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Suit No. 80 of 1964; decided on 12th September 1967.

, S. 42‑Declaratory suit‑Expression "legal character"‑Meaning‑Equivalent to word "status" ‑Suit for declaratlon that plaintiff is not in default of stipulated contract‑Not maintainable‑Words and phrases "Status"‑Meaning.

The plaintiffs claimed relief in the following words :‑----

A declaration as against all the defendants to the effect that the plaintiffs have not committed any breach whatsoever of any of the terms and conditions of contract dated the 29th of June 1963, between the plaintiffs and the defendant No. 1 and, therefore, their security in the form of bank guarantee to the extent of Rs. 66,000.00 is not liable to be cashed by the defendants Nos. 1 and 2 from the Defendant No. 3:

Held, that the declaration sought cannot be granted in the suit under S. 42, Specific Relief Act, 1877, and for that reason the suit was incompetent and not maintainable.

The suit was primarily, with respect to the pecuniary rela tionship between the parties.

A further objection, to the maintainability of the suit was that the declaration sought was neither with respect to the plaintiffs' legal character, nor with regard to any right to property. Under section 42 of the Specific, Relief Act, 1877, it was only with regard to these matters that a person could come to the Court for declaratory relief. The phrase "legal character" has been used, in the sense of "status"; which is constituted by the attributes which the law attaches to a person in his individual and personal capacity and which, according to Holland, is referable .to such legal conditions as (1) sex, (2) minority, (3) 'patria potestas' and manus', (4) coverture, (5) celibacy, (6) mental defect, (7) bodily defect, (8) rank, caste and official position, (9) slavery, (10) profession, (11) civil death, (12) illegitimacy, (13)' heresy, (14) foreign nationality, and (15) hostile nationality. According to Salmond, the term "status" is usually confined to personal legal condition or, personal capacities and incapacities, or compulsory as opposed to conventional personal conditions.

In this sense, the expression will include personal rights and burdens to the exclusion of the proprietary relations, contractual capacities and incapacities, or legal conditions imposed upon a person by law without his own consent as opposed to the condition which he has acquired himself by agreement, such as the position of a slave. A declaration that the plaintiff has not committed breach of the terms of a contract is a declaration neither with regard to any legal character, nor any right to or in any property.

The plaintiffs' remedy could have been either a suit for rescission of the contract, or for specific performance if so permitted, or for damages for its breach.

M. A. Naser v. Chairman, Pakistan Eastern Railways anal others P L D 1965 S C 83 ; Nathu Ram v. Mauls and others A I R 1937 Lah. 25 and F. Gopal Das Permanand v. L. Mul Raj A I R 1937 Lah. 389 ref.

, Ss. 54 (c) & 56(1) read with S. 145, Contract Act (IX of 1872)‑Suit for injunction that defendant Bank be restrained and prohibited from paying over guarantee amount to person entitled, to guarantee arranged for by plaintiff‑Not maintainable‑Surety Bank entitled, under S. 145, Contract Act, 1872, to indemnify itself only if guarantee was "rightfully" paid‑Plaintiff would have efficacious relief in proceed ings by Bank for indemnifying itself in respect of payment ,of guarantee money to person entitled.

A. H. Pirzada for Plaintiffs.

S. A.‑Nusrat with Kamal Asfar for Defendant No. 1.

J. H. Rehmatoolla : amicus curiae.

Dates of hearing: 29th September, 1st November 1966, 31st January, 14th March, 25th May, 9th, 17th and 30th August 1967.

The plaintiffs have sued the Government of East Pakistan, the Coal Controller, East Pakistan, and the Habib Bank Ltd., for declaration that the plaintiffs have not committed any breach of the contract dated 29th June 1963, for supply of steam coal to the Government of East Pakistan and, further, that the Govern ment of East Pakistan is not entitled to require payment of Rs, 66,000,00 (rupees sixty‑six thousand) from the Habib Bank Ltd., under its guarantee for due performance of this contract, and for an injunction to restrain the Habib Bank Ltd., from making payment of this amount to the Government of East Pakistan.

2. The relevant facts material for the decision of this suit, as set out in the parties pleadings and in the evidence recorded in the suit are these. The Coal Controller, Government of East Pakistan, by notice issued on 9th May 1963, invited tenders for supply of 40,000 to 50,000 ton of steam coal for delivery at Chittagong or Chalna. The plaintiffs submitted their tender on 24th May 1963, which has been produced in Court as Exh. 6. The Government of East Pakistan accepted this tender by two documents, that is, Exh. 9, which is the advance acceptance letter dated 29th June 1963, and Exh. 10, of the same date, which contains detailed terms and conditions of acceptance of the plaintiffs' tender and, consequently, constitutes the contract between tae parties. Under this contract, the plaintiffs undertook to supply 60,00) long tons of steam coal from China to the defendants Nos. 1 and 2, with 10 per cent. margin Clause 7 of Exh. 10 provided for immediate shipment of the contracted goods and fixed 30th November 1963, as the date by which the total contracted quantity was required to be shipped. Under clause 13, the price of coal was 52 shilling per long ton F. O. B. payable to the suppliers, namely, China National Metals and Minerals Import and Export Corporation, Peking, by irrevocable, trans ferable, divisible, assignable and confirmed letter of credit payable in sterling. Payment of freight was made payable at 39.6 sh. per ton by a similar later of credit to be opened in favour of the plaintiffs' nominee, namely, Alavi Sons (U. K.) Ltd., London. Clause 14 of the contract required shipment to be made at intervals of 15 days. Under clause 19, time for completion of the shipment was made of the essence of the contract, and the plaintiffs were made leable, in case of non- delivery of the contracted goods, for payment of liquidated damages at 2 per cent. of the value of undelivered quantity and, further, to indemnify the purchaser, namely, the Government of East Pakistan, for loss sustained if "risk‑purchase" was made by the Government in the event of non‑delivery of the contracted quantity or any part thereof. Under clause 20, the plaintiffs were required to give security for the due performance of the contract by depositing with the Government Rs: 66,000.00 (rupees sixty‑six thousand) in cash and by executing a security bond in the sum of Rs. 30,000.00. Under clause 21 this security was liable to be forfeited if and when the plaintiffs made default in the performance of the contract.

3. The condition as to cash deppsit of Rs. 66,000.00 was latter substituted by bank guarantee in the like amount and, accordingly, the defendant No. 3, on the plaintiffs' request, issued this guarantee by Exh. 14 dated 31st July 1963, undertaking unconditional payment to the Director, Directorate of Supply, Government of East Pakistan, the sum of Rs. 66,000.00 "without any further question or reference to the contractor on contractor's failure to perform the contract in conformity with the contract". Exh. 14 further contained the stipulation that the guarantee will remain valid and is force up to 31st December 1963, by which date the claims, if any, under the guarantee should be lodged with the defendant No. 3.

4. The letter of credit for the price of coal was duly estab lished by the Government of East Pakistan but, according to the plaintiffs, letter of credit for freight was not received by their nominee, namely, Alavi Sons (U.K.) Ltd., until 26th July 1963. On receipt of this second letter of credit, the plaintiffs entered into a shipping contract with Messrs M. K. F. import and Export, Beirut, Lebanon for shipment of coal from ports in China to ports in East Pakistan. This contract, which has been brought on record as Exh. 13, provided for payment of freight by the plaintiffs to the carriers by 31st August 1953, through transfer of the letter of credit, which had already been opened in United Kingdom, to Lebanon. It appears that due to change introduced in the banking practice relating to documentary credits by the Uniform Custom and Practice, 1963 Revision, the letter of credit for freight could not be transferred to Beirut, unless the credit was amended by incorporating therein an express provision for transfer of credit outside the United Kingdom. The advice as to the necessity for this amendment was received by the Bank of China, with whom the freight letter of credit had been opened by the Government of East Pakistan, only on 9th August 1963 and by letter Exh. 15, dated 10th August 1963 the Bank of China requested the State Bank of Pakistan for permission to amend the letter of credit so as to make it transferable to Beirut. This permission was granted on 13‑8‑1963 by Exh. 16, but the Govern ment of East Pakistan's advice for amendment of the letter of credit was communicated to the State Bank of Pakistan only on 2nd September 1963, by Exh. 22. The delay in the communication of this advice was explained in this letter as being due to the fact that the earlier communications on this subject had not been received by the Government. Thereupon, the letter of credit was amended and information to this effect was given by the Bank of China to Alavi Sons (U. K.) Ltd. by cable which was confirmed by the bank's letter Exh. 24, dated 12‑9‑1963. But by this time, the shipping contract which the plaintiffs had entered into with M. K. F. Import and Export of Beirut had already expired. It was stated at the Bar that the plaintiffs failed to obtain extension of this contract and also faced difficulty in obtaining alternative shipping space as, by that time, shipping space had come under heavy demand due to the conclusion of contract for supply of wheat between the United States and the U. S. S. R. These difficulties were brought by the plaintiffs to the notice of the Coal Controller, who was requested, by Exh. 28, dated 19th October 1963, and Exh. 29, dated 31st October, 1963, to extend the duration of the letter of credit so as to allow shipment up to 31st March 1964. On 6th December 1963, the Coal Controller wrote Exh. 30 to the plaintiffs to the effect that‑---

(i) the Government of East Pakistan had .been approached for the extension of the period of shipment ; and

(ii) The plaintiffs should arrange for extension of the validity of the bank guarantee up to 30th June 1964.

The plaintiffs claim that in consequence of this communication from the Coal Controller, they wrote two letters to the Habib Bank Ltd., the defendant No. 3, on 14th December 1963. One is Exh. 36/1, produced by Basharat Hussain, a senior officer in the Foreign Exchange Branch of the defendant No. 3, who was summoned as Court witness. The plaintiffs in this letter referred to the defendant No. 3's letter dated 14th December 1963, and authorized this defendant' to extend the validity of its guarantee up to 30th June 1964. The copy of the other letter written by the plaintiffs on 14th December 1963, to this defendant, was produced by the plaintiffs' witness, Mehr Alavi as Exh. 31. This letter is to the effect that extension of the bank guarantee is conditional on the extension of shipment period, which condition the defendant No. 3 was required to insure before extending the guarantee. The Court witness, Basharat Hussain, however, stated that the original of Exh. 31 had not been traced in the records of the defendant No. 3, nor was their any entry of receipt of this letter in the inward register of this defendant.

5. The extension of the period of guarantee was given by the defendant No. 3 by Exh. 34/2, dated 16th December 1963. The plaintiffs, however, failed to obtain extension in the shipment period from the Government of East Pakistan, who treated the plaintiffs to be in default in the performance of the contract and consequently made a claim upon defendant No. 3 for pay ment of Rs. 66,000.00 under its guarantee. The plaintiffs there upon brought the present suit to claim the reliefs mentioned above upon the following pleas ;

(i) that the plaintiffs were not in breach of the contract for supply of Rs. 60,000.00 long tons of steam coal to the Govern ment of East Pakistan ;

(ii) that the guarantee, Exh. 14, dated 31st July 1963, lapsed on 31st December 1963, as no claim thereunder was till then lodged by the Government of East Pakistan with the defendant No. 3 ; and

(iii) that the extension of the period of guarantee was subject to extension in the period of shipment, which not' having been granted by the Government of East Pakistan, no claim could be made by the latter upon the defendant No. 3 for payment of Rs. 66,000.00.

6. The suit has been defended only by defendants Nos. 1 and 2. The defendant No. 3, though served with summons in the suit, remained absent throughout the proceedings. The defen dants Nos. 1 and 2 have filed lengthy written statement which, however, do not clearly set out these defendant's case with regard to the plaintiffs' claim in suit. From what. I have been able to ascertain from the pleadings and the statements made at the bar in answer to questions from the Court, these defendants appear to have denied responsibility for delay in the amendment of the letter of credit for freight, or to have held out any assurance to the plaintiffs' for extension of the shipment period anti also the plaintiff's contention that the extension of the guarantee was subject to extension in the shipment period. The plaintiff's plea that the guarantee given by Exh. 14 lapsed as no demand there under was made with the defendant No. 3 up to 31st December 1963, does not appear to have been clearly denied by the defendants, and the statement in the plaint that the State Bank of Pakistan made a demand upon the defendant No. 3, before 31st December 1963, for payment of Rs.66,000.00 by this defendant to the Government of East Pakistan, was also denied by the defendant No. 1 as well as the defendant No. 2. Thus, the Government in fact admitted that demand for payment of Rs. 66,000.00 was made only under the extended guarantee after 31st December 1963.

7. On 8‑3‑1965, the allowing consent issues were filed by the plaintiffs and adopted by the Court:

"(1) Did the plaintiffs fail to perform the contract in conformity with the terms and conditions thereof and thereby the amount of security/guarantee furnished through defendant No. 3 for Rs. 66,C00.00 is liable to be forfeited in terms of contract

(2) Where the defendants Nos. 1 and 2 responsible for delay in opening a letter of credit thus causing delay in performance of the contract as alleged by the plaintiffs

(3) Was the period of guarantee extended up to 30‑6‑1964 conditionally as alleged by the plaintiffs If so its effect "

It will be noted that even these issues do not clearly set out the defendants' case. The parties, however, proceeded to trial and tendered numerous documents in evidence, in addition to which the plaintiffs examined, P. W. 1, Meher Alavi, P. W. 2, kiaz Muhammad Khan, and P. W. Fazal Bhai, and the defendants examined D. W. 1 Fakhruddin Siddiqi and D. W. 2 Saifuddin Ahmad. No attempt was made by either Party to examine defendant No. 3, or to summon from it correspondence relating to the guarantee or extension in the period of its validity. Consequently, I, on my own motion, issued summons to the defendant No. 3 to produce these documents, which was done through this defendant's senior officer, Basharat Hussain, who was examined by me as Court witness. This, Basharat Husain produced defendant No. 3's file relating to the guarantee given by this defendant on the plaintiffs' behalf to the Government of East Pakistan. The two important documents contained in this file are the Government of East Pakistan's letter dated 14th December 1963, under the signature of Mr. Muhammad Noor Zaman, Coal Controller, by which the defendant No. 3 was required to make payment of Rs. 66,000.00 under its guarantee dated 31‑7‑1963 which was brought on record as Exh. 36/3, and the plaintiffs, letter of the same date requesting the defendant No. 3. to extend the period of the validity of its guarantee, up to 30th June 1964, which was brought on record as Exh. 36/1. This last letter does not contain any condition that the extension should be subject to extension in the shipment period. It was, however, explained by the plaintiffs' witness, Meherali Alavi, that this condition was contained in Exh. 31, which it also dated 14tb December 1963, and which was sent to the defendant No. 3 with Exh. 36/1. The Court witness, Basharat Hussain, however, stated in his evidence that the defendant No. 3's record did not contain any trace of Exh. 31, nor was there any entry in this defendant's inward registers with regard to receipt of this letter. Both Exhs. 31 and 36/1 purport to be in reply to the defendant No. 3's letter dated 14th December 1963, which, however, was not produced by any of the parties, namely, the plaintiffs or the defendants Nos. 1 and 2, nor was it found in the file brought by Basharat Hussain. The documents produced by Basharat Hussain show that the Government of East Pakistan did lodge its claim under the original guarantee on 14th December 1963, that is, before the expiry of the period of validity of this guarantee, but the defendants Nos.1 and 2 did not take up a plea to this effect in their written statement, an omission which I have been unable to understand or appreciate. As a matter of fact, the contest between the plaintiffs and the defendants Nos.1 and 2 centered on the limited question whether the sum of Rs. 66,OC0.00 was payable to the Government of East Pakistan under the extended guarantee.

8. The issues settled with the consent of the parties raise three points, that is, the question relating to the extension of the guarantee; the default of the plaintiffs in the performance of the contract, arid the claim of the Government for payment of the amount guaranteed by the Habib Bank Ltd. In my opinion, however, it is not necessary to decide ‑these points in this suit, because a preliminary question, which goes to the root of the suit, arises, that is whether the suit itself is maintainable. Though the maintainability of the suit has not been questioned in their written statements by the first two defendants, yet the Court is under duty. to determine whether the reliefs sought by the plaintiffs can at all be granted by the Court. I would, for convenience, here reproduce the very words in which the plaintiffs have claimed these reliefs in paragraph 27 of the plaint:

"(a) a declaration as against all the defendants to the effect that the plaintiffs have not committed any breach whatsoever of any of the terms and conditions of contract dated the 29th of June 1963, between the plaintiffs and the defendant No. 1 and, therefore, their security in the form of bank guarantee to the extent of Rst 66,000.00 is not liable to be cashed by the defendants Nos. 1 and 2 from the defendant No. 3,

(b) for an injunction against the defendant No. 3 restraining and prohibiting them from making over the payment of the guaranteed amount of Rs. 66,000.00 or any other amount to the defendants Nos. 1 and 2 whether directly or indirectly by themselves or through their agents, servants and subordinates in any manner whatsoever."

9. Thus, under the first relief the plaintiffs seek declaration with regard to the contract under which they undertook to supply 60,000 long tons of steam coal, and a further declaration that the guaranteed amount is not payable by defendant No. 3 to the defendants Nos. 1 and 2. Under the second relief, the plaintiffs seek an injunction to restrain the third defendant from making the payment of the guaranteed amount to the defendants Nos. 1 and 2. The suit is thus, primarily, with respect to the pecuniary) relationship between the parties. As shown in the arguments of l Mr. J. H. Rehmatoola who; on my request, appeared as amicus curiae and to whom I am grateful for valuable assistance extended in this case, a suit of this nature is not at all maintain able. This is the view taken in two decisions of the High Court of Lahore, Nathu Ram v. Maula and others (A I R 1937 Lah. 25) and F. Gopal Das Permanand v. L. Mul Raj (A I R 1937 Lah. 389). In first case, Abdul Rashid, J. as he then was held that section 42 of the Special Relief Act was not applicable to cases where a declaratory relief was sought in respect of rights arising out of a contract which would effect only the pecuniary relationship between the parties to the contract. In the second case, it was held by the same learned Judge that declaration that a certain sum deposited by the plaintiff with the defendant as margin money is accountable by the defendant to the plaintiff cannot be granted under section 42 of the Specific Relief Act as it affects only the pecuniary relationship between the parties to the contract.

10. A further objection to the maintainability of the suit is that the declaration sought by the plaintiffs is neither with respect to the plaintiffs' legal character, nor with regard to any right to property. Under section 42 of the Specific Relief Act 1877, it is only with regard to these matters that a person can come to the Court for declaratory relief. The phrase "legal character" has been used, as held in K. P. Ramakrishna Patter v. K. P. Narayana Pattar and others (I, L R 39 Mad. 80) in the sense of "status",; which is constituted by the attributes which the law attaches to a person in his individual and personal capacity and which, according to Holland, is referable to such legal conditions as (1) sex, (2) minority, (3) 'patria potestas' and manus', (4) cover ture, (5) celibacy, (6) mental defect, (7) bodily defect, (8) rapk, caste and official position, (9) slavery, (10) profession, (11) civil death, (12) illegitimacy,, (13) heresy, (14) foreign nationality, and (15) hostile nationality. According to Salmond, the term "status" is usually confined to personal legal condition or, personal capacities and incapacities, or compulsory as opposed to conventional personal conditions. In this sense,l the expression will include personal rights and burdens to the exclusion of the proprietary relations, contractual capacities and incapacities, or legal conditions imposed upon a person by law without his own consent as opposed to the condition which he has acquired himself by agreement, such as the position of a slave. A declaration that the plaintiff has not committed breach of the terms of a contract is a declaration neither with regard to any legal character, nor any right to or in any property. This point is now conclusively settled by the decision of the Supreme Court in M. A. Nasir v. Chairman, Pakistan Eastern Railways and others (P LD 1965SC83) from which I would, with respect, reproduce the following observations of Fazle‑Akbar, J.

"In the suit there was also a prayer for a declaration under section 42, of the Specific Relief Act that the contract in question was still subsisting. The learned counsel has pot pressed this point before us. Under the provisions of section 42 of the Specific Relief Act a person entitled 'to any legal character' or to 'any right to property' can institute a suit for a declaratory relief in respect of his title to such legal character or right to property. It will, therefore, suffice to say that section 42 does not contemplate a suit like the present one."

This pronouncement should effectively dispose of doubts, if any, with regard to the maintainability of the present suit, which I hold accordingly to be misconceived and incompetent. The plaintiffs remedy could have been either a suit for rescission of the contract, or for specific performance if so permitted, or for damages for its breach but none of these courses have been pursued by the plaintiffs.

11. The relief of injunction sought by the plaintiffs to restrain the defendant No. 3 from making payment of the guaranteed amount to the Government of East Pakistan also cannot be granted, because, firstly an injunction of this nature does not come within the scope of Chapter X of the Specific Relief Act, under which alone the plaintiffs could come for preventive relief, and, secondly, the reliefs which the plaintiffs seek to obtain in this suit can be effectively obtained in other usual proceedings. Under section 54, a perpetual injunction may be granted to prevent the breach of an obligation existing in favour of the plaintiff, whether expressly or by implication, or in cases where the defendant invades or threatens to invade the plaintiff's right to, or enjoyment, of, property. Obligation here means any duty enforceable at law. Under section 56 (i), the Court would not grant injunction when, equally efficacious relief can be obtained by any other usual mode of pro ceedings.

12. The question is whether the defendant No. 3 has threatened to invade the plaintiffs' right to property. In other words, have the plaintiffs any moneys in deposit with defendant No. 3, and does this defendant propose to apply these moneys to the payment of the guarantee No such case has been set out in the plaint. The point, therefore, does not concern with any danger or threatened injury to the plaintiffs' property. The relief sought by the plaintiffs could, at the most, be brought under the first part of section 54, under which an injunction to prevent breach of an obligation would be granted by the Court. The problem, therefore, resolves itself into the question, doe defendant No. 3 owe any obligation to the plaintiffs The plaintiffs were unable to precisely formulate the obligation owed to them by the defendants. They would, however, say that the defendant is under obligation not to misuse the plaintiffs deposits by appropriating the same to the guarantee given to the Government, or by making payment of the guarantee, or by retaining it wrongfully as security. But it is not claimed that the plaintiffs have any deposits with defendant No. 3, the misuse whereof would constitute breach of a banker's obligation to his customer. If the surety has applied its awn funds to the discharge of the guarantee, the question then would be whether the payment has been made rightly or wrongly. Under section 145 of the Contract Act, the surety can claim indemnity from the principal debtor only for moneys rightfully paid by the surety under the guarantee, and not for any moneys which he has paid wrongfully. Wrongful payment is not a legal injury, and consequently cannot constitute breach of an obligation, because, if payment has been made wrongfully, the surety would be unable to claim indemnity from his principal debtor. Thus accepting the plaintiffs' case that the proposed payment of the guarantee by the defendant No. 3, would be wrongful, as the plaintiffs have not committed breach of contract, this would not give any cause of action to the plaintiffs, for the defendant No. 3A would have no legal claim for indemnity on the plaintiffs for payments which are made wrongfully. Wrongful payment would not be a payment under the guarantee at all, and would be s nullity as regards the principal debtor, who would have ample opportunity to protect himself against such payment if the surety brings a suit against him for indeminity. Such a suit would be art efficacious relief for the plaintiffs, and the existence of this relic) presents a bar to the claim for injunction by reason of the pro visions of section 56 (i) of the Specific Relief Act.

13. The above discussion leads to the conclusion that neither the declaration, nor the injunction, sought by the plaintiff can be granted in this suit which for this reason, is incompetent and not maintainable. Accordingly, I would dismiss the suit, but as the judgment has proceeded on grounds different from the pleas taken by the defendants Nos. 1 and 2 I decline to make any order as to costs in their favour.

A. H. Suit dismissed.

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