On 17 December 2019, the High Court of Sindh, in Pakistan, has issued a judgment in favor of our client that has been a respondent, in this case of NIB Bank Limited v. Allied Services & Others (First Appeal No. 69/2007).

The original case before the subordinate Banking Court pertained to a claim by a NIB Bank against a borrower for the breach of lease finance facility where collateral was transport vehicles of borrower’s business that were repossessed by the bank before commencement of legal action based on the given claim. The judgment was issued in favor of NIB Bank in the amount of PKR 352,405 (approx. USD 2,320) but NIB Bank was not happy with the monetary figure calculated in the judgment of the Banking Court.

Accordingly, after securing a copy of the Banking Court decree (that is formalized in line with the given judgment) NIB Bank filed an appeal with the High Court after 48 days of the date of the given judgment, without seeking condonation of delay in filing appeal, whereas the governing statutory provisions clearly state that such appeals must be filed within 30 days of the date of the given judgment.

NIB Bank claimed that the figures in the impugned judgment be revisited to factor in the additional amount of PKR 3,624,922 (approx. USD 23,850) towards unpaid rentals/debt installments and interest/markup. The respondents led by Allied Services challenged by maintaining that the given appeal fails on statute of limitations as it has been filed after the expiry of 30 days limitation period without even seeking any leave from High Court for condonation of such delay on sufficient grounds (in any). The respondents further asserted that NIB Bank is not entitled to any additional amounts once lease finance agreement was in breach the forced repossession of vehicles was effected by NIB Bank even before commencement of legal action before the Banking Court.

The High Court ruled on this by taking up only the statute of limitation issue as follows:

- The impugned judgment was issued on 24 August 2007, and in accordance with the special law Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the appeals assailing such judgment (under special law) must be filed within 30 days of the date of the given judgment;

- In this case NIB Bank waited for 48 days from the date of the impugned judgment, and is at error in relying on ordinary law Section 96 of the Civil Procedure Code, 1908, whereby appeals can be filed within 30 days of the decrees that are issued under ordinary law;

- Further, that NIB Bank also did not file any motion seeking condonation of delay in filing appeal after the expiry of the statutory deadline per Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001; and

- Thus, the appeal filed by NIB Bank is hopelessly time-barred, and is accordingly dismissed.

This precedent is a significant contribution to banking and finance law jurisprudence in Pakistan.

Faisal Daudpota, the Senior Partner of our firm, speaks on the topic of “Best Practices in Mediation for Europe, the Middle East, and Africa” at the Webcast of International Trademark Association (INTA)

Faisal Daudpota, the Senior Partner of our firm, speaks on the topic of “Early Termination for Non-Attainment of Minimum Turnover” at the 2019 Annual Conference of International Distribution Institute (IDI)

Faisal Daudpota, the Senior Partner of our firm, speaks on the topic of “Rebranding and Changing Know-How in Franchising: Rebranding Provided for in the Franchise Agreement” at the 2017 Annual Conference of International Distribution Institute (IDI)

The Inland Revenue Tribunal of Pakistan has issued a decision discussing the meaning and scope of words “Franchise” and “Franchise agreement” as:

“(1) Franchise: Generally speaking, a franchise business takes effect when a person, either natural or artificial grants an authority or a right to another person, either natural or artificial, to market the former’s goods or services within a certain territory or location. Generally, there are two main types of franchises, [namely:] (a) Entire business format franchise – The franchisee receives the use of the trademarks, reputation (good will), trade secrets, copyrights, and marketing and service information of the franchisor; (b) Product distribution franchise – The franchisor distributes a particular product to franchisees, such as vending machines.

(2) The term franchise also refers to a type of business in which a group or individual receives a license from a corporation to conduct a commercial enterprise. Corporate franchises enable a franchisee to market a well-known product or service in return for an initial fee and a percentage of gross receipts.

(3) A type of license that a party (franchisee) acquires to allow them to have access to a business’s (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business’s name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees.

(4) A franchise agreement is the contract that establishes the relationship, including rights and obligations, of the parties named as franchisor and franchisee. Generally, the franchise agreement provides the following: (a) The franchise fee; (b) Restrictions placed on the business management structure of the franchisee; (c) The inventory; (d) The income which the franchisor requires and when it will be calculated; (e) Length of the agreement (time span); [and] (f) A termination clause as to upon what event will the franchisor terminate the franchise agreement.

(5) A franchise agreement is not a fixed draft but one can negotiate before entering a franchise contract that best suits one’s business goals and priorities.

(6) Franchise (in government) A right specifically conferred on a group or individual by government, especially the privilege conferred on a corporation such as electricity, telephone, and bus services. Franchise may be revoked with or without the consent of the grantee as stipulated in the contract for the grantee’s violation of terms, and the government may take back granted rights by eminent domain proceedings. Franchise provisions usually include tenure; compensation to the grantor; the services, rates, and extensions; labour problems, security and strike regulations; capitalization; and reversion to the grantor.

(7) Franchising is a method of doing business in which someone shares business, idea, art, etc. with other people in exchange for an annual fee and a percentage of the gross profits. The idea dates back to the middle ages when a king would grant rights to individuals to engage in activities such as running a market or brewing ale. The Singer sewing machine company, which granted distribution rights to franchisees in 1851, is often cited as the first modern franchise operation.”

The Tribunal also ruled that the definition of franchise provided under Pakistan’s domestic excise law “is wide and broad enough to incorporate in it, all important features of the word franchise described by us as above“.

Furthermore, the Tribunal has also clarified the jurisprudential understanding of the term “Royalty“, by declaring that:

“The word Royalty as a noun has different connotations. Besides its other meanings, it also refers to some specific meanings with reference to the financial and commercial undertakings. These inter alia, include the following:—

(a) It refers to the payment to the holder of a patent or copyright or resource for the right to use their property;

(b) A share of the profit or product reserved by the grantor, especially of an oil or mining lease. Also called override. The word override in Finance means, “the commission paid to executive”. This is a commission paid to an Accounts Executive on the basis of sale made by a representative;

(c) It refers to a right or prerogative of the crown, as that of receiving a percentage of the proceeds from mines in the royal domain;

(d) The payment for the granting of a right by a monarch to a corporation or an individual to exploit specified natural resources;

(e) A share paid to a writer or composer out of the proceeds resulting from the sale or performance of his or her work;

(f) A share in the proceeds paid to an inventor or a proprietor for the right to use his or her invention or services.

The Lahore High Court in Pakistan has for the first time in Pakistan’s jurisprudence defined the concept of franchising that:

“… Franchise is the right to produce, manufacture, sell or deal in any product or business or service for a fee or consideration including a technical fee or royalty. Therefore, a franchise agreement will grant the franchisee the right to operate its business in the name and style of the franchisor’s business. So in essence it is a way to do business. A franchise agreement allows the franchisee the right to use the mark or patent of a franchisor for a royalty or fee. The franchisee must ensure that the goods or services maintain the uniformity and standard of the franchisor’s goods or services. The franchisor provides the technical assistance and the Know How to protect its mark or patent so as to ensure uniformity in quality. Therefore, a franchisor shares its business model with all relevant details so that the franchisee can use the patent, logo or mark of the franchisor and maintain the standard, style, quality and look of the product or services provided, as if it is given by the franchisor itself. The franchisor must grant the franchisee the right to use its patent or mark or logo, that is its intellectual property, to the extent necessary to operate the franchisee business. In addition to this the franchisor also provides the assistance and Know How in support of the business and helps to solve problems along the way. Therefore, franchising is a business relationship between the parties where the franchisor services and facilitates the business of the franchisee within defined parameters.“

The same decision also provides that excise duty applies to the license fee paid by Honda Atlas Car Pakistan Limited (Licensee) to Honda Japan (Licensor) because pursuant to the license agreement, the Licensee gets access to intellectual property rights, technical assistance and know-how for manufacturing and sale of Honda automobiles. The fact that the technical assistance and know-how is the proprietary right of Licensor does not mean or suggest that it is not a service provided by Licensor. Also the fact that Licensee manufactures the automobiles does not take the license agreement out of ambit of franchise services as the Licensee manufactures and sell automobiles in Pakistan and also provides after sale services to its customers. The franchise services provided by Licensor are for manufacture, sale and all related services provided by the Licensee. These all fall within the ambit of franchise and services under the domestic excise law of Pakistan, and the payments for such services are accordingly taxable.

The Inland Revenue Appellate Tribunal of Pakistan issued a decision in this case that excise duty is applicable to payments made by a bottling company under a tripartite agreement to a sole supplier (Pepsi-Cola Hattar) for purchase of concentrate for beverages of specific brands, where such sole supplier is under supervision of another party (Pepsi-Cola USA) to the given agreement. The Tribunal held that such payments be treated a royalties, and are taxable, in the light of the fact that: (i) the bottling company did not bring on record any copy of the given agreement (on the pretext that its disclosure will be detrimental to competitive advantage of business in the market), and (ii) previously the bottling company had paid excise duty on direct payments (and acknowledged them as royalty payments) to the principal (Pepsi-Cola USA) for purchase of concentrate for beverages of the given brands.

On 28 September 2016, the High Court of Sindh, in Pakistan, has issued a judgment in favor of our client, in the case of Trading Corporation of Pakistan v. Punjab Trading Agency (Suit No. 571/1997).

The main claim in this case was that Plaintiff had alleged breach of bailment contract by the Defendant, whereby performance of contract comprised of handling of rice on the ‘Book Balance’ basis without any physical verification of the stock of rice, which was lying in the Plaintiff’s godown in dumped position, and that the claim as to shortage in stock was raised post satisfactory performance of the given contract.

The High Court ruled on this main litigated issue as follows:

- To constitute an effective bailment contract (within the meaning of Section 148 of Contract Act, 1872), it is obligatory on part of the bailor to put the bailee in possession of the goods. There must be actual tender and delivery of the goods and acceptance thereof by the bailee. There must be actual physical transfer of possession. Merely putting into possession of the documents of title does not constitute bailment of goods.

- In the present case the evidence leads to conclusion that the contract was awarded to the Defendant on the ‘Book Balance’ basis without any physical verification of the stock of rice which was lying in the Plaintiff’s godown in dumped position, and that no tangible and convincing evidence documentary or otherwise was brought on record by the Plaintiff for proving the exact quantity of rice stock handed over to the Defendant at the time of award of the contract.

- It is also an admitted position that despite various requests/letters by the Defendant no physical survey was conducted in respect of the stocks entrusted to the defendant either at the time of award of the contract or during the currency of the contract. The Plaintiff’s claim is mainly based on the survey report, which was conducted after the years of expiry of the contract.

- Accordingly, Plaintiff cannot claim breach of bailment contract by the Defendant because in effect the given contract is not a bailment contract; rather it was just a simple contract for handling of goods at Plaintiff’s godown without physical verification as to quantity of goods and without any physical delivery of goods.

 This precedent is a significant contribution to contract law jurisprudence in Pakistan.

This article provides an overview as to the jurisdiction that these IP Tribunals are to exercise in Pakistan. For convenient reading the body of this article has been arranged into nine parts as below. The first serves as the introduction to subject matter of this article, the second part in general terms lists the practical benefits of having IP Tribunals, the third part identifies the causes of actions that expressly have been included in the original jurisdiction of IP Tribunals, the fourth part analyses the causes of action that IP Tribunals can try in its capacity as a civil court, the fifth part alludes the causes of action that IP Tribunals can try in its capacity as a criminal court, the sixth part points out the causes of action that do not fall within the jurisdiction of IP Tribunals, the seventh part notes the thresholds as to transfer of pending cases to IP Tribunals, as well as to the appeals that can be preferred against the rulings of IP tribunals, the eight part described the powers and composition of IP Tribunals, and the final ninth part serves as the conclusion to this article.

For more … click here

On 14 December 2015, the High Court of Sindh, in Pakistan, has issued a judgment in favor of our client, in the case of Abdul Haleem v Gulshan-e-Faisal Cooperative Housing Society & Others (Suit No. 1018/2005). The main claim in this case was that the gift transaction pertaining to a real estate amongst the defendants is invalid, and that validation and recordation of the same by the local community society be declared as invalid. The High Court ruled on this main litigated issue as follows:

- Under Mohammadan Law, formalities of a valid gift are: (1) declaration of gift by the donor, (2) express/implied acceptance of gift by the done, and (3) delivery of possession of gift by the donor to done.

- As the defendants have failed to prove delivery of gift (of real estate) through delivery of possession letter or original allotment letter to the main defendant (i.e. donee), therefore, the gift transaction remained incomplete/invalid, and that recordation of the same by the local community society is also invalid.

This precedent is a significant contribution to contract law, and Islamic law jurisprudence in Pakistan.