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Civil Suit No. 110 of 1963, decided on 31st May 1966.
Government of India Act, 1935
, S. 175(3)‑Contract on behalf of Government‑Provisions of S. 175(3) directory and not mandatory‑Provisions place certain duties on officer concerned Failure to comply with provision, however, does not invalidate contract‑‑‑Constitution of Pakistan (1962), Art. 212.
Where the Deputy Director, Department of Supply and Development, Ministry of Industries was fully clothed with the necessary authority to deal with the contract in dispute it was held that mere failure of such officer to comply with certain specified obligations and conditions relating to performance of his duty would not invalidate contract so as to prejudice the interest of innocent contractors belonging to the public.
Pakistan v. Amin Agencies P L D 1962 Kar. 467 and Maxwell on Interpretation of Statutes, 10th Edn., p. 376 ref.
Ibadat Yar Khan for Plaintiff.
Shah Jamil Alam for Defendants.
Date of hearing : 18th May 1966.
The plaintiff's suit for recovery of Rs. 63,597.50 is based on the following material facts. Plaintiff is a registered firm; and in reply to a tender of the defendants for the supply of 1,00,000 sq. feet of water‑proofing material, known as jutmat or jutoid, offered to supply the required quantity at the rate of 0‑15‑6 ps. per sq. foot F. O. R. Karachi. He submitted samples on the 17th of June 1960. On 7‑7‑1960, the defendants agreed to purchase jutmat at the rates offered by the plaintiff, it being stipulated that the supply would be made within 4 or 5 months from the date of the formal acceptance of the plaintiff's tender. Defendants confirmed the acceptance of the plaintiff's tender on 9‑7‑60, it being further stipulated that the goods would be inspected at the plaintiff's godown and after the approval of the inspecting officers, delivery was to be made to the defendants F. O. R. Karachi, the Railway Receipt to be despatched to the Assistant Engineer IV Central Contract Division No. 1, Pak. P. W. D. Rawalpindi, who was the consignee of the goods. It is stated that the defendants agreed to pay 95 % of the value of the goods against the inspection report, and the balance of the 5 % was to be made good by the defendants against further copies of the inspection notes duly respected by the consignee at Rawalpindi. On 13‑7‑60, the plaintiffs offered inspection of about 50,000 sq. feet of jutmat to the inspecting authority. The inspection was effected on the 21st of July and a note accordingly issued by the Director of Inspection. On 23‑7‑60 this quantity was delivered to the defendants F. O. R. Karachi, and two Id. Rs. obtained covering 140 bundles and 128 bundles of the goods in dispute. On presentation of the inspection report regarding this quantity, plaintiff was paid Rs. 46,028 being the 95% of the value of the goods with the balance outstanding at Rs. 2,422‑9‑6. On 10/207‑60. inspection of the balance of the tendered consignment of 49,988 sq. feet was offered, which was inspected on 11‑8‑60, and the inspection note issued. On 13‑8‑60 a bill for Rs. 46,006 for the 95 % of the value of the goods inspected was sent to the defendants. Copies of the inspection reports 2, 3 and 5 were received by the consignee at Pindi on 16‑8‑60. On 15‑8‑60 the plaintiff delivered the balance of the contracted goods under two R. Rs. which were despatched to the consignee at Pindi. It is the plaintiffs case that after the goods had been delivered to the defendants and payments became due, the defendants rescinded the contract by their letter dated 16th August 1960, notifying the plaintiffs that they did not require the goods. This letter was received by the plaintiffs on 17th August. Plaintiff's case also is that thus the defendants are liable for the balance of the first consignment, the full value of the second with interest at the rate of 9 % per annum, the cause of action being said to arise on the 16th of August 1960 when copies of the inspection notes were received by the consignee at Pindi, and when the defendants failed to pay the balance of the value of the first consignment.
2. The defence in the written statement is one general allegation of conspiracy between the me6bers of the staff of the defendant and the plaintiff. In particular, it is, stated that tenders were called for the supply of 1,00,000 sq. feet of water‑proofing material, but that these tenders could not have been invited from the contractors. The case was one of limited tenders which under the rules they issued only to firms registered with the defendants. In the present case, no invitation to tender was published in the press, and the invitation was confined to firms registered with the defendants, and it is averred that the plaintiffs in conspiracy with a member of the defendant's staff got an invitation to tender issued to those who were not, registered with the defendants, and that this could not be done without the sanction of the Director of Purchase of the Department of Investment, Promotion and Supply, Ministry of Industries, whose sanction did not exist in the present case. According to the defendants, the present case was one of a single quotation which could not be sanctioned by the Deputy Director. The plaintiff did supply the quantity of jutmat stated by him in conspiracy with the staff members of the defendants without giving the name and address of the manufacturers, and without, stating that the price was one permissible for him to charge as legitimate profit, and that the price demanded did not vitiate the restrictions runner the law. Again basing their case on an alleged conspiracy, it is averred that the Deputy Director, Purchase concerned who accepted the plaintiff's tender, had no authority to do so, and 4hat the entire transaction was illegal, without authority and void, the plaintiffs tender being cancelled and for the first time rejected on 11‑8‑60 when the fraud was discovered. The agreement was cancelled as the contract was illegal. The inspection notes did not affect the position of 'the defendants. The goods were received by the indentors and the bills were got sanctioned by the plaintiffs with the help of the staff members of the defendants, and in spite of the plaintiff being informed on the 11th of August 1960 not to submit any more goods, the inspection notes were got issued by him, and the goods got delivered for inspection on 20th July 1960. It is further averred that the plaintiff was informed by the indentor by trunk call and telegram on 11‑8‑60 not to despatch any goods, in spite of which the plaintiff railed the goods on 15‑8‑60. Their case further is that the goods of the second consignment were lying with the defendants at the risk pf the plaintiff and that the suit was mala fide and vexatious.
3. The following issues were framed by consent of the parties.
(1) Was the tender for supply of water proof material called from the public or were the tenders issued to individual registered contractors as pleaded in para. 2 of the plaint and para. 2 of the written statement
(2) Were the plaintiffs registered contractors with the defendants and if not, what is its effect
(3) Was the issue of tender to the plaintiffs illegal
(4) Could the quotation given by the plaintiffs be sanctioned by the Deputy Director
(5) Was the offer made by the plaintiffs to supply the material in conspiracy with certain members of the staff of the defendants as alleged in para. 3 of the written statement
(6) Was the acceptance of tender of the plaintiffs the result of conspiracy between the plaintiffs and certain members of the staff of the defendants, and if it was, does it create any obliga tion on the defendants.
(7) Was there a contract between the plaintiffs and , the defendants
(8) Did the indentor of the goods in suit inform the plaintiffs by trunk call and telegram on 11th August 1960 not to send the goods any more, and the plaintiffs fraudulently got the inspection note issued after the aforesaid instructions ante dating the same as 11 th August 1960
(9) Whether the contract was cancelled on 11th August 1960
(10) Were the defendants entitled to cancel the contract
(11) Whether the suit is mala fide vexatious. Are the defen dants entitled to special costs under section 30‑A, C. P. C.
4. My findings are as under:‑
Issue 1.‑Tenders were issued to the plaintiff as one of the contractors on the list of the defendants.
Issue 2.‑ Yes.
Issue 3.‑No.
Issue 4.‑Yes.
Issue 5.‑ No.
Issue d.‑No.
Issue 7.‑Yes.
Issue 8.‑No proof.
Issue 9.‑Yes.
Issue 10.‑No.
Issue 11.‑.‑No.
5. The following witnesses were examined by the parties. Mr. Muhammad Farooq one of the partners of the plaintiff‑firm, was the only witness examined to support, plaintiff's claim. Muhammad Saleem, Exh. 12, the Assistant Director of the Department of Investment, Promotion and Supply, Mr. Hamza Ali, Exh. 13, Director of the Investment, Promotion and Supply, and Mr. Jamil Bilgrami Superintendent of the Hyesons, gave evidence for the defendants.
6. Muhammad Farooq's evidence is that they are registered suppliers and contractors to the Government since 1948, and had tendered for the supply of material in dispute called jutmat or jutoid. The acceptance of their tender is Exh. 8. The contract between the parties is Exh. 9. It was stated that the contracted goods were supplied in two instalments after due inspection by the defendant's officers, after which followed the inspection notes and the first payment of Rs. 48,004 was made against the R. R. from the Audit office at Karachi. The second consignment valued at Rs. 46,000 teas despatched to the P. W. D. at Pindi for which no payment had been made. The letter stopping supply of the contracted goods was received by the plaintiffs on 16‑8‑60 being Exh. 10 sent through a special messenger. He has stated that the contracted material was purchased from the open market from Khalid & Co. and denied any fraud, forgery or conspiracy with any of the staff of the defendants.
7. Defendant's witness Muhammad Saleem, the Assistant Director incharge of the Section dealing with cement products, roofing material, etc. has stated that jutmat is a betuminised heisan used for water‑proofing of roofs, the proprietary rights of which were with Hyesofs Steel Mills. Hyesofis were initially asked to tender. Their sample was sent to the Pakistan Council of Industrial and Scientific Research to opine or to the quality of the material and the rate of 0‑6‑8 per sq. foot F. O. R., Karachi inclusive of sales tax. He states that their section F‑4 had not advertised for the tender, and that the Deputy Director has no power to negotiate in respect of any negotiable contract, although in cross‑examination ire admitted that Assistant Directors are comment to sign contracts on behalf of the President, provided they have obtained the necessary sanction and gone through the normal official procedure. Mr. Hamza Ali, the Director of the Department of Purchase concerned, has stated that the contract in dispute was governed by Form P. S. 35 in regard to the general conditions of contract applicable to the Department of Supply and Development in the Government of Pakistan. According to him a contractor can charge a reasonable price, the plaintiffs being invited to tender his tender being a single tender. Initially he stated that the purchasing powers and also that of sanctioning are with the Secretary of the Department concerned who has delegated them to the Director‑General who exercised these powers jointly with the Associate Financial Adviser, and that no sanction was obtained for the contract in suit: When the contract was placed with the plaintiffs, he was the Director concerned, and the necessary approval was not obtained, and that the Assistant Director concerned was Mr. M. M. Khan who had died and the Deputy Directors Mr. Maroof Hussain was on leave. The contract was cancelled under the orders of the Director‑General.
8. In cross‑examination he has stated and admitted in terms of the powers of the officers of the Department of Supply and Development concerned embodied in the Manual, Exh. 14, that the Deputy Director has the power to purchase up to a limit of Rs. one lac. He went on to state that Mr. Maroof Hussain was one of the Deputy Directors and it was he who had endorsed Exh. 17 which is dated 10‑5‑60, that the plaintiffs were on the approved lists of suppliers of jute products, and that enquiries could be made from them with regard to the supply of such products. His department he said deals with Hesian and jute products, and although at an early stage he stated that he was unaware if invitations to tender had been issued to other contractors, he corrected himself by admitting that this was so adding that only four of them had responded, of which three did not quote. He also admitted that at an early stage the matter was referred to the Finance Department for their concurrence. Admitting that the item in suit was a jute and asphalt item, he could not state the reason for the cancellation of the tender, and further stated that the tenders in the present suit was not a limited tender. Mr. Jamil Bilgami stated that Hyesons have the exclusive right to produce jutoid the normal price being 0‑9‑0 per sq. foot towards which Government was allowed 20% rebate and the price came to 0‑6‑9 ps. The market price of this material was 0‑9‑0 per sq. foot plus sales tax. He states that an order valued at Rs. 10,000 would be given a 10% discount.
Reasons.
Issue No. l.‑The statement of Mr. Hamza Ali on the issue is quite definite. He admits on this aspect of 'the case that inquiries were issued to possible suppliers of which four responded and three did not quote, leaving the plaintiff in the picture as the sole tenderer for the supply of the item in suit, and automatically answering this issue.
Issue No. 2.‑On the same evidence as has been recorded on Issue No. 1, and on the statement of Mr. Hamza Ali, the plaintiffs were in fact contractors registered with the defendants. The noting on Exh. 17 by Mr. Maroof Hussain on the plaintiff's inquiry from the defendant's department regarding their requirements of jute products, is to the following effect:
"If I remember correctly, Jacobs are on the approved list of suppliers of jute products. Please ensure that inquiries on this subject are sent to them."
Decides what finding there should be on this issue.
Issue No. 3.‑Defendants have been unable to examine any evidence to establish that the issue of the tender to the plaintiff was illegal. Plaintiff is an approved supplier and contractor of the defendant's department. An inquiry was issued to the plaintiff with regard to the jutmat for which the plaintiff's had tendered in the normal procedure, and openly quoted 0‑15‑6 per sq. foot as their rate. Besides, it has not been shown that the issue of the tender or inquiries from the plaintiff were made in an underhand manner. Finding accordingly.
Issues Nos. 4 and 10.‑These issues must also be decided on the evidence of Mr. Hamza Ali, who is a Director of the defendant concerned department. Although he has stated that at no stage was the case fret up to him for approval, according to para. 15 of the Manual of Office Procedure with regard to the purchase of the Department of Supply and Development, and in terms of para. 115 with regard to the purchase of stores, it has been established that a Deputy Director can make purchases, subject to the conditions laid down in para. 116 up to' rupees one lac. Paragraph 116 refers to the financial control over purchases made by the Director, D. G. S and D, subject to the reference and control of the Ministry of Finance for indents above the value of Rs. 50,000. In the present case the tender was for Rs. 96,875 and on the admission of Mr. Hamza Ali that at the inquiry stage the matter was referred to the Finance Department for their concurrence, it cannot be said with any justification, that the Deputy Director of the Department concerned, did not have the power to sanction the tender. Admittedly he was empowered to do so. Besides Mr. Saleem, another official of the defendant's department has admitted that the Assistant Directors are competent to sign contracts on behalf of the President, provided they have obtained the necessary sanction and gone through the normal official procedure.
8. Learned counsel for the defendants has contended that the Deputy Director of the Department concerned could not sanction the agreement with the plaintiff and that, in any case, because of the high rates quoted by the plaintiffs, defendants were entitled to cancel the contract. It is argued on the basis of rule 2(b) of Form No. 35 of the Manual of Office Procedure which reads as follows :‑
"A person signing the tender form or any document forming part of the contract on behalf of another shall be deemed to warrant that he has authority to bind such other and if, on enquiry, it appears that the person so signing had no authority to do so, the purchaser may, without prejudice to other civil and criminal remedies, cancel the contract and hold the signatory liable for all costs and damages."
That the Deputy Director concerned did not have the authority to sign the agreement, although the purchaser or the other party may hold the signatory officer liable for all costs and damages. It is stand that the remedy for the plaintiff is to sue the officer concerned. Learned counsel for the plaintiff has referred to Pakistan v. Amin Agencies (P L D 1962 Kar. 467), in support of his contention that it has been established from the evidence of the two officers of the Department concerned, that the Deputy Director had the inherent powers and was fully clothed with the necessary authority to deal with the contract in dispute, but that the manner of the exercise of his authority or the procedure involved is an internal matter for departmental consideration. It is quite clear on the basis of para. 115 of the Manual referring to certain limits of each officer of the Department of Supply and Development that the Deputy Director had the power to effect purchases worth up to the value of rupees one lac.
9. Mr. Ibadat Yar Khan hiss also referred to section 175 (3) of the Government of India Act, 1935 by which all contracts made in exercise of executive authority of the Federation or by the Governor‑General, shall be executed on behalf of the Governor-General by such persons and in such manner as he may direct or otherwise.
10. Maxwell in his Interpretation of Statutes, 10th Edition, page 376, has referred to the performance of a duty in a certain manner or within the time specified and under which specified obligations and conditions in the performance of a public duty, and that such prescription may well be regarded as intended to be directory only in cases when injustice or inconvenience to others who have no control over those exercising the duty would result, if such requirements were essential and imperative.
11. In P L D 1962 Kar. 467, referred to earlier, their Lordships in assessing the arguments urged before them, and the decisions in two unreported judgments in First Appeal, alluded to the observations made in a contract being expressed to be made by the Governor‑General, where a duty is placed on the officer concerned to adhere to such a form of expression, and observed that it may be argued that failure to comply with such a provision should not be held to invalidate the contract as on such a view, innocent contractors belonging to the public, might suffer hardship and inconvenience. The instant tender was an open one and there is no evidence that it was accepted illegally or without the authorities concerned being unaware of its terms and conditions. There is no evidence worth consideration examined by the defendants to establish that the Deputy Director concerned did not have the authority to accept the tender. It was not possible for the plaintiffs to know which of the officer were, in the course of official procedure, authorized to accept a tender and for sign a binding agreement. Special emphasis is sought to be laid on the fact t64t the Deputy Director concerned accepted a high price for the tender at 0‑15‑6 per sq. foot. When Hyesons who have the exclusive right to produce jutmat, hat, quoted 0‑6‑9 per sq. foot. Muhammad Saleem, an Assistant Director, has stated that Hyesons were called upon to tender for the contract in dispute. It appears that even Hyesons were not able to produce the required quantity, or quality, and, therefore, they were not able to quote or supply. The plaintiffs have stated that they purchased these goods in the open market and from Khalid & Company. Plaintiffs were not asked to state where they had made the purchases from. The defendant department and their officers accepted the tender with open eyes fully clothed with the necessary authority, and having the inherent power to accept the tender. They accepted and paid for the first consignment leaving a balance in favour of plaintiff. The second consignment is admitted to have been received by them. I also do not feel that the price quoted by the plaintiffs was necessarily excessive, for even Hyesons with their rights and scope for production of the indented articles, were unable to quote, the item being apparently difficult to manufacture and/or obtain in the quality and quantity required by the defendants. Besides, the commercial risk involved, there are the normal hazards of trade to be taken into account. Even if it is conceded that the rate quoted by the plaintiffs was slightly high, this circumstance cannot devolve against the plaintiffs for the lapse, if any, of the officers of the defendant‑department. I am unable to agree that the grievance of the defendants is statutory, and on that account that the plaintiffs must suffer. My finding on this issue will therefore be that the quotation given by the plaintiff could be and was in fact sanctioned by the Deputy Director, and that the defendants were not entitled to cancel the contract.
Issues 5 and 6.‑Mr. S. I. Alam for the defendants, has conceded that there is no evidence of conspiracy led or examined by the defendants to support the averments on the basis of which these two issues were framed. They must, therefore, be decided against the defendants.
Issue 7.‑It is conceded that there was a contract between the plaintiff and the defendants. Finding accordingly.
Issue 8.‑No evidence has been led by defendants on this issue also. The telegram alleged to have been sent with regard to the contracted items, reached Karachi and could, as the learned counsel for the defendants has urged, have been immediately conveyed to the plaintiff. He could even have been informed well in time by a special messenger, as was done on the 16th of August. Plaintiff's witness Muhammad Farooq has stated that the letter Exh. 10, informing him that the contracted items were no longer required by the Department of Supply and Development, reached him on the 16th August after he had despatched the second consignment to Pindi, and that this was sent by a special messenger. There is no evidence of any attempt having been made to inform the plaintiffs immediately stopping further supplies before they had despatched the second consignment to the consignee at Rawalpindi. Plaintiff's witness Muhammad Farooq, has stated that he received the telegram from the P. W. D. consignee at Pindi after the goods of the second instalment had been sent. My finding accordingly on this issue will be against the defendants.
Issue No. 9.‑Prima facie, it appears that the contract was cancelled on the 11th August 1560, but for reasons given on my findings on Issue No. 8, this will have no effect on the claim of the plaintiff, owing to the defendants being unable to inform the plaintiff before the despatch of the second consignment.
Issue No. H.‑There is no evidence also on this issue. The question then of special costs being awarded to the defendants also does not arise. .
12. It is established that there was an agreement for the supply of julmat between the plaintiff and the defendants. It is admitted that the two consignments were despatched by the plaintiff after due inspection by the defendant's officers. Defendants have been unable to establish that plaintiff's tender could not have been accepted either owing to the high rate quoted or that the officer concerned did not have the authority to do so. The result will be that on the admitted position and the established facts, plaintiff is entitled to a decree as prayed against the defendants with costs and interest of 6 % per annum from the date of suit till payment.
A. E. Suit decreed.
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