' Civil Miscellaneous Application No,3772 of 1998 is granted subject to all just exceptions.
' This is a suit by plaintiffs for recovery of Rs,38,807,667 against the defendants and set-off as well as counter-claim by defendants against the plaintiffs seeking a declaration to the effect that termination of defendant Paramount's General Sales Agency is unlawful and illegal; direction to plaintiffs to restore the agency; injunction restraining the plaintiffs Philippine Airlines from giving its General Sales Agency for the Territory of Pakistan to anyone else other than the defendants and a money decree in the sum of US $ 12 million alongwith interest. Defendants through C.M.A. 164 of 1998 solicit a restraint order against the plaintiffs from granting the General Sales Agency in respect of the Territory of Pakistan to anyone else pending adjudication of the suit. As in the first instance, notice was ordered on the first C.M.A., the prayer for interim order was repeated through C.M.A. 1730 of 1998 under the provisions of section 151, C.P.C. Seeking some interim orders on urgent hearing with a further prayer that in case someone else including Kashmirwala (Pvt.) Limited has been appointed as General Sales Agent by the plaintiffs to direct the plaintiffs to restrain such General Sales Agent from. Acting as such pending the decision of C.M.A. 164 of 1998.
'2. Defendants were awarded General Sales Agency by virtue of an agency agreement between the parties for a period of 15 years with effect from 15-8-1977 which after expiry was renewed through another General Sales Agreement executed between the parties on 15th August, 1992. This agreement was valid for a period of one year with stipulation for termination as well as renewal subject to terms and conditions specified therein and subject to general terms and conditions as incorporated in Schedule A appended to the Agreement. While the plaintiffs brought this suit for recovery of definite amount on settlement of accounts between the principal and the General Sales Agent, defendants in the written statement claimed set-off and counter-claim raising preliminary objections that the plaint does not reveal any cause of action and that the claims agitated in she suit pertaining to the period from 1987 to 1993 are barred by limitation and thus the plaint is liable to be rejected under Order VII, Rule 11, C.P.C.
3. The case of the defendants is that although according to the plaint agency existed up to 15th August, 1995, a reminder appeared in Daily Dawn dated 28th April, 1997 stating that Paramount Aviation (Pvt.) Limited ceased to be the G.S.A. Of Philippine Airlines from August 15, 1993. As this public notice reflected the termination of General Sales Agency in favour of the defendants, it is urged that the plaintiffs could not lawfully terminate the agency as it was coupled with interest and the defendants out of their own resources had set up agency offices for the benefit of plaintiffs in Karachi, Lahore and Islamabad. Defendants claimed to have cordial relationship between the parties because of exceptional services and significant contribution by them for promotion of the plaintiffs business in the Territory of Pakistan. However, this relationship became sore because of the plaintiffs' unilateral, sudden and malicious decision to take away its flights from Pakistan quite contrary to the repeated pleas by defendants who despite much opposition had brought down the aviation fuel price. With regard to the commission contemplated in the agreement, defendants urged that a further commission known as incentive commission was payable to them which was settled between the parties in the meeting of 19th December, 1990 further stipulating "that the additional incentives due to the G.S.A. For a particular monthly sales period will be granted to them within a period of 30 days counting from the scheduled monthly submission of reports by the G.S.A.
In case the principal fails to pay, such additional incentives on its due date, the G.S.A. Will be allowed to deduct such incentive amount from their next remittance following the sales period.
Defendants denied that any amount was due from them as unremitted sales, unlawful deduction-I or double payment. Defendants questioned unilateral act of the plaintiffs indicating termination of their agency without any reasonable cause and claimed a permanent injunction restraining the plaintiffs from terminating the agency and/or grant of agency to a third party in addition to a money decree in the sum of US $ 12 million on account of the damages/loss sustained by them.
4. A reply to the set-off and counter-claim was filed by the plaintiffs cotroverting various allegations of the defendants and denying their liability for a money decree or a permanent injunction as solicited.
5. At the hearing, learned counsel for the plaintiffs vehemently urged that while set-off in relation to the relief claimed by the plaintiffs in the written statement is permissible under the provisions of Order VII, Rule 6, C.P.C. Sub-rule (2) whereof stipulates that the written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect both of the original claims and of the set-off; but this shall not affect the lien upon the amount decreed, of any pleader in respect of the costs payable to him under the decree. Main thrust of the learned counsel is that the defendants may be justified in seeking a money decree by way 'of a set-off in their written statement they cannot seek specific nerformance of agency agreement between the parties under the provisions of Specific Relief Act and moreso a permanent injunction of the nature sought by them. Learned counsel further urged that the relief of counter-claim put forward by the defendants is beyond the scope of setoff as envisaged in law.
Learned counsel referred to the proviso to section 42, Specific Relief Act dealing with discretion of Court as to declaration of status or right laying down that no Court shall make any such declaration where the plaintiffs being able to seek further relief than mere declaration of title, omits to do so. According to the learned counsel, relief of injunction is barred by clauses (t), (h), (i) & (j) of section 56, Specific Relief Act. In support of his contention learned counsel referred to the Supreme Court judgment in Naimat Ali v. Jai Ramdas PLD 1983 SC 5(11).
6. Conversely Mr. M.L. Shahani, learned counsel for the defendants urged that the relief of counter- claim through a written statement is controlled by rule 162 of the Sindh Chief Court Rules (0.S.) which permits the defendant to set up a counterclaim in addition to his right of pleading a set-off under Order VIII, Rule 6, C.P.C. He further submitted that the declaration and injunction sought by the defendants emerge out of general Sales Agency Agreement between the parties on which essentially the case of the plaintiffs is founded. Learned counsel also referred to sub-rule (2) of rule 162 referred hereinabove stipulating that such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a 'final judgment in the same suit, both on the original and on the counter-claim. Rule 163 deals with the grolmds to be urged in support of the right of the counter-claim; rule 164 permits the plaintiffs to deliver a reply to the counter-claim whereas rule 165 says that where the defendants set up a counter-claim, the Court may on the application of the plaintiffs make in that behalf at any stage of the proceeding and after hearing the defendants, made an order directing that the counterclaim may be tried separately and may make such other orders as shall be just.
7. In Naimat Ali's case Supreme Court observed that there is a well-recognized distinction between a set-off and a counter-claim. Although in one sense both are identical inasmuch as they are cross-actions on the part of the defendant but a set-off is an essential weapon of defence. If the defendant succeeds in establishing it, it serves the purpose of answering to the plaintiff's claim either wholly or pro tanto because a set-off is really a debt claimed by the defendant against the plaintiff to counter-balance a debt claimed by the plaintiff against the defendant. A counter-claim, on the other hand, is essentially a weapon of offence and is not really relevant as a plea in defence to the claim of the plaintiff. It enables the defendant to enforce a claim against the plaintiff as effectually as in an independent action. Its essential nature is that of a cross-suit pleaded through the means of the written statement in the same suit.
8. On a careful analysis of the provisions contained in Order VIII, Rule 6, C.P.C. And scrutiny of the pleadings of the parties as well as points urged at the Bar, I am of the view that the counter-claim set up by the defendants cannot be supported by the provisions contained in Order VIII, Rule 6, C.P.C. Or as an equitable set-off. Indeed the case pleaded by the defendants is in the nature of a fresh and distinct cause of action of course emerging from the General Sales Agency Agreement between the parties which in law may perhaps be entertained as a cross-suit provided it is not otherwise barred by any provision of law. Moreover, since the defendants are required to pay court-fee on the counterclaim and such has been actually paid by the defendants, counter-claim pleaded in the written statement may even be rightly entertained as an independent cross-suit. On this score alone, therefore, it may not be possible to hold that the prayer of the defendants is not maintainable and, thus, liable to he thrown out summarily. Refer PLD 1983 SC 5 and Ahmed Hassan v. Ajab Khan 1988 CLC 1575.
9: Adverting to the merits of the injunction application, defendants' case is that the agency was coupled with permanent interest, therefore, it cannot be terminated to the prejudice of such interest. In support of such plea, learned counsel submitted that the defendants made huge investment on establishment of their offices at Karachi, Lahore and Islamabad, employed a good number of staff to promote the sales of plaintiffs' business; that the defendants succeeded in persuading the Federal Government to agree to the reduction of aviation fuel by making hectic efforts and special endeavours to ensure that the cost of the flights to and from Pakistan is substantially reduced and that despite the expiry of the period of agency on 15th August, 1995 defendants have been actually and practically acting as agents of the plaintiffs which agency cannot be terminated unilaterally without a reasonable notice. Learned counsel in this connection referred to Muhammad Arif Effendi v. Egypt Air 1980 CLC 2199, Muhammad Arif Effendi v. Egypt Air 1980 SCM R 588 and Zubair Ahmed v. Pakistan State Oil Ltd. PLD 1987 Kar.
112. On the other hand, learned counsel for the plaintiffs besides relying upon Arif Effendi's case as decided by Ajmal Mian, J. (as his Lordship then was in the Sindh High Court) referred to Worldwide Ttading Company v. Sanyo Electric Trading Company Limited PLD 1986 Kar. 234; Ghee Corporation of Pakistan v. M/s. Ashraf & Sons 1995 M LD 390 and M/s. Farooq & Company v. Federation of Pakistan 1996 CLC 2030.
10. In Muhammad Arif Effendi's case, Ajmal Mian, J. Expressed the view that in order to attract the provisions of section 202, Contract Act, agent should have an interest in the property which is the subject-matter of the agency. Referring to sections 205 and 206, Contract Act, his Lordship took the view that a Court of law may attach an implied term of a reasonable notice even in a case in which under the agreement a summary termination of the agency agreement was contemplated. In the said case, Muhammad Arif Effendi was appointed as General Sales Agent by Egypt Air for international commercial flights and in pursuance of the agreement he had furnished a Bank guarantee in the sum of Rs,500,000 to the principal and invested about Rs,40,00,000 for the establishment of defendant business in Pakistan. While the plaintiff filed a suit for declaration, permanent injunction and alternatively for rendition of accounts, defendant Airline filed a cross- suit for accounts against the plaintiff. Learned Judge declined to grant temporary injunction against the defendant from terminating the agency license but he restrained the defendant from encashing the Bank guarantee on the condition that the plaintiff shall furnish a Bank guarantee of an equal amount. In appeal, Supreme Court granted interim injunction subject to conditions fixed by the said Court on the view that the plaintiff had raised substantial questions of law and fact.
Supreme Court, however, clarified that neither the order of the High Court nor the appellate order is to be considered as expression of any opinion on the merits of the case or pleadings and averments of the parties which obviously were still sub judice and would be decided by the High Court after due trial of the case. It may, therefore, be safely concluded that Muhammad Arif Effendi's case as decided by the apex Court does not enunciate any principle of law in terms of Article 189 of the Constitution and it is not obligatory for the Court to grant injunction in case of termination of agency. I am fortified in this view by Pakistan Automobile Corporation Limited v.
General Motors Overseas Distribution Corporation PLD 1982 Kar.
796. No doubt this view was followed in Zubair Ahmed's case by a learned Single Judge of this Court who was persuaded to grant interim injunction but the facts of the reported case are completely distinguishable and not on all fours with the facts of the present case.
11. In Worldwide Trading Company case, Tanzeel-ur-Rehman, J. (as he then was) dealing with two statutory illustrations mentioned below section 202, Contract Act observed that these contemplate that the interest of the agent forming the subject-matter of the agency is to be some sort of an adverse nature qua the principal. So, according to the true construction and scope of section 202, the agency can be said to be coupled with interest where the authority of an agent is given for the purpose of effectuating a security or of securing an interest of the agent. This can be inferred from the documents forming the basis of agency or from the course of dealings between the parties and from the other surrounding circumstances. Learned Judge further held that a contract of agency, generally speaking is revokable, as it is contemplated by section 201 of the Contract Act.
Sections 202 and 205 appear to act as rider on section 201. The principle underlying those sections, as it appears is that a contract of agency in its very nature, is terminable. However, if it is coupled with interest of the agency in the property forming part of the subject-matter of the agency, it cannot be terminated to the prejudice of such an interest, unless there is an express contract to the effect that it can be unilaterally terminated even to the prejudice of such interest. In Ghee corporation of Pakistan v. M/s. Ashraf & Sons, learned Single Judge of this Court Was dealing with a prayer for interim injunction in terms of sections 42 and 21 of the Specific Relief Act. Indeed the plaintiff had questioned the action of defendant inviting new tenders for transporting the goods after the expiry of contract in his favour and sought a declaration that he is entitled to continue with the contract of transportation of goods. In the wake of facts of the said case, in the exercise of revisional jurisdiction, Mukhtar Ahmed Junejo, J. (as he then was) observed that main relief of declaration sought by the plaintiff was not in terms of section 42 of the Specific Relief Act, as none of the plaintiffs has a vested right to continue with as transporter under a previously concluded contract, the period of which was over. It was further held that a declaration that action of the defendant in inviting new tenders was void and of no legal effect, was not covered by four corners of section 42 of the Specific Relief Act. In M/s. Farooq & Company v. Federation of Pakistan, Mian Allah Nawaz, J. Of the Lahore High Court in the light of the provisions of sections 182, 188 and 202 of Contract Act held that contract of agency between the parties containing specific clause that plainiiff as well as defendant would have right to terminate the same by serving three months' notice was thus revocable and defendant had full authority to terminate the same. Learned Judge further held that even if it was assumed that proposal made by defendant was illegal, same would not help plaintiff, who had right in such eventuality to claim damages from defendant for illegal termination of agency. Reverting to the provisions of section 202, Contract Act, learned Judge expressed the view that amount spent in setting up office and necessary infrastructure being essential for carrying on business of agency, such Acts were not, anterior to the contract and did not create interest of agent in the subject-matter.
12. Judging the case of the defendants in the light of the case-law discussed hereinabove, it would suffice to say that they have hardly been able to establish any interest of permanent nature in the property forming the subject-matter of the suit. No document worth consideration has been placed on record to reflect that the defendants invested huge amounts in setting up various offices for running agency business and the recruitment of technical staff for this purpose.
Assuming, however, for the sake of argument, that they invested huge sums, it was ancillary to the object of the agency agreement and they were required to make such expenses for carrying out the objects of the agency in their favour. Likewise correspondence with various State functionaries by defendants persuading them to reduce the cost of aviation fuel generally used by aircrafts in 1989 and 1990 may not by itself be sufficient and adequate to create an interest in the property on the part of the defendants. Be that as it may, the tariff of aviation fuel if reduced under a policy of the Federal Government was beneficial to all airlines touching the territory of Pakistan and not the plaintiffs alone. Likewise receipt of telephone telex bills, from Pakistan Telecommunication Corporation Limited after the expiry of the licence would not make any substantial difference to hold that the agency in favour of the defendants remained extended by implied conduct of the plaintiffs or otherwise. Mr. M.L. Shahani was at pains to refer to correspondence between the parties in September, 1997 requesting the defendants to obtain permission for over-flying of plaintiffs' aircrafts from the Government of Pakistan. Learned counsel also referred to proposed winter schedule for flights of Phillipine Airlines over Pakistan territbry from 26th October, 1997 to 28th March, 1998 to indicate that the defendants were approached as General Sales' Agent of the plaintiffs who could not legitimately terminate the agency without sufficient cause by inviting fresh applications for agency through public notice in media. Without commenting on the merits of this contention and deeper analysis of the point raised, fact of the matter remains that the contract of agency between the parties being liable to termination was revocable on ninety (90) days' notice prior to the expiry of the agreement which was duly served on the defendants. Learned counsel for the plaintiffs referred to plaintiffs' letter, dated 30th June, 1995 Annexure-K intimating the defendants to please cease and desist from issuing any P.A.L. Traffic document in their custody or control with a caution that any action taken or to be taken by them contrary thereto shall be deemed unauthorised and for which they shall be held accountable for. This caution was repeated through plaintiffs' letter, dated 28th August, 1995, Annexure M categorically warning them that General Sales Agency Agreement expired on 15th August, '1995 and was deemed terminated as of said date reiterating further to cease and desist from issuing any P:A.L. Traffic document in their custody or control and any action taken contrary thereto shall be deemed unauthorised and to be accounted for by them. In the face of clear and unequivocal statement of fact, it appears difficult to subscribe to the view of the defendants that the agency contract stood renewed impliedly.
13. Having taken the view that the defendants, prima facie, failed to establish any interest in the property being the subject-matter of the suit, it would be rather more difficult to restrain the plaintiffs from awarding the agency to anyone else in the face of a specific averment that the agency has since been granted to M/s. Kashmirwala (Pvt.) Limited who are not joined as party to the suit or the counter-claim. Any order touching the interest of the said third party is likely to adversely affect the interest of the said third person and vitiated by reason of violation of the principle of natural justice. Much was stressed about the plaintiffs' concealing the factum of agency contract between them and M/s. Kashmirwala (Pvt.) Limited at the Bar but suffice it to say that defendants having apparently failed to establish an excellent prima facie case, their prayer for interim injunction pending the decision of the suit must fail and is hereby declined. Needless to observe, with the decision of aforesaid two C.M.As. Interim order directing the parties to maintain status quo stands recalled.