M/s. POPULAR PHARMACY, KARACHI vs M/s. NOVA BIO MEDICAL and others

ORDER

' In this suit for declaration, injunction and damages seeking adeclaration that the termination of plaintiffs sole distribution agreement by defendant No,1 is illegal and in breach of contract, injunction restraining defendant No,1 from transferring distribution agreement to defendant No,3 and a decree in the sum of Rs,15 million against defendant No,1, the said defendant has moved this application praying for an order that their name may be deleted from the array of parties and/or the plaint be rejected for the reason that this Court has no jurisdiction to proceed against this defendant.

2. Main ground urged in support of this application is that defendant No,1 neither resides nor carries on business or personally works for gain within the territorial jurisdiction of this High Court nor has it acquiesced to the institution of the suit in this Court. Next ground raised in support of the prayer is that there is no privity of contract between the plaintiffs and defendant No,1 as the alleged sole distribution agreement produced by the plaintiffs was never signed by defendant No, 1 .

3. Plaintiffs who are dealing in medicines and pharmaceutical products for the last 45 years and one of the leading agents, distributors and representatives of several intertnationally reputed companies filed this suit on the averments that by virtue of sole distribution agreement dated 1-1- 1988 defendant No,1 appointed them as sole distributor for importing, selling and distributing specified portion of defendant No, 1 's products in Pakistan. In order to promote sales of the aforesaid defendant in Pakistan plaintiffs established branches throughout Pakistan, appointed sales staff and incurred huge expense thereon. It is maintained that initially agreement was valid for a period of two years but it was extended mutually and the parties acted upon it for more than five years. For achieving this object plaintiffs opened LCs. From time to time in favour of defendant No,1 for import of their products but in April, 1993 defendant No,1 unilaterally terminated the agreement in contravention of clause 9 of the said agreement which inter alia provided for at least 30 days' notice for cancellation/termination thereof and transferred the distributionship to defendant No,3. On account of abrupt termination of distributionship, plaintiffs claim to have suffered losses and damages to the tune of Rs,35 lacs on account of unsold stock not likely to be sold. Besides they sustained loss of business resulting in deprivation of income and staff redundancy package as well as cost of various Nova instruments supplied to different customers throughout Pakistan valued at Rs,75 lacs. They called upon defendant No,1 through their advocate's letter dated 4-7-1993 to pay a sum of Rs,11 million equivalent to US $ 402930 but defendant No,1 through their advocate's letter dated 10-8-1993, denied the execution of the agreement and disputed the signature of their Vice-President as an act of forgery. According to the plaintiffs cause of action arose to them at Karachi firstly on 1-1-1988 when the plaintiffs and defendant No,1 executed sole distribution agreement, secondly on 20-5-1993 when defendant No,1 unilaterally terminated the agreement and transferred distributionship to defendant No,3 and finally on 22-9- 1993 when the defendant No,1 declined to pay their claim.

4. Mr. S.A. Sarwana, learned counsel for defendant No,1 after referring to various clauses of the agreement contended with vehemence that defendant No,1 having denied execution of the agreement there is no privity of contract between the parties; that the suit therefore could not be maintained as the relationship between the parties is that of a buyer and seller which does not create any obligation on the part of defendant No,1 to continue with the alleged contract. No doubt defendant No,1 has denied the execution of agreement in the instant application as well as the letter sent to plaintiffs in response to their counsel's letter the fact remains that disputed issues of fact cannot be adjudicated at this stage of the case when defendant No,1 has neither filed a parawise written statement nor surrendered for evidence on oath. The controversy with regard to agreement therefore may be properly raised in the written statement for determination at the trial of the suit after recording evidence.

5. It was next contended that defendant No,1 neither ordinarily resides nor carries on business nor has a principal or sole registered office at Karachi within the jurisdiction of this Court. In this connection learned counsel referred to section 20, C.P.C. Which deals with the institution of the suit where defendant resides or cause of action arises. From the title of the plaint it is evident that defendant No,1 does not ordinarily reside in Pakistan and their address as given in the title of the plaint is that of USA but the case of the plaintiffs as per averments made in the plaint apparently falls within the ambit of clause (c) to section 20, C.P.C. Which permits the institution of a suit in a Court within the local limits of whose jurisdiction, the cause of action, wholly or in part arises. A plain reading of the plaint discloses a cause of action arising at Karachi which cannot be brushed aside or excluded from consideration simply because defendant No,1 has merely denied execution of the agreement. For the purposes of assumption of jurisdiction averments made in the plaint are considered to be true and accepted for determination of jurisdiction of a Court. It may suffice to say that according to the plaintiffs averments, agreement between the parties was executed at Karachi, products of defendant No,1 were supplied at Karachi and termination of the agreement took place at Karachi when defendant No,1 abruptly discontinued supply of their products and appointed defendant No,3 as their sole distributor. The statements made in the plaint for the purpose of rejection or return of plaint are ordinarily accepted to be true and it cannot be held by any stretch of reasoning that the cause of action did not arise at Karachi as asserted in the plaint.

For this reason alone whether the defendant No,1 ordinarily resides or not or carries on business or not within the jurisdiction of this Court would not by itself be enough to delete their name from the array of parties as the aforesaid defendant is a necessary party to the suit and their presence is necessary for an effective adjudication of the issues at the trial.

6. Mr. S.A. Sarwana then referred to the treatise on Private International Law by Cheshire, 8th Edition, (1970) and referred to me the observations at pages 76, 78 and 79 dealing with "jurisdiction" under the English law but these are not relevant for the reason that Pakistan has codified law with regard to jurisdiction which in the present suit is not otherwise barred. Learned counsel also referred to All England Law Reports Annotated, Volume 2 dealing with a case under Admiralty jurisdiction but I am not impressed by the judgment in the said case which is wholly irrelevant and distinguishable from the facts of this suit.

7. Learned counsel laid much emphasis on the terminology used in Explanation II to section 20, C.P.C. Which lays down that a corporation shall be deemed to carry on business at its sole or principal office in Pakistan or in respect of any cause of action arising at any place where it has also a subordinate office at such place. He referred to Rehmania Trading Co. v. Eagle Star Insurance Co. (PLD 1960 .SC 202), Brady & Co. (Pakistan) Ltd. v. M/s. Saeed Saigel Industries (1981 SCMR 494) and WAPDA v.

Ghulam Bari (PLD 1991 SC 780) in support of his contention that this Court has no jurisdiction to entertain the suit and proceed against defendant No,1 who is a foreign resident. I have gone through the reported cases dealing with a corporation carrying on business and the scope of the words "shall be deemed" and "carries on business" within the meaning of clauses (a) and (b) of section 20, C.P.C. Which per se do not divest this Court of the jurisdiction already vested in it.

Needless to point out section 120, Civil Procedure Code is a complete answer to the point raised by Mr. Sarwana. This section unequivocally postulates that sections 16, 17 and 20 shall not apply to High Court in the exercise of its original civil jurisdiction. The civil jurisdiction of the High Court is divided into four classes (i) ordinary, (ii) original, (iii) appellate and (iv) those special matters which are the subject of special provisions. Ordinary jurisdiction embraces all such jurisdiction as is exercise in the ordinary course of law without any additional steps being necessary to assume it, as opposed to extraordinary jurisdiction which the Court may assume in its discretion upon special occasions and by special orders. C.P.C. Is applicable in exercise of civil jurisdiction by the High Court except the exercise of civil original jurisdiction. Restrictions contained in sections 16, 17 and 20 are not applicable to the High Court in the exercise of its original jurisdiction.

8. On the other hand learned counsel for the plaintiffs referred to M.A. Choudhry v. Mitsui O.S.K. Lines Limited (PLD 1970 SC 373) in which the view taken was that a clause in contract providing for determination of all disputes, arising between the parties to contract, by foreign Tribunal must be construed as a submission clause for arbitration and jurisdiction of local Courts was not ousted.

9. In the case reported as Builders Association Ltd. v. Federation of Pakistan (PLD 1986 Lahore 171) where cause of action was not disputed and foreign company not resident in country had entered into a contract through its agent in Pakistan, it was held that more assertion that a defendant is a nonresident foreign company does not divest the Municipal Court of its power and jurisdiction to take cognizance and try a suit against it. In the context of the facts of the reported case it was observed that the question of non-existence of cause of action or privity of contract is different from the objection of jurisdiction raised by the defendant. These questions should not have, therefore, been dealt with by the Trial Court. The objection that the Court lacked jurisdiction over defendants should have been dealt separately and that too after framing necessary issues and allowing opportunity to the parties .To lead evidence as it involved factual inquiry.

10. Lastly learned counsel for the defendant No,1 contended with vigour and vehemence that a foreign Court passing a decree must be a Court of competent jurisdiction in international sense.

The argument proceeds on the premises that even if a decree is passed by this Court it would not be capable of execution. Learned counsel referred to Ghulam Ahmed v. Saroosh Rattanji Wadia (PLD 1959 Karachi 624) a Division Bench decision but I am unable to persuade myself to go to this extent and to hold that this suit if decreed, decree would not be legally executable. In my humble view these are far-fetching questions to be determined after evidence and decree if actually passed it would be for the executing Court to examine whether a decree passed by a foreign Court can be executed or not. It is proposterous at this stage to subscribe to the view of the learned counsel which if accepted is likely to give rise to multifarious complications.

11. For the aforesaid facts and reasons I see no merit in this application which is accordingly dismissed. Defendant No,1 is directed to submit parawise written statement within thirty days failing which law shall take its own course.