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Suit No. 989 of 1979, decided on 27th April, 1983.

---S. 22‑.‑Agent and Principal‑Scope and extent of agents authority extends to all lawful acts for purposes of agency ‑ Consequences of acts of agent‑Principal's liability to indemnify agent‑Agent furnishing Bank guarantee to a person on behalf of Principal for performance of contract‑Guarantee encashed on account of default of Principal -Agent filing suit against Principal for recovery of guarantee money and compensation for loss of commission and interest ‑ Principal, held, liable to indemnify agent against lawful acts done by him.

A. Rauf for Plaintiff.

Nemo for Defendant.

Date of hearing : 27th April, 1983.

The plaintiffs have filed the suit for recovery of Rs. 4,38,000 with costs and interest.

The defendants who are residents of Holland, have been served by with summons by substituted service. They have been called absent. Accordingly the case is directed to proceeded ex parte against them under rule 6 of Order IX, C. P. C.

1. The facts briefly stated in the plaint are that pursuant to invitation of tenders issued by Messrs National Refinery Limited (hereinafter referred as N. R Ltd.) for the export of Naptha on terms and conditions enumerated in the Tender documents, the plaintiff contacted the defendant and apprised them of the same, and inquired from the defendants to confirm if they were interested in participation in the said deal. On 4th October, 1976 the plaintiff received telex message from the defendant confirming their interest in participation in the said tender vide telex dated 4‑10‑1976 (Annexure "C" to the plaint) which reads as follows :‑---

"Thanks for your telex 2nd October, 1976. We confirm hereby our interest in participation in the Naptha Tender of N. R. L. on the condition that you can take care of the local side of the deal. Please rush Tender Documents and all relevant details".

Accordingly on the instructions of the defendants the plaintiff submitted the bid. The defendant agreed to pay 10 % (U. S. Dollars) per B. B. L. (U. S. per Barrel) as the plaintiffs commission.

As per conditions of the Tender Inquiry, the plaintiff with the authorisa tion of the defendants furnished a bid bond (Bank Guarantee) for Rs. 2,50,000 for performance of the conditions of contract and informed the defendants accordingly as per telex dated 18‑10‑1976 a copy of which has been produced alongwith the plaint as Annexure "D". The said Bank Guarantee, inter alia provided that on the bidder's default in performance of their obligations the Bank shall pay Rs. 2,50,000 to N. R. Ltd. on their written demand. Copy of the Bank Guarantee has been produced as Annexure "E" to the plaint.

The Tender submitted by the plaintiff was found to be the highest, 3f which fact the plaintiff gave intimation to the defendant by telex dated 19‑10‑1916 (Annexure "F" to the plaint). The defendant acknowledged the above telex and in reply informed the plaintiff as follows :‑------

"Thanks very much good news I am very pleased with the good news .... ... We shall now work on the Transport arrangements for lifting as late as possible."

Copy of the above telex has been produced as Annexure "G" to the plaint.

2. The bid submitted as mentioned above was accepted by N. R. Ltd. who communicated their acceptance to the plaintiff and called upon him to open irrevocable Letter of Credit and also dominate the vessel for lifting the Cargo as provided in the tender documents and in the contract. The plaintiff accordingly informed the defendants vide telex Annexure "H" to the plaint.

By telex dated 29th October, 1976 (Annexure "J") the defendants authorised the plaintiff to sign the contract with Messrs N. R. Ltd.

Under the terms of the contract the plaintiff was required to open letter of credit and‑ nominate the vessel latest on 5‑11‑1976. The plaintiff, therefore, sent urgent message to the defendants on 11-1‑1976 for opening the necessary letter of credit and nominate the vessel. The plaintiff has produced photostat copy of the telex dated 1‑11‑1976 as Annexure "K" to the plaint.

It is also disclosed in the plaint that by telex (Annexure "L" to the plaint) the defendants were warned that :‑--------

"....If you do not act in time as discussed on phone yesterday, your Bank Guarantee of Pakistan ‑ Rupees 2,50,000 equivalent U. S. Dollars 25,402 furnished for and on your behalf and on your specific instructions, will be encashed and contract will be awarded to next highest bidders---"

The plaintiff has expressly stated in the plaint that the relations between the plaintiff and the defendants was that of an agent and a principal and that the commodity (Naptha) was only for export and the payment was to be made in U. S. Dollars, that he was acting as agent for the defendants who had authorised him to enter into the said deal on their (defendants) behalf.

3. As neither any vessel was nominated nor letter of credit was opened within the prescribed time. N. R. Ltd. treated this as a default and encashed the Bank Guarantee of Rs. 2,50,000 due to default of the defendants as the result of which the plaintiff suffered loss amounting Rs. 4,38,000 as detailed below :‑---------

(1) Loss due to the encashment of Bank ,Guarantee .--------------- Rs. 2,50,000

(2) Interest/Commission, expenses incurred in

Trunk Calls, Telexes etc . --------------------------------------------- Rs. 27,000

(3) Loss of Commission due to the default of the defendant ... Rs. 1,61,000

---------------

Rs. 4,38,000

---------------

4. The plaintiff in the circumstances, on the plea that the loss thus suffered by him was in performance of instructions of the defendants for whom he was acting as agent in the transaction, has filed the present suit claiming that it was primary duty of the defendants to comply with the contract and to indemnify the plaintiff for the losses suffered by him as agent.

5. I have gone through the plaint and the documents produced along with it, and the affidavit in ex parse proof filed and the original documents produced.

From the material on record I am satisfied that the plaintiff was acting merely as an agent of the defendants in the transaction and that he had furni shed the Bank Guarantee in the sum of Rs. 2,50,000 on the instructions and as agent on behalf of the defendant which Bank Guarantee was encashed by N. R. Ltd. due to the default committed by the defendants in opening the letter of credit and nominating the vessel l within the time stipulated in the contract which was signed by the plaintiff on authorisation by the defendants. Consequently the plaintiff not only was deprived of the commission which be otherwise would have earned but also suffered loss amounting to Rs. 2,50,000 on account encashment of the Bank Guarantee furnished on the instructions of the defendants.

In the light of the facts discussed above, and being of the opinion on the material on record, that the plaintiff (an agent) suffered loss of Rs. 2,50,000 due to encashment of Bank Guarantee and also was deprived of commission amounting to Rs. 1,61,000 on account of default of the' defendant, I hold that as provided under section 222 of Contract Act, the defendants are liable to indemnify the plaintiff against the lawful acts done by the plaintiff, as an agent in exercise of the authority conferred upon him. The plaintiff has thus successfully established his claim against the defendants for recovery of Rs. 2,50,000 on account of encashment of Bank Guarantee and Rs. 1,61,000 for loss of commission.

The plaintiff has also claimed of Rs. 27,000 on account of interest/ commission, expense, incurred on telexes etc. No details of these expenses have been given, but finding that in fact the plaintiff, as agent, of the defendants bad incurred heavy expenses in course of presiding the job as an agent, I am of the opinion that the plaintiff is entitled to payment of Rs. 10,000 against this item of claim, from the defendants, as a reasonable estimate of the expenses incurred.

6. The plaintiffs suit for the above reasons is decreed for Rs. ,4,21,000 with proportionate costs. The plaintiff has claimed interest at the rate of Rs. 15 % per annum. Since however rate of interest is 10 % per‑ annum as per State Bank notification, in my opinion interest of justice would be met, if interest is allowed at this rate. Accordingly on the amount decreed, the defendants shall also pay the plaintiff, interest at the rate 10 % per annum from the date of suit till payment.

M. B. A. Appeal accepted.

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