P L D 1969 Peshawar 313
Before Shah Zaman Babar and Qaisar Khan, JJ
ISLAMIC REPUBLIC OF PAKISTAN THROUGH
DEFENCE SECRETARY, GOVERNMENT OF PAKISTAN,
KARACHI‑Appellant
Versus
NAZAR DIN KHATTAK & SONS‑Respondent
Regular First Appeal No. 7 of 1962, decided on 2nd July 1969.
S. Fakhari Alam Khan, Addl. A.‑G. assisted by Mian Burhan uddin, Asstt. A: G. for Appellant.
Peer Bakhsh Khan for Respondent.
Dates of hearing : 17th, 18th and 19th June 1969.
JUDGMENT
SHAH ZAMAN BABAR, J.—‑ Messrs Nazardin Khattak & Sons, Peshawar (the plaintiffs) were approved contractor for Army Supply Corps. The plaintiffs’ tender for the supply of firewood to Units of 9(F) Division, stationed in Peshawar Supply Area, was accepted and sanctioned by Major‑Gen. Haqnawaz Khan, Commander 9(F) Division on the 17th of January 1956. The tender was converted into an agreement after sanction by the aforesaid Commander on the 29th of February 1956. The contract was for the period of one year commencing from 1st of April 1956 up to 31st March 1957.
The plaintiffs were supplying firewood according to the actual requirements of the Commander 9(F) Division. The Contractors were to supply, vide clause 3 of the Special Conditions of the Contract, Shisham, Phulla, Kikar, Kahu and Gurgura for bakeries only, and any wood, except Ghaz, Tamarisk or Jal, could be supplied for other use. The rate of supply fixed was Rs.2‑3‑6 per 100 lbs. Vide clause 8 of the agreement the Officer sanctioning the Contract (Commander 9(F) Division) could only rescind the contract for certain reasons.
2. Before the commencement of the Contract, the plaintiffs dumped in store the firewood on the premises where the previous Contractor had stored his firewood. The Officer Commanding Station Supply Depot objected to this dumping place and asked the plaintiffs‑Contractors to shift the fuel near the Station Supply Depot. The plaintiffs did so under protest.
3. The supply of the firewood started from the 1st of April 1956. Soon after complaints of quality and quantity and the specification of firewood by the Army people began. On this account the Officer Commanding, Station Supply Depot started procurement of the supply of firewood, under clause 7 of the agreement, as risk purchases at much higher rates than the control rates from other sources from 6th October 1956. The plaintiffs conveyed their protest to the Commander L of C Sub‑Area, Peshawar, with no avail. Ultimately on 19‑1‑57 the Commander L of C Sub‑Area rescinded the contract agreement of the plaintiffs. This order was conveyed to the plaintiffs on 21st of January 1957. The cost of risk purchases was recovered from the plaintiffs’ other contracts.
4. Feeling aggrieved, the plaintiffs instituted the suit on 26‑11‑57 against the Islamic Republic of Pakistan through Defence Secretary, Government of Pakistan, for the recovery of the amount of Rs. 42,357‑11‑6, on the counts, given below :‑
(a) A sum of Rs. 25,381‑8‑6, which was deducted by the Commander L of C Sub Area from their bills relating to the supply of meat etc. in connection with other contracts, on the basis of alleged loss sustained by the Commander L of C Sub‑Area for the purchases made by him from other sources on higher rates.
(b) Rs. 6,500, as a claim of profit from which the plaintiffs have been deprived due to purchases made from other sources instead of the plaintiffs.
(c) Rs. 4,000 as claim by way of damages on account of loss on sale of stock available at the time of rescission of the Contract.
(d) Rs. 6,476‑6‑0 (Rs. 6,395 principal amount plus Its. 1,110‑6‑0 interest) in claim for the refund of security deposits, and
(e) Claim of interest at 6% per annum from the date of the institution of the suit till the date of recovery of the suit amount and costs of the suit.
5. The defendant contested the suit on various grounds. The averments in the plaint and the written statement are reflected in the following issues :‑
(1) Whether the plaintiffs have no cause of action ?
(2) Whether the claim relating to the recovery of interest at the rate of 6 per cent. per annum is leviable to court‑fee ?
(3) Whether notice under section 80 of the Code of Civil Procedure was not given to the defendant in accordance with law ?
(4) Whether the plaintiffs’ Firm is duly registered under the Partnership Act ?
(5) Whether the successor‑in‑office of Commander 9(F) Division could rescind the contract effected between the parties ?
(6) Whether the plaintiffs failed to supply the requisite quantity of fuel wood to the defendant and that the fuel wood supplied was not according to specification ?
(7) Whether the defendant without any reason illegally stopped accepting the supply of fuel wood with effect from 4‑10‑56 and thus acted in contravention of the terms and conditions of the contract agreement as a result of which the plaintiffs sustained loss ?
(8) Whether the defendant was competent in rescinding the contract at the risk of the plaintiffs ?
(9) Whether the defendant was justified in deducting the sum of 25,381‑8‑6 from the bills of the plaintiffs ?
(10) Whether the plaintiff’ are entitled to the recovery of Rs. 357‑11‑6 from the defendant as detailed in the plaint ?
(11) Whether in the event of decree the plaintiffs are entitled to the interest claimed by theta ?
(12) Relief.
6. The suit was tried by the Court of Senior Sub‑Judge, Peshawar. Ultimately Mr. Muhammad Humayun Khan then Senior Sub‑Judge, Peshawar, decided the suit by his judgment dated 24‑1‑62.
7. The learned Senior Sub‑Judge held on issue No. I that the plaintiffs had a cause of action. The issue was found against the defendant. On issue No. 2, it was observed that at the time of the institution of the suit the claim of the plaintiffs relating to the recovery of interest at the rate of 6 % per annum could not be ascertained and as such the court‑fee of Rs. 10 is accordingly fixed for this relief under Article 17 (vi) of the Court Fees Act. The issue was decided accordingly. Issue No. 3 was also decided against the defendant. Issue No. 4 was not pressed. Issues 5 and 8 were tried together. The learned trial Judge on these issues observed that according to the statement of Major S. A. Hussain (D. W. 6), H. Q. 9(F) Div. was redesig nated as H. Q. Peshawar L of C Sub‑Area with effect from 1st of March 1956 and that no modification to the Contract concluded with the plaintiffs was required. In the light of this statement it was held that the Commander L of C Sub‑Area was the legitimate successor of Commander 9(F) Division and, therefore, he could rescind the contract. Both the issues were decided in favour of the defendant. Issues 6 and 7 were also tried together. As a result of lengthy discussion, the learned trial Judge held issue No. 6 in favour of the defendant and issue No. 7 against the plaintiffs. In conclusion to a still lengthy discussion on issue No. 9 it was held that the defendant was not justified in deducting the sum of Rs. 25,381‑8‑6 from the bills of the plaintiffs and decided the issue against the defendant. On issues Nos. 10 and 11, it was held that in view of the findings on issues 6, 7 and 9 the plaintiffs were entitled to recover Rs. 25,381‑8‑6 from the defendant and no other relief of refund of the security deposits or interest thereon, as the plaintiffs had broken the contract. It was further held that the plaintiffs, having failed on issues 6 and 7, they were also not entitled to any interest claimed by them even for the amount of Rs. 25,381‑8‑6. In conclusion of the findings on all the issues, the learned Senior Sub‑Judge granted the plaintiffs a decree for Rs. 25,381‑8‑6 (twenty‑five thousand, three hundred eighty‑one, annas eight and six piece only) against the defendant. The suit for the claim of other reliefs was dismissed. The parties were to bear their own costs.
8. The Government has come up on first appeal to this Court against the grant of decree of Rs. 25,381‑8‑6 in favour of the plaintiffs. In the grounds of appeal the findings on issues 9 and 10 have been assailed.
9. The learned Additional Advocate‑General on behalf of the defendant contended at the outset that in view of clause 33(i) read with section 3 of the Limitation Act, the suit .of the plaintiffs was barred. He further urged that this being a pure question of law, could be raised for the first time in this appeal.
10. The contention though attractive, is devoid of legal force. Condition No. 33(1) of the Special conditions to the Contract reads :‑
“33 (i). I/we hereby agree that the Governor‑General in Pakistan shall be discharged from all liabilities under this contract or in relation to the subject‑matter thereof unless an arbitration or suit, where such suit lies, is commenced within three months from the expiry of the contract period mentioned in clause (i) hereof or any extension thereof.”
Section 3 of the Limitation Act lays down
“3. Dismissed of suit etc., instituted, etc., after period of limitation.‑Subject to the provisions contained in sections 4 to 25 (inclusive), every suit instituted, appeal preferred, and application made, after the period of limitation prescribed thereof by the First Schedule shall be dismissed although limitation has not been set up as a defence.
Explanation.‑A suit is instituted, in ordinary case, when the plaint is presented to the proper officer; in the case of a pauper, when his application for leave to sue as a pauper is made; and, in the case of a claim against a company which is being wound up by the Court, when the claimant first sends in his claim to the official liquidator,”
The learned A. A: G. further contended that the suit contract was for a period commencing from 1st of April 1956 up till 31st March 1957 and that according to this clause the suit could be commenced within three months from the expiry of the contract period in addition to a period of two months of the notice under section, 80, C. P. C. In this way the learned A. A.‑G. argued that the suit having been instituted on 26‑11‑57, was barred by 8 months. The defence of the bar of limitation was not raised specifically by the defendant in the Court of 1st instance and as such there is no issue on this. Legally the omission to plead the bar of limitation does not preclude a party from urging the bar or the Court from holding a proceeding to be so barred if it is apparent in view of section 3 of the Limitation Act. Under section 3 of the Limitation Act a suit can be dismissed if it is instituted after the period of limitation prescribed thereof by the First Schedule to the Limitation Act, although limitation has not been set up as a defence. In the present case the defence of bar of limitation has not been taken on account of its late institution under any Article of the 1st Schedule of the Limitation Act but under a special clause of the Contract. Under section 23 of the Contract Act the consideration or object of an agreement is unlawful if it defeats the provisions of any law. Again under section 28 of the Contract Act, every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time which he may thus enforce his rights, is void to that extent. In Nathu Mal Ram Das v. B. D. Ram Sarup & Co. and others (I) it is ruled :‑
“A clause in a contract providing that no claim or dispute of any sort whatever can be recognised, if not made in writing within 60 days from due date of payment does not (1) A I R 1932 Lah. 161 take away the statutory right of a plaintiff to bring his claim within the time prescribed by law.”
In Pherai and another v. Pudai Ram (A I R 1925 Oudh 502) it has been held :‑
“It is not open to the parties to any agreement to contract themselves out of the law of Limitation by inserting in their agreement two alternative starting points for limitation.”
In Gobardhan Das v. Dau Dayal (A I R 1932 All. 273) it has been observed:‑
“But no one can contract himself out of the statute of Limitation. Estoppel cannot be pleaded against a statutory bar of limitation.”
In view of this, we hold that the agreement to the extent of its clause 33 (i) which limits the time within which rights are to be enforced, is void to that extent. The plaintiffs had, B therefore, to institute a suit within three years from the date from which the Contact was rescinded or was to be completed. In the present case the plaintiffs have averred that the cause of action arose to them on the 29th of September 1957. The suit was instituted on 26‑11‑57. As such it is within the prescribed period of limitation.
11. The contention of the learned A. A.‑G. on the point of limitation can also be easily repelled in another way. The plaintiffs in para. 18 of the plaint have averred that the suit is within time. In the written statement in para. 18, in reply to para. 18 of the plaint, it has been averred that this is a legal plea and does not require any reply. The objection that the suit is time‑barred in view of clause 33 (i) of the contract, is a special plea of limitation. The defendant had to specifically plead this plea under Order VIII, rule 2, C. P. C. and had also to specifically deny the plea of limitation under Order VIII, rule 3, C. P. C. This has not been done and so the defendant is debarred fro raising this special plea of limitation. In Mst. Gul Resha an another v. Mst. Hayadara and others (1968 S C M R 979) it has been observed at page 981
“Learned counsel appearing in support of the petition contends that under section 3 of Limitation Act it was the duty of the Court to consider this question whether it was raised or not. But in the present case, it appears, that the High Court was right in not allowing this point to be raised for the first time in revision, because, the specific plea in the plaint that the suit was within time, not having been controverted in the written statement, it must be deemed to have been admitted that the suit was within time. In the facts of the present case, therefore, the question of limitation could not arise and was rightly not allowed to be raised.”
12. The learned A. A.‑G. assailed the finding of the Court of first instance in granting a decree for a sum of Rs. 25,381‑8‑6 to the plaintiff‑respondents. He argued that the learned trial Court having held on other issues that the plaintiff‑respondents were responsible for the breach of the contract; the recovery of the price of fuel wood on risk charges from the plaintiff-respondents was justified. For full appreciation of the point, the relevant clauses, 7 of the agreement, and 29 of the Special Conditions of the agreement are recapitulated as under
“7. In event of‑
(i) rejection of my/our supplies/services as described in paragraph 6(i) above, or
(ii) my/our failing, declining, neglecting or delaying to comply with any demand or requisition or otherwise not executing the same in accordance with the terms of contract, the officer operating the contract shall be at liberty (without prejudice to any other remedy the Government may have no account of such breach or non‑performance of the contract) to purchase or to procure or to arrange from Government stocks or otherwise, at my/our expense, such supplies/services as may have been rejected or that I/we may have failed/declined, neglected, or delayed to supply, or such authorised substitutes therefor as are specified in the Schedule hereto, and any excess cost so incurred over the contract price (together with all incidental charges and expenses) incurred in purchasing, procuring or arranging for such supplies/services or their authorised substi tutes and, in cases where issues in replacement are made from Government stocks or supplies, the cost or value of such stocks or supplies (together with all incidental charges or expenses) shall be recoverable from me/us on demand.”
“29. As long as there is no control order under which the maximum price is fixed below the agreed price Government shall pay for the goods supplied at the agreed rates and in the event of such a control order being made and put in force, the price shall be the maximum so fixed under the control order in force at the time of delivery.”
13. Compensation for loss or damage caused by breach of contract is governed by section 73 of the Contract Act, which provides as under :‑
“73. 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 damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.‑In estimating the loss or damage 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.”
14. As said above, the defendant‑appellant started risk purchases of fuel wood from other sources from 6th of October 1956. Various documents pertaining to the risk purchases have been consolidated in the proforma Exh. D. W. 6/12 at page 268 of the typed record. it may be mentioned here that, a total of Rs. “:5,180‑5‑:0 has been shown as a total cost of local purchases in this proforma while the amount recovered from the plaintiff respondents has been shown as Rs. 23,514‑1‑3. The plaintiffs in para. II of the plaint have claimed the amount recovered from them as Rs. 25,381‑8‑6. The defendant in para. 11, in reply to pare. 11 of the plaint, has admitted the amount recovered from the plaintiff respondents to be Rs. 25,381‑8‑6 as the same which has been averred by the plaintiffs in para. 11 of the plaint. A decree for the same amount has been awarded to the plaintiffs. This amount in view of the admission of the defendant cannot now be re‑agitated to be an amount of Rs. 23,514‑1‑3 as giver in the proforma.
15. The learned trial Court in his finding on issue No. 9 has observed :‑
“In my opinion, the defendant’s arguments do not appear to be plausible in view of Clause 29 of the Special Conditions for the supply of firewood copy Exh. D. W. 1/6 which is in the following terms. As there is no control order under which the maximum price is fixed below the agreed price Government shall pay for the goods supplied at the agreed rates, and in the event of such a control being made and put in force, the price shall be, the maximum fixed under the control order in force at the time of delivery, Clause 7 of the Tender for the supply of firewood is to the following effect. That failing, declining, neglecting or delaying to comply with any demand or requisition or otherwise not executing the same in accordance with the terms of contract, the officer operating the contract shall v: at liberty (without prejudice to any other remedy the Government may have on account of such breach or non‑performance of the contract to purchase or to procure or to arrange from Government stocks or otherwise, at my/our expense, such supplies as may have been rejected or that I/we may have failed, declined neglected. or delayed to supp’.‑y or such authorised substitutes therefore as are specified in the Schedule hereto, and any excess cost so incurred over the contract price (together with all incidental charges and expenses), incurred in purchasing, procuring or arranging for such supplies/services or their authorised substitutes and, in cases where issues in replace ment are made from Government stocks or supplies, the cost or value of such stocks or supplies (together with all incidental charges or expenses) shall be recoverable from me/us on demand’. It is significant that clause 7 does not make mention of the rates at which the risk purchases were to be made whereas clause 29 of the special condition for supply of firewood makes mention of the control rates. Therefore, the two clauses when read together would not leave any scope for the acceptance of arbitrary rates for the purposes of risk purchases, which in the present case were more than double the control rates and the rates of the plaintiffs. It is unfortunate that no real efforts appear to have been made by the Army authorities in getting the supply on the control rates or at rates reasonably above the control rates as a special case of army supplies. If genuine efforts had been made by the defendant and he had failed in procuring said rates, plaintiffs had no alternative to suffer the losses. Although in the written statement it was specifically pleaded in answer to the allegations made in para. 6 of the plaint that the defendant had invited quotations for fixing the market rates and made the risk purchases from different timber dealers, the evidence, shows that almost the entire risk purchases with the exception of few items were made by the defendant’s servant from M/s. Tilla Muhammad & Sons whereas the few remaining items were purchased from Khwaja Inayatullah who is also alleged by the plaintiffs to be a relative of M/s. Tilla Muhammad & Sons. It may be noted that M/s. Tiila Muhammad & Sons were the old contractors of the supplies. Defendant has entirely failed to establish that the defendant had; invited any quotations for the risk purchases.”
“There is no independent evidence on the record to show that Zarin Khan and Behram Khan were set up by the plaintiffs. At any rate it was the duty of the defendant’s servants to have called for quotations when they made up their mind to rescind the contract in question and not to have arbitrarily accepted rates which were double the control rates and as such were totally unjustified. Could the authorities justify their action simply on the ground that these were risk purchases Risk purchases do not mean `Paryai‑Mall‑Par Ya‑Hussain, the difference in the amount of the risk purchases had ultimately to be recovered from the plaintiffs’ pocket.”
The plaintiffs have averred in para. 6 of the plaint that the risk purchases made by the defendant‑appellant from other sources were at arbitrary and above control rates. The defendant in reply to this para. has averred that the risk purchases were made at market rates through quotations invited from different dealers. D. W. 6 Syed Asghar Hussain was operating this contract in his capacity as Officer Commanding, Supply Depot, Peshawar. This witness has stated in examination‑in‑chief
As we have to meet the requirements of the troops by making risk purchases, therefore, if the contractor fails, we have to meet the emergency by making risk purchases. We make these risk purchases after getting quotations front;’ suppliers and we have to accept the lower quotation taking into consideration the quality of the commodities and it may not necessarily be the lowest if the quality is not according to the specification.
From the perusal of the record, we find no evidence to the effect that the Army authorities had invited quotations for supply of the risk purchases fuel. It appears from the record that fuel wood was a controlled commodity during the operation of this Contract. Exh. P. W. 1/24 (copied from the judgment of the S. S. Judge) is the Notification No. 2317‑30/IV/MM/49‑11, on dated 3‑5‑55, showing the control rates of fuel wood asunder : (1) Firewood Pahari ‑Rs. 2‑3‑0 per standard maund. (2) Firewood Baghi‑‑‑Rs. 1‑9‑6 per standard maund. Exh. P. W. 1/25 (page 95 of typed record), P. W. 1/26‑A (page 100), P. W. 1/26‑B (page 102), P. W. 1/26‑C (page 103) and P. W. 1/27‑A (page 107) show that by these letters the plaintiffs have been informing the Army authorities of this notification and the control rates of the fuel wood therein. The proforma Exh. U. W. 6/12 shows that the risk purchases of the fuel wood were made approximately at double the rates of the contract rates. D. W. 6 Major Syed Asghar Hussain testified in cross -examination
I took over as O. C. SS. D. Peshawar in Jan. 1956. I have taken over from Major Arjumand Hamidullah. At that time Mirza Tila Muhammad and brothers were the fire wood contractors for Peshawar Area. After the termination of their contract the plaintiffs contract started: The entire fire wood obtained on risk purchase basis, excepting the quantities mentioned in Exh. P. W. 1/70 to 1/78 was purchased from Messrs Tila Muhammad & Brothers the previous con tractors, as will be apparent from Exhs. P. W. 1/62 to 1/69 and Exh. P. W. 1/79 to Exh. P. W. 1/98. I do not know if the fire wood was control item. It is a fact that it was brought to my notice that the firewood was a control item as is apparent from Exh. P. W. 1/26‑A.
The defendant has led no evidence to the effect that the risk purchases of the fuel wood were made from various dealers of fuel wood by inviting quotations from them or at the control rates or even rates reasonably above control rates. The risk purchases as admitted by D. W. 6 have been made mostly from Messrs Tila Muhammad the previous Contractors or a few of them from others, who are alleged by the plaintiffs to be relatives of Tilal Muhammad. Even Tila Muhammad has not been produced as a1D witness by the defendant. Thus it is explicity clear that the Army authorities made no efforts in getting the supply of risk purchases on control rates or at the rates reasonably above the, control rates. Without the authenticity of the rates of the risk purchases, the risk purchases as quoted in the proforma Exh. D. W. 6 12 appear to be fancy prices which are approximately more than double the control rates in those days.
10. As said above, the compensation for loss or damage caused by breach of contract is governed by section 73 of the Contract Act. In A. K. A. S. Jamal v. Moola Dawood Sons & Co. (A I R 1915 PC 48) it has been ruled
“A plaintiff who sues for damages for breach of contract of sale owes the duty of taking all reasonable steps to mitigate the loss consequent upon the breach and cannot claim as damages any sum which is due to his awn neglect . . . . .”
In Foley Brothers and others v. James A. Mellwee and others (A I R 1917 P C 255) it has been held
“That a person treating a contract as broken and suing at once for breach of it will be entitled to such damages as would have arisen from the non‑performance of the contract at the appointed time and in assessing the damages, a jury will of course take into account whatever the plaintiff has done or has had the means of doing as a prudent man ought in reason to have done whereby his loss has been or would have been dimi nished . . . .”
In Firm Kidar Nath‑Behari Lal v. Firm Shimbhu Nath Nandu Mal (A I R 1957 Lab. 176) it has been held :‑
“In a suit for damages for breach of a contract to sell the measure of damages is admittedly the difference between the contract price and the market price on the date of the breach.”
In Iqbal Hasfan Burney and another v. Ameen Tareen (P L D 1967 Kar. 840) it has been held
“Where damages are claimed on basis of breach of a contract the case would be governed by section 73 of the Contract Act, 1872. 1n terms of the provisions of that section the plaintiffs can get compensation for such loss or damage as was caused to them by the commission of the alleged breach and which naturally arose in the usual course of things, or which the parties knew, they made the contract, to be likely to result from the breach. But they cannot claim remote or indirect damages.”
In Messrs Muhammad Amin Muhammad Bashir Ltd. v. Messrs Muhammad Amin & Bros. Ltd. (P L D 1969 Kar. 233) it has been observed :‑
“We are in respectful agreement with the point of view that difficulties in estimating damages should not be excused for shirking the duty of solving the problem that may be before a Court and that the material which may be before the Court should be scrutinized and examined for purposes of finding what relevant and sound inference can be drawn from it. This attitude is however to be accompanied with the obligation that failure of party to produce the best evidence should be reckoned against him.”
Their Lordships have gone to the length of saying that every pre sumption should be made against such a party.
17. In the present case we find that there is no evidence at! all of the price prevailing at the time the alleged risk purchases) were made by the defendant‑appellant. There is also nothing to indicate the condition of the fuel market in those days. The documents of risk purchases consolidated in the proforma are not supported by any oral evidence of the persons who made the risk purchases or of the persons from whom the risk purchases were made.
18. In conclusion this appeal fails and is hereby dismissed. The decree awarded to the plaintiff‑respondents to the tune of Rs. 25,381‑8‑6 is maintained. The parties are to bear their own costs.
A. E./S. A. H. Appeal dismissed:
