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P L D 1966 Supreme Court 201

Present: A. R. Cornelius, C. J., Fazle‑Akbar and B. Z. Kaikaus, JJ

Mian MUHAMMAD LATIF‑Appellant

Versus

THE STATE‑Respondent

Criminal Appeal No. K‑13 of 1963, decided on 8th October 1965.

(On appeal against the judgment and order of the High Court of West Pakistan, Karachi Bench, dated the 20th July 1962, in Criminal Acquittal Appeal No. 339 of 1960/Criminal Reference No. 163 of 1960).

(a) Constitution of Pakistan (1962), Art.

58(3) ‑ Leave to appeal to Supreme Court‑Granted to consider "important questions of law", namely, as to (1) true nature of transactions entered into by accused petitioner; (2) whether High Court could convict for a different offence when trial Court had refused to amend charge alleging such an offence.

(b) Essential Commodities (Control of Distribution) Order, 1953, cl

. 3‑"Approved dealers" not nominated by Controller‑General‑Conclusion that cl. 3 was not applicable (if imported goods were disposed of to other persons), held "not possible" from that circumstance "alone"‑Reference to Controller‑General necessary after import of goods in such case.

(c) Essential Commodities (Control of Distribution) Order

, 1953, cl. 3 (2)‑Agreement between importer and another party to buy imported goods‑Such buyer does not become vested with full rights of property in goods until a "release order" has been procured by importer, from Controller‑General‑Buyer's lien on such goods‑Distinct deference of such lien from "exercise of full property rights"‑Distinction, of significance in determining whether there has been a "sale in contravention of import control regulation".

(d) Essential Commodities (Control of Distribution) Order,

1953, cl. 5‑Word "sell" to be construed in its technical sense discoverable from Contract Act (IX of 1872) and Sale of Goods Act (III of 1930), and not in its popular sense‑Concept of "sale" in relation to "intricate commercial transactions"‑[Lambert v. Rowe (1914) 1 K B 38 distinguished].

(e) Essential Commodities (Control of Distribution) Order,

1953, cl.. 3 read with cl. 6 "Sell" ---"Sale"‑Complete pro prietorship of buyer in goods sold dependent upon seller being armed with authority to convey goods further by procuring "release order"‑[M'Bain v. Wallace (1881) 6 A C 588 not relevant.]

(f) Essential Commodities (Control of Distribution) Order,

1953, cl. 3 (2) read with cl. 6‑.sale" or "disposal" of goods Parties agreeing before arrival of pods from foreign country that permission of Controller‑General was "sine qua non for completion of "sale"‑Such permission actually granted eventually‑Alleged buyers restraining themselves "deliberately and consciously" from further disposing of goods before grant of such permission "in compliance with law"‑"Sale", held not complete, until permission of Controller‑General had been granted‑(Maxim)‑(Principle appli cable to criminal jurisdiction)‑',No one, should be construed into a crime"‑Applicability.

"In a case (of prior agreement to sell) where it was clear (1) that between the parties to the contract, at the time when it was set down in writing, it was clearly Understood that such a permission (of the Controller‑General) was sine qua non for completion of the sale, (2) that such permission was actually granted, and (3) until it was granted the party which was to be the transferee of the property deliberately and consciously in compliance with the law held itself under a restraint with regard to the further disposal of the goods, it should have been clear that to relate the transfer of property back to any time earlier than the grant of permission was not possible. There was positive realization of the need to comply with the controls and there was positive satisfaction of the obligation, before the buyers purported to act on the transfer, by further disposal .of the goods. That was the first unequivocal act of proprietorship all earlier acts, e.g. possession, being of a nature such that they could found a claim to‑proprietor ship only by a process of construction of legal provisions, when taken in conjunction with other facts. There is a principle applicable to the criminal jurisdiction which, the circumstances of the present case require should be clearly, and distinctly recalled. It is that no one shall be construed into a crime. Where as here the law is one of absolute liability, that is to say, the requirement of means tea is excluded, it is of special importance that the breach of a legal restraint on freedom should appear with similarly absolute clearness. It should not be one which has been ascertained by some process of involved legal construction, such as that appearing from the judgments under appeal. It is to be noted further that the evidence shows that the agreements in this case were drafted after taking legal advice as to whether they were in consonance with‑ the control legislation. The parties had not entered upon the transaction blindly, and moreover, at no stage of the transaction does anything appear to indicate that there was any attempt, by either sellers or buyers, at concealment of anything that passed, from the eyes of the control authorities.

Amrit Banaspati Co. Ltd.'s case A I R 1947 Bom. 306 distinguished.

(g) Imports and Exports Control Act (XXXIX of 1950),

S. 3 (2) Licence issued by Chief Controller‑Such Controller has power to impose conditions in respect of licence‑Licence‑holder not complying with such conditions (e.g. non‑transferability of licence) invites "sanctions" of law against himself.

It is a tenable view that a power to issue a licence includes the power to impose conditions in respect of such licences either generally or individually.

A licence holder acting upon a licence issued by the Chief Controller, subject to express conditions, is acting in contra vention of the law and inviting sanctions, if he fails to comply with the express conditions contained in the licence.

(h) Imports and Exports Control Act (XXXIX of 1950)

, S. 3 (2)‑Condition of non‑transferability of import "permit" (licence otherwise called "sub‑authorisation")‑Licensee before taking any steps to import goods entering into an arrangement described as an "agreement of sale" of sub‑authorisation, with a third party‑Held not to be a "transfer" of licence in circumstances of case, but an "agency transaction", which did not amount to a contravention of condition of non‑transferability of licence Agencies of "immense" variety‑Agent with an "interest" in a commercial transaction "not a rarity"‑Agent entitled to "lien" on goods received, for his expenses and charges: (per Cornelius, C. J., Fazle‑Abar, J., agreeing; Kaikaus, J. contra)‑Hoarding and Black Market Order (XIV of 1956), S. 3‑[S. Sibtain Fazli v. Messrs Star Film Distributors P L D 1964 S C 337 ref.]

(i) Imports and Exports Control Act (XXXIX of 1950),

S. 3 (2)‑Condition of non‑transferability of import licence "Transfer", at law, requires giving to transferee "by sub stitution", a status equivalent to that of transferor at least "in substance", if not "in appearance", or, transferee placed in a position "to operate" the licence‑Importer (licence‑holder) content with receiving only "a commission by way of a percentage," from alleged transferee, not by itself a circumstance destructive of a contract of "agency"‑ 'Transfer"‑Test ‑ Whether agent (buyer) becomes vested in himself with rights and liabilities under licences by act o, f licence‑holder or by agreement itself.

A. K. Brohi Senior Advocate (Sayed M. Sadiq Advocate Supreme Court with him) instructed by Ghulam Ali Membn Attorney for Appellant.

Abdul Kader Sheikh Additional Advocate‑General West Pakistan (Abdul Hayee Qureshi Advocate Supreme Court with him) instructed by Ijaz Ali Attorney for the State.

Dates of hearing: 16th, 17th, 18th and 19th March 1965.

JUDQMENT

CORNELIUS, C. J

.‑This appeal by Mian Muhammad Latif Managing Director of a Company known as Friederike Limited, Karachi, comes before the Court by special leave granted to appeal against a judgment of a Division Bench of the West Pakistan High Court finding him guilty of offences of

(1) attempting to sell imported goads in contravention of section 6 of the Essential Commodities (Control of Distri bution) Order, 1953;

(2) selling such imported goods in contravention of the said provision of law (the trial Judge had refused to frame a charge of this offence) and

(3) "misusing the (Import) licence in contravention of the provisions of the Imports and Exports (Control) Act, 1950,"

which offences were held to be punishable under section 3 of the Hoarding and Black Market Order, 1956. These convictions were recorded in an appeal against the acquittal of the appellant at trial by a Special Judge. Along with the appellant two other persons, had been tried and acquitted by the Special Judge. One of them died during the pendency of the Government appeal, while the other was convicted by the High Court and has not sought to appeal further.

Leave to appeal was granted to consider "important questions of law, namely,

(i) as to the true nature of the transactions entered into by ,q the petitioner and

(ii) as to whether the High Court could convict for a different offence, when the trial Court had refused to allow an amendment of the charge alleging such an offence."

Messrs Friederike Limited had received from the Govern ment of Pakistan a permit described as Sub‑Authorization No. RM000608, enabling them to import certain foreign made goods to the value of 90,000 U. S. dollars=Pakistan rupees three lacs, subject to conditions specified in a public notice of the 31st January 1955, issued by the Chief Controller of Imports and Exports, as well as to special instructions contained in the permit and any further conditions that might be prescribed from time to time by the Pakistan Government. The goods to be imported were described as "Buses, Trucks (CKD) pick‑ups, vans carry‑ails and combies and station wagons, Ambulances and Micro‑buses on wheels and spares thereof." The National Bank of Pakistan was prescribed as the Bank which would handle the financing, by which presumably is meant the foreign exchange part of the transaction. The foreign exchange sanction was to be distributed as follows, that is "15 % for pick‑ups, vans and carry‑alls and Station Wagons" and 20 % for purchase of spares. There were certain conditions regarding the vessels in which the goods were to be carried, but as to these matters, it would seem that compliance was duly made in the utilization of the licence, which so far as has been made out, extended to 100 percent of the sanctioned foreign exchange. Of this amount, a major part was applied to the direct import by, and in the name, of Friederike Ltd., of truck chassis and pick‑ups, and spare parts therefor. There remained, however, a balance of about Rs. 60,000, and it is as to the utilization of the licence in respect of this balance that the case was preferred. Briefly, the utilization was by means of two transactions, the first between Friederike Ltd., and Western Motors Stores, and the second: between Friederike Ltd., and Star Motor Works. The amounts of foreign exchange involved were Rs. 45,000 in the Western Motor Stores transaction and Rs. 7,287 in respect of the Star Motor Works. The transaction with the Western Motors Stores was recorded and an agreement signed on the 25th May 1955, and with the Star Motor Works on the 28th June 1955. The form used in each case is the same. In what follows, I shall state the principal terms, and it will be convenient too to state at the same time, my view of the purpose and effect of certain of these terms, in respects relevant to the decision of the case.

Each document was described as an agreement of sale, and commenced with a statement that Friederike Ltd.; had agreed to sell and the second party had agreed to purchase the following, viz:-

"Spare parts for Buses, Trucks, Pick‑ups, vans and (Station) Wagons."

The amounts of foreign exchange were mentioned and in each case, the agreement was supported by a list of the goods to be imported, made out in very considerable detail, and duly attested by both parties. Mention was made of sub‑Authorization No. RM000608, in order to attract the conditions of the permit. Each document then went on to say that the indents, i.e., the orders placed abroad for the supply of goods listed with the document, had been prepared by the buyers, and that, if any goods included within these orders were not covered by the description "specified on the sub‑authorisation permit" and there was in consequence levied a penalty or demurrage, such cost should fall on the buyers, but were such cost should be incurred because "the auto‑spare parts are for makes of trucks, buses and station wagons other than those implied in. the sub‑authorisation permit" then any cost incurred by way of penalty and demurrage would be borne by the sellers. This term indicates a doubt as to whether the permit could be interpreted to cover auto‑spares other than those directly relatable to the vehicles imported under the permit, for reference to the .lists attached to the agreements shows that most of the items were for makes of vehicles other than those which Friederike Ltd., were importing under the same sub‑authorisation. However, in the result no question appears to have been raised by the control authorities on this ground and the goods were allowed to enter and be dealt with without objection on this score.

The document then declares that the sellers should be free of liability resulting from "non‑shipments, partial shipments, shortages, damage or loss in respect of the con signments", in other words, that all risks in these respects were undertaken by the buyers. Such risks are ordinarily covered by insurance, so that the practical effect of this term was probably no more than to place upon the buyers the cost of necessary insurance against such risks. The next term in the documents is one relating to consideration not for the price of the goods which were earlier specified, but in relation to the transaction as a whole; for the consideration was fixed in terms of a percentage, viz., 76 Y. on the amount of the foreign exchange involved in the case of W6stern Motors Stores, and 801 of the similar amount in the case of Star Motor Works, or in real figures, Rs. 34,200 in the first case, and Rs. 5,832 in the second case. These sums were paid immediately by cheque upon the signing of the documents and are described to be "the profit in full" in relation to the transaction. There is of course a relation between the sums thus taken as "profit in full" and the price of the goods actually imported in consequence of these agreements. Thus for example; in the case of Western Motors, it has been brought out in the evidence of a partner, Mr. Muhammad Saeed Fikri, P. W. 1, that in all, the landed cost of the goods imported under his agreement was about Rs. 85,200. Evidence was given by a Superintendent in the Ministry of Industries, Muhammad Azam, P. W. 4, to the effect that importers were permitted to "mark up" the landed costs to the extent of 100 per cent before Pakistan currency was devalued and by 80 percent after such devaluation, for the purpose of determining the price at which they could sell the imported goods in the Pakistan market. In other words, if Friederike Ltd., had undertaken the direct sale of the goods they imported in the Pakistan market, they would have been entitled to sell these covered by the Western Motors Stores agreement, for about Rs. 1,70,000 making a profit of Rs. 85,200. Under the agreements, however, they were relieved of all expenses in connection with the importation of the goods as will be presently shown, and the mark‑up was to ensure to the benefit of the buyers exclusively. It was in relation to such benefit to be obtained by utilization of the licence of Friederike Ltd., that the latter firm received the sum of Rs. 34,200 leaving a balance of over 50,000 as clear profit for Western Motors Stores. Mr. Fikri said in his evidence that

"this amount of Rs. 34,200 was far below that percentage which the importers could have charged legally."

There can be no doubt of the complete truth of that statement. The position was similar in respect of the Star Motor Works transaction.

Proceeding with the consideration of the documents, the next term they certain is one laying down that letters of‑ credit to cover the import would be arranged through the National Bank of India Ltd., Saddar Branch, Karachi. The evidence in the case shows that Friedrike Ltd., maintained no account with the National Bank of India Ltd., but each of the two buyers had accounts with this Bank Friederike Ltd., maintained an account with the National Bank of Pakistan only, so far as appears from the record of this case. The agreement went on to say that all charges in respect of the letters of credit would be borne by the buyers. Friederike Ltd., further undertook to instruct the National Bank of India, Ltd., Saddar Branch that they should "advise the Buyers immediately on receipt of relative shipping documents" and the buyers undertook the responsibility "to retire the Bank's bills in respect of all consignments . . . . . and to arrange clearance themselves through the Customs and Port Trust" and further to bear all expenses in the shape of customs duties, Port Trust dues, penalty, demurrage charges and other incidentals in connection with the clearance.

Then follows a term which was never applied, but which on the face of it, reserved to Friederike Ltd., a right of disposal in respect of the goods imported, in certain contingencies. This term provided that the buyers were free to use the National Bank of India Ltd., Saddar Branch, Karachi, as their agent for effecting all payments towards Bank bills, drafts and incidental charges, for arranging clearance of the goods through the customs and Port Trust, and for paying all dues in connection with the clearance, and also for storage of the goods after clearance. Should the contingency arise that in the course of the operation of such arrangement, the National Bank of India should refuse or stop "such facilities to the Buyers" the sellers would have the power to call upon the buyers to arrange all payments demanded by the Bank within 30 days of a notice of demand by the Bank stopping facilities, and if within 30 days, the buyers should fail "to honour their obligation", the sellers were to take over the goods from the Bank after paying all the Bank's dues and thereafter would have the right "to dispose of the goods at the cost and risk of the Buyers." In actual fact, while the National Bank of India Ltd., Saddar Branch did carry out all functions in connection with the "bills, drafts and other incidental charges", clearance of the goods through customs, payment of customs dues etc. and finally storage of the goods received, was arranged by the two buyers through other agents or by themselves. The goods were after receipt stored in the buyers own go downs, but this particular term, in so far as it secured power of disposal to Friederike Ltd., would nonetheless have had effect, if the buyers had failed to meet the Bank's demands, e.g., if the Bank had allowed short‑term credit in these respects and the goods had been cleared through the Customs through an agency other than the Bank, then if the Bank's demands were not met, Friederike Ltd., would conceivably have had the power to enforce this term, that is to take possession of the goods and dispose of them at the cost and risk of the buyers a term has the effect of recognising that despite the direct contact between the Bank and the buyers, there was a legal relationship between the Bank and Friederike Ltd., also, and it was for Friederike Ltd., to satisfy the Bank's demands in case of default by the buyers in meeting it. This was strictly in order, since the imputation was to be in the name of Friederike Ltd., and the Bank's security in the transaction, viz. the shipping documents, which are in themselves a symbol of property, was to be in the name of Friederike Ltd.

The remaining terms of the agreement are brief. It was provided that the buyers, after they had cleared the consignments through the customs and Port Trust should deliver all "relative invoices, packing lists, bills of entry and other relative shipping documents" to Friederike Ltd, against a written receipt: The necessity for this term is clear, namely, that after the clearance there still remained certain steps to be taken to make it possible for Friederike Ltd., as the importers, to divest themselves of all power and responsibility in respect of the goods in question, the principal step being compliance with the law requiring them to obtain a release order from the Import control authority. A number of the relevant release orders have been placed on the record. Most of them authorised Friederike Ltd. to

"supply at controlled rates the following scheduled articles imported by you to sdealers/customers,"

but one of them is expressed as follows, viz:‑

"to sell the spare parts of mechanically propelled vehicles, imported by you . . . . . to your regular customers/dealers. "

In each case reference is made to clause 3(2) of the Essential Commodities (Distribution) Order, 1953.

There was a term placing upon the buyers the burden of meeting all obligations in the nature of customs penalties or penalties due to contravention of import trade control regulation or any other regulations. Since Friederike Ltd., were the importers, these penalties would be imposed upon them by name, and the effect of the terms is thus to transfer the obligation to make good the penalties, to the respective buyers. A general clause towards the close obliged Friederike Ltd. in the following terms:

"The sellers shall do or cause to be done all such acts, deeds and things as are necessary for the due completion of this sale."

It is common ground between the prosecution and the defence that in particular, this clause laid upon Friederike Ltd; the duty of obtaining the aforesaid release orders. It was made clear by Mr. Fikri of Western Motors Stores and by Mr. Hashmatullah of Star Motor Works, (P. W. 2), that it was fully understood by them from the very start of the transaction, that the goods to be imported could not be sold in the Pakistan market in the absence of a release order, and further that only the importer, namely, Friederike Ltd., was capable of obtaining such a release order and not the buyers from Friederike Ltd. The final term of the agreement was one providing for the consequence of a breach on the part of Friederike Ltd., in respect of any condition of the agreement and was expressed in the following terms:‑

"In the event of the breach on the part of the sellers, the sellers shall refund to the purchasers the sum of Rs. 34,200/5,832 together with all other payments made by the buyers on these consignments."

In actual effect, no breach was committed, and this clause did not come into play. In terms of the agreements, the acts to be performed by the sellers were few. Their duty was confined to authorising the National Bank of Pakistan to make available the Sub‑authorisation permit to the necessary extent, to the National Bank of India, in each of the two cases, and this they did. They were required to authorise the National Bank of India to deliver all "original documents" in respect of the relevant letters of credit to the respective buyers, and this they duly did. The letters of credit had been opened in their name through the National Bank of India in each case but the deposits and all other costs in respect of these several letters of credit were made and borne by the respective buyers. "Original documents" would have reference to bills of lading etc. such as would be necessary for eventual clearance of the goods through the customs. The condition of delivery was however that payment of all dues should be made by the respective buyers to the National Bank of India, and here a reference may (be made) to the power reserved in the agreement under which Friederike Ltd. could take possession of the go6ds and dispose of them at the cost and risk of the buyers in case they made default' in relation to the "facilities" which they were permitted to enjoy at the hands of the National Bank of India. But apart from the provisions in the agreement, Friederike Ltd., had other responsibilities, namely, to satisfy the requirements of the law in relation to import control, in the capacity of importers operating under a licence. Under section 5 of the Essential Commodities (Control of Distribution) Order, 1953, the following obligations lay upon Friederike Ltd., within one v eek of receiving information of despatch of the consignment of goods from a place outside Pakistan, the‑ importer is required to furnish to the Controller General, of Prices and Supplies with information in respect of the consignment, containing such details as the description and quantity of scheduled articles to be imported, the expected date and place of arrival of consignment in Pakistan, and how the importer proposed to dispose of the scheduled articles on arrival giving relevant particulars.

Again, under subsection (2) the importer was required to furnish to the Controller‑General the following details in respect of the scheduled articles imported, within two weeks of the arrival of the consignment in Pakistan, viz., detailed description of articles imported, and landed costs of these articles, showing customs duty, and other incidental charges, if any, separately. Among the purposes to be served by the giving of such information was that of enabling the Controller‑General to exercise his powers under sections 3 and 6 of the said Order. By section 3, the Controller‑General was empowered to nominate approved dealers", and when such dealers had been nominated, scheduled articles could not be sold to any other person or dealer except with the prior permission in writing of the Controller‑General This section also enables the Controller‑General to require by order that specified quantities of articles should be sold to specified approved dealers. No approved dealers were appointed under this provision, but with respect to the learned Judges of the Division Bench, it is not possible from this circumstance alone, to conclude as they did that

"therefore section 3 . . . . , has no application to the facts of this case."

For, it appears from the release orders mentioned earlier that they were issued by the Controller‑General expressly under the provisions of section 3, subsection (2), and that the Controller General interpreted section 3 as if. it made his per‑mission a requisite further disposal of imported goods by an importer, notwithstanding that no list of approved dealers had been issued or in other words, that by his mere failure to nominate approve dealers, the importer did not by that fact alone became free to release the imported goods in the open market, as he pleased. That is an interpretation which in my opinion the words of section 3 can reasonably bear and which is also in consonance with the purpose of the Order in question, namely to maintain a control over the releases of imported scheduled articles into the general market. Both by reason of the practice adopted, as well as by the duty lying upon the Controller‑General to implement the purposes of the Order, it seems to me that mere absence of a list of approved dealers did not enable the importer, in this case, Friederike Ltd., to sell the goods once possession had been obtained after import, without further reference to the Controller General. In this case; information under section 5 appears to have been duly provided by Friederike Ltd. to the Controller General, and m the result, in the case of each consignment as received and imported, a release order of the kind already indicated was issued in due course under section 3 (2) of the Order, thereby overcoming the prohibition upon disposal of imported scheduled articles laid by section 6 of the same Order, which is in the following terms:‑

"6. Disposal of imports-‑No importer shall sell or otherwise dispose of any scheduled articles imported by him after the commencement of this Order except in accordance with such written instructions as may be given to him in that behalf under sub‑clause (2) of clause 3:

Provided that ‑ if no such instructions are given within twenty‑one days from the latest date on which any of the items of information required to be furnished under sub clause (1) or sub‑clause (2) of clause 5 is received in the office of the Controller‑General, the importer may, subject to the other provisions of this Order, dispose of the articles."

Friederike Ltd., after compliance with the requirement of clause 5, waited to obtain instructions from the Controller‑General under this section, and did receive them within the prescribed period of 21 days, so that the occasion to utilize the franchise given by the proviso never arose. It should be noted however that this freedom was still subject to "other provisions" contained in the Order. The release orders did not specify to whom the goods could be sold, and therefore transfer of the goods to the buyers in these cases was within the capacity of the importer, duly acquired by due compliance with all the relevant provisions of the Order.

The reference to "due completion of the sale" needs some further consideration. The concern of the buyers was that they should be placed in such a position as to enjoy full rights of ownership of the goods which under the agreements they were to acquire against the consideration they had undertaken to pay. There can be no question but that, since these orders had been placed in the name of Friederike Ltd., and the bills of lading and other shipping documents' were also in the name of Friederike Ltd., in the legal sense, property in the goods vested in Friederike Ltd., qua such obligations as were enforceable under the laws controlling their import. By securing possession of these goods after the processes of importation had been gone through, did the buyers become vested with property therein They certainly could be held in law to have the possessory right, or in other words a lien in relation to all the expenses they had undergone, in the name of, and on behalf of Friederike Ltd. But these still remained for compliance, the law controlling distribution of the imported goods, and only the importer could make such compliance, by procuring a release order. Until such a release order was obtained, there was absence of power in Friederike Ltd., to part with their property in the goods. Before that happened, the buyers could not be thought, by virtue of the agreement or the operation of the general laws governing the transfer of property, to have become vested with the full right of property in the goods, extending to the power of further disposal. It is in that sense and only in that sense that the expression "due completion of the sale", can be understood, having regard to all the circumstances of this transaction.

The provision for a breach by sellers may have reference to such matters as default in issuing authorisation to the National Bank of India, or failure to comply with the requirements of section 5 of the Order, after despatch of the goods from overseas, or after their arrival, or a failure to obtain a release order after clearance of the goods. The document being in the importer's name, Friederike Ltd., were capable of frustrating the transaction at a number of stages. The provision for refund to the sellers, upon such breach would appear to militate against an interpre tation of the agreement as vesting property rights in the imported goods at any stage of the transaction, prior to the obtaining of a release order. That would not, of course, stand in the way of the buyers exercising their rights of lien in respect of any of the imported goods which may have come into their possession, for satisfaction of the seller's obligations under this term. But between the enforcement of alien of this nature and the exercise of property rights in respect of such goods, there is a distinct difference, which is of significance to the determination of such a fundamental question as whether there was in fact in this case a sale in contravention of the import control regulations.

The Judge of the trial Court dealt with the case in the following way. The charge which he framed by way of amendment of an earlier charge was in the following terms:‑

"That you Mian Muhammad Latif, 'Nasrullah and H. J. Lasarn, between 27‑5‑55 and 28‑5‑55 attempted to sell Motor Parts covered by sub‑authorization, No. RM000608 dated 10‑5‑55, Exh. 76, to Messrs Western Motor Stores, and Messrs Star Motor Works of Karachi on 27‑5‑1955 respec tively.

(a) by offering for sale the said Motor Parts.

(b) Dealt with and used sub‑authorization No. RM000608 dated 10‑5‑55, Exh. 76, in contravention of its conditions and the provisions of the law in Pakistan and towards that and executing agreements Exh. 3 and Exh. 47 receiving Rs. 34,200 and Rs. 5,852 as profit in full from witnesses Mr. Fikri and Mr. Hashmatullah of said firms respectively in contravention of Pakistan Law, viz., section 6 of Essential Commodities (Distribution) Order of 1953 and section 3 of Imports and Exports Control Act of 1950 thereby committed the offence of dealing in Black Market within the meaning of section 2 (2) (ii) and (v) thereby committed an offence punishable under sections of the Hoarding and Black Market Order, 1956." There is here a degree of condensation in expression calling for some elucidation. It appears that the Special Judge, for the purpose of the charge, assumed that the agreements executed between Friederike Ltd., and the two buyers constituted offers for sale, or an attempt to sell scheduled articles, and that this was a contravention of section 6 of the Essential Commodities (Control of Distribution) Order, 1953. The second part of the charge that relating to section 3 of the Imports and Exports Control Act, 1950 has reference to an allegation of transfer of the sub‑authorisation permit.

The sub‑authorization was expressly made subject to conditions earlier prescribed in a public notice by the Chief Controller of Imports and Exports, exercising a power relatable to the Imports and Exports Act, 1950. One of these conditions was that the sub‑authorization "was not transferable except with the permission of the Controller, Imports and Exports or a person duly authorised by him." The prosecution allegation on which the second head of charge was based was that these two transactions involved transfer of the licence pro tanto to the respective buyers.

The findings of the Special Judge were as follows. He came to the conclusion that by the agreements themselves no sale in the legal sense was effected since acts remained to be done by the sellers up to the stage of obtaining release orders. He observed further that at the time of these agreements, forward contracts were not forbidden by the law in respect of goods imported under licence, (The law has subsequently been changed, but it is unnecessary to consider the change for the purposes of the present case). The reference to "forward contracts" by the Special Judge must be understood in relation to the precise allegation of illegal sale, for in the main, the Special Judge's view was that the parties designated as buyers in these transactions were really agents acting on behalf of Friederike Ltd., and such possession as they had in respect of the imported goods at each stage of the transaction prior to the issue of the release order was in the capacity of such agents. This becomes clear from the discussion in the Special Judge's Judgment regarding the second head of charge, namely, the transfer of the sub‑authorisation. The Special Judge started by saying that a forward contract was not a complete sale, and therefore, the goods were held by the buyers in the capacity of bailees. Consequently, use of the sub‑authorisation was not in fact a transfer thereof, and there was no contravention of the condition of non -transferability. The Special Judge discussing the question of utilization of the licence observed that whatever the buyers did throughout the transaction, they did in the name of and for Friederike Ltd., and as to their eventually coming into possession of the goods, he observed as follows:‑

"They held the goods in their own custody because they had advanced the finances and therefore they would have the lien on the goods. The sub‑authorisation was in no way sold to them." And with respect to the aspect of utilization of the licence within the meaning and purpose of the law relating to distribution of imported goods, he made the following observation which is of some significance:‑

As regards the indents, the importers would only import the goods, which could readily be sold to his customers and if Messrs Frederike Ltd., asked Messrs Western Motors and Star Motors as to the type of the goods, they would require and asked them to supply such indents, this was no violation of law nor a violation of the conditions of the sub‑authori sation."

In other words, the underlying purpose of the laws controlling the import of foreign goods and their distribution in the Pakistan market was to use a limited supply of foreign currency to the very best advantage for meeting the requirements of the trade and of the public. Evidently, this purpose would be frustrated if the goods were not ordered on the basis of real knowledge of the detailed requirements of the trade and public; over a considerable future period. Therefore, postulating that Friederike Ltd., were not directly in touch with the retail or even the wholesale market for motor spare parts, (which appears to be the case) they were acting in consonance with the true purpose of the law controlling the import of such goods and their distribution, when they called in aid the special knowledge and judgment possessed by two firms such as Western Motors Stores and Star Motor Works for providing them with details of market requirements, which could be met within the available portion of their licence. Reference may with advantage be made here to a statement by Mr. Fikri of Western Motors Stores. He said:‑

"We entered for sale of these goods after we were notified by the accused Co., importers that release orders had been issued. There was no term of the agreement that we will sell the goods after release order because there was no incentive to sale quickly. The nature of the trade is such that we cannot sell quickly. If I could wait for 6 months to get the goods I could also wait for three or four days to get the release order."

In his examination‑in‑chief, this witness went to the length of saying that "legally I could sell them the same day that I received the goods", but in cross‑examination it was brought out from his mouth that no sale by him could be valid until the release order was issued, and that by the clause obliging the sellers to do everything necessary "for the due completion of this sale", it was meant inter alia that "if it was necessary to obtain the release order they would get it."

It was on these grounds that the Special Judge came to the conclusion that the case on the charges framed had not been made out against the accused persons and he accordingly acquitted them.

The learned Judges in the High Court dealt with the case from a radically different point of view in both respects. They first observed that a mere offer to sell was not a black market deal unless it contravened some Pakistan law and that under section 6 of the Distribution Order, mere offering for sale was not a contravention, but they went on to observe that if an offer was of such 'a nature that if consummated, it would result in an offence under the Hoarding and Black Market Act, then, in their own words

"it is perfectly clear to us that it will amount to an attempt to commit an offence of dealing in black market".

They proceeded, as they said, to examine the question whether there was an attempt to sell, from this point of view. The first step in their argument is an interpretation of the expression "sell" and "sale" as used in the relevant instruments, and they came to the conclusion that "prohibition of selling as provided in these provisions of law is used in the general sense as is understood by a common man and not in the technical ‑sense". They went on to observe that there was "nothing technical" about a proceeding controlled by the statutory Order, namely, the Distribution Order in the present case. From this, they proceeded to say that if what transpired between Friederike Ltd., and the two buyers was in its "popular sense" a sale or "was likely to result in a sale in contravention of the prohibitory provisions", then there would be an offence under the specified law. They derived support for this mode of ascertainment of a sale in the circumstances of the case from a decision of the English Court of Appeal in the case of Lambert v. Rowe(1)‑(1914) 1 K B 38 . This was a case of evasion of a market toll under the Markets and Fairs Clauses Act, 1847, by the method of contracting for the purchase of pigs outside the market area while the goods were to be delivered and paid for within that area. The Court of Appeal found that the sale of the goods took place outside the market area notwithstanding that possession of the goods sold was transferred within the area. Two passages have been cited by the learned Judges from the judgments delivered in this case, and each of them makes it clear that the concept of sale adopted for the purposes of that case was applicable peculiarly to transactions at markets and fairs within the meaning of that Act. In the judgment of Ridley, J. the following passage occurs:‑

"This question arises upon an Act of Parliament, the use of the word "sell" in which is, according to previous decisions, not to be construed with reference to the niceties of the law of contract of sale, or to the distinction between a sale and an agreement to sell, or to the question whether the property in the goods has passed, but is to be understood in a popular sense." (The underlining is mine).

This learned Judge went on to say that any lawyer would have said in the case that the sale took place inside the market area, but observed that

"any ordinary person, not a lawyer, who was asked the same question would unhesitatingly say that the sale took place . . . at the farm house."

The very special meaning of the expression sale' within the context of the special Act, seems to appear even more clearly from the judgment of Scrutton, J. who said that in his opinion,

"the justices in endeavoring to apply the law of the land have applied the wrong law". (The underlining is mine)and that they should have understood the word "sale" according to the "minds of farmers." The learned Judges of the Division Bench have accepted this special meaning, applied in special circumstances, following precedent decisions, as if it were applicable without qualification to the sale in the present case, and have said

"in the light of the above observations it is quite clear to us that the questions whether the property in the goods in the legal sense passed to the buyers in the present case is not of such importance."

Speaking with respect to this view; I think it is of great and real9 importance that what has fallen from the learned Judges in regard to the proper approach to the understanding of the concept of sale in relation to an intricate commercial transaction of sale; governed by a series of complicated procedures derived from the practices of commerce in more than one countries, supplemented by the complexities of a series of laws imposing controls at various stages, from the point of the provision of foreign exchange to cover the import down to the point of distribution in the general market, should not be allowed to pass unnoticed. There is, in the fullest sense, no comparison at all between a transaction such as that in the present case, and the sale of pigs at some English farm by a former to a butcher. If the Courts of the country were to introduce so loose an interpretation of the legal incidents of a sale into the appreciation of transactions of a commercial nature, within the broad context of the foreign and4 domestic trade of the country, a great and irremediable confusion would inevitably descend upon the entire law governing the vast variety of questions arising before the Courts in their task of determining legality, as between contracting parties, to transactions of sale. Even the processes of commerce themselves would be thrown into a state of uncertainty which would probably require many years for re‑adjustment of the procedures an instrumentalities in operation within the complex of the country's trade, to adapt to so new a concept of a sale as that which, in the present case, a Division Bench of the West Pakistan High Court has introduced into the whole system. The case was one lying in the international field. The goods ordered came from a number of different countries the United States, the United Kingdom, Japan. A number of different in these several countries were employed for effecting the transactions. Speaking with respect to the learned Judges of the Division Bench, it is probable that all such foreign agencies, being accustomed to act on the basis of generally accepted view of law as to what constitutes a sale in a commercial transaction, would suffer from a deep sense of confusion through being faced by the proposition that for the future, in Pakistan, the Courts would interpret such sales on the same principles as have been applied in a very special sense, and under the caution of carefully chosen words of distinction, by the English Court of Appeal, to the sale of a few pigs. I use words of emphasis and I do so because in my opinion the occasion demands the utmost emphasis to make it clear that in Pakistan as in all countries with which Pakistan has commercial relations, the concept of sale in the field of commerce is no crude or common place concept, but is one which is held in con sonance with the most generally accepted view in the world of trade at large, that is to say in a strictly legal sense, being governed by an elaborate set of laws, of which the Contract Act and the Sale of Goods Act, 1930 may be specially mentioned as being in force in Pakistan.

The learned Judges then proceeded to deal with the question whether issue of the release order was necessary for completion of the sale, and observed that even accepting this argument

"it would not mean that if all conditions had been fulfilled namely that the profit had been taken and the goods had been delivered to the buyer in implementation of the agreements, the sale did not take place."

On this foundation they held that an offence of selling the goods in contravention of the law had been committed. They went on to mention that the agreements contained no term relevant to the issue of release orders and referred to what had been said in this connection by Mr. Fikri of Western Motors Stores, for coming to the conclusion that on the point of the release order, there was no more than a verbal agreement that the buyers would not sell the goods in the open market until the release order had been issued. The learned Judges have referred to Mr. Fikri's evidence on this point as a "certain obliging statement." The description does less than justice to what was actually said by Mr. Fikri. He said that in the original draft agreement prepared by his firm, express mention was made of the release order, which was later deleted, but not by him, although he did not insist on its inclusion when it yeas explained that it was for the seller to obtain the release order and that this was included within their obligation to complete the sale‑ by doing all necessary acts. Mr. Fikri said

"the sellers had to do it and if it was necessary to get release order they would get it . . . In case of breach of this the sellers would have returned the money and I would have returned the goods."

There is nothing "obliging" about the statement. It seems clearly to be in consonance with the relevant express terms in the agreement.

The learned Judges went on to consider this "verbal agreement" as if it were a distinct, collateral agreement between the parties to the sale, relating to the buyers' subsequent use or disposal of the things sold. They referred to a case from the United Kingdom, M Bain v. Wallace(1) (1881) 6 A C 588 . The contract there is described in the judgment under appeal as an "unqualified contract of sale . . . . by which the ship builder agreed to complete and deliver to the purchasers the vessel for a price to be paid in two instalments, with power to them, in the event of the ship‑builder failing to complete the contract, to enter into possession of the vessel and complete it or sell it."

From certain correspondence between the parties, it appeared that in the event of the purchasers selling the ship further, and making a profit thereby, such profit would ensure to the benefit of the ship‑builder. The question raised was whether property in the ship had passed irrespective of the agreement contained in the later correspondence. In the judgment of Lord Selbrone in the House of Lords, expressions are used indicating the difficulty that was felt in determining whether the supplementary agreement created a merely moral obligation, or whether the matter had gone

"beyond moral obligation, into a legal or equitable obligation, which the Courts would enforce."

But, Lord Selborne was clear that this additional or supplementary agreement was "a bye‑agreement, a collateral agreement, not in the form of a regular back bond", but a consensus in respect of a possible subsequent sale, and there was therefore no ground for treating the first contract of sale as being anything other than a sale. What appears to me, speaking with respect, to be determinative of the question whether irrespective of the subsequent agreement, the earlier and "unqualified" contract of sale operated as a transfer of property is the circumstance that unless the purchaser had become seized of the property in the fullest sense, no subsequent sale could have been con templated. The stipulation in relation to a subsequent sale could therefore have no implication in reference to the acquisition of the right of property under the "unqualified contract." But I cannot see in what way the case of M Bain is at all relevant to the consideration of the present case. What is in question here is whether or not the complete proprietorship of the buyers in the goods concerned was dependent upon the sellers being armed with authority to convey the goods further, in the form of a "release order" expressly conferring that capacity on them, under the law controlling distribution of imported goods in the Pakistan market. Bearing in mind that the evidence is clearly to the effect that from the very outset, the fact that without a release order there could be no sale by the importers P was present to the minds of all concerned, it becomes impossible to regard the question of the capacity of the buyers to dispose of the goods further as being merely collateral to the true question under examination. The capacity could only be acquired if the sale in their favour was complete, and it could not be completed, whatever, acts might have been performed in relation to the goods themselves up to that point, unless the sellers had possessed the capacity to transfer the goods further. The fact should not be overlooked that the goods in the case were scheduled articles, and under the Distribution Order, by clause 3 (2), the Controller‑General was empowered by writing to "issue such incidental or supplementary instructions in writing if to any importer in regard to the sale of such articles as he deems fit". Clause 6 of the Order indeed states that if no instructions were given by the Controller‑General within 21 days of receiving the last item of information furnished under clause 5: the importer should be at liberty to dispose of the imported goods, but this was still "subject to the other provisions of this Order". Therefore, the powers of the Controller General exercisable in detail in respect of .any scheduled articles by instructions to importers were still available, so that if within 21 days of receiving the aforesaid information, the Controller -General should have intimated to Friederike Ltd., that they must act in a certain way in regard to any of the goods the had been received in the present case, such orders would have had to be obeyed, and if there were, in consequence, failure of fulfilment of the agreements with Messrs Western Motors Stores or the Star Motor Works, that would have ‑had to be accommo dated by other remedies at law.

Therefore, it seems to me that the treatment by the learned Judges of the requirement of a release order as a matter collateral to the contract, is not in accordance with the facts and the circumstances of the case, and does not take into account the nature of the control over distribution under which all parties to the case, and in particular, the sellers Friederike Ltd., were obliged to act.

As has been seen, the learned Judges were of the opinion that there was not merelyan offer of the goods but an actual sale, but they proceeded to find that even if there was no sale in the legal sense, yet the sellers had been guilty of "disposing of" the goods by placing them at the disposal of the buyers, and they referred to a Bombay case of Amrit Banwspati Co. Ltd (1) A I R 1947 Bom. 306. where it was held that ,by crushing a quantity of groundnuts in addition to the quantity which the accused‑Company was permitted to crush, there had been a disposal of such additional quantity of the goods and thereby contravention of a rule in the Defence of India Rules, 1935. Here, there is no case of crushing or conversion of the goods into another form and the question remains strictly in the legal field as to whether the act of sale had been completed without the prior permission of the Controller‑General. Here the permission was given, and it was a permission to supply' or sell' to any person of the importer's choice. It was given under a law worded so as to override all the incidents of the general law in relation to the transfer of property in goods which are the subject of a contract of sale. Despite anything appearing in the Sale of Goods Act, or in any other law relating to such transfer of property where the control legislation provided in plain terms that no sale or transfer could be made except with the permission of a designated authority, it was not open to a Court to reach the conclusion that such transfer had taken place in the absence of such permission granted. At least in a case where it was clear (1) that between the parties to the contract, at the time when it was set down in writing, it was clearly understood that such a permission was " sine qua non for completion of the sale, (2) that such permission was actually granted, and (3) until it was granted the party which was to be the transferee of the property deliberately any consciously in compliance with the law held itself under a restraint with regard to the further disposal of the goods, it should have been clear that to relate the transfer of property back to any time earlier than the grant of permission was not possible. There was positive realization of the need to comply with the controls and there was positive satisfaction of the obligation, before the buyers purported to act on the transfer, by further disposal of the goods. That was the first unequivocal act of. Proprietorship, all earlier acts, e.g. possession, being of a nature such that they could found a claim to proprietorship only by a process of construction of legal provisions,, when taken in conjunction with other facts. There is a principle applicable to the criminal jurisdiction which in my view, the circumstances of the present case require should be clearly and distinctly recalled. It is that no one shall be construed into a crime. Whereas here the law is one of absolute liability, that is to say, the requirement of mens rea is excluded, it is of special importance that the breach of a legal restraint on freedom should appear with similarly absolute clearness. It should not be one which has been ascertained by some process of involved legal construction, such as that appearing from the judgment under appeal in this case. It is to be noted further that the evidence shows that the agreements in this case were drafted after taking legal advice as to whether they were in consonance with the control legislation. The parties had not entered upon the transaction blindly, and moreover, at no stage of the transaction does anything appear to indicate that there was any attempt, by either sellers or buyers, at concealment of anything that passed, from the eyes of the control authorities.

The last question dealt with in the judgment is that of contravention of the condition of non‑transferability of the licence. The learned Judges rejected the argument that contra vention was no offence, because this condition was imposed by the Chief Controller and not by the Central Government under the Imports and Exports Control Act. They considered that conditions incorporated in the licence were conditions imposed under the Act. The sub‑authorisation is in express and clear terms on this point, and if indeed there has been a transfer of the licence, it would be difficult to avoid the conclusion that there has been a violation within the meaning of section 3(2) of the Act. The argument presented before this Court on the point was that it was for the Chief Controller to issue licences, but the major power of regulating the grant, use and transfer of the licences etc. was reserved to the Central Government, which had not imposed any condition of non‑transferability in respect of the licences generally. It is however a tenable view that a power to issue a licence includes the power to impose conditions in respect of such licences either generally or individually, and on the view already expressed concerning the powers vested in the Controller‑General in respect of the imported goods, it is) reasonable to find that a licence‑holder acting upon a licence, issued by the Chief Controller, subject to express conditions, is acting in contravention of the law and inviting sanctions, if he fails to comply with the express conditions contained in the licence.

On the point whether there was a transfer, the circumstances which weighed with the learned Judges may be enumerated as follows. Considering that the word "transferable" was a worn of the widest import including a sense of "every means by which the property may be passed from one person to another" they observed that a licence is by its nature personal to the licensee and went on to point out certain special features of the present transaction, namely, that (1) the indents and orders were prepared by the buyers, (2) the letters of credit were opened through their own bank, (3) the bank bills were retired by them, (4) the goods were cleared by them, (5) the goods were then taken to their own godowns, (h) the sub‑authorisation itself was sent. by the National Bank of Pakistan to the National Bank of India to be used for the benefit of the buyers, and (7) the sellers issued authority to the National Bank of India to deliver air shipping documents etc. to the buyers. In these circumstances in, the opinion of the learned Judges, the sellers were reduced to a mere dummy position. Although, all the documents were in their name, yet each document enured to the benefits of the buyers. The whole process was a "crude device to camouflage the real nature of the transaction" and there had in effect been "transfer of the use of the Sub‑authorisation without the permission of the Controller". The learned Judges agreed that it J such a case, the importer might use financial assistance, which they believed was not the case here, but they were satisfied than if such a financier were also allowed firstly, to hold the goods and secondly to have full dominion over them, then in their own words:‑

"it is quite clear to us that it would be nothing else but amount to transferring the licence for all intents and purposes in favour of the purchasers."

They expressed the opinions that "partial misuse of the licence is as bad as that of the entire licence".

An aspect of the whole transaction which had been mentioned and acted upon by the Special Judge, namely, the aspect of agency, seems wholly to have escaped the attention of the learned Judges of the High Court. It is true that a correct appreciation of the agreements was apt to be observed by their being described as "agreements of sale", and by the contracting parties being described as "seller" and "buyers" respectively. But despite these appearances, the terms of the agreements clearly exhibit the features of an executory contract, with precise specifications of the respective functions of the contracting parties in the execution of the contract, and of penalties in case of non‑performance. The end‑result was to be a completed transfer of property, when functions on both sides were duly performed. The commercial advantage to Friederike Ltd., in terms of money, was indeed secured at the out‑set but it should not be overlooked that in certain eventualities, they were under obligation to refund it, and the terms made it clear that the obligations of the parties were, in no sense, determined by this payment, which has the character of being a pre‑condition of entering into the contract, as well as the full consideration that was to accrue to them upon the due completion of the whole series of steps involved in the execution of the contract.

The matter may be put somewhat in this way. By the agreements themselves, provision was made for a great many of the necessary commercial steps in the transaction to be performed by the National Bank .of India, if the buyers should have so chosen. A case is easily conceivable in which the whole transaction from the placing of the orders themselves right up to the point of clearance of the goods from customs and Port Trust, might have been undertaken by the said Bank or another Bank, and the goods after clearance might have been stored in the Bank godown and all this might have been done under financial accommodation provided by the Bank. That would clearly be an agency transaction from start to finish on behalf of the buyers. Since under the law only the importer nominated in the licence could effect import and receipt, of the goods, all necessary documentation would be on behalf of, or in favour of the importer, with the Bank however acting as the importer's agent.

The case so far put does not involve any direct interest in the goods being vested in the Bank, beyond the necessity of securing the monies they had expended and their agency charges. But agencies are of immense variety and an agent with an interest in the result of a commercial transaction is by no means a rarity and there might even be a Bank, which would undertake air executory responsibility in respect of an import of this kind, on terms better than merely having a lien on the goods for securing reimbursement of its expenses and the agency charges. There might, for instance, be a stipulation that the Bank would negotiate sale of the goods in the local market, retaining the major portion of the commercial profit for itself, and paying the balance to the importer, and in such a case it would be immaterial at what stage of the contract, the latter received his consideration. The statutory instruments themselves imply that the importer would ordinarily not undertake the Commercial function of releasing the imported goods in the local market.

Here, the aid of the Bank was taken only for the purposes of the letters of credit, of receiving the shipping documents and of delivering them against payment received on behalf of the shippers, to the buyers upon instructions given by Friederike Ltd, who were the importers and as such vested with the property represented by the shipping documents. All actions in respect of clearance of the goods, through the customs and the Port Trust offices, were taken by the buyers, at their own expense, either directly or through agents, but in the name of Friederike Ltd. On the face of it, that is undistinguishable from an agency transaction, precisely as the actions of the National Bank of India in respect of the letters of credit and the shipping documents must be understood to be on their face, and in their essence, agency transactions. There is no question but that as security for their expenses and charges, the buyers, assuming that they were occupying the status of agent, were entitled to a lien on the goods received, which they would assert by retaining possession. In the premises, possession was received by them with the consent of the importers, but it is conceivable that in certain circumstances, they may have been obliged to take steps to obtain possession at law or otherwise.

The question then arises whether the fact that the con sideration for the agency actions was not in the form of a percentage of the money outlay involved, with or without fixed charges for services but by the acquisition of a major interest in the end commercial result of the entire transaction, leaving a percentage worked only on the foreign exchange element involved byway of commission or profit for the importers, is sufficient to overcome in favour of the buyers, the subordination involved in an agency transaction, to such an extent as to elevate them to the position of quasi‑principals in respect of the licence, qua the true principals, namely, Friederike Ltd. To effect, at law. a transfer of the licence, something should have been done which gave to the transferee, by substitution a status equivalent to that of the transferor at least in substance, if not in appearance, Something must appear to indicate that the subordination involved in becoming an agent for another, had been in substance removed, that, in fine, the agent was placed in a position to operate the licence, substantially in independence of the licence‑holder, his principal. The only circumstances relied upon to produce that result is that at the end of the transaction, when the goods had been freed of all administrative controls, they became the property of the agent to negotiate in the open, market, for his own profit while the licence‑holder, who had at no time pointed with his power of operating the licence, ‑was content to receive a commission, by way of percentage as stated. It seems to me impossible to regard the single circumstance as destructive of the agency. Instances where an agent derives benefits (in) terms of money, from a transaction which greatly exceed those reaching the principal, are not far to seek. The proprietor of a factory for instance, may, employ an agent to operate it himself receiving a con sideration amounting to only a small percentage of the eventual profits, as the price of his being relieved of all the labour, the hardships and risks attendant on the successful operation of the factory. A Zamindar may employ agents to exploit his lands consideration of fixed payments, which may be only a small part of the profits derivable from those lands. In neither case would the position of the agent be thought in law to challenge com parison with that of the principal on the mere footing that the agent derives a greater profit from the agency than eventually reaches the principal.

Therefore, in my view, on the point of transfer, the decision must turn upon whether, at any stage during the period that the statutory controls remained effective in respect of the transaction, the agents, namely the buyers, became vested themselves with the rights and liabilities under the licence; by act of the licence‑holder, or by the effect of the agreements themselves. I do not find it possible to come to such a conclusion in the facts and the circumstances of this case. The two transactions in their entirety appear to amount to no more than utilization of fortries of the licence, through agents, acting throughout in that capacity, and at no relevant time did such agents come to occupy the position of principals, qua the licence either nominally or substantially. Consequently, there was no transfer of the licence, or any part thereof, involved in these transactions.

For, these reasons, I would allow this appeal and acquit the appellant on both counts.

FAZLE‑AKBAR, J

.‑I agree with the conclusion at which my Lord the Chief Justice has arrived. I would however, add that; the finding that there was no transfer of licence will be confined to the facts of this case.

B. Z. KAIKAUS, J.

‑I will not repeat the main facts which appear sufficiently in the judgment of my Lord the Chief Justice. I will take up first the question whether the agreement in dispute amounted to transfer of an import licence because the decision of this question will affect the decision of the other question, that is, whether there was an attempt to sell the goods in contravention of the Essential Commodities Control Order.

On a consideration of the agreement I have come to the conclusion (I say so with great respect) that either we do away altogether with the law relating to illegality of transfer of a licence and hold that a person can never be guilty of a transfer of a licence or we hold this agreement to be such a transfer. If we hold the present agreement to be valid we will be granting to every holder of licence the free right of transfer of his rights under an import licence on receipt of a consideration. I bad questioned Mr. Brohi during arguments as .to when there would be a transfer of a licence if the present case was not one of such transfer. The answer Mr. Brohi gave was that there will be a transfer only in case the transferor executes an irrevocable power of attorney in favour of the transferee enabling him to do all the acts in connection with the import licence which the transferor could perform. I am unable to see how the mere absence of an irrevocable power of attorney can absolve the transferor of his liability in connection with the transfer of a licence if, though he does not execute a power of attorney, he undertakes to do everything in connection with the import licence which, has to be done by him on account of the fact that the licence is in his name. To say that without executing an irrevocable power of attorney this offence cannot be committed would amount to granting a free right of transfer of licence to licence holders if they just omit granting a power of attorney though otherwise under the deed that is executed the rights of parties are the same as they would be in case of a transfer.

The main question to be asked in such cases is: Was this a genuine transaction of sale of goods which had been imported or were to be imported by the transferor and belonged to the transferor, and were sold to the transferee for consideration or was it a case where the transferee has become the true importer having paid consideration for the transfer of the licence and the name of the transferor is henceforth being used (like the name of a zenamidar) in connection with the import because the licence stands in his name and all action must necessarily be taken in his name.

What I am going to say is in accord with and only in amplification of what was said in S. Sibtain Fazli v. Messrs Star Film Distributors (1)P L D 1964 S C337 as to the considerations which will govern a decision of the question of transfer of a licence. I will discuss this matter from various angles, but I will begin the discussion like this. If two persons agree that a licence held by one be transferred to the other for consideration what is the form that the transfer will take Obviously they cannot write out a deed purporting to be a transfer of a licence, the transfer being prohibited and such a deed being of no legal effect. The agree ment that would be executed will necessarily take the form of an agreement in respect of sale of goods. The transferor will pose as the person who has either got the goods or is going to get them and who is transferring those goods to the other party. He will, however, take care that he gets the money which is the consideration for sale of licence and that henceforth he is not liable in the matter whatsoever: This is the crucial point in such cases. The transferor will on getting his consideration for transfer be relieved of all liability in respect of the matter, that is, the transferee will undertake that all the burden which may fall on the transferor because of the use of his name will be borne by him (the transferee). As the licence stands in the name of the transferor it is he who is liable for payment to the dealing bank as well as to the Government in respect of certain dues and taxes. The transferor will have to include some term in the agreement by which he may be secured against any failure on the part of the transferee to discharge his liabilities. Such a term may take the form that if the transferee failed to discharge all these liabilities the transferor will take over the goods and will recoupe himself to the extent to which it is necessary for discharge of those liabilities. Of course the transferor will not take any further benefit than the price which he is receiving for the sale of licence, but he wants to be insured against liabilities which may fall on him and may keep some control on the goods to meet such situation. While the transferor will make it plain in the document that all liabilities whatsoever are to be discharged by the transferee, the transferee may insist that the right which he is going to purchase, that is, the right to import goods should be insured to him and that if he does not receive that right then he should not be liable to make payment. What I mean is that the transferee will want a true right to import the goods. If it turns out that the goods which he wants to import cannot be imported on the licence at all though the transferor is representing that they can be so imported then he should not be liable for any payment, because he is purchasing a right to import goods of his choice.

These are the terms which will ordinarily be incorporated in an agreement which is truly an agreement for sale of a licence though it is in the form of an agreement for sale of goods. There may be some variations of this agreement to suit particular circumstances, but what I have stated above will be its substantive terms,

Now if we consider the agreement in dispute in the light of what 1 have stated above it will be found that it is just the agreement which on a sale of a licence will be executed. The transferor has taken a fixed amount of consideration for the transfer of his rights which amount has no reference to the price of goods which are to be imported. He has made it a definite condition that this money which he gets as profit is his in all circumstances and that it does not in the least matter to him whether the goods are shipped at all or are damaged or lost in transit. He gets the sale price of the licence and his liability is only this that the goods which the transferee wants to import can be imported on this licence. The transferee has told him that he wants spare parts of particular makes of trucks, etc. The licence was not truly speaking applicable to such spare parts because it mentioned trucks and spare parts "thereof". It related to the spare parts of the trucks which were named in the licence but the transferee wanted to have spare parts of some other trucks. There was a doubt as to whether the spare parts which the transferee wanted to import could be imported on that licence and the transferee was not prepared to pay anything unless they could be imported. So the transferor agreed that if they could not be so imported then he would not be entitled to retain the profit. On the other hand if they could be imported the transferor was not liable if the transferee committed any mistake in preparing the list of goods to be imported.

This is one method of looking at the matter and I will now go into the question as to what criteria can be employed for determining whether an agreement amounts to a transfer of a licence or an agreement for sale of goods. To me it appears clear that the question for consideration in such cases will be does the transferor get under the deed the same rights as he would have if he sold the licence or does this agreement subject him to the liability to which he would be subject if he really was the importer. 1f the rights which a person gets under an agreement are just the same or substantially the same as he would get if he sold a licence then it should be held that he is selling a licence. We are concerned with the effect of a. transaction. We know that this transaction cannot be put in the form of a licence and must necessarily be put in the form of sale of goods. The form therefore is immaterial and what we have to consider are only the legal effects which means the rights of the parties under it. Now is not the agreement in dispute giving to the transferor all the rights which he would have if he executed an agreement of sale of licence There can be little difficulty in holding that he gets all and perhaps more than what he would get if he executed a deed selling the licence.

Another method of determining this matter is to ask the question: who is the true importer Is it a case where the goods which are being imported in fact belonged to the so‑called transferee, but he is using the name of the transferor for import or is, it a case where the transferor really owns the goods which were imported and then sold to the transferee. I have already referred to the fact that under the agreement the right of the transferor to that which is called profit is wholly unaffected by non‑shipment of goods or by loss partial or total of the goods. The clause speaks of relieving the transferor of all loss in connection with "shipments, partial shipments, shortages, damage or loss in respect of the consignments" and as my Lord the Chief Justice, has put it, in accordance with this clause, "all risks in these respects were to be borne by the buyers". This is by itself sufficient to show that the transferee was not regarding himself as the owner of goods. The other point to consider is that if he was the owner then what was being spent by the transferee in connection with the import, that is, payment to the exporter, to the shipping company, to the bank, and to the Government, should be a loan which was being advanced by the transferor to the transferee. It cannot be said that the goods belonged to the transferor who was importing them and yet the money with which these goods were purchased was not a loan. If the transferor was the importer all the money would be paid on his behalf and it would be a loan to him by the transferee: But there is not the slightest indication in the whole of this agreement that the transferor would in. any way be indebited to the transferee in respect of the payments he would be making. Also in such a case when the goods are not shipped at all or are lost during transit or for some reason they do not come to Pakistan and therefore are not delivered to the transferee, the transferee should be entitled to recover the loan from the transferor and yet under the agreement the transferor has not taken the slightest responsibility in this connection. There is no explanation at all as to how the transferor can be entitled to retain the "profit" paid to him as consideration and also not discharge the loan if there is only an agreement to sell the goods. This is a point which may properly be stressed. If there is just an agreement for sale of goods and the goods are not delivered to the vendee on what hypothesis can the seller retain the consideration and also refuse to re‑imbursed the vendee for what is spent by him Let me repeat that if the seller was the owner of goods all payments made by the transferee were on behalf of the transferor. It is only if the transferee himself was the owner of goods and the transferor was simply allowing his name td be used that these terms of the agreement can be explained.

Another question that arises in connection with this agreement is this: what was to happen if goods were not purchased at all Goods may not be purchased for a number of reasons. The goods may not have remained available in the market at all for purchase. The company which was manu facturing the goods may have failed or for some reason may have ceased manufacturing those goods. How is the transferee in such a case entitled to retain what he calls profit Obviously if the goods are not available they cannot be purchased and there cannot be a sale. If there was only an agreement to sell the goods there would in fact be a failure to perform the agree ment by the transferor if the goods are not purchased and the transferee would be entitled to sue the transferor ‑for damages on account of failure of the transferor to perform his contract. The transferor would be pleading that on account of some unforeseen events he was unable to purchase the goods and therefore he should be relieved of the liability for damages but surely there would be no question of the transferor retaining the amount of profit which he received at the time of the execution of the agreement. Bat the provision in this agreement is that even if the goods are not shipped at all the profit is to be retained by the transferor. The only hypo thesis on which the retention of profit by the transferor in such a case can be justified is that it was an agreement for sale of a licence.

Even if the goods were not purchased because the transferee did not provide the funds still the transferor cannot be entitled to retain profits on an agreement to sell when he is unable to sell the goods whatever the reason therefor what can be said in favour of the transferor in such a case is that the transferee agreed to advance a loan but failed to perform his contract. The transferee may in that case be liable to damages for not advancing the loan to the transferor for purchase of goods, but in respect of the agreement to sell the transferor cannot be entitled to retain the consideration. Let me repeat here that the purchase was to be made according to the contention of the appellant for his benefit. The contention before us was that the transferee was acting as a financier, because the appellant, the holder of a licence had not sufficient money to buy the goods himself. Now if he for failure of the financier to advance the money the goods are not purchased the transferor cannot retain the profit on goods which have never come into existence and can only sue the transferee for damages for failure to advance a loan.

Take next the case where goods are purchased and money is paid by the transferee for. the purchase, but through the fraud of the exporter they are not shipped at all or instead of goods stones or a similar material is put in a consignment. How again the transferor is entitled to retain the amount of profits on goods which are neither shipped nor received by him nor ever delivered by him to the transferee

I may state that the fact that the goods would be covered by insurance does not appear to be of any relevance. We are concerned with the rights of parties under the agreement. There is no reference in the agreement to an insurance, but in any case the nature of the transaction is to be decided with reference to rights and liabilities created by the agreement and not with reference to the question whether the loss of one of the parties is recoverable from a third party or not. I may also point out that the insurance company may fail or it may refuse to pay and a suit may take twenty years or it may not be possible due to lack of jurisdiction to sue a foreign company at all or war or some other unforeseen event may destroy the chances of recovery of the amount insured. We are really concerned with the implications of the agreement. Why does this agreement say that the loss will fall on a person who is still to purchase goods which may or may not come into existence and not on the person who is the owner of goods

From the above discussion it should be clear that though of necessity the agreement in dispute had to be put in the form of an agreement for sale of goods it grants to the transferor all the rights which he would have had if he had sold the licence and relieves him of all liabilities which he would have had if he was himself purchasing and importing goods from the foreign market.

I am not inclined with great respect to my Lord the Chie Justice to accept that in such a case the transferee should be regarded as acing all the time only as an agent of the transferor and therefore he cannot be regarded as a transferee of the licence. The rights which the parties have under the agreement are wholly inconsistent with the transferee being only an agent of the transferor in relation to import. If the transferee was only an agent there would be no basis for the transferee retaining the profit if no goods were shipped at all or if for any reason they could not reach Pakistan nor would the transferee be liable for the loss if they were partly or wholly damaged during transit. If the transferee had paid to the bank as well as to the Government only as an agent of the transferor then, in case of non‑shipment or loss of goods he would be entitled to receive the whole amount he spent from the transferor along with the profit. In the' preceding discussion I have shown that the terms of the agreement are consistent only with the transferee being the true importer of goods. We are to consider the substance of a thing and not its form. The form necessarily had to be that of an agreement for sale. The transferee cannot have it both ways. He cannot enter into an agreement which absolves him of all risks and liabilities to which he would be subject if he himself was the importer and which grants him just the benefit he will have if he sold the licence and yet escape liability for sale of a licence. If an agreement like the present is not hit by the law then there is no bar to a sale of a licence. Such an agreement is all that the holders of licences need in order to sell the licences.

I would hold that there has been a transfer of a licence. The Chief Controller of Imports had power, as my Lord the Chief Justice has found to impose a condition in respect of the transfer of the licence. The appellant having violated a condition of the licence was guilty under section 3 of the Hoarding and Black Market Order and I would uphold his conviction on this ground. On the view that I take no question arises as to whether the appellant sold or attempted to sell goods in contravention of legal provision. There was just a transfer of a licence and there was in fact no agreement to sell goods.

While I would uphold the conviction I would considering that a release order had subsequently been issued by the Chief Controller of Imports and Exports reduce the sentence to a fine of Rs. 1,000.

ORDER OF THE COURT

In accordance with the view of the majority we acquit the appellant on both the counts.

A. H. Appellant acquitted.

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