Gulzar Ahmed, where temporary injunctions were granted without even making tentative observations as to the applicability of Section 202, one may refer to a judgment of this Court in the case of Pakistan Automobile Corporation v. General Motors Overseas Distribution Corporation (PLD. 1982 Kar. 796). In this case, after an elaborate consideration of the law. Ajmal Mian J. (as his Lordship then was) took the view that in an appropriate case, an injunction restraining the defendant from terminating an agency in favour of the Plaintiff could be granted. At the same time his Lordship was pleased to hold that for such purpose it was not necessary even to make a tentative adjudication on the question whether the agency or franchise was coupled, with an interest. In view of these weighty authorities I think the question of grant of temporary injunction is to be decide on its own merits and independently of the question of application of Section 202 Contract Act. Indeed an injunction can be granted if the merits and circumstances of the case so require.
14. Nevertheless Mr. Mansoorul Arfin relied upon three decisions of this Court, namely Muhammad Riaz v. Federal Construction Corporation (1'987 CLC 345) Huma Enterprises v. Pir Ali Shah (1985 CLC 1522) and Universal Business Equipment v. Kakusai Inc. (1995 MLD 367) wherein it has been held that monetary compensation is adequate in such cases and no injunction can be granted. Front a survey of the case, law cited at the bar it appears that no hard and fast rules has been laid down by the superior courts as to specific consideration for grant or refusal injunction in such cases.
Each case is decided on its won merits though it may be safe to say that grant of an interim injunction is an exception rather than the rule- Normally compensation in monetary is considered adequate for illegal termination of agency though indeed interim injunction can also be granted when there are special equities in favour of the plaintiffs. In such situations, as held Mukhtar Ahmed Junejo, J, (as his lordship then was) in Universal Trading Corporation v. Beecham Group (1994 CLC 726 the Courts have proceeded on the principle that in a fit cases an interim injunction may be granted even if the case does not fall within the for corner or Order 39 rules 1 and 2 in order to foster the cause of justice.
15. On merits Mr. Gulzar Ahmed vociferously contended that termination of the plaintiff's agency was contrary to the term of the agreement between the parties on the other hand Mr. Mansoor-ul- Arfin argued that the plaintiff had committed a fundamental breach of contract by failing to set settle the defendants dues to the extent of more than 11 millions rupees. I am refraining from deciding factual controversies lest they may prejudice the parties or even tentatively recording a finding whether a fundamental breach was committed or not in terms of the contract.
Nevertheless learned counsel for the plaintiff admitted that certain sums of money were payable to defendants but disputed the quantum of the amount claimed. It was also admitted that the plaintiff had borrowed some money from bank in respect whereof the defendant had furnished guarantee. Mr. Gulzar Ahmed nevertheless argued that the plaintiff would be able to liquidate liabilities only through continuance of business under the agreement which could even require financial support.
16. In the circumstances, I am of the view that even if the plaintiffs have made out a prima facie case they are not entitled to an interim injunction. Even if there has been a pre-mature or illegal termination of the contract of agency it can be compensated in money terms. It would not be just a equitable to force a relationship upon the defendant who might have to incur further financial liabilities on account of the same. For foregoing reasons the application is dismissed.