Find a Lawyer

Criminal Appeal No. 94 of 1967, decided on 21st May 1969.

S. 45‑Partnership, dissolution of‑Dissolution of firm does not discharge firm's liabilities to third parties‑Clause in deed of dissolution discharging partner from liabilities of firm‑Operative only between parties inter se.

S. 23‑-- Firm exporting certain items to foreign country and undertaking to repatriate sale proceeds within a fixed number of months but failing to remit amount to relevant quarters‑Accused a partner of firm at time of export contending that he had separated from firm which stood dissolved and thus no liability attached with him‑ No evidence produced to show non‑payment of sale proceeds by importer before dissolution of firm‑Mere dissolution of firm, in circumstances, held, not sufficient to relieve accused of his liability.

Ss. 4 & 25‑Word "firm"‑‑ Only a convenient designation for describing partners‑Not by itself a legal entity‑Each partner liable for firm's acts or acts of other partners done in course of firm's business‑Undertaking given by accused partner and other partner on behalf of firm before dissolution of firm to repatriate sale proceeds of goody exported Accused liable for breach of undertaking even after dissolution of firm.

S. 23 Foreign exchange‑Conviction for non‑repatriation of export proceeds not proper if it was for reasons and circumstances beyond exporter's control‑Exporter however taking no genuine steps to effect repatriation, neither approaching relevant quarters for help nor inducing forger partner to effect same‑Failure to repatriate sale proceeds, held, not due to circumstances beyond accused's control in circumstances.

Tawhid Ali Sardar v. State P L D 1969 Dacca 395 rel.

Zia G. Shaikh for Appellant.

Hassan Inamullah for the State.

Dates of hearing : 7th and 8th May 1969.

The appellant has been convicted by the learned Sessions Judge, Karachi sitting as the Foreign Exchange Tribunal under section 12(1) read with section 23 of the Foreign Exchange Regulation Act, 1947 and sentenced to pay a fine of Rs. 8,Ou0 or 9 months' R. I. in default. He has filed an appeal against his conviction and sentence which has now come up for hearing before me.

2. According to the prosecution, the facts material to this appeal are as follows : The appellant and Ghulam Rasool (an absconder) were partners in a firm carrying on business in Karachi known as "United Carpet Industry" (hereafter called the Firm). Between 22nd April 1961 and 27th July 1961 this Firm had exported certain items such as pickles, shoes etc. to England on an undertaking to repatriate to Pakistan the sale proceeds of the said exports within a period of four months. The bankers of the Firm were the National and Grindlays Bank, Karachi and the United Bank, Karachi. The goods were to be delivered to an English Firm known as Clyde House Manufactur ing Company (hereafter called Clyde House) Westmore Lane Newcastle Upon Tyne against a trust receipt on at2 undertaking to remit the payment for the said goods within three months. It is material to observe that Clyde House was managed by two directors, namely, the father and mother of Ghulam Rasool the absconder. However, although the goods arrived in Newcastle, no payment was made by Clyde House. The appel lant has produced little evidence about the reasons for the failure of Clyde House to purchase these goods. According to a letter dated the 2nd November 1961 written by Clyde House to the Firm (which is at page 71 of the paper book) the goods were sub‑standard and not up to the sample, therefore Clyde House offered to purchase them if the price was reduced to half. But it is doubtful if this was the correct position. Thus, according to a letter by the Firm to the United Bank, Karachi (page 64 of the paper‑book) Clyde House had faced difficulties in the previous year, therefore it had net been able to remit the amount for the goods sent to them. According to another letter by this Firm to the National and Grindlays Bank, Karachi dated the 20th January 1960 the Directors of Clyde House were coming to Karachi to discuss the dispute with the Firm. Finally, it would appear from a letter written by Ghulam Rasool, the absconder, on the 2 I st May 1964 to the United Bank, Karachi that the said Ghulam Rasool was in England and had been trying to sell the goods himself, but there were difficulties in selling the shoes because they were of a size smaller than the normal British sizes. I have observed that the Firm had given an under taking to remit the sale proceeds of its exports within four months. As this was not done, the State Bank of Pakistan had given extension of time for the remittance of the said sale proceeds up to 30th May 1962 vide Exh. 30. However, the State Bank of Pakistan got fed up of these delays and by its letter dated the 11th December 1964 Exh. 4 it gave a notice to the appellant to show cause why he should not be prosecuted for the failure to repatriate the sale proceeds of the goods exported (Exh. 4). In his reply dated the 26th December 1964 (Exh. 5) the appellant stated that he had separated from the Firm on 15th October 1961, that he knew nothing about what bad happened to the goods shipped and that the sole responsibility for remitting the sale proceeds of the goods shipped was that of his ex‑partner Ghulam Rasool. The State Bank was not satisfied with this explanation and after investigations were completed, the appellant was prosecuted and convicted as stated.

3. In his statement in the Sessions Court, the appellant admitted the shipments by his Firm and the fact that the sale proceeds of the goods shipped had not been brought into the country. However, he stated that the Firm, which had exported the goods, had been dissolved, and on this ground he disclaimed responsibility for the failure to remit the sale proceeds of the goods shipped from Pakistan. He also examined witnesses to prove the dissolution of the Firm, and produced copies of his letters to Clyde House the Pakistan High Commission in London, and to the Newcastle Chamber of Commerce to show that he had made enquiries about Clyde House but that his efforts were of no avail. The learned Sessions Judge has held that the dissolu tion of the firm by itself did not relieve the appellant of his liability to repatriate the sale proceeds of the goods exported, and he has also held that the appellant had failed to prove that the failure to effect the said repatriation was beyond his control, therefore he had convicted the appellant. Learned counsel criticized this finding on various grounds which I shall now consider.

4. According to the copy of the deed of dissolution of the firm Exh. 50 produced by the appellant, the business of the firm was suspended on 15th October 1961 whilst the deed of dissolu tion was executed on 4th July 1962. According to the terms and conditions of this deed the business of the firm was taken over by Ghulam Rasool, the absconder, and the appellant had no interest in the business of the firm as from 15th October 1961 and was not to be responsible for any liability of the firm, Learned counsel submitted that under this deed of dissolution Exh. 50 the appellant's liability ceased as from 15th October 1961 which was within the period of four months from the last shipment effected by the firm, therefore he submitted that the appellant was not liable for the failure to repatriate the sale proceeds of the said exports. However, if the business of the firm had really been suspended with effect from 15th October 1961, the appellant could easily have produced the books of account of the firm or the assessment orders of the Income‑tax Authority to prove his claim. He examined his Accountant Baqi Ali to prove that a copy of the deed of dissolution had been forwarded to the banks of the firm and to the Income‑tax Officer. But even this witness did not say that the business of the firm had been suspended before the date of dissolution of the firm. There is absolutely no evidence to support the claim of the appellant that the firm's business was suspended in October 1961. There fore I hold that the firm carried on business at least till the date of its dissolution.

5. The next question for determination is whether the deed of dissolution of the firm was genuine I have observed that the appellant has only produced a copy of this deed. However, P. W. Baqi Ali has said in evidence that this was a true copy of the original deed which had been sent to the Income‑tax Officer. He also said that signed copies of this deed had been sent to the banks and the firms. However, P. W. Muhammad Shammuddin, as officer of the National and Grindlays Bank, has said in evidence that his bank had not received intimation from any of the partners of the firm about its alleged dissolution. It is also significant that when he was confronted in cross‑examination with a signed copy of this deed of dissolution, he identified the appellant's signature on it froth the specimen signature card signed by the partners of the firm when they had opened an account with his bank, but he said : "I say that the signature of Ghulam Resool over it (copy of the deed of dissolution) does not tally with the signature of Ghulam Rasool on the specimen signature card and other documents . But the appellant had examined another officer of the same bank D.W. Muhammad Shamimuddin D.W. Shammuddin produced the inward register of the bank and according to an entry in that register dated the 19th July 1962, the bank had received a letter with a copy of a deed of dissolution from the firm. However, this witness was not able to produce the copy of the deed of dissolution and said that, although an effort had been made to search it, it was not traceable. I am not inclined to believe the evidence of this witness, and I accept the evidence of P. W. Muhammad Shammudin. Accordingly the appellant has failed to prove that he had sent a copy of the deed of dissolution of his firm at least to the National and Grindlays Bank. No evidence has been produced to show that such a deed had been received either by the Income‑tax Department or his other bankers, therefore I am of opinion that the deed of dissolution was not a genuine document.

6. However, even assuming for the sake of argument that the deed of dissolution was genuine, it could help the case of the appellant only if he had proved that the payment by Clyde House of the goods exported by the firm had been made after the dissolution of the firm. As it is not denied that the firm paid income‑tax and had even an income‑tax consultant; it was for the appellant to prove that no payment had been made by Clyde House before the dissolution of the firm. Even the firm's Accountant D. W. Baqi Ali ‑has not given any evidence in this respect, therefore, the appellant has failed to prove that no pay ment had been made by Clyde House before the firm's dissolu tion. As it was admittedly the appellant's duty to effect the repatriation of the sale proceeds of the goods exported during the pendency of the firm, the mere fact that the firm was dissolved is not sufficient to relieve the appellant of liability. Therefore, the learned Sessions Judge has very rightly disbelieved the appellant's plea.

7. As learned counsel fear the appellant has argued vehe mently that the appellant ceased to be liable on the dissolution, of the firm I shall briefly consider this argument. It is settled law that the dissolution of a firm does not discharge the‑partners of their liabilities to third parties therefore in the instant case the clause is the deed of dissolution (Exh. 50) discharging the appellant from the liabilities of the firm would be operative only as between him and the absconder Ghulam Rasool. However, learned counsel for the appellant submitted that the undertaking to repatriate the sale proceeds of the goods exported, which had been given in the G. R. P. I. Forms Exhs. 10, 11 and 12, had been signed by the firm, therefore the appellant was not liable. The argument is devoid of merit. A firm is only a convenient designation for describing the partners of whom it consists and by itself it is not a legal entity. Further, each partner is liable for the acts of the firm and/or the acts of the other partners in the course of the firm's business, therefore, as D the G. P. R. I. Forms have been signed by or on behalf of the firm, the appellant and Ghulam Rasool the absconder are both liable under those forms, as they had thereby covenanted to repatriate the sale proceeds of the goods exported from Pakistan. Accordingly, I agree with the view of the learned Sessions Judge that the dissolution of the firm did not relieve the appellant of his liability to repatriate to Pakistan the sale proceeds of the goods exported within the time prescribed by the State Bank of Pakistan.

8. Finally, learned counsel for the appellant argued that the prosecution had to prove that the appellant had intentionally committed default in failing to repatriate the foreign exchange earned on the goods exported and that the prosecution had failed so to prove, therefore, the appeal was fit to be allowed. In support of this submission he relied on a judgment of the Dacca High Court in Tawhid Ali Sardar v. State (P L D 1969 Dacca 395). A. Subhan Choudhuri, J. has observed in the said case as follows:‑

"The law applicable to this case may be clarified at the outset. Conviction under section 23 of the Foreign Exchange Regulation Act can only be based upon a finding that the non‑repatriation of the export proceeds was intentional and deliberate. There cannot be any conviction under this section if the exporter was unable to repatriate the sale proceeds for reasons and circumstances beyond his control. This pos tulates honest attempts on his part to honour the undertak ing. The immunity will not be available to him if his conduct is mala fide. Merely taking some steps to show that he made attempts at repatriation will not exonerate him from the liability of conviction. It is only when it is proved that the accused made bona fide attempts to repatriate the sale proceeds of the exported goods in accordance with his undertaking that he will be entitled to acquittal."

I am in respectful agreement with these observations, however, as the appellant had exclusive knowledge of his own efforts to repatriate the sale proceeds of the goods exported I have to examine whether the evidence produced by him is sufficient to prove that he had intentionally failed to repatriate the sale proceeds of the goods exported.

9. The appellant has produced copies of his letters Exhs. 60 and 61 written to the father and the mother of Ghulam Rasool (who were both Directors of Clyde House) requesting them to arrange payment for the goods exported to them. Next he has produced copies of three letters Exhs. 62, 63 and 64 written to the High Commission for Pakistan in London making enquiries about Ghulam Muhammad the father of Ghulam Rasool. These letters were acknowledged by the High Commission's Commercial Counsellor's letter vide Exh. 65. He has also produced copies of his letters Exhs. 66 and 67 written to Newcastle Chamber of Commerce, enquiring about the whereabouts of the Clyde House and the replies of the Newcastle Chamber of Commerce Exhs. 69 and 70 in which the Chamber informed him that only the parents of Ghulam Rasool the absconder had been connected with Clyde House since its incorporation in 1944. Accord ing to the learned counsel, this correspondence proves that the appellant's failure to repatriate the sale proceeds of the goods exported was not intentional. Assuming for the sake of argu ment that the appellant really believed that the letters written by him would effect the repatriation of the sale proceeds of the goods exported all the letters produced by him were written from or after November 1965 which was nearly a year after the show‑cause notice dated 11th December 1964 (Exh. 4) issued to him by the respondent. The appellant has given absolutely no explanation of his conduct from 1961 to November 1965 and it is doubtful if he could really have believed that anything could be achieved by writing letters after four years to our Embassy in London or to the Newcastle Chamber of Commerce. I have also to observe that although the State Bank of Pakistan was most concerned with his failure to repatriate the sale proceeds of the goods exported, he never cared to inform the State Bank. Similarly it is obvious that the Controller of Imports and Exports and the Department of Trade Promotion might have been of assistance in effect ing the repatriation of the sale proceeds of the goods exported, but he never sought the assistance either of the Chief Controller of Imports and Exports or of the Department of Trade Promo tion. Finally, he had to show what efforts he made to induce his former partner Ghulam Rasool to effect the repatria tion of sale proceeds of the goods exported, because Clyde House was owned by the parents of the said Ghulam Rasool. He has produced no evidence in this respect, and the learned r counsel tried to argue that this was because the appellant was ignorant of his former partner's whereabouts. I am not able to believe that the appellant was unaware of his former partner's; whereabouts and learned counsel for the respondent has refer red to the correspondence exhibited which shows the falsity of the appellant's claim that he did not know about Ghulam Rasool's whereabouts. Apparently by a letter dated 17th April 1960, the National and Grindlays Bank, Peshawar had asked the appellant for the whereabouts of the said Ghulam Rasool, and in his reply dated 26th April 1963 Exh. 84 he had written "you may have any further information if required in this connection from Messrs Nishat Brothers, of Elphinston Street, Karachi without disclosing the source of this address". It is therefore, clear that the appellant was aware of the whereabouts of Ghulam Rasool, and his claim to the contrary is false. In all the circumstances discussed, I am of opinion that the appellant has failed to prove that his failure to repatriate the sale proceeds of the goods exported by the firm was due to circumstances beyond his control.

10. The prosecution have therefore proved beyond reason able doubt that the appellant has intentionally failed to repatriate the sale proceeds of the goods exported, therefore he has been rightly convicted and sentenced. The appeal is without merit and is dismissed.

Appeal dismissed.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.