1. ' The present suit has been filed for damages to the extent of Rs,44,706 million. It is the case of the plaintiff that as a private limited company carrying on business of export of marine fish, fish meal and fish preparation in the beginning of 1984 the plaintiff initiated a project under the name and style of Rehman Feeds (Pvt.) Limited, with parry object to produce high protein value fishmeal product to meet increasing domestic demand. It is the case of the plaintiff that the total proposed project cost was Rs,19,323 million, as against that the plaintiff had applied for financial assistance to the extent of Rs,10,950 million, out of which the defendant agreed to finance the plaintiffs in a sum of Rs,6.699 million, which constituted a foreign currency element being US$ 0.290 million equivalent to Rs,4.650 million and a local currency finance in the sum of Rs,2.049 million. The debt equity ratio being 72 :
28. Such has been stated by the plaintiff in para. 4 of their plaint. In having allowed financial assistance, as security for the repayment, when due, the defendant required the plaintiff to provide collateral security by mortgaging the project land against the finance assistance. The Plot of land bearing Nos.B-146, 147, 158 and 159, Sector B, Industrial Trading Estate in Tehsil Hub District Lasbella, Balochistan measuring 7500 Sq. Meter was duly allotted to the plaintiff.
2. The said property being allotted but, according to the plaintiff, till such time production is commenced, and thereafter, payment is made to the Lasbella Industrial Estate Development Authority, the lease could not be granted in respect of the said property, and in consequence, could not be mortgaged. Such was a condition precedent. Notwithstanding the fact that it could not be mortgaged, the said LIDA gave an undertaking to the defendant, that no sooner is the lease executed in accordance with the policy of the authority, the same would be deposited with the defendant on behalf of the plaintiff for the purpose of creating an equitable mortgage thereon.
3. ' It is the case of the plaintiff that tender inquiries from the international market of plant and machinery were to be obtained which were sought and opened. Thereafter, on 25-7-1985 the import licence was also obtained. However, it is the case of the plaintiff that due to exchange rate fluctuation the letter of credit could not be established by the defendant resulting in the expiry of the import licence and it remained unutilized. It is the case of the plaintiff that unnecessary delay had been caused wherefore the entire project cost was increased and upon being required by the defendant, a fresh feasibility report on the increased project costs and sums was prepared by the plaintiff and was duly approved by defendants. According to the plaintiff the cost increased from 10-456 million to 14.284 million, an increase of 36.61% which was due to the currency fluctuation and the increase in the prices of site, plant and machinery in the international market from US$ 0.242 million to US$ 0.489 million (an increase of 102%). These increased rates were also reflected upon the fresh tenders, which opened on 16-14987 on the basis ocinternational market. The tenders were not finalized wherefore the two import licences bearing Nos.B-47823 and B-478824 also expired.
4. Another licence bearing No,278087 was against obtained and the letter of credit, therefore, was established on August 13, 1988, however, the qualified commitment letter to confirm the letter of credit from the Asian Development Bank was issued by the defendant after the delay of eight months in April, 1989. Finally, the imported plant arrived at Karachi Port on 19-1-1990. It is stated by Mr. Muhammad Sharif that during the time taken for the arrival of the machinery the plaintiff completed their factory by inducting from their own resources a sum of Rs,6.961 million which was duly verified by the officer of the defendant. In view of the delay caused, the project overrun and its cost came to Rs,1.856 million that is, from 14.284 to 16.140 million in which the equity of the plaintiff came to 43.13% as against 36% which was the requirement of the defendant. In view of the declining position of the liquidity on account of additional investment, which according to the plaintiff was due to default and failure on the part of the defendant, the working capital and or other monies required which had been held by them were utilized, and could not be utilized for the purpose it was kept. Upon deterioration of liquidity position, the plaintiff applied for enhancement of local currency loan so that they may be able to pay customs duty. The application was given to the defendant on 4th March, 1990 for enhancement of 3.375 million. Despite the fact that the customs duty had to be paid forthwith, the defendant bank took 15 months to process and sanction the same amount which was so done in 17th April, 1991. For this amount the defendant again demanded mortgage of the project land, despite the fact that the issue had already been settled when the undertaking was given by the LIDA. According to them, numerous meetings for disbursement of the loan were held and written requests were given from time to time but the amount was not disbursed despite approval through delayed. It is the case of the plaintiff that due to the above delay of disbursement of local currency loan the plant and machinery that had arrived at from abroad and paid for from the finances obtained from the defendant lay at the port unclaimed for one year causing heavy damages by way of demurrages. In view of the machinery and equipment being at the port for one year, the Customs Authorities sought to sell the same for which an advertisement was published in daily Jang dated 17-1-1991. It is the case of Mr. Muhammad Sharif that the demurrages on that the date were Rs,1.800 million. The plaintiff, therefore, approached the defendant immediately drawing attention to the announcement and requesting for release of fund by letter, dated 27-2-1991. Despite the above, the funds were not released. A second show-cause notice for auction was received by the plaintiff from the Customs Authorities which was also transmitted to the defendant on 6-8-1991 as again requesting for disbursement of the funds. In response the bank again insisted to mortgage the project land which according to the plaintiff LIDA had indicated. As a result of the refusal to pay the customs duty the plant and machinery were auctioned on 2-2-1993. The bank by a letter dated 8-2-1993 requested the Customs Authorities to stop auction when the Customs Authorities granted two days time for paying the required dues. Despite the time given by the customs authorities and in view of already granted finance which could have been paid for settlement of the customs dues, the defendant refused to pay the same where after, the plant and machinery were delivered to the purchase in auction.
5. ' It is on account of non-disbursement of the additional enhanced finance/loan amount, that on 11- 2-1993 the plaintiff requested the defendant to return all the documents which were submitted to the defendant on 1-8-1991 but the same was also refused.
6. ' The plaintiff stated that their project profits in accordance with the feasibility report were that in 1990 they would earn Rs,3.460 million, which would increase in 1991 to Rs,4.705 million and in 1992 to Rs,6.266 million and in 1993 to Rs,7.972 million. The calculation of the profits were based on the basis of demand of fish meal product which were 125,000 tons as against the domestic production capacity of 60,000 tons that Rs,200 per ton prevailing at the time when the feasibility report was prepared in 1990 whereby payback period for two years and ten and a half months was agreed.
7. According to him, from 1990 to 1993 the demand of fish meal products increased from 80 to 100% as against the domestic production capacity of 40 to 50%. According to him, therefore, if the inflation rate which was about 12.5% would be considered the accumulated profit would have been Rs,22.403 million which would increase to Rs,25,204 million reducing the payback period by four months. It is the case of the plaintiff that the amount of investment made by the plaintiff himself was Rs,6.961 million invested in the project in fixed and current assets as their equity in August, 1988.
8. According to him, there is a loss of liquidity position and thus, a loss of mark-up also. In view of the above, the plaintiff have calculated their claims as follows:--
(a) Principal amount invested Rs,6.961 million.
(b) Loss of project profits Rs,25.204 million.
(c) Loss of mark-up Rs,7 .541 million.
(d) Mental and physical torture Rs,2 million.
(e) Los of reputation in the Rs.3 million Local and International Market.
9. Rs.
10. 44.706 million ' The defendants have filed their written statement denying the entire position stating that it was not obligatory upon the bank to sanction Additional loans, however, rescue to project the bank sanctioned additional loan with the condition that the plaintiff would mortgage the project land which the plaintiff failed to fulfil. The defendants have denied the fact that the undertaking was given. It is stated by the defendants that the plaintiff were defaulter of LIEDA and were unable to pay the amount payable to LIEDA. The date of payment was extended by LIEDA upto 30-9-1992 and despite the above the plaintiff failed to clear the dues of LIEDA.
11. ' It is asserted that the bank was not duty bound to sanction loan and give additional money or enhance the loan. According to them, release of machinery was the responsibility of the plaintiff and was not their duty. As such the defendants have denied that as they were not bound to give additional loan, non-payment of customs duty could not be taken to be their fault in the disposal of the machinery by the Customs Authorities. The defendants have also denied the fact that they are liable to any amount payable.
12. ' The following issues were settled:-
(1) Whether the plaintiff has suffered damages and losses on account of unlawful' acts of the defendants.?
(2) Whether the plaintiff is entitled to the relief claimed in the suit?
(3) What should the decree be?
13. ' I shall deal with all the issues simultaneously as they are interrelated.
14. ' Both Mr. Muhammad Sharif, Advocate for the plaintiff and Mr. Rizwan Ahmed Siddiqui, Advocate for the defendants have concluded their arguments after having filed their written arguments. The written arguments are on record. Both the counsel have reiterated their contentions as contained in the plaint as also in the written statement.
15. ' The aforesaid case of the plaintiff and the fact contained and stated in the plaint have been reiterated in the evidence and the same has also been argued. The defendants have relied upon the fact they had acceded to the request of the plaintiff initially for payment of a total sum of Rs,8.478 million in foreign currency for import of machinery and Rs,0.700 million in local currency for locally fabricated machinery totalling to Rs,9.178 million were sanctioned in accordance with Exhs.5/3, 5/5, 5/8 and 5/11. The conditions of which were: "(4) Security: A. Existing Assets.
(i) Project Land: Plot Nos. B-146, B-147, B-158, B-159 measuring 7500 Sq. Meters situated in Lasbela Industrial Estate Development Authority Area, Karachi valuation of the said plot shall be accepted to the extent of 20% for premium paid by you. ".
16. ' You will submit title documents in original as required by Manager, A.D.B.P, Karachi Branch and legal advisor. Any clause in the title documents derogatory to the interest of A.D.B.P. Shall not be acceptable.
(ii) Building.---constructed from your own equity worth Rs,1.336 million. You will submit approved maps building from LIEDA.
(B) Future Assets.
17. ' Imported/ locally fabricated machinery purchased out of bank loan.
18. ' You will submit pro forma invoices of machinery to be imported and invoices of machinery locally purchased.
19. ' Valuation of all the above fixed asses both present and future shall be determined and maximum credit limit fixed by Karachi Branch as per Bank's Standing Instructions. In case of any shortfall you will be required to offer additional security duly transferred in the name of company to cover unsecured loan.
20. 6 Disbursement Schedule. ---You will invest your equity for the construction of building first, thereafter legal documents shall be executed after checking utilization of your equity by our Deputy Director (PLD) A.D.B.P., Karachi, Loan for Machinery shall be released as under:--
(i) Foreign Currency Loan. ---The loan shall be disbursed under Asian Development Bank's Agro Industries Credit Line 617-Pak (SF) through International shopping after calling three international quotations of Suppliers. The loan shall be released against letter of credit to the established by You at A.D.B.P., Head Office Branch, Islamabad.
(ii) Local Currency Loan.---Loan for locally fabricated machinery shall be released against the supply order on submission of quotations of reputed and genuine suppliers by you as per Bank's Standing Instructions. 60% payment shall be released to the Supplier at the time of placing supply order. 25% at the time of delivery and the remaining 15% after successful Wal of machinery of site (part payment with part delivery is allowed). Final utilization of loan shall be accepted by our project credit officer.
(7) Recovery Schedule.---The loan shall be recovered in 14 equal half yearly instalments commencing after 1-1/2 years of the disbursement of 1st loan instalment.
(11) you will:--
(h) meet any shortfall in the cost of the project from their own resources."
21. ' According to the defendant, the plaintiff failed to mortgage the property situate at Lasbella but, have not denied the undertaking of LIEDA Exh.5/6 and Exh.5/7. It has not been denied by the plaintiff that the loan was allowed to the plaintiff. In fact it has been stated that the plaintiff have availed off finance totalling to Rs, 9.178 million as contained in Exh.5/26. It has been stated that the plaintiff have appreciated the assistance rendered by the defendants requesting for enhancement of the financial facility. Admittedly, the bank in terms of Exh.5/36 sanctioned an additional loan of Rs,3.375 million for payment of import duty/sales tax, surcharge,- lqra, welfare, demurrage, customs clearance and octroi etc., but such was again subject to fulfilment of the following conditions: "(b) That any due amount/charges will be cleared by you before availing disbursement.
5. Security.---The additional loan shall be secured against the available credit margin, if any. Entire tengible project assets of the project both present and future will be mortgaged\hypothecated with A.D.B.P. To cover the shortfall of Rs,0.577 million in securities through project assets, you arc required to provide additional tangible security outside the project assets acceptable to the Bank.
22. The MCL is worked out as under:--(emphasis is mine) {{TABLE}} Assets Value Percentage MCL Land 0.791 70% 0.554 Building 2.473 70% 1.731 Machinery including Importation cost and Erection and Installation charges 16.779 70% 11.745 Total 20.043 14.030 Total liability Outstanding as on 25-4-1991 11.232 Additional loan 3.375 Total liabilities 14.607 MCL available 14.030 Shortfall 0.577 {{TABLE}} ' Additional security outside project assets having value equivalent to Igo of the loan-amount will be covered through outside securities already offered by you.
6. Documentation.---To secure the additional loan you will be required to execute the legal document wherever necessary on the proforma available with A.D.B., main Branch, Karachi. The documents shall be executed in consultation with the Legal Advisor, A.D. B.P., Karachi, and vetted by him on completion.
7. Disbursement Schedule.---After execution of legal documents and provision of necessary securities, the additional loan of Rs,3.375 million will be disbursed on re-imbursement basis/direct to the concerned authorities."
23. ' The validity of sanction was for a period of one year from the date of issuance of the letter.
24. According to the defendants, the plaintiff did not comply with the terms contained in the sanction, the project land was not mortgaged. There was no lease of the project land. According to them, as the conditions of the sanction were not met the loan was not disbursed. The defendant's witness Mr. Nasim _laved admitted the fact that the terms under the additional loan that was grnated have been mentioned in the sanction letter Exh. 5/36 and the plaintiff did not fulfil the conditions prescribed as such the additional facility was not disbursed on account of non-fulfilment of the terms and conditions by the plaintiff arid that the plaintiff has not suffered on account of negligence on the part of the defendant Bank. The witness in cross-examination denied that all the facilities and formalties were fulfilled by the plaintiff.
25. ' The defendants have in the written . Arguments stated that the suit is liable to be dismissed on account of the fact that evidence was not led through the authorized person and the said Mr. Allauddin was not empowered to lead the evidence.
26. ' The plaintiff on the other hand, having filed written arguments reiterating all the contentions stated in the plaint stated that the said manager who was examined Mr. Nasim Javed in the examination-in-chief stated that: "Thereafter additional facility to the extent of Rs,3.375 million was sanctioned which was not disbursed.---The loan was granted for import of machinery which had arrived. The additional facility was granted at the request of the plaintiff for payment of import duty, as well as sales tax etc. In relation to the imported machinery." (emphasis is mine).
27. ' It has also been admitted by the said witnesses of the defendant that: "The first facility was disbursed notwithstanding the failure of the plaintiff to create mortgage of the property in (LIDA) on the basis of undertaking furnished by the plaintiff." (emphasis is mine)
28. ' The said witness also accepted the fact that the project cost had increased from Rs,10.456 million" to Rs,14.284 million. Accordingly, it has been argued by Mr. Muhammad Sharif and stated in the written arguments that the plaintiff had duly complied with the terms and conditions in the original sanction letter, clause 4 was waived in terms of Exh.5 13 dated 30-3-1988 whereby the plaintiff were not required to execute any mortgaged deed. Such has been admitted by the witness. The witness has also admitted in cross-examination that the amount of additional facility had to be paid directly to the Customs Authorities towards payment of customs and sales tax and according to him:-- "initially agreed arrangement was for payment of the duty directly."
29. ' In Exh.5/42 the Agriculture Development Bank of Pakistan has stated that the request regarding disbursement of the importation costs directly to the Clearing Agent has not been accepted by the competent authority and stressed that the disbursement will be made direct to the concerned authority as mentioned in the sanction letter. By this letter in fact; on 100 November, 1991 the bank had admitted the fact that the customs duty etc., had to be paid by them. No doubt, the claim was for payment to the plaintiff directly but such could have also been made to secure the interest directly to the Customs Authorities, which was not done. There are on record numerous letters. Few of them being Exhs.5/48, 5/49-A, 5/49-B and 5/50 requesting for disbursement of the enhanced amount, but such disbursement, has admittedly not been made.
30. ' It is clear from the above that there are admitted positions that the additional finance was granted for the purpose of payment of customs duty etc. It is also an admitted position that an undertaking dated 5-8-1985, Exh.5/6 was given by the Lasbella Industrial Estate Development Authority (LIEDA). It is also an admitted position that the Government of Balouchistan and Industry, Commerce and Mineral Resources Department had issued a no objection certificate for allotment of land for setting up of a fish meal, and fish oil production industry for which a plot of 7500 Sq.
31. Meters for a total consideration of Rs,1,81,500.000 was granted being 20% down payment. It is also an admitted position that the machinery for which the said finance had been granted had arrived at in Pakistan. It is also an admitted position that the additional loan/finance was granted, as aforesaid for the payment of various taxes, dues etc. In fact, the witness of the bank has admitted the same but had stated that it is only due to the failure on the part of the plaintiff to create a mortgage of the project property.
32. ' When the said financing was granted by an enhancement of the local currency component no doubt there was a specified position that the project property would be mortgaged for the enhanced portion. Upon the grant of enhancement it is not denied that the undertaking of the LIEDA had not been seen. Exh.5/6, the undertaking of LIEDA is, absolutely clear. The relevant portion is reproduced hereunder for convenience sake.
33. "And whereas among others the condition precedent for granting the lease to the various allottees of the plots in the area of 1-1.1.T.E. Is that the allottees have first to raise and/or construct the buildings factories and start production where under they can claim, The execution of lease deed for 99 years, after payment of full premium and other dues of Flub Industrial Trading Estate.
34. And whereas Messrs Rehman Feeds Ltd., having their registered Office at 27 Garden West, Karachi- 3 have been allotted a Plot of land bearing Nos.B-146, 147, B-158 and 159 in Sector 'B' measuring about 7,500 Sq. Meters setting up fish meal and fish oil production industry for which the A.D.B.P.
35. Has sanctioned to them for import of machinery Rs,4,650 million (in Foreign currency) and Local currency of Rs,2.049 million for locally fabricated machinery against the security of the said project land.
36. ' And whereas in the absence of the marketable title and the grant of the proposed lease deed to them, Messrs Rehman Feeds Limited are not in a position to furnish the said security by way of execution or mortgage or otherwise.
37. ' And whereas Messrs Rehman Feeds Limited have approached Hub Industrial Trading Estate with the request to give an undertaking to the Agricultural Development Bank of Pakistan that as and when the proposed lease deed in respect of Plot No,146, 147, 158, 159 in Sector "B" within Hub Industrial Trading Estate is executed between the Lasbela Industrial Estates Development Authority as the lessor and Messrs Rehman Feeds LTD. As the lessee, such an instrument shall not be delivered by ' Lasbela Industrial Estate Development Authority to the Lessees but the same shall be handed over to the Agricultural Development Bank of Pakistan on behalf of the lessees so as to create in equitable mortgage against the said plot of land." (Emphasis is mine).
38. It will be seen that the Lasbella Industrial Estate Development Authority (LIEDA) has stated that the condition precedent for granting the lease to the various allottees of plots in Hub Industrial Trading Estate is that the construction is raised in and production is commenced, it is only then can a lease be granted. The lease is a transfer of property in favour of the lessee. It is also clearly mentioned that in the absence of a marketable title and grant of lease, the plaintiff cannot create mortgage on the property. No one can transfer the title better than what he has. Such is the well-settled law.
39. The undertaking further states that allotment has been made in respect of the plot of land measuring 7500 Sq. Meters and relates to the sanction by the plaintiff of the various amounts. The undertaking further goes on to say that the defendants have approached the Hub Industrial Trading Estate with a request to give an undertaking to the plaintiff that as and when the proposed lease deed in respect of the project land in HITE is executed between LIEDA as the lessor and Rehman Feeds Ltd., as the lessee. The said instrument would, not be delivered to the defendant but would be handed over directly to the plaintiff" so as to create an equitable mortgage against the said plot of land." In granting the additional amount of Rs,3,375 million for the payment of import duty etc. The undertaking was within the knowledge of the plaintiff. It is also an admitted position that initially the grant of finance provided in Exh.5/3. The sanction and disbursement was subject to the terms and conditions provided in the said letter of sanction in which it was categorically provided that the sanction was subject to amongst others, the permission to mortgage the property. The said permission had been filed as Exh.5/4, dated 31st March, 1985. However, the property could not be mortgaged till such time the construction was completed and that the factory had started production. It is not only strange but a matter of concern that the said Rs,3.375 million were granted and such fact has been admitted in the examination-in-chief where it is stated that the said enhancement was sanctioned by the letter of sanction Exh.5/36 but the conditions that were imposed which may have been impossible. It is not denied except for the general statement of Nasim laved Siddiqui, the witness of the defendant said that "the plaintiff did not fulfil the conditions prescribed for disbursement of the additional facility. The plaintiff did not mortgage the property held by it at Lasbella Industrial Estate Development Authority (LIEDA). The additional facility was not disbursed on account of non-fulfilment of the terms and conditions by the plaintiff" (emphasis is mine). The only condition emphasized as having not been fulfilled was the non-creation of the mortgage. In the original condition policy which were the conditions were to be fulfilled mortgage was a requirement. However, in the letter dated 17-6-1991 (Exh.5/36) the security was "the additional loan shall be secured against the available credit margin if any. The entire tangible product assets of the project both present and future will -be mortgaged/ hypothecated with A.D.B.P." It is not provided anywhere in Exh.5/36 that the undertaking will not be accepted and mortgaged has to be effected. It was known that the property could not be mortgaged and the undertaking was present which categorically provides the fact that upon the conclusion/construct ion and upon commencement of business will the lease be granted. Inter alia, mortgage could not have been effected without the lease being granted. Unless the machinery was got released the factory could not come in production, and without that the lease could not be granted. Whilst granting the additional amount it was in the knowledge of the defendant-Bank and that at best they could have required another undertaking. That has not been done. In fact, in cross-examination the witness of the defendant, Nasim Javed Siddiqui has categorically stated that "the first facility was disbursed notwithstanding the failure of the plaintiff to create mortgage of the property in LIEDA area on the basis of undertaking furnished by the plaintiff". In fact, the limit was enhanced from Rs,6.699 million to Rs,9.178 million, admittedly, on the basis of the undertaking give for the creation of mortgage. It is also an admitted position and accepted by the witness that the project cost had increased from Rs,10.456 million to Rs,14,284 million. The witness has accepted the fact that letter Exhs.5/26 to 5/31, 5/33, 5/35, 5/38 and 5/39 were received by the defendant-Bank. He has admitted the fact that the additional facility was to be paid directly to the Customs Authorities. In the aforesaid letters which have been admitted and accepted as having been received, the defendants have been requesting to make the payment of the purpose of duty etc. As stated above, such was granted by Exh.5/36, which is a letter of sanction dated 17-6-1991. Requests were made by the plaintiff to make payment. In the letter of 31st August, 1991 (Exh.5/39) which has been admitted to have been received, it has been stated that all the documents and formalities had been concluded and confirmed by the Legal Adviser and all fees and dues etc., had been paid. It has been stated that "now merely because of your inter departmental clarification for acceptance of security of the interest, port charges etc., are increased heavily on us for no our fault. Therefore, we request you to please instruct your Main Branch at Karachi allowing us to draw the said loan above sanction loan additionally sanction amount for meant of for the payment of port clearing charges, custom duty etc., at your earliest".
40. Another letter of 9-10-1991, Exh.5/41 was written requesting for the "payment of the duty etc." The defendant, however, by a letter dated 10-11-1991 Exh.5/42 admitted the fact that disbursement was to be made, but stated that the competent authority had stressed that the disbursement will be done directly to the concerned authorities and not to the clearing agent.
41. ' The section 37 of the Contract Act reads as under: "37. The parties to a contract must either perform, or offer to perform their respective promises, unless such performance is dispense c: with or excused under the provisions of this Act, or of any other law.
42. ' Promises bind the representatives of the promissors in case of the death of such of promisors before performance, unless a contrary is dispensed with or excused under the provision of the contract. In fact when the portion of the mortgage was known to the defendant that it was impossible to perform, that portion of the contract, being impossible to perform, was void. Further where the person has promised to do something which he knew or with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promise must make compensation to such promise for any loss which such promise well sustain through non-performance of the promise. The defendant admittedly was the promisor, and refused to perform their part of the contractual obligation. intention appears from the contract." Further section 56 of the Contract contract Thus, the in a suit for breach of defendant is entitled to be.
43. ' Act reads as under:-- supplied with necessary particulars of his "56. An agreement to do an act impossible in itself is void."
44. ' A contract to do an act which, after the contract is made, becomes impossible, or by reasons of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
45. ' Where one person, has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promise did not know to be impossible or unlawful, such promise must make compensation to such promise for any loss which such promise sustains through the non-performance of the promise.
46. From the above it will be clear that parties to a contract must perform their respective promises, unless such performance claim. It is the case of the plaintiff that they had supplied the particulars to the defendants vide legal notice dated 15-2-1993 and the facts as stated in the plaint. Reliance is placed on the case of Jamshed Karimuddin Musalman v. Kunjilal Harsukh Kalar and another (AIR 1938 Nagpur 530).
47. ' Numerous letters that were exchanged are on record and are not denied. Admittedly, subsequently a telex. (Exh.5/47) was given regarding urgency in the matter and for payment of the promised amount and stating that serious loss would be caused. The said telex message was also reproduced in the letter Exh.5/48. A reminder, therefore, to them was given on 3rd May, 1992 (Exh.5/49(A). A legal notice was sent on 16th May, 1992 Exh.5/50 giving details and urging that the said amount of Rs,3,375 million sanctioned be paid else A.D.B.P. Would be responsible for all consequences. Another notice dated 18-1-1993 (Exh.5/51) was sent stating that there was a Press release that packages lying un cleared at the Karachi Port have been ordered by the Honourable Prime Minister to be immediately auctioned. A copy of the said notice was also sent to them. A reminder again was given on 23rd January, 1993 Exh.52. Subsequently, by a letter dated 10-2-1993 the counsel for the plaintiff wrote to A.D.B.P. That the clearing agent M/s. Dacotrans Pakistan Private Ltd. Had informed them that the consignment had been auctioned by the Custom Authorities on 2- 2-1993. Despite this, the said defendant did not take action. The entire machinery was imported from the loan and finance granted by the defendants which were its security. Careless and the callous approach of the defendants is evident from the fact that they have not even cared to reply, refuse or otherwise allow finance. Loan was given on an undertaking earlier and could have been given again on the basis of undertaking. There was malice and mala fide in not seeking to have the machinery that were imported for value, released from the Customs Authorities on payment of the customs duties. The plaintiff cannot be made liable for such eventualities. The machinery had been sold and that it was only due to the negligence of the defendants.'
48. ' The plaintiff had taken reasonable steps to mitigate their losses, which was the only requirement.
49. In fact it is evident that there were numerous requests that were made. Frantic effort was made by the plaintiff in that regard by sending telegram and by making efforts so that the sale of the machinery is stopped. The reliance is placed on the case of Messrs Sh. Muhammad Amin & Co. v.
50. The Provincial Industrial Development Corporation (1991 CLC 684). It had been held that where there is a breach of the employed terms of the contract for which damages are liable to be granted, if person does any wrongful act of which the direct result is loss or injury to another person he must compensate such person in money if the extent of loss or injury can be estimated. Such is the import of section 173 of the Contract Act that when a contract has been broken, -the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damages caused to him thereby, which naturally arose in the usually course of things from which such breach, has been caused. The question in the present case is that admittedly the monies were payable and as afore stated such was granted on a request by the plaintiff. The defendants while granting the said additional finance knew specifically that project property could not be mortgage. Despite the conditions of mortgaged it was known that the mortgaged could be completed only after commencement of production in the factory and not before. The refusal, therefore, was nothing but breaking the contract causing an unprecedented loss to the plaintiff where, the machinery had arrived and were available in Karachi. It was only after the customs duty was paid that the machinery could be secured and taken to the factory and the production could have commenced. Without it being got released, there was no way that the production could have commenced, and without the commencement, the lease could not be granted. The consequence of not paying is that the lease of the plot cannot be obtained and the plot's mortgage cannot be finalized. The bank is responsible for the non release of the promised customs duty etc. It is well- settled principle of "Restitutio In Integerum" that the Courts will endeavour, so far as money can do it, to place the injured in the same situation as if the contract had been performed. In the case of Pakistan v. Messrs A. Ismail Jee & Sons Ltd. (1980 CLC 1522) it was held, on the basis of judgment in Living Stone v. Rawyards Coal Co. (1880) 5 App. CAS.25, it that (sic) "that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation".
51. ' In another case being Aslam Saeed & Company v. Trading Corporation of Pakistan PLD 1985 SC 69 in a detailed discussion on the principles of grant of compensation it has been held that, where in an agreement the quantum of compensation for breach has been provided they were only be entitled to the award of damages to the extent provided in, the agreement. In this present case, however, there is nothing provided, and therefore, the explanation contained in section 73 provides that in estimating the loss or damages arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account will have to be taken into account.
52. It is well-established that the rule on the question of measure of damages where two parties have made a contract which one of them have broken, the damages which the other party ought to receive in respect of such a breach of contract should be such as may fairly and reasonably be considered either arising naturally, i,e, according to the usual course of things, from such breach of contract itself or such as reasonably be supposed to have been in the contemplation of both parties, at the time of they made the earliest, as the probable result of the breach of it. [Hadely v.
53. Baxendale (1854) 9 Exch 341]. This principal and rule laid was discussed and followed in the case of Pakistan v. Messrs Ismail Jee & Sons, referred above. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendants, and thus, known to both the parties, the damages resulting from the breach of such a contract which they would reasonably compensate, would be the amount of injury which would necessary follow from a breach of contract under the special= circumstances known and communicated.
54. ' But on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. The principle is that a person can only be held responsible for such consequences as may reasonably be supposed to be in contemplated by the parties at the time of making the contract.
55. ' In the case of Kingsly v. Secretary of State 36 CU 271 it was held:-- "Every breach of duty arising out of a contract gives right to an action for damages without proof actual damages. The amount of damages recoverable is, as a general rate, governed by the extent of actual damages sustained consequences of the defendants act. In cases admitting proof of such damages the amount must be established with reasonable certainty. This does not mean that absolute certainty is required or in all cases is there a necessity for direct evidence as to the amount. Damages are not uncertain for the reason that the loss sustained is incapable of proof with the certainty of mathematical demonstration or is to some extent contingent and incapable of precise measurement. In the extreme cases where the defendant has put it out of the plaintiffs power to prove the quantum of damages exactly, the presumption is against the defendant and the burden is on him to reduce the amount from the highest possible estimate."
56. ' In the case of Mehtab Din v. Fazal Din PLD 1954 Lah. 451 the question of mitigating the losses has been dealt with and it was held:-- "The question what is reasonable for a plaintiff to do in mitigating of his damages is not a question of law, but one of fact in the circumstances of each case, the burden of proof being on the defendant."
57. ' In the case of Cull inane v. British "Rane" Mfg. Co. Ltd. (1953) 3 WLR 923 (C.A.) it was held that:-- "The plaintiff purchased a clay pulverizing plant from the defendants, the defendant warranting that the plant would be able to process the plaintiff's only at the rate of 6 tons per hour. The plant failed to process the clay as per warranty, the plaintiff sued the defendant for damages for the capital expended in installing the plant with interest making allowance for the unpaid balance of the purchase price and the residual value of the plant and ancillary equipment. He also claimed for the loss of profit, deducting from his estimated gross receipt at the warranted output, running costs, interest on capital, depreciation and maintenance. The loss of profit was. Claimed as from the date of installation until the date of trial."
58. It is by now well-settled that there are 3 kinds of damages that may be claimed:--
(1) Nominal damages.
(2) General damages.
(3) Special damages.
59. ' In the present case the plaintiff falls in the 3rd category i,e, he is entitled to special damages which relate to the consequences or probably arising from the breach complained of. The test that has been laid down is that they must be such as the Court reasonably considers to be those which the parties would certainly contemplate.
60. ' It has been argued by the defendant the suit filed by the plaintiff merits to be dismissed as no evidence was led by the authorized person of the company as nb resolution of the Board of Director of Company was placed on record to establish that Mr. Alauddin was empowered to lead evidence on behalf of the plaintiff's Company.
61. ' It was argued that the conduct of the plaintiff was not fair, the charges of the LIEDA for obtaining lease in their favour were not paid. It is the case of the defendant that this act would show that the plaintiff had no money at all to pay the LIEDA dues. In the circumstances the defendant could not have entered into any further risk.
62. ' The contention of the defendants is not only incorrect but seems to be one, which is to correct one's wrong. Reliance, on sections 51 and 52 by the defendant is not warranted. In fact from the evidence and the pleadings it is clear that all promises made by the plaintiff had been concluded and the requirements made by the defendants were acted upon except for physically mortgaging the property which was in the knowledge of the defendant. If there were apprehensions, the bank ought to have refused to grant the finance. But once the finance was granted upon an application having been given, it could not have been refused on flimsy grounds. It has been discussed in detail, as to how the property could not have been mortgaged. There is nothing on the record that there was a total refusal. The defendant was only trying to avoid and wriggle out of their commitment. This has caused the loss, which has to be compensated.
63. ' The defendant-bank sought to have been responsible to have caused the payment to be made once they had approved the same it could and has been argued that the said payments were subject to mortgage being created. A perusal of the initial finance, as "stated earlier, having been granted which is contained in Exh. 5/3 requires permission to mortgage the property along with approved map. Exh.5/4 has been filed which is the permission to mortgage. Subsequently, by Exh.5/5, the sanction of Rs,6.699 million in continuation to the earlier sanction, was granted in which the project land was to be taken as security but despite the fact that the mortgage was not complete the said amount was disbursed. It is said that it was disbursed on the basis of the undertaking which is Exh.5/6, which as afore stated categorically brings to the knowledge of the defendants that the lease in respect of the property cannot be executed till such time that the factory starts production where after they can claim execution of lease deed for 99 years after payment of full premium. It is malice on the part of the defendant-bank in stating that as the premium of the said land was not paid, therefore, the lease was not granted and as such the property/undertaking could not be taken as security. It is clear from the language of the undertaking that only after start of production can the lease be claimed. The question of payment would only come after the commercial production starts. The undertaking was categorically that after the lease documents would be handed over for the purpose of crating equitable mortgage.
64. Subsequent enhancements were also allowed and disbursed and it was only when it came for the disbursement of the customs duty that such an attitude and approach was taken up. Nowhere, he has the defendant-bank denied before the filing of the suit that they shall not make payment. The only thing is that they have not acted. The witnesses also does not deny the fact that it was not payable. The only reservation was the mortgage afore discussed. Exh.5/36 admits revised project costs and admits the fact that the additional loans was granted and given. In fact, in clause 7, it is stated that the Additional loan of Rs,3,375 million will be disbursed after execution of legal documents. It is clear from Exh.5/45 a letter written by the plaintiff to the defendant that such formalities had been completed and there was some misunderstanding as to the creation of a mortgage. At least bank should have been careful to have the assets that had given/purchased from the foreign exchange component of the financing to be cleared, if there was a dispute and kept with them especially, when there was clear intimation that the said machinery was being sold out and time was given by the Custom Authority.
65. Nothing can be warst then, what one sees from the bureaucratic approach of a development- bank. The Development Bank ought to have, instead of causing difficulties and problems solved the same when there was no dispute that the money was payable for the Customs duties etc. Relationship of a banker and creditor is a scared relationship. Financial relations once created could not be done away lightly, only at the whims and fancy of the bank. What could be more cruel than by the act of the bank the customer is ruined. The application was made and was agreed upon, the documents were executed except for the mortgage. It was known that the mortgage could not have been executed if the machinery does not reach the factory. It was known that the production could not have been started if the machinery is not released. The machinery would have been sold and was subsequently sold due to the delay and utter negligence of the part of the plaintiff.
66. As regards the claim of damages the plaintiff have given details of the losses caused and the project profits that were expected to be earned. There is nothing in the evidence of the defendants to deny these assertions. In my opinion that the act of the defendants is one of negligence, which has caused the sale of the machinery without any benefit to both the plaintiff or the defendant. In fact had the machinery been installed the same would have been productive. Such has also not been denied. The financing, as also enhancements were on the basis of projection, valuations and appraisals, which were found profitable. This is the loss caused in the assets and the loss in profit that is claimed. The same cannot be denied. I am of the view, therefore, this suit is liable to be decreed as prayed. In view of the above, the suit is decreed as prayed with costs.
67. ' I am constrained to say that such unprofessional approach has usually been a cause of losses, resulting in loss both to the bank and this country. It should be determined what was the cause of a for this highhanded attitude and who was responsible. Such persons should be pointed and punished. with costs.