MESSRS F. & I. INDUSTRIES LTD. AND 2 Others vs MESSRS FORBES FORBES
This appeal by special leave arises from an order refusing to stay a subsequently instituted suit under section 10 of the Code of Civil Procedure 1908. The appellant company had appointed the respondent as its sole selling agent and later secured a loan secured by pledged shares and a promised bank guarantee. Following disputes and termination of the agency, the respondent filed a recovery suit in the High Court at Karachi, while the appellants had earlier filed a suit in Rawalpindi seeking a declaration, injunction, and accounts. The appellants applied to stay the Karachi suit, which was refused by the Single Judge and upheld in Letters Patent Appeal on the ground that the matters in issue and causes of action in the two suits were entirely different. The Supreme Court dismissed the appeal, holding that section 10 requires the matter in issue in the subsequent suit to be directly and substantially in issue in the previously instituted suit, which condition was not met here as the causes of action were distinct.
- Whether the provisions of section 10 of the Code of Civil Procedure 1908 apply when the matters directly and substantially in issue in two suits are different?
- Does a suit for recovery of a loan and a previously instituted suit for declaration and rendition of accounts share the same matter in issue for the purposes of staying proceedings?
- Section 10, Code of Civil Procedure 1908
1. MUHAMMAD GUL, J.-This appeal by special leave of this Court arises out of an application made by the appellants herein under section 10 of the Code of Civil Procedure in Suit No. 383 of 1970 by the respondent herein in the High Court at Karachi.
2. The appellant No. 1 herein is a private limited Company engaged in the business of manufacturing sweets and confectionary in Islamabad. By an agreement dated 1-2-1969 it appointed the respondent with its head office at Karachi as its sole selling agent for its products. It appears that shortly after the above agreement, appellant No. 1 was in financial straits and therefore secured a loan of Rs. 1,50,000 from the' respondent.
3. The loan was agreed to be repaid by monthly instalments of Rs. 25,000 as per arrangement set out in a letter dated 25-8-1969 which was confirmed by a subsequent letter dated 28-8-1969. By way of collateral security appellants 2 and 3 pledged their shares of the nominal value of Rs. 2,00,000 in the share capital of appellant No. 1. On 4-9-1969 the respondent wrote to the appellants that unless the entire loan was repaid by 30-6-1970, the pledged shares with the respondent as collateral security for the loan shall be transfer--able to the respondent on its request. Subsequent to the above intimation, the agreement of agency between appellant 1 and the respondent was terminated on 21-11-1969. By means of a letter of even date appellant 1 under--took to give a bank guarantee to the respondents to cover certain payments due to the respondent including the amount of the aforesaid loan. These undertakings were however, not fulfilled. No bank guarantee as promised was furnished. This led to a further dispute between the parties culminating in the institution of Suit No. 383 of 1970 on 3-9-1970 by the respondent against the three appellants, for the recovery of Rs. 1,62,949.61 on account of said loan and interest charges.
4. It seems however, that the appellants in anticipation of the suit by the respondent, earlier filed a suit in the Court of Senior Civil Judge, Rawalpindi in which the appellants claimed the following relief, namely :---
(1) that it be declared that the respondent herein is not entitled to the bank guarantee in respect of the value of stocks lying with the respon--dent as the selling agent of the appellant No. 1 and for the loan of Rs. 1,50,000 ;
(2) that the respondent be restrained by injunction from demanding the bank Guarantee from the appellants and from selling and distributing the manufactured products of the appellants and lying with respon--dent ; and
(3) a preliminary decree for accounts against the respondent with regard to the stocks lying with the respondents and a decree for damages.
5. It appears that on the basis of their earlier suit at Rawalpindi, the appel--lants applied under section 10 of the Code of Civil Procedure in the High Court at Karachi for the stay of proceedings in the suit for the recovery of. Rs. 1,62,949.61.
6. A learned Single Judge by order dated 11-5-1971 refused the appellant's request for the stay of the suit on the ground that the rival claims in the two counter-suits between the parties were entirely different and therefore, the provisions of section 10 are not at all attracted.
7. On a Letters Patent Appeal being filed, the above view was upheld by a Division Bench of the High Court by its judgment dated 10-5-1972.
8. Leave was granted in the because of divergence in the judicial opinion on the legal question which also appeared to be of first impression so far as this Court was concerned.
9. We have heard at some length Mr. M. Fazlur Rehman, in support of this appeal but we found it without substance. A plain reading of section 10, C. P. C. Makes it abundantly clear that an essential condition for the applica--petition of the section is that the matter in issue in the subsequent suit is "also directly and substantially in issue in the previously instituted suit between the same parties." It may be true that the two suits are between the same patties but that is by all. There is no similarity between the matters directly and substantially in issue in the two suits. The causes of action in the two suits are entirely different. In the suit instituted by the respondent in the High Court at Karachi the relief claimed is about the recovery of loan with interest due thereon on a default by appellant No. 1 to pay the monthly instalments. Indeed, the respondent had not asked for any bank guarantee for the repay--ment of loan. The view taken by the High Court therefore, is unassailable.
10. There is thus no merit in this appeal and is hereby dismissed with costs.