MAULVI ANWARUL HAQ, J.---This judgment shall decide R.F.As. Nos.86 and 179 of 2003 as these proceed against a common judgment of a learned Judge, Banking Court.
2. On 2-1-2002 the respondent No.1 filed a suit against the appellant and the remaining respondents for recovery of Rs.33,267,302. According to the plaint, the respondent No.1 is Banking Company as defined in the Financial Institutions (Recovery of Finances) Ordinance, 2001, while respondent No.2 is a Public Limited Company. The respondent No.3 was sued as a guarantor while the appellant and respondents Nos.4 to 6 were sued as guarantors and mortgagors. It was then narrated that in the year 1997 vide resolution dated 28-6-1997 the said company resolved to obtain Murabaha Finance from the respondent No.1 to the extent of Rs.30 million. However, the respondent No.1 agreed to grant a facility of Rs.5 million and the facility letter was issued on 28-6-1997. A promissory note was executed by the said Company and a General Financing and Collateral Agreement was entered into. Then there is reference to the Pledge Agreement and appointment of Muccaddams who were handed over the pledged goods. The plaint then narrates that the appellant and respondents Nos.4 to 6 created mortgage on their Property No.55-A, Fleming Road, Lahore, commonly known as Malik Mansion. The appellant acting for himself and a attorney of respondents Nos.4 to 6 created an equitable mortgage on the said property and deposited the original title documents with the respondent No.1 which are being retained by it. The appellant then executed the Memorandum of Deposit of Title deeds and also got registered a Token Mortgage deed. Similarly, he executed an Irrevocable Power of Attorney qua the said property in favour of the respondent No.1. Then there is reference to a Continuing Guarantee executed by respondent No.3 in favour of respondent No.1 while copy of guarantee executed by the appellant was also annexed.
The facility was availed. The respondent No.1 then agreed to enhance the limit to Rs.16 million. Out of this amount Rs.8 million were earmarked as Murabaha Facility while Rs.8 million against the Letter of Credit Facility. A facility letter dated 31-7-1997 was issued. A fresh agreement was entered into. Vide resolution dated 3-2-1998, the respondent. No.2 requested the respondent No.1 for facility of Rs.80 The respondent No.1 agreed to grant the facility to the extent of Rs.73,250,000 and the facility letter was issued on 18-2-1998. Again a fresh agreement was entered into between the Company and the respondent No. 1. Vide facility letter dated 20-8-1998 the facility was renewed in the sum of Rs.64,500,000. Again a fresh agreement was `entered into. The facility was availed. Vide letter dated 16-8-1999 the facility was renewed in the sum of Rs.39,500,000. Again a fresh agreement was entered into. Lastly, vide facility letter dated 23-11-2000 the facility was renewed in the same amount and a fresh agreement was entered into. In para.11 of the plaint the detail of the due amounts against Murabahas as well as letters of credit facility was stated. It was then stated that in June, 2001, a new Muccaddam was appointed who made a stock report stating that the stocks pledged by the said Company have been replaced with obsolete Computer Components while a stock of medicines have also been substituted. The Company was directed to reinstate the pledge in its original shape. In response the Company promised to provide collateral but this was not done. Further inquiries were made and it was found that stocks pledged with the respondent No.1 are of much lower value than the one retained and ultimately it turned out that the stocks which were, in fact, worth only Rs.600,530.50 were misrepresented to be of value of Rs. 10.166,843.20.
Further details of the claim were then stated in para.14 of the plaint and a decree in the said suit amount was accordingly prayed for. The defendants in the suit were served in the manner prescribed. The respondents Nos.2 and 3 on the one hand, the appellant in the 2nd and respondents Nos.4 to 6 in the 3rd filed applications for leave to defend. These applications were resisted by the respondent No.1 and were dismissed by a learned Judge, Banking Court-III, Lahore, who decreed the suit in the sum of Rs.32, 211,284 against all the defendants jointly and severally.
This was done vide judgment and decree dated 26-9-2002.
3. Against the said judgment and decree the appellant has filed R.F.A. No.86 of 2003 while respondents Nos.4 to 6 have filed R.F.A. No.179 of 2003.
4. Mr. Khalid Mahmood, Advocate/learned counsel for the appellant contends that his client did not execute any document and the said guarantee and mortgage documents were forged by respondent No.3. Further states that the power of attorney in favour of his client executed by respondents Nos.4 to 6 had been revoked in the year 1992 and as such the said documents shown to have been executed in the year 1997 are void being without lawful authority. He then argues that even if it be assumed that the documents were validly executed, then these pertained to the original facility of Rs.5 million which stood adjusted and was rendered non-existent because of the subs uent agreements between the principal debtors and the B< ik to which his client was not a party. Syed Haider All Shah, Advocate/learned counsel for respondents Nos 4 to 6 (appellants in R.F.A. No.179 of 2003) argues that the powers of attorneys were given in the year 1989 but these were revoked by means of document registered on 22-10-1992 and as such his clients are not bound by the acts of the attorney i.e. the appellant in R.F.A. No.86 of 2003. According to him, the respondent No.3 was a known Tax Consultant and the original title documents as well as the original powers of attorney had been handed over to him for the purposes of preparing the tax documents but he proceeded to hand over the said documents to the Bank to obtain the said finance facility without any reference to the said appellant.
5. Mr. Khalid Saleem, Advocate/learned counsel for the respondent No.1-Bank contends that the appellants have put up a false stance. They are very closely related. According to him, there is no plea that the said attorney had the notice of revocation of the powers of attorney and more important that the Bank also had the notice of the same. According to the learned counsel, the plea taken that the original documents were handed over to the said Tax Consultant is patently false. According to him, the guarantee given by the appellant in R.F.A. No.86 of 2003 was a continuing guarantee and covered future obligations as well. Similarly, the mortgage subsists till such time that it is redeemed in accordance with the law and the papers are released.
6. We have gone through the records of the learned trial Court, with the assistance of the learned counsel for the parties. It is an admitted fact that the appellant in R.F.A. No.86 of 2003 (hereinafter to be referred to by his name as Azam) was appointed as a general attorney by means of registered documents dated 29-11-1989 by the respondents Nos.4 to 6. There is also no dispute that Azam had the power to alienate the property by means of a mortgage. These powers of attorneys were cancelled by means of a registered documents dated 22-10-1992. The learned counsel for the bank does not seriously question the factum of revocation. He, however, insists that the said fact was concealed deliberately or otherwise. Relies on section 208 of the Contract Act, 1872, to urge that the termination of the authority of Azam would not take effect as regard the Bank before it comes known to it. We have examined the P.L.As. and we find that there is no plea that Azam or the Bank had the notice of the revocation of the said powers of attorney. In the absence of any plea or defence being raised on the said lines, there is no question of permitting the appellants to prove something, which they had not pleaded. We, therefore, do hold that the said revocation had not taken effect either against Azam or against the Bank.# We may note here that it is the case of respondents Nos.4 to 6 that all the original documents including the power of attorney were handed over to the said Tax Consultant. There is no explanation as to why the revocation deeds were not handed over to the said Tax Consultant.
7. Now coming to the question of execution of the documents by Azam, these documents are a Memorandum of Deposit of Title deeds executed on 28-6-1997 by Malik Muhammad Azam confirming the deposit of the documents mentioned in the schedule. These documents include the several original title deeds and the original general powers of attorney. Then, there is mortgage deed dated 14-7-1997 registered on the same date, an affidavit acknowledging the deposit of the original documents sworn on 12-7-1997, an irrevocable power of attorney executed on 14-7-1997 and registered on the same date. Then there is a letter of guarantee dated 28-6-1997 executed by him. We are not inclined to accept the denial of the said Azam qua the execution of the, said documents. His signatures do appear on his P.L.A. and to a naked eye the signatures appear to be similar.
8. Now in the said Memorandum of Deposit of Title Deeds, the mortgage money has been mentioned as Rs.20 million for the purposes of security of repayment whereof title documents were deposited. The guarantee letter dated 28-6-1997 also mentions the maximum limit of facility as Rs.20 million. The mortgage deed which is stated to be a token mortgage having been registered to cover the said equitable mortgage also refers to the payment of the mortgage money. To our mind upon a reading of the said three documents, the amounts secured or guaranteed to be paid to the Bank is up to the limit of Rs.20 million.
9. Now. Mr. Khalid Mahmood learned counsel for Azam draws our attention to the various sanction or facility letters mentioned in the plaint. According to his reading of the said facility letters each and every such letter issued after the original letter dated 28-6-1997 states that it supersedes the previous letter and final letter issued on 23-11-2000 consequently supersedes all the earlier letters.
The precise argument is that the liability of the appellants being relatable to the first facility letter, after making of the new arrangement and increase of finance facility, the appellants shall stand absolved of their original liability as it will be deemed that the same stands adjusted or revoked.
The argument appears to be attractive. However, learned counsel for the Bank draws our attention to a judgment of a learned Division Bench of this Court in the case of Mian Aftab A. Sheikh and 2 others v. Messrs Trust Leasing Corporation Limited and another 2003 CLD 702. Now it will be seen that the argument of the learned counsel for the appellants, as it is, finds support from the provisions of sections 133, 134 and 135 of the Contract Act, 1872 which tend to absolve a surety in case of a variance made in the terms of the contract between the principal debtor and the creditor without the surety's consent and this includes the contracts of the nature mentioned in sections 134 and 135 of the Contract. Act. Now in the said judgment, a similar plea was taken with reference to the said provisions of law. Now we find that the terms of the guarantee involved in the said case of Mian Aftab A. Sheikh and 2 others as reproduced in the judgment at pages 715 and 716 are similar to those of the said letter of guarantee 'dated 28-6-1997. Additionally, we would like to reproduce the following clauses 9, 10 and 11 of the said letter of guarantee: "9. Any account settled between Al-Baraka and the Customer or any demand by Al-Baraka on the Customer or his/its agent or any judgment or award obtained by Al-Baraka against the Customer or any statement from Al-Baraka stating the amount due to Al-Baraka at any time from the Customer shall be accepted by me/us as conclusive evidence of my/our liability under this Guarantee and shall be binding on me/us and I/we hereby waive all rights to question and/or challenge the same.
10. Al-Baraka shall be at liberty without any further consent from me/us and without thereby affecting its rights against me/us hereunder at any time to determine, enlarge or vary the amount and the terms of the facility to the Customer, to vary, exchange, abstain from perfecting or release any other securities held or to be held by Al-Baraka for or on account of the repayment intended to be hereby secured or any part thereof, to accept compositions from and make any other arrangements with the Customer in respect of any of its obligations regarding bills, notes or other securities held or to be held by Al-Baraka for and on behalf of the Customer.
11. Until all moneys and liabilities due from or incurred by the Customer to Al-Baraka shall have been paid or discharged, I/we shall not, either by paying off any sum recoverable hereunder or by any other means or grounds, claim any set off or counter-claim against the Customer in respect of any liability on me/our part or claim or prove in compliance with Al-Baraka in respect of any payment by me/us/any of us hereunder or be entitled to claim or prove against the Customer or his estate or the benefit or any other security which Al-Baraka may now or hereafter hold for any money, liabilities due or incurred by the Customer to AlBaraka or to have any share therein."
Now Their Lordships concluded as follows at page 720 of the judgment:-- "12. In the present case also appellant guarantors had expressly given their consent as per above reproduced clauses 2, 7 8, 9 and 10 of the letter of guarantee, dated 23-1-1993 and had assented to any subsequent composition of debt, enlargement of time and other variations between the leasing corporation and the company (UL). The guarantee was a continuing guarantee, permitting the creditor and the principal debtor to vary the, terms of the leasing agreement. The appellant guarantors had waived their prior right or consent or assent to such variance. In our opinion, contracting parties had a right to contract out of the privilege of release or discharge by executing an agreement of waiver of prior consent/assent in the guarantee.
Rescheduling memorandum of Understanding dated 21-6-1995 was within contemplation of above clauses and, therefore, did not affect discharge of appellants from their guarantee obligations. It will be hair splitting to state that provisions of section 133 or 135 of the Contract Act visualize consent or assent of the guarantor at the time of variance only and the same cannot be waived by the guarantors in advance."
10. We, therefore, hold accordingly while bell in respectful agreement with the said rule.
11. However, as noted by us above, the maximum limit of the security or the guarantee was fixed in these documents at Rs.20 million. The amounts worked out in paras.11 and 13 of the plaint comes to Rs.33,267,302. Thus, the point which remains to be seen and determined in this case is as to whether there is some evidence on record to bind the appellants to the extent of the said amount when the entire said amount was disbursed commencing May, 2001 and ending 24-11-2001.
12. In the light of the above discussion, both I hese R.F.As. are disposed of as follows:--
(i) The judgment and decree passed by the learned trial Court as against the principal debtors i.e. respondents/defendants Nos.1 and 2 shall remain in tact.
(ii) The judgment and decree as against the appellant and respondents Nos.4 to 6 (defendants Nos.3 to 6 in the suit) is hereby set aside and instead an interim decree in the sum of Rs.20 million is passed in favour of the plaintiff-Bank and against the said defendants Nos.3 to 6 in the suit in terms of section 11 of the Financial Institutions (Recovery of Finance) Ordinance, 2001.
(iii) Leave to defend is granted to the said defendants Nos.3 to 6 in the suit to the extent of the remaining suit amount. The learned trial Court shall accordingly frame the issues and proceed further in the matter.
(iv) No orders as to costs.