1. ' Plaintiff filed suit under Order XXXVII, Civil Procedure Code for recovery of Rs,32,83,500 on the basis of two cheques of Rs,17,83,500 and Rs,15,00,000, given by the defendants, which were dishonoured on their presentation.
2. ' Brief facts of the case are that the plaintiff awarded fishing rights to defendant from 1-9-1988 to 3- 4-1989 at Hub Dam Reservoir. Due to ban on the comn iercial fishing imposed by the Ministry of Food and Agriculture, the fishing rights could not be awarded thereafter and to resolve the dispute between the parties several meetings were held. As per plaintiff on 21-9-1994, the plaintiff and the defendants agreed for grant of contract of fishing rights in favour of defendant No,1 in respect of Hub Dam Reservoir for three years fishing session coming from 1-9-1994 to 30-4-1997 for total consideration of Rs,53,50,000. The minutes were duly recorded and signed by all the parties and according to the plaintiff the said minutes are the concluding contract between the parties and defendant No,
1. In pursuance of the said concluding contract the defendant delivered a cheque of Rs,17,83,500 dated 21-9-1994. The defendant then further delivered another cheque of Rs,15,00,000 dated 17-10-1994 to the plaintiff. Both the cheques were dishonoured on presentation for encashment. Apart from above defendant paid a sum of Rs,7,50,000 towards the instalment which was duly encashed. Plaintiff filed this suit for recovery of Rs,32,83,500 'on the basis of these two cheques.
3. ' The defendants filed leave to defend application and stated that no contract has been entered into between the parties and as such the cheques given by the defendants are without any consideration. It is alleged that in terms of the earlier contract dated 17-9-1991 the plaintiff was required to complete the stocks of commercial fish seed amounting to Rs,1.500 million and the said fish seed shall be stocked in presence of the defendant or his authorised representative. It is further stated that the period of contract was to commence from the date of completion of the stocks in the reservoir by plaintiff. The defendant stated that the plaintiff failed to complete the stocks of commercial fish seeds and as such no contract commenced between the parties calling upon the defendants to pay contracted amount. On the basis of these allegations defendants sought leave to defend. Apart from this it is worth to mention that much prior to filing of the present suit the defendant had filed Suit No,2 of 1993 in this Court seeking the following declaration:
(a) To declare that as per the agreement the fishing right in Hub reservoir was assigned to the plaintiff and the defendants are not entitled to assign any contract to another contractor by ignoring the plaintiff;
(b) to declare that the plaintiff has spent millions of rupees for the development of the reservoir and entitled to fishing right as per the agreements;
(c) to direct the defendants to perform their part of obligations of the contractors;
(d) to restrain the defendants, their agents, representatives, attorneys, employees, officers or any person acting on their behalf from assigning or giving the contract of fishing right of Hub- Reservoir to any other person except the plaintiff as agreed in the agreements and also restrain them from dispossessing the plaintiff and its employees from the reservoir and further restrain them to interfere into the developing process of the plaintiff;
(e) any better relief/reliefs which this Honourable Court deems fit and proper in the circumstances of the case;
(f) cost of the proceedings.
4. ' It is stated by the defendant that the suit filed by the defendant for declaration, specific performance and permanent injunction was decreed by the Court on the basis of statement of plaintiffs Director (Fisheries). After having notice of the said decree, the plaintiff filed an application under section 12(2), Civil Procedure Code challenging the said decree on various grounds including that the learned advocate for the plaintiff was not authorised to give consent or to compromise the matter. The application under section 12(2), Civil Procedure Code was registered as J.M. No,1 of 1995.
5. In the said J.M. No,1 of 1995 plaintiff and the defendant both filed respective issues and on the basis of the pleadings and after hearing the arguments of learned advocates of the plaintiff, Court framed the following issues in the aforementioned J. M. No,1 of 1995:
(1) Whether the advocate for the defendants was duly authorised to enter into any compromise with the plaintiff/respondent and sign the compromise application dated 25-9-1994 under Order 23, rule 3, Civil Procedure Code submitted by the plaintiff?
(2) Whether the defendant No,4 was authorised to make the statement before the Honourable Court for implementation of the alleged agreement dated 10-10-1991 without the permission of other defendants particularly defendant No,1?
(3) Whether the agreement dated 10-10-1991 being a draft agreement could be treated as the final agreement to warrant the statement of defendant No,4 regarding its implementation?
(4) Whether the plaintiff before passing the impugned decree had attended the meeting of the negotiating Committee constituted on the order of the Managing Director, WAPDA and entered into a new agreement for leasing out of fishing rights for a period of 3 years for an amount of Rs,53,50,000 and whether the signing of the minutes of the meeting and issuance of the cheque of Rs,5.35 million as per minutes of the meeting amounted to execution of new agreement ?
(5) Whether the impugned decree was obtained by misrepresentation of facts, fraud and collusion and is liable to be set aside?
(6) What should the order be?
6. ' The learned Judge allowed the application under section 12(2), Civil Procedure Code, holding that the learned advocate for the plaintiff had no authority to compromise the matter as there was specific restriction in the Vakalatnama to enter into compromise and as such compromise decree has been obtained by misrepresentation, without giving any findings on the other issues.
7. Nevertheless the point remained that the issues, which were proposed by the plaintiff himself to the effect that "whether the plaintiff (defendant herein) before passing the impugned decree had attended meeting of Negotiating Committee constituted on the order of Managing Director, WAPDA and entered into a new agreement for leasing out fishing rights for a period of three years for an amount of Rs,53,50,000 and whether the signing of the minutes of the meeting and issuance of cheque of Rs,5.35 million as per minutes of the meeting amounted to execution of a new agreement?"
8. ' The defendant stated that payment under the cheques cannot be claimed as no agreement was executed between the parties to determine the commencing period of the contract. It is further alleged by the defendant that plaintiff did not store any fish seeds in the dam and had failed to fulfil their contractual obligation, which was the basic requirement of the contract for its commencement, as per clause 12 of minutes dated 10-10-1991 and as such no binding contract between the parties came into existence. The defendant stated that defendants Nos,2 and 3 were forced to sign minutes dated 21-9-1994, the cheque of Rs,17,83,500 was given by the defendant to plaintiff under compelling circumstances. It is stated after the consent decree was passed in Suit No, 2 of 1993 on 20-5-1994. In terms of decree the defendant through his legal notice dated 17-10- 1994 forwarded cheque of Rs:15,00,000 in replacement of cheque of Rs,17,83,500. It is alleged that without performing his obligations, the plaintiff presented the cheques for encashment. The defendant stated that since contract amount was Rs,30,00,000 as per decree of Court in Suit No,2 of 1993, the defendant forwarded cheque of Rs,15,00,000 being 50% of the contract price in replacement of cheque of Rs,17,83,000 earlier handed over to plaintiff. Alongwith application for leave to defend, the defendant filed agreements dated 7-9-1991 and 10-10-1991 executed between defendant No, 1 and plaintiff, letters dated 15-7-1995 and 12-12-1995, addressed to the plaintiff by defendant.
9. ' On behalf of the plaintiff, Mr. Sohail A. Siddiqui, Assistant Director (Fisheries) filed counter-affidavit and denied the various allegations made in the application for leave to defend. It is stated that the suit has been filed on the basis of two dishonoured cheques and the defendant has issued cheque of Rs,17,83,500 and Rs,15,00,000 in terms of agreement between the parties. It is stated that minutes/agreement dated 21-9-1994 has superseded earlier minutes dated 7-9-1991 and 10-10- 1991. It is denied that under the compelling circumstances and 'threats the defendants were forced to sign the minutes/agreement dated 21-9-1994. According to the plaintiff the minutes dated 21-9- 1994 was signed by plaintiffs top officials and defendants, by itself is a contract between the parties and execution of the contract at later stage was mere a formality. The plaintiffs M.D.
10. Approved the negotiation proceedings on 25-9-1994 and the same were conveyed to defendant.
11. ' The plaintiff further stated that minutes dated 21-9-1994 have been acted upon by the parties and merely because formal contract was not executed between the parties, the same will not absolve the defendant to deny issuance of cheques on the alleged grounds taken in the leave to defend application.
12. ' Learned counsel for the defendant in support of his contentions relied upon following case-law:
(i) 1992 SCMR 718.
(ii) 1984 SCMR 568. (111) 1995 SCMR 925.
(iv) 1991 CLC 442.
(v) PLD 1996 SC 749.
(vi) PLD 1986 Kar.157.
(vii) 1993 CLC 1291.
13. ' Learned counsel for the plaintiff in support of his contentions relied upon following case-law:
(1) PLD 1996 SC 749. (ii) 1992 SCMR 718.
(iii) 1981 CLC 1.
(iv) PLD 1982 Lah.203.
(v) 1990 CLC 1243.
(vi) 1990 ALD 246(2).
(vii) 1990 ALD 247.
14. ' I will first discuss the case-law relied upon by the defendant.
15. ' In the case of M/s. National Security Insurance v. M/s. Hoechst Pakistan Ltd. (1992 SCMR 718), the Honourable Supreme Court held that the guarantees and indemnity bonds are not negotiable instruments and summary suits under Order XXXVII of the Code are only instituted upon bills of exchange, hundies or promissory notes and since the guarantor had executed guarantee bonds, the summary procedure provided under Order XXXVII of the Code of Civil Procedure.
16. ' The Honourable Court further held that before the Court can grant leave to a defendant to appear and defend a suit, it must prima facie find from his application and affidavits that there is reasonable material which makes it incumbent on the plaintiff to prove consideration or there exists a plausible defence or some specific question of fact or law which requires to be tried or investigated.
17. ' In the case of Abdul Karim Jaffarani v. United Bank Ltd. And 2 others (1984 SCMR 568), the Honourable Court held: ' No hard and fast rule can be laid down for determining the question as to how the discretion vesting in the Court to subject the order for grant of leave to defend to conditions, ought to be exercised as this question depends on the facts and circumstances of each case. It would be improper to lay down a rule of thumb for the exercise of power in matters of discretion vesting in a Court, when even the statute has left it unfettered. However, we would point out that in order to correctly exercise the discretion vesting in a Court under the provisions in question, it is necessary to examine the scope of object underlying such provisions providing for special procedure of this kind. In view of the legislative history of these provisions, the overall object envisaged by the Legislature was to provide for expeditious disposal litigation involving commercial transactions of a particular nature by a summary procedure so that the procedure for trial of suits to prolong the litigation and prevent the plaintiff from obtaining an early decision by raising untenable and frivolous defences. It is in this context that the discretion to impose conditions is to be exercised. If, therefore, the Court is of the opinion that the defendant is trying to prolong the litigation and impeding a speedy trial, although on the allegations made in the application a triable issue has been raised then the Court would be justified to impose conditions. But, as already pointed out, it will be improper exercise, of discretion to impose conditions simply because, at the leave granting stage the defendant is unable to adduce his defence. The proper stage for substantiating his defence by evidence would be at the trial subsequently."
18. ' The Honourable Court modified the order of High Court to furnish security of Rs,22,59,463.97 to Rs,2,80,000.
19. ' In the case of Abdul Rauf Ghauri v. Mst. Kishwar Sultana and 4 others (1995 SCMR 925), post-dated cheque of Rs,19,00,000 was dishonoured; and leave was granted on furnishing bank guarantee of like amount. Against order of conditional leave, petition filed by the petitioner before the Honourable Supreme Court on the ground that since condition mentioned in agreement dated 22- 7-1992 was not complied with by the respondent's predecessor-ininterest, they were not entitled to the encashment of cheque. The Honourable Supreme Court on the basis of these facts modified order of leave to defend subject to furnishing bank guarantee and granted leave on the condition of furnishing any solvent security to the satisfaction of the trial Court.
20. ' In the case of Haji Abdul Wahid v. Hoechst Pakistan Ltd. (1993 CLC 1291), appeal was filed against conditional leave granting order and a Division Bench of this Court held that: "We are of the humble view that the stage of proof can only come after the defendant/appellant has been allowed leave to defend the suit and that the nature of the defence has to be determined at the time when the affidavit is put in, at that stage, all that the Court has to determine, is whether, if the facts alleged by the defendant/appellant are duly proved, they will afford a good or even a plausible answer to the plaintiffs' claim. Once the Court is satisfied about that, leave cannot be withheld and no question about imposing conditions can arise; and once leave is granted, the normal procedure of a suit, so far as evidence and proof so obtains. We accordingly accept the contention of the learned counsel for the appellant/defendant that the imposition of the condition by the learned Single Judge in the last paragraph of his judgment has to be. Removed."
21. ' In the case of Muhammad Arif v. Abdul Qayyum (1991 CLC 442), Mr. Wajihuddin Ahmad, J. (as he then was) held: "The only question before me is whether the defendant has made out a case for grant of leave to defend and, if so, whether the leave should be conditional or unconditional. In the context of grant of leave, the Court is required to examine all questions which can or may arise by way of defence, as deducible not merely on the basis of what the defendant pleads or says in relation to his application for leave to defend but with reference to the entire record before the Court. In the first place, I am satisfied that the questions raised by the defendant on applying for leave, prima facie, have substance, merit due examination and a case for grant of leave is made out.
22. ' The rule with regard to the imposition of conditions in grant of leave is that unconditional leave cannot be granted in cases where the possibility of the defence being a sham one cannot be overlooked. On the same principle, and indeed as an extension of it, I am of the considered opinion, that the defendant would be entitled to unconditional leave where as regards the plaintiffs claim, such being frivolous, vexatious or otherwise untenable cannot be ruled out. In view of what has been urged in defence and what has been noted in this paragraph, it would not be unreasonable to entertain doubts about the plausibility of the claim in this suit and, therefore, the defendant is entitled to an unconditional leave."
23. ' In the case of Mian Rafique Saigol and another v. Bank of Credit and Commercial International (PLD 1996 SC 749), the Honourable Supreme Court after discussing various case-law held: "So far case-law on the point mentioned above from our own jurisdiction is concerned, view taken consistently is that it would be improper to lay down a rule of thumb for the exercise of powers in matters of discretion vesting in a Court when even a statute has left it unfettered. In view of the Legislative history of these provisions the overall object envisaged by the Legislature was to provide for expeditious disposal of litigation involving commercial transactions of a particular nature by a summary procedure so that the defendant does not have the means open to exploitation in the ordinary procedure for trial of suits to prolong the litigation and to prevent plaintiff from obtaining an early decision by raising untenable and frivolous defences. It is in this context that distretion to impose condition is to be exercised."
24. ' Now I will discuss the case-law relied upon by the Advocate for the plaintiff.
25. ' The learned counsel for the plaintiff has also relied upon the case of M/s. National Security Insurance Company v. M/s. Hoechst Pakistan Ltd. (1992 SCMR 718) and Mian Rafique Saigol (ibid), which I have already discussed hereinabove.
26. ' In addition to this, learned counsel relied upon the case of Hussain v. Raja All (1981 CLC 1), the Honourable Court held that it is not incumbent upon holder of pronote to prove consideration and permission to defend cannot be given unless there are other facts which are deemed sufficient by the Court to support the applications.
27. ' In the case of Hamidullah Khan v. Muhammad Nawaz Qasuri (PLD 1982 Lah. 203), the Honourable Court refused to grant leave as the petitioner had admitted having issued cheque and it is not incumbent on holder to prove consideration.
28. ' In the case of M/s. Razzaq & Co. v. M/s. Riazeda (Pvt.) Ltd. (1990 CLC 1243), leave to defend was sought on the ground that the defendant has suffered loss due to negligence of plaintiff and cheque was to be encashed only after the exported goods reached the port of destination and after payment was received from foreign buyer, the Honourable Court refused to grant leave to defend application holding that the pleas being raised by the defendant/appellant are accepted for the purpose of granting leave to defend, it would change the entire complexion of the suit, frustrating very purpose for which Order XXXVII was incorporated in the Code of Civil Procedure.
29. ' The plaintiffs advocate relied upon head notes of M/s. Norwich Union Fire Insurance v. M/s. Zaitoon Textile Mills Ltd. And Pakistan v. Deverfield, reported in 1990 ALD 246(2) and 1990 ALD 247. In the first case defendant contended that suit under Order XXXVII was not maintainable as dispute related to contract, Honourable Court held that suit was not based on contract but on dishonoured cheque.
30. In the second matter Honourable Court decreed the suit as defendant had not denied the amount claimed by plaintiff.
31. ' Where there arose triable issues for adjudication leave normally is granted unconditionally and where defence is patently dishonest or unreasonable, when it could not reasonably be expected to succeed, the leave can be granted conditionally. The issue for grant or not to grant leave, and whether to grant or not to grant conditional leave can be summarized in the light of decisions of various Courts right from Fine Textile Mills case reported in PLD 1969 SC 163 as under:
(i) Leave to defend in a suit instituted under Order XXXVII, Civil Procedure Code shall be granted by Court where the facts disclosed by the defendant on affidavit make out a case of shifting of onus on plaintiff.
(ii) Leave may also be granted on any other ground or facts which the Court considers sufficient to support the application for grant of leave.
(iii) Refusal to grant leave is a rare phenomena confined to cases where no defence at all is disclosed by the defendant.
(iv) No hard and fast rule can be laid down for grant of conditional or unconditional leave.
(v) Where facts disclosed in affidavit are such that it becomes necessary for the plaintiff to prove consideration of the instrument leave to defend may be granted unconditionally.
(vi) Leave can be granted unconditionally where execution of the negotiable instrument is denied and from material on record it is not possible for Court to record a positive finding at the stage of consideration of application.
(vii) Where claim in suit on its face appears to be prima facie time-barred, unconditional leave can be granted.
(viii) There can be other circumstances in which unconditional leave can be granted.
(ix) Where defence disclosed found by the Court illusory or lacking bona fides. Leave can be granted conditionally.
(x) Where defence in the application are vague or intended to delay the proceedings without supporting material about the allegation of fraud, coercion, leave can be granted conditionally.
(xi) What should be terms and conditions for the grant of leave is at the discretion of the Court to be exercised keeping in view facts and circumstances of each case. On the basis of these principals I have to consider the application for leave to defend filed by the defendant, however, I would like to refer the case of M/s. Karachi Flour Mills Union v. Province of Sindh (PLD 1976 Lah.623), wherein it has been held: "Mr. Ajmal Mian learned counsel for the plaintiffs conceded, and rightly so, that although a meeting was held on 31-12-1960 between the plaintiffs and representatives of the Pakistan Government, the decisions taken as recorded in the minutes of the meeting Exh.D/3 were in the nature of recommendations and did not constitute a binding and enforceable agreement. As stated in the minutes although certain proposals offered to the plaintiffs were reluctantly accepted by them, nevertheless, they yet needed the 'final concurrence of the Financial Adviser, so that this outstanding issue is settled once for all'. It is not in dispute that the required final concurrence of the Financial Adviser was not given. Therefore, in the absence of a concluded agreement, the plaintiff claims on the basis of the decision recorded in the minutes against both the Government of Pakistan as well as the Provincial Government cannot be sustained."
32. ' In another case of Muhammad Matin v. Dino Manekji Chinori (PLD 1983 Karachi 387), the Honourable Court held: "We are, therefore, of the view that the question, whether there was a concluded contract, is always a question of fact, and has to be inferred from the evidence led and the documents produced by the parties. Evidence has yet to be recorded, and the plaintiff has succeeded in establishing a prima facie case that there was a legal and valid contract between the parties."
33. ' In the case of Dr. Fazal Din v. Muncipal Committee, Lyallpur (PLD 1956 (W.P.) Lahore 916), the Honourable Court held that "It is only by a seal that Corporation acts when it enters into contracts in writing and if there be no seal the Corporation has not acted at all and a contract has not come into existence".
34. ' In the case of A. R. Wright & Sons Ltd v. Romford Corporation, [1956] 3 All E R 785, on the basis of the following facts: "By an agreement in writing but not under seal, signed by the borough engineer on behalf of the Corporation and made in accordance with the Corporation's standing orders, the plaintiffs were engaged by the Corporation to demolish certain premises belonging to the Corporation. Under the agreement the plaintiffs were to receive Pound Sterling 39 14s. In money, and the material obtained in the course of the demolition (valued at about Pound Sterling 3,200) was to become their property. Their profit out of the contract was estimated and nearly Pound Sterling 750. In an action by the plaintiffs against the Corporation for damages for breach of the contract by repudiation, the Corporation, by its defence, alleged that the contract, not being under seal, was not binding on the corporation. The plaintiffs contended that the agreement was enforceable against the corporation because, being made in accordance with the corporation's standing order, it was valid by virtue of section 266(2) of the Local Government Act, 1933, which required contracts to be so made, and because the corporation could appoint and had validly appointed the borough surveyor to execute the written contract on their behalf...."
35. ' Lord Goddar, C.J. Of Queen's Bench Division held, "that the contract was not enforceable against Corporation because it was not under the seal of the Corporation".
36. ' I do not want to discuss in detail the questions (i) whether minutes dated 21-9-1994 signed by the parties constituted concluding contract or not, (ii) whether payments through cheques were in consideration of said minutes or subject to execution of contract, (iii) whether defendants were compelled to sign minutes dated 21-9-1994 and cheque of Rs,17,50,000, (iv) whether defendants by free will signed said minutes against their own interest under decree passed by Court in Suit No,2 of 1993. I am presently dealing the application for leave to defend, and I have to see only whether any plausible defence, question of law and facts has been raised in application for leave to defend or not and as detailed discussion of these questions at this stage may effect the interest of any party.
37. ' In my humble opinion there are serious questions of law and facts which require adjudication by providing parties opportunities to prove their respective case before suit can be finally decreed. In the circumstances, the application is allowed and leave to defend the suit is granted unconditionally.
38. ' The defendants are directed to file written statement within four weeks from today.