IN THE HIGH COURT OF SINDH, KARACHI

PRESENT:

MR. JUSTICE AQEEL AHMED ABBASI.

JUSTICE MRS. KAUSAR SULTANA HUSSAIN.

Admiralty Appeal No.01 of 2015

Trading Corporation of Pakistan (Pvt) Limited

Vs.

Mv Han Zhong Men & others

Appellant: Trading Corporation of Pakistan through M/s. Fayyaz Ali Metlo, Athar Hussain, M. Ayub Channa and Farooq Ali, advocates

Respondent No.4: Messrs Sapna Traders & Builders through Mr. Shaiq Usmani, advocate along with Govind Ram

Respondents No.1 & 2: MV Han Zhong Men & another through Mr. Adeel Abid, advocate

Mr. Khaleeq Ahmed, DAG a/w Qazi Ayazuddin, AAG.

Date of Hearing: 05.10.2022.

Date of Order: 05.10.2022.

O R D E R

AQEEL AHMED ABBASI, J :-- Being aggrieved and dis-satisfied with the order dated 16.04.2015 passed by the learned Single Judge of this Court in Admiralty Suit No.14/2006 filed by the appellant i.e. Trading Corporation of Pakistan (Pvt) Ltd. Against respondent No.1 i.e. Mv Han Zhong Men and others, directing the forfeiture of earnest money of respondent No.1 proportionate of the quantity of sugar not lifted by it, the appellant has preferred instant Admiralty Appeal on the following facts and grounds:-

(1) That in the year 2006 the Appellant imported sugar from India. The vessel (Respondent No.1) carrying 17,009.800 metric tons (MT) of sugar reached Karachi in the end of August 2006. On inspection, the sugar was found badly damaged by water. The Respondent No.1 assured to compensate the loss and undertook to give such Bank Guarantee after discharging the goods.

(2) Apprehending that the Respondent No.1, after discharging the goods, might run away without giving the Bank Guarantee, the Appellant filed Admiralty Suit No.14 of 2006 on 19-09-2006 and prayed for a decree of US$.10.681,055/against the Respondent No.1 and also prayed for its arrest untill it gave the Bank Guarantee for the decretal amount.

(3) On 26-09-2006, advocate for the Respondent No.1 filed undertaking to furnish Bank Guarantee to the extent of the damage to be ascertained by a joint survey after discharging the entire goods under supervision of the Nazir.

(4) Relying upon the undertaking of the Respondent No.1, this Hon’ble Court passed orders for the discharge of the goods and directed that the Respondent No.1 shall not sail untill it furnished the Bank Guarantee. However, the Respondent No.1, after discharging the goods, sailed away without giving the Bank Guarantee.

(5) With a view to safe guard interests of both the parties, the Hon’ble Court ordered to sell the goods through the Official Assignee, who invited lenders specifically mentioning that the tender must be accompanied with Pay order equal to 10% of the offered money and the balance price must be deposed within 15 days and entire quantity of sugar must be lifted within 45 days of the acceptance of offer, tailing which the earnest money would stand forfeited. The tender was published in leading newspaper of the country, including daily Dawn published from Karachi, Lahore & Islamabad and daily Jang published from Karachi, Lahore, Rawalpindi and Quetta.

(6) On 30-05-2007, offer of the Respondent No.4 at the rate of Rs,23,000/- per MT was accepted as against offers of M/s Paracha Textile Mills at the rate of Rs.22,900/- per MT and Moro Trading Corporation at the rate of Rs.21,600/- per MT. However, Respondent No.4 did not turn up to lift the sugar within the time.

(7) On 20-08-2007, 15 days’ time was granted to the Respondent No.4 for lifting the sugar on condition of forfeiting the earnest money in case of failure.

(8) On 21-09-2007, expressing reservations about the favour of allowing the Respondent No.4 to make payment according to the quantity of the sugar lifted by him, the court granted time of two weeks more to lift the sugar on the condition of depositing the entire price of the balance quantity, else the earnest money would stand forfeited without any notice.

(9) On 08-10-2007, the Respondent No.4 was given time of four months more as a last chance with condition that in case the sugar is not lifted the amount of the earnest money would be forfeited and the remaining quantity of sugar would be put to auction at the cost of the Respondent No.4.

(10) On 17-01-2008, advocate for the Respondent No.4 made a clear statement that due to decrease in the price of sugar in the open market the Respondent No 4 was unable to lift the remaining quantity of sugar.

(11) In such circumstances, the remaining quantity of the sugar was re-auctioned on 08-03-2008 and the highest bid of Messer Rana Brothers at the rate of Rs.12,250/per MT was accepted on 17-03-2008.
(12) According to appellant, due to deliberate non-performance of the contract, the Respondent No.4 caused loss of more than Rs.50,000,000/- but the learned Single Judge through impugned order has forfeited the earnest money proportionate to the portion of the sugar not lifted, on wholly irrelevant considerations; hence this appeal:

2. Learned counsel for the appellant after having read out the impugned order passed by the learned Single Judge, whereby, the application i.e. CMA No.293/2009 filed by the respondent No.4, namely, Sapna Traders and Builders (Auction Purchaser) for release of the earnest money deposited by it with the learned Official Assignee in respect of auction of Cargo measuring 17326.300 M.T. has been allowed, has argued that the learned Single Judge has failed to appreciate the fact of non-lifting of the entire quantity of sugar by the respondent No.4, which according to learned counsel, has caused loss of more than Rs.05 crores, therefore, on account of deliberate non-performance of contractual obligation by the respondent No.4, the entire amount of earnest money was required to be forfeited, instead of directing forfeiture of earnest money only proportionate to the portion of sugar not lifted. According to learned counsel for the appellant, the learned Single Judge while passing the impugned order failed to appreciate that in terms of Section 73 of the Contract Act, 1872, the respondent No.4 is liable to compensate the loss caused to the appellant by the respondent, whereas, according to Order XXI Rule 71 read with Section 36 CPC, for deficiency of the price and all expenses attending the resale of the sugar are to be recovered from the respondent No.4 under the provisions relating to the execution of decree for the payment of money. According to learned counsel for the appellant, the learned Single Judge has also failed to appreciate that the vessel of respondent No.1 has already left the territorial limits of Pakistan while committing fraud upon the Court without giving any bank guarantee, therefore, if the entire amount of the earnest money deposited by the respondent No.4 is not forfeited on account of non-performance of the contractual obligation i.e. lifting the remaining quantity of the sugar within the contractual period, which has caused loss to the appellant, therefore, the respondent No.4 is under legal obligation to compensate the appellant accordingly. It has been prayed that the impugned order may be set-aside and the respondent No.4 may be directed to deposit the amount received pursuant to Court’s order in respect of 1/3^rd of the quantity of sugar which was not lifted by the respondent No.4 as per terms of the agreement.

3. Conversely, learned counsel for respondent No.4 has vehemently opposed the contention of learned counsel for the appellant, and has submitted that the learned Single Judge, after having examined the relevant facts and the evidence available on record, has been pleased to pass a well-reasoned order to the effect that “since the issue of damages is yet to be ascertained, I deem it appropriate to pass order for forfeiture of proportionate amount in relation to the quantity of the cargo that was not lifted. Learned counsel for the respondent No.4 has further argued that in view of admitted position that out of 17326.300 MT, 11256.005 MT of sugar was lifted by the respondent No.4 only 1/3^rd of remaining quantity could not be lifted for the valid reason as discussed in the impugned order. Learned counsel further argued that the appellant itself, was selling sugar at a rate of lesser than the rate at which the sugar was lifted by the respondent No.4, therefore, it would have been futile effort to purchase cargo at such rate, as it would not fetch any reasonable amount and, therefore, is not in a position to dispose of such cargo of sugar at such rate. In addition to hereinabove submission, learned counsel for the respondent No.4 has further argued that there was no forfeiture clause in the contract, which could allow the appellant to forfeit the entire amount of earnest money deposited by the respondent No.4, whereas, according to learned counsel, the appellant could not establish as to how much damage or loss has been caused on account of non-lifting of 1/3^rd remaining quantity of the cargo on the agreed rate. According to learned counsel, during course of hearing before the learned Single Judge the respondent No.1 (defendant No.1 in the suit) has conceded to proportionate forfeiture of the earnest money, whereas, the appellant (plaintiff in the suit) also filed a letter of no objection to this effect, therefore, to agitate this aspect of the matter through instant appeal is misconceived, besides having no merits. Learned counsel for the respondent No.4 has further submitted that under the facts and circumstances of the instant case, the impugned order passed by the learned Single Judge of this Court has not suffered from any factual error or legal infirmity, therefore, Admiralty Appeal No.1/2015 filed by the Trading Corporation of Pakistan is misconceived and liable to be dismissed. While concluding his submission learned counsel has submitted that though Admiralty Appeal No.2/2015 has been filed by the respondent No.4 against the impugned order, however, if the appellant in Admiralty Appeal No.1/2015 will not press instant appeal or the same is dismissed by this Court the respondent No.4 will not press Admiralty Appeal No.2/2015.

4. Learned counsel for the respondents No.1&2 has submitted that since the subject dispute regarding forfeiture of the earnest money pursuant to auction of sugar by the orders of the Court through Nazir, primarily, is between the appellant and the respondent No.4 (auction purchaser), whereas, there seems no adverse findings recorded by the learned Single Judge in the impugned order against the respondents No.1&2, therefore, the respondents No.1&2, while reserving their right to protect their interest and to defend any further claim by the parties, does not want to object to the impugned order, and for this reason, have not filed any appeal against the impugned order.

5. We have heard the learned counsel for the parties, perused the record and have also gone through the impugned order passed by the learned Single Judge with their assistance.

6. The impugned order dated 16.04.2015 has been passed by the learned Single Judge on CMA No.293/2009 filed by the respondent No.4 (auction purchaser – Sapna Traders & Builders) for the return of earnest money deposited by it before the learned Official Assignee of this Court in respect of auction proceedings of 17326.300 MT sugar. The above admiralty suit was filed by the appellant against the respondents No.1 to 3 for recovery of damages to the tune of US $ 10,681,055/-, whereas, the respondent No.4 was not party to the suit, however, came into picture as an auction purchaser pursuant to the Court’s orders directing the Official Assignee to put the aforesaid quantity of cargo to auction and consequently in view of order dated 24.12.2007 re-auction was conducted, wherein, the respondent No.4, being a successful bidder, was allowed to lift the cargo for a period of 90 days. However, as per record respondent No.4 lifted 2/3^rd quantity of the cargo, whereas, remaining 1/3^rd quantity of the cargo could not be lifted for the reason as stated by respondent No.4 that the appellant itself, at the relevant time, was selling sugar at a rate lesser than the rate at which the sugar was being lifted by the respondent No.4. It has been observed that before the learned Single Judge, without any objection by parties, on Official Assignee’s References No.2&3, whereby, the offer for sale of cargo of 17326.300 MT by the respondent No.4 was approved by the Court vide order dated 30.05.2007, whereas, vide order dated 20.08.2007 15 days’ time was granted/extended to lift the cargo. However, since the entire quantity of the sugar was not lifted within the given time, therefore, pursuant to orders dated 21.09.2007 and 08.10.2007 the time was further extended to lift the remaining cargo, however, it was directed by the Court that in case, within four weeks from the order dated 08.10.2007, the remaining 1/3^rd sugar is not lifted, earnest money deposited by respondent No.4 may be forfeited. It was further directed that the remaining quantity be put to auction at the cost of the respondent No.4. It is pertinent to note that neither any request or order for forfeiture of the entire amount of earnest money was made. Subsequently, pursuant to an order dated 24.12.2007 passed by the learned Single Judge in the above suit the learned counsel representing respondents No.1&2 conceded to the forfeiting of the proportionate amount of earnest money, and the leftover cargo was ordered to be re-auctioned in the following terms: -

"Mr. Muhammad Naeem, learned counsel for defendant No. 1, states that instead of forfeiting the entire earnest money, the surety amount may be forfeited in proportionate to the balance sugar which was not, lifted and same may be re-auctioned.

As far as the forfeiture of security is concerned since the learned counsel for the auction purchasers is not present this will be decided later on.

As far as the reauction of remaining quantity of sugar the Official Assignee is directed to reauction the balance quantity of sugar.

As far as the request of Mr. Samiuddin Sami with regard to the godown charges is concerned he may submit his claim which will be decided on its own merit."

7. Pursuant to above order shows that prior to impugned order, there was no request or any order of the Court requiring the respondent No.4 to lift the entire quantity of sugar, failing which, the whole amount of earnest money will be forfeited. In view of hereinabove facts and circumstances of the instant case, and the various orders passed by the learned Single Judge on the Official Assignee’s References, by consent of the counsel for the parties to the suit, the learned Single Judge through impugned order has been pleased to hold that since almost 2/3^rd of the cargo has been lifted by the respondent No.4 and the only quantity which was not lifted is 1/3^rd, therefore, forfeiture of the entire amount of earnest money would not be reasonable, hence, directed for forfeiture of proportionate amount of the earnest money, as the contesting party has already conceded to such argument and given no objection in writing to this effect. While reaching to such conclusion, the learned Single Judge has been pleased to observe that this is, however, without prejudice to the rights and claim of the parties, as the issue of damages is yet to be ascertained.

8. Learned counsel for the appellant was confronted to assist this Court, as to whether in view of no objection having been given in writing before the learned Single Judge relating to forfeiture of the proportionate earnest money, the appellant retract from such no objection given in Court, or can justify filing of instant admiralty appeal, requiring this Court to direct forfeiture of the entire amount of earnest money. More particularly, when the substantial amount of quantity of sugar has been admittedly lifted by the respondent No.4, whereas, by consent of the parties the remaining 1/3^rd of the sugar was put to re-auction, and subsequently, the appellant has already received entire amount of sale proceeds without any objection, in response to such query of this Court, learned counsel for the appellant could not submit any reasonable explanation, nor could justify filing of instant Admiralty Appeal No.1/2015 against the impugned order passed by the learned Single Judge.

9. In view of hereinabove facts and circumstances of the instant case, we do not find any substance or merits in the instant appeal, which prima facie has been filed against an order passed by consent of the parties, whereas, the appellant has failed to make out a case that there has been deliberate default or non-compliance of the contractual obligations by the respondent No.4, nor could demonstrate as to how and to what extent, such partial default on the part of the respondent No.4 has caused any loss and damage to the appellant. Accordingly, instant Admiralty Appeal No.01/2015 was dismissed vide our short order dated 05.10.2022 and above are the reasons of such short order. Whereas, in view of dismissal of aforesaid Admiralty Appeal No.1/2015, Admiralty Appeal No.2/2015 filed by the respondent No.4 (Sapna Traders & Builders) at the request of learned counsel for respondent No.4 was also dismissed as not pressed vide short order, as referred to hereinabove.

10. Before parting with this order, we may observe that the Official Assignee’s Reference No.1/2022 dated 26.05.2022 filed in the above Admiralty Appeals was not disposed of, therefore, we deem it appropriate to dispose of the above reference as well while recording detailed reasons, as it is consequential to the decision in the above appeals. It will be advantageous to reproduce the contents of the aforesaid Official Assignee Reference, which reads as follows: -

“Submitted:

It is respectfully submitted that the Hon'ble Supreme Court of Pakistan has been pleased to pass order dated 28.04.2022 in Civil Petition No.715-K of 2019 (Trading Corporation of Pakistan (Pvt) Ltd Vs. MV Han Zhong Men then anchored at the Port Karachi and others) whereby the Official Assignee would release the sale proceeds of the Cargo alongwith profits and any other sums accrued from or relating to sale of damaged sugar auction under the order dated 12.02.2007. Copy of order of the Hon'ble Supreme Court of Pakistan is enclosed as "A".

2. That the Official Assignee sold sugar as per order of the Hon'ble Court when an amount of Rs.3,98,50,000/- of M/s. Sapna Traders and Builders was forfeited proportionately vide order dated 16.04.2015, the operation whereof has been suspended in the above Adm. Appeal No.01/2015 vide order dated 07.05.2015; the operative part whereof is reproduced herein below:-

........”The counsel for the appellant contended that the learned single judge did not consider the fact that on account of non-lifting of the entire sugar that appellant has suffered loss, which is more than the earnest money and order release of 2/3^rd of the earnest money to the respondents.

Issue notice to respondent's for 22.05.2015. In the meantime, the operation of the judgment is suspended till the next date of hearing"

3. That the damaged sugar was re-auctioned against an amount of Rs.28,02,10,539/- which was invested and as per the bank statement following were the amounts available with Official Assignee:-

(i) Sale proceeds of Sugar Rs.28,02,14,539/-

Profit earned. Rs.44,36,46,225/-

Total = Rs.72,38,60,764/-

(ii) Earnest money deposited

by bidder M/s. Sapna Traders

and Builders. Rs.3,98,50,000/-

Profit earned. Rs.5,89,88,000/-

Total = Rs.9,88,38,000/-

4. That in pursuance of order dated 28.04.2022 of the Hon'ble Supreme Court of Pakistan the Official Assignee released an amount of sale proceeds of sugar alongwith accrued profit amounting to Rs.72,38,60,764/- through cross cheque No.00000001 dated 10.05.2022 in favour of "Trading Corporation of Pakistan (Pvt) Ltd." which has been acknowledged by Mr. Muhammad Asif Rajpar, an authorized officer of Appellant by virtue of General Power of Attorney and Resolution of the Board, copies of which are enclosed as 'B', C, D and E.

5. The Official Assignee respectfully submits the above facts and states that in compliance of order of the Hon'ble Supreme Court of Pakistan: the Official Assignee has released the amount of sale proceeds of the Cargo alongwith profit accrued thereon of Rs.72,38,60,764/- to the Trading Corporation of Pakistan (Pvt) Ltd., however, kept the earnest money of the Appellant i.e. M/s. Sapna Traders & Builders alongwith profit total Rs.9,88,38,000/- which facts may graciously be taken on record or may pass any appropriate order as deem fit and proper by this Hon'ble Court after notice to parties.

Sd/- 26.05.2022

(DR. CHAUDRY WASIM IQBAL)

OFFICIAL ASSIGNEE OF KARACHI”

11. Perusal of the aforesaid Official Assignee’s Reference reflects that in view of the order dated 28.04.2022 passed by the Hon’ble Supreme Court of Pakistan in Civil Petition No.715-K of 2019 the Official Assignee has already released the amount of sale proceeds of the cargo alongwith profit accrued thereon in the sum of Rs.72,38,60,764/- to the appellant (Trading Corporation of Pakistan), however, kept earnest money of the respondent No.4 (Sapna Traders & Builders) alongwith profit amounting to Rs.9,88,38,000/-, therefore, in view of the order passed by the learned Single Judge which has been confirmed by this Court in the instant Admiralty Appeals. Official Assignee may release the proportionate earnest money in respect of remaining 1/3^rd quantity of the sugar, which could not be lifted in favour of the appellant (Trading Corporation of Pakistan), whereas, remaining amount may be adjusted / returned to the respondent No.4 (Sapna Traders & Builders) after proper verification and identification. It is expected that such exercise may be completed within a period of fifteen (15) days from the date of receipt of this order.

Official Assignee Reference No.01/2022 stands disposed of in the above terms.

J U D G E

*Farhan/PS*