1. ' The plaintiff-Bank filed a ' suit on 17-3-1994 for recovery of Rs.54,170,004.40 plus Rs.10,834,000.88 as liquidated charges calculated @ 20% along with costs and other charges. The defendants were issued a show-cause notice under section 6(2) of the Banking Tribunals Ordinance, 1984, requiring them to show cause as to why the decree as prayed for in the plaint should not be passed against them. The defendants submitted their reply to the show-cause notice on 5-4-1994. The suit was decreed in favour of the plaintiff and against the defendants jointly and severally in the sum of Rs.5,41,70,004.40 with costs, vide judgment dated 25-1-1996.
2. ' The said judgment/decree was challenged in Constitutional Petition No,11387 of 1996 wherein the vires of sections 4, 6(6) and 9 of the Banking Tribunals Ordinance, 1984 were challenged. This Constitutional petition along with numerous writ petitions were allowed vide judgment dated 23-9- 1996 and the judgment/decree dated 25-1-1996 was set aside. After the promulgation of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 the suit came before this Court. The Non-Performing Assets of the defendant-Company in the hands of the Bank were taken over by the CIRC (Corporate and Industrial Restructuring Corporation) under section 18 of the Corporate and Industrial Restructuring Ordinance L of 2000.
2. The facts averred in the plaint are that the plaintiff advanced a finance facility of Rs.29,720,771.09 between 7-8-1990 and 24-9-1990 and also provided Bank Guarantees in the sum of Rs.30 million on 24-9-1990 through its Central Branch in favour of National Development Leasing Corporation Ltd., hereinafter to be called NDLC, said finance facility of Rs.29,720,771.09 was adjusted in full on 24- 9-1991 by the defendant No,
1. The plaintiff-Bank received a letter on 4-4-1991 from NDLC whereby the said guarantee was recalled and the plaintiff-Bank agreed to pay off NDLC by debiting the account of defendant No,1 on a condition that the defendants executed the usual finance documents. The defendants executed the finance agreement on 8th April, 1991 wherein the defendant No,1 agreed to buy-back the goods at a price of Rs.5,41,70,004.40. In addition to the mortgage document already with the Bank, following security documents were also executed by the defendants:--
(a) Demand promissory note dated 8-4-1991.
(b) Facility letter dated 8-4-1991.
(c) Letter of guarantee dated 8-4-1991 executed b, tie defendants No,2.
3. ' The details of the mortgages refer to hereinbefore for the property are as follows:--
(i) Equitable mortgage in favour of the plaintiff Bank, in the sum of Rs.37,417,500, created by deposit of title deeds on 2-10-1990.
(ii) Legal mortgage in the sum of Rs.3,118,125 created in favour of the plaintiff-Bank on 2-10-1990.
4. ' Despite various letters the defendants have failed to adjust the outstanding liability nor made any attempt to liquidate the same.
5. ' The defendants resisted the suit raising the plea that the guarantees in favour of NDLC were valid up to 23-12-1990. The same were not invoked before the said period, there was no request for extension of the validity period as such the guarantees could not be encashed.
6. ' After the promulgation of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 leave to defend the suit was granted vide order dated 18-4-2000 by Malik Muhammad Qayyum, J., as he then was. The defendants filed the written statement. The following issues were framed:-
(1) Whether the suit is not maintainable?
(2) Whether the suit has been filed by the duly authorized person?
(3) Whether the plaintiff is entitled to recover the amount from the defendants?
(4) Relief.
7. ' With the consent of the parties Local Commission was appointed for recording the cross- examination/evidence of the parties.
3. Learned counsel for the plaintiff has reiterated the contents of the plaint.
8. ' Conversely the learned counsel for the defendants submitted that payment to NDLC by the plaintiff-Bank was beyond validity date. The Bank guarantees issued by the plaintiff-Bank favour of NDLC were valid up to 23-12-1990. The encashment was allegedly. Made on 8-4-1991. There was no alleged letter dated 4-4-1991 from NDLC recalling the guarantees. Learned counsel further maintained that there was no written request by the defendants for the extension of the guarantee.
9. The guarantees Exh.P.W.1/3 and Exh. P.W.1/5 were cancelled on 3-7-1991. Reliance was placed on section 145 of the Contract Act, 1872 and Alavi Sons Ltd. v. The Government of East Pakistan and others (PLD 1968 Karachi 222) and Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others (1999 CLC 755) to contend that the defendants are not liable for the payments made wrongfully by surety. He also referred to the cross-examination of Khalid Razzaq, P.W.1.
10. ' Issue No,3.
4. I have considered the arguments of the learned counsel for the parties and perused the record.
11. Plaintiff-Bank furnished Parking Guarantee Exh.P.W.1/3 in favour of NDLC on 24-9-1990 in the sum of Rs.20.700 million. The front page of the same shows that it was valid up to 23-12-1990. However, clause 12 of the same shows that it "shall not in any manner extend beyond 7-1-1991 on which date we shall stand discharged of all our liabilities hereunder". P.W.1/4 shows that the validity of the said Parking Guarantee Exh.P.W.1/3 was extended up to 7-4-1991 at the request of the defendant No,1 with the date of payment up to 23-3-1991. Another Parking Guarantee P.W.1/5 dated 24-9-1990 was furnished in favour of NDLC in the sum of Rs.10,350,000. The same was also valid up to 23-12-1990.
12. However, clause 12 of the same reveals that it shall not in any manner extend beyond 7-1-1991. The said Bank guarantee indicates that it was also extended up to 7-4-1991 at the request of defendants with date of payment up to 23-3-1991 vide Exh.P.W.1/6. No documentary evidence has been brought on the record to show . That the defendants requested the plaintiff-Bank for extension of the Parking Guarantees. Syed Mustafa, P.W.2 admitted in his cross-examination that "it is correct that after the original guarantee was issued there was no further request in writing for their extension". I am of the considered view that there was no request from the defendants to extend the validity period of the original guarantees Exh.P.W.1/3 and Exh.P.W.1/5, both dated 24-9- 1990. Mere bald statement of the P.Ws. Cannot be accepted. The next question arises as to when the guarantees Exh.P.W.1/3 and Exh.P.W.1/5 were called upon. Recall date will be the material date between the parties. Here too, no documentary evidence was adduced to manifest as to when the demand upon the guarantee was made by NDLC. Mere oral assertion of the P.W.1 and P.W.2 is not acceptable. Similarly no documentary evidence was produced to reveal as to when the encashment of the guarantee was actually made or on what date the encashment cheque was issued by H.B.L. The guarantees Exh.P.W.1/3 and Exh.P.W.1/5 show that the same were cancelled on 3-7-1991. Khalid Razzaq, P.W.1 admitted in cross-examination that "cancellation date of guarantee is dated 3-7-1991 whereas liability was reversed on 3-7-1991 as per NDLC record. Same is the position regarding Exh. P.W.1/6, Exh.P.W.1/3 and Exh. P.W.1/4". No effort was made by either party to summon the record of NDLC to prove the fact as to when the demand upon guarantees was actually made. The alleged request letter dated 4-4-1991 recalling the guarantees has been withheld from evidence. Clause 9 of the guarantees P.W.1/3 and P.W.1/5 demonstrate that the demand on the guarantee "shall be deemed to be effected by addressing and posting a letter containing the said demand to us or otherwise delivering the sale to us". The essential condition has not been met. The date of encashment of the guarantees is also not clear. It is admitted by Khalid Razzaq, P.W.1 that as per NDLC record the liability was reversed on 3-7-1991. The same date appears on Exh.P.W.1/3 and Exh.P.W.1/5. It appears that the guarantees were in fact encashed on 3- 7-1991, even after expiry of the alleged extended validity period i.e. 7-4-1991. Mere bald statement of the P.W.1 and P.W.2 that the said guarantees were encashed on 8-4-1991 cannot be accepted. In my view the Bank has made the payment beyond the validity period.
5. The defendant No,1 entered into Finance Agreement dated 8th April, 1991 Exh.P.W.1/9 with the plaintiff by which the plaintiff agreed to provide a finance of Rs.32,695,370.12 (equivalent to encashed guarantee amount) to the defendant. The finance agreement Exh.P.W.1/9 shows that the customer (defendant) agreed to sell to the Bank during the period ending 8-4-1993, the goods up to a total of Rs.32,695,370.12. Clause 3 of the said agreement is silent about the date for repayment of the marked-up price/purchase price of Rs.5,41,70,004.40.
13. ' The first question which arises in the instant case is that whether the finance agreement dated 8- 4-1991 Exh.P.W.1/9 is without consideration. In my view it is so. The alleged sale price of Rs.32,695,370.12 was never disbursed to the defendant-Company. The P.Ws. Deposed that the Bank received a request on 4-4-1991, which is before the expiry of the alleged extended validity period i.e. 7-4-1991, for the encashment of the Parking Guarantees. I have already held that there is no proof of that and that there is no proof either of the fact that the defendant ever made a request for extending the operative period of the guarantees.
14. ' The encashment of the guarantees could form consideration under section 2(d) of the Contract Act, for the finance agreement dated 8-4-1991, however, it is past and past consideration is no consideration. A contract without consideration is Void unless it comes under any of the exceptions set out in subsections (1) to (3) of section 25 of the Contract Act, 1872. See Habib Bank Limited v.
15. Shamim Qureshi (PLD 1988 Karachi 481), Anwarul Haq v. State Oil Company Limited (1993 CLC 1565), Abdul Karim Jaffarani v. United Bank Limited and 2 others (1984 SCMR 568), Pervaiz Akhter and another v. The Additional District Judge, Rawalpindi and 4 others (PLD 1990 SC 681), Messrs Tribal Friends Co. v. Province of Balochistan (2002 SCMR 1903) and Ghulam Ali and 2 others v. Mst.
16. Ghulam Sarwar Naqvi (PLD 1990 SC 1). Section 25 of the Contract Act, 1872 which reads as under:-- "Agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law. An agreement made without consideration is void, unless--
(1) it is expressed in writing and registered under the law for the time being in force for the registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless;
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, on something which the promisor was legally compellable to do, or unless; ' it is a promise, made in writing and signed by the person to be authozied in that behalf, to pay wholly or in part a debit of which the creditor might have enforced payment but for the law for the limitation of suits.
17. ' In any of these cases, such an agreement is a contract.
18. Explanation 1.---Nothing in this section, shall affect the validity, as between the donor and donee of any gift actually made.
19. Explanation 2.---An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
20. ' The conditions necessary to constitute a promise within section 25 are:--
(a) that it should be in writing;
(b) be signed by the person to be party therewith;
(c) be a promise to compensate a person wholly or in part who has already voluntarily done something for the promisor;
(d) be a promise to pay wholly or in part a debt, of which the creditor might have enforced payment but for the law for the limitation of suits.
21. ' It does not require that in the writing itself the consideration should be described as past service or past debt, when in fact it was such past service or past debt and was rendered or paid as such.
22. See Kasturchand Jiwaji v. Manekchand Devchand (AIR 1943 Bombay 447). It seems probable that the plaintiff-Bank informed the defendants that NDLC (Principal Creditor) has made a demand on the guarantees and that plaintiff has honoured it and that the defendants (Principal Debtors) should compensate the plaintiff-Bank. As debt was still due to NDLC from the defendant (Principal Debtor) it felt obliged to reimburse the Bank. The finance agreement dated 8-4-1991 Exh. P.W.1/9 can be considered an undertaking by the defendants to re-compensate the Bank for the payment made by it in discharge of the debt due from the defendants to NDLC. It is not the case of the defendants that their liability to NDLC (Principal Creditor) was not enforceable against them nor it was statute barred debt. The right of the lender to receive payment and the obligation of the borrower to repay never dies by lapse of time. NDLC could have sued the defendants (Principal Debtors). Where a promise is made by a person to compensate another for the past services rendered by him, the agreement is valid. In my view the case of the plaintiff is covered by section 25(2) of the Contract Act, 1872. This clause appears to cover cases where a person without the knowledge of the promisor, or otherwise than at his request, does the latter some service and the promisor undertakes to re-compense him for it. In such cases promise does not need a consideration to support it. See Ghulam Ali and 2 others v. Mst. Ghulam Sarwar Naqvi (supra). It does not revive a dead right but resuscitates the remedy to enforce payment by suit. The payment made by the plaintiff-Bank was an act "voluntarily done" for the defendants. Voluntarily done connotes something performed or done of one's own free-will and choice and not constraint, or prompted by another. There is nothing on the record to show that the finance agreement dated 8- 4-1991, Exh.P.W.1/9 was executed under any pressure or coercion.
23. ' In addition to the liability admitted in the finance agreement Exh.P.W.1/9, the defendants have also admitted, their liability in the correspondence made with the plaintiffs.
24. ' The plaintiffs issued legal notice dated 27-9-1993, Exh.P.W. 1 / 16 to the defendants stating that a sum of Rs.32.695 million was paid to NDLC on account of the guarantees and that despite various notices the liability had not' been adjusted. The defendants replied vide letter dated 16-1-1994 Exh.P.W.1/14 in which receipt of the legal notices was confirmed and the following assurance was given:-- "We assure you that we are as concerned about your outstanding as you are and have every wish and desire to resolve the issue in a manner which is acceptable to both the parties."
25. ' A further request for an additional finance facility of Rs.3,00,00,000 was also made. Since the defendants have accepted the liability, they are estopped by conduct from having volte face and say that agreement was devoid of consideration.
26. ' I have carefully examined the finance agreement Exh.P.W.1/9, it only gives the date of sale of raw materials/goods etc. By the customer to the Bank as ending 8-4-1993. The defendant/customer was to purchase the goods immediately. The finance agreement does not give any date for repayment of the finance/marked-up price by the customer. Clause 3 of the agreement P.W.1/9 is silent. The statement of account shows that mark-up charged up to 8-4-1993 (date of sale of goods by the customer to Bank) is Rs. 15,363,100.45 and for the cushion period it is Rs.6,111,533.83. As stated above the defendant was to sell the goods to the Bank till 8-4-1993 and "shall purchase immediately the said goods from the Bank". No mark up could be charged till 8-4-1993. The plaintiff is entitled to th original amounts paid on the guarantees to NDLC. The issue is answered accordingly.
27. ' Issues Nos.1 and 2.
28. ' No arguments were advanced on these issues the learned counsel for the defendants. They are acco ingly decided against the defendants.
6. For what has been stated above the suit is decreed in favour of the plaintiff-Bank and against the defendants to the tune of Rs.3,10,50,000 (the payment made on guarantees) jointly and severally with costs and cost of funds as envisaged in section 3(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, from the date of the institution of the suit.