1. ' C.M.A. No,273 of 2005 has been filed by the defendant No,4, Muhammad Younus HabibIn the application it is inter alia prayed that, "this Honourable Court may be pleased either to pass a Joint Decree against all the defendants (including myself) or may be pleased to grant unconditional leave to defend the suit and appear therein in the interest of justice, fairplay and equity".
2. ' Brief facts as a preclude to are necessary to appreciate the rival contentions of all the learned counsel. Plaintiff originally filed the instant suit against the defendants Nos.1, 2 and 3 only.
3. Defendant No:2 sued as a guarantor in the meantime expired. While granting leave to the defendants, plaintiff was directed to bring the legal heirs of the defendant No,2 on record within two weeks, otherwise the plaint shall be struck off. It appears that the legal representative of defendant No,2 were not joined, apparently for the reason that, right to sue on the basis of guarantee did not survive the deceased guarantor, therefore, there is no suit as against defendant No,2.
4. ' It further appears that some evidence was also recorded. It appears that during course of the proceeding pursuant to some settlement between the plaintiff and Younus Habib and others, an agreement settling liabilities and dues payable to the plaintiff-Bank was arrived at on 27-82002. As per settlement, it appears that defendants Nos.4 to 10 assumed and took over the suit liability.
5. C.M.A. No,8574 of 2002 under Order XXIII, rule 3, C.P.C. Was filed by the plaintiff and defendants Nos.1 and 3 on 20-12-2002, they sought disposal of the suit in terms of the agreement arrived at between plaintiff in suit and the defendants who were not party. At the relevant time. On 3-3-2003 the application was dismissed by the Court on the ground that, the suit could not be decreed against the person who are not party to the suit. It therefore, necessitated C.M.A. No,156 of 2004 under Order I, rule 10, C.P.C., whereupon defendants Nos.4 to 10 were added as party to the proceeding.
6. ' Defendant No,4 only put in appearance and filed the listed application, whereas, defendants Nos.5 to 6 chose to remain absent despite service.
7. ' The controversy that has engaged the attention of this Court appears to be whether on facts and circumstances, the decree as against all the defendants could be passed or against the newly- added defendants Nos.4 to 10 only.
8. ' Mr. Saleem Thepdawala, learned counsel appearing for the defendants Nos.1 and 3 contends that, since the liability in suit were unequivocally assumed and taken over by the newly-added defendants Nos.4 to 10 under the agreement referred to above, defendants 1 and 3 stood absdlved and discharged of any liability in suit. He extracts supports from various clauses of the agreement, which is admitted by all the parties. He therefore, urges that terms of the agreement unequivocally postulate the assumption of liability and consequences in case of default or breach thereof. He further contends that, for all practical purposes the defendants Nos.1 and 3 the original defendants stood absolved and exonerated.
9. ' In contra, learned counsel for the defendant No,4 contends that facility was availed by defendants Nos.1 and 3 and they are also the beneficiary, therefore, same is to be enforced against them as well. According to him, the NAB under duress and pressure obtained the signature of the defendant No,4 on the subject agreement, therefore, cannot be enforced or acted upon. To a specific query of the Court, it was stated that, defendant No,4 has till date not challenged the said agreement nor, filed any proceeding to impugn the same. He however, maintained that, suit may be decreed jointly and severally against all the parties to the suit so that defendant No,4 may recover the amount from the defendants Nos.1 and 3 who have in fact availed the facility in suit.
10. ' Mr. Zubair Qureshi, appearing for the plaintiff contends that the agreement was entered into between the plaintiff and defendants Nos.4 to 10. He contends that the defendants Nos.4 to 10 have committed breach thereof. Neither the amount mentioned therein was paid nor, security as committed was furnished, he therefore, contends that, the agreement has not been performed, therefore, plaintiff is entitled to a decree jointly and severally against all the parties to the suit.
11. ' Having heard the arguments and perused the record.
12. ' In order to appreciate rival contention of the learned counsel it will be beneficial to examine relevant terms of the agreement. It appears that, the agreement was executed by and between defendants Nos.4 to 10 referred to as First Party and Plaintiff-Bank, referred to as Second Party. In the first recital of the agreement. Defendant No,4 acknowledged that he and his nominees were the beneficiary of the various financial facilities as detailed in schedule "A" to the agreement. As regard the suit liabilities, same find mention in the Schedule "A" as serial No,62 in the sum of Rs,218.342 millions.
13. ' In the third recital, the First Party, that is defendants Nos.4 to 10 committed "jointly, severally and irrevocably, to pay to the Second Party (i,e, plaintiff's Bank) a sum of Rs,1,600,000,000 (on billion and six hundred millions) in settlement of our existing liabilities and obligations arising out in the Suits and all other existing liabilities and obligations arising out, relating to or connected therewith". The liabilities contracted to be settled in all 69 suits including suit in hand as detailed in schedule "A" to the agreement-.
14. ' From the fourth recital of the agreement, it appears that State Bank of Pakistan and so also Chairman, National Accountability Bureau (NAB) conceded and accorded approval to such agreement. Relevant Clauses under which the liabilities were assumed are 1, 2, 4, 7 and 13 having direct bearing on point in controversy, are reproduced for the benefit of appreciation.
(1) Younus Habib, one of the First Parties, hereby admits, acknowledges and declares that as Chief Operating Officer of the defunct Mehran Bank Ltd., which was later merged with National Bank of Pakistan, hereinafter referred to as The Bank he had approved and disbursed financing facilities of various kinds to 65 customers, as described in Schedule "A" attached herewith. However, for all intents and purposes, he, or his nominees were the actual main recipient and beneficiary, in addition to all other First parties named above, who had availed and fully utilized the financing facilities in the various names of customers. The First Parties do hereby also admit and acknowledge the said fact and further declare that they are fully competent and authorized to act and commit in the name and on behalf of the customers named in the Schedule "A".
(2) The First Parties do hereby admit and acknowledge that they are the principal debtor, guarantor, surety, beneficiary, indemnifier, Bcnamidar and or associate (as defined in the National Accountability Bureau Ordinance, 1999 (NAB Ordinance) or the credit facilities, finances, loans and or various financial obligations granted/extended by the Bank to the customers as named in the Schedule "A".
(4) After negotiations with the Second Party and in consideration of the mutual covenants contained herein the First Parties do hereby agree and undertake jointly, severally and irrevocably, to pay to the Second Party a sum of Rs,1,600,000,000 (Rupees one billion and six hundred million) in settlement of their 'existing liabilities and obligations as admitted and acknowledged above and set out in the Suits and all other existing liabilities and obligations arising, out relating to or connected therewith. To show their bona fide, the First Parties have already reduced their liability partially by making ,payment to the Bank of a sum of Rs,25,000,000 (Rupees Twenty-five million only) on 21st August, 2002.. The First Parties are willing and agreeable to make payment of the balance of the said amount on the dates and in the manner desired below:--
(i) Rs,25 million on or before September, 2002.
15. (ii)Rs,40 million on or before 30th October, 2002.
16. (iii)Rs,110 million within a period of 30 days form the date hereof.
17. (iv)Rs, 30 million on or before 30th December, 2002.
18. (v)Rs,160 million on or before 30th March, 2002.
19. (vi)Rs,160 million on or before 30th June, 2003.
20. Rs,160 million on or before 30th September, 2003.
(vii) Rs,160 million on or before 30th December, 2003.
(viii) Balance of Rs,760 million on or before March, 2005.
(7) The First Parties do hereby guarantee and assure the Second Party and the NAB that the aforesaid Cheques shall be honoured and payment against the same will be made to the Second Party on the respective due dates positively. The First Parties are fully conscious and acknowledge that if they shall fail or refuse to create the mortgage in favour of the bank within 30 days from 'the date hereof in respect of the properties described in Schedule "C" or if any of the aforesaid cheques is dishonoured or if they shall fail or refuse to pay all or any portion of the aforesaid outstanding amounts on the due dates, the entire outstanding amounts as claimed by the Second Party in the Suits described in Schedule "A" attached herewith shall forthwith become. Due and payable by the First Parties jointly or severally together with accrued and accruing mark-up thereon at the rate of 42 (forty-two) paisas per thousand per day and such default on the part of the all or any of the First Parties shall constitute a criminal offence which shall further render all of the First Parties to be prosecuted jointly and or severally both in Civil and Criminal Courts of competent jurisdiction, in accordance with the laws.
(13) That First Parties agree and undertake to execute and deliver fresh documents relating to existing securities as may be reasonably required by the Second Party for securing repayment by the First Parties of the outstanding amounts. The First Parties shall ratify, remove and correct forthwith and defect or objection in respect of any documents of securities and properties mortgaged with the Second Party and hereby further assure that the securities furnished by the First Parties, are free from all claims, demands, dues and encumbrances of any nature whatsoever and that the owners of the securities are holding clean, lawful and marketable title of the movable and/or immovable assets under the charge and lien of the Second Party. The First Parties agree and undertake to execute any and all other agreements and/or documents whenever called upon by the Second Party for the further and better execution of the terms and conditions of this agreement."
21. ' On perusal of the above clauses, it is evident that the defendants Nos.1 to 10 unequivocally assumed all the liability in respect of subject-matter of present suit. It also appears that, in case of default, the First Party i,e, defendants Nos.4 to 10 were held to be responsible to face the consequence.
22. In terms of Order XXII, rule 10, C.P.C. The person on whom the interest or liability devolves, may be joined to prosecute or defend the claim. In this case it appears that; the plaintiff as well as the defendants Nos.1 and 3 had jointly moved C.M.A. 8574 of 2002 under Order XXIII, rule 3, C.P.C.
23. Seeking judgment and decree against the defendants Nos.4 to 10. However, said application was dismissed, as noted above on the ground that at the relevant time, said defendants were not Party to the suit. In terms of section 41 of the Contract Act, as well where a promise accepts performance from a third person, he cannot afterward enforce against the predecessor promisee.
24. ' It, therefore, appears that the plaintiff-Bank itself acknowledge that the liability in suit since assumed by the defendants 4 to 10, thereby absolving the defendants Nos.1 and 3 of their liabilities if any.
25. Even otherwise tenor of the agreement sufficiently demonstrates that the parties thereto i,e, plaintiff accepted assumption of the liability by defendants Nos.4 to 8 which amounts to novation of contract. Liability if any on the basis of claim in suit has been taken over and assumed under fresh agreement dated 27th August; 2002, therefore, predecessor agreement on the basis of which suit was filed, was superceded and no more enforceable. Successor agreement is in fact novation of contract relieving and discharging the earlier promisors of their liability if any. (See S. Sibtain Fazli v. Star Film Distributors PLD 1964 SC 337).
26. ' Effect of novation of contract is provided in section 62 of the Contract Act, illustration (a) to above section is also relevant to facts of the present case, which runs as follows:-- "62 Effect of Novation.--- Rescission and alteration of contract. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.
(a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor instead of A. The old debt of A to B is at an end, and a new debt from C has been contracted."
27. ' In the instant case, as the facts unfolded, it appears that the plaintiff-Bank voluntarily entered into contract with defendants Nos.4 to 10, accepted them as a debtor in respect of claim in suit, agreed to enforce the claim under the agreement as against them. Mr. Zubair Qureshi, when asked, was not able to point out any clause or reservation on the part of the plaintiff-Bank to claim any right as against the original defendants Nos.1 and 3. In fact defendants Nos.1 and 3 joined the plaintiff to seek decretal of suit as against the defendants Nos.4 to 10, on the basis of subject agreement, as already detailed in the narration above.
28. Thus, where parties to the contract agree to substitute a new contract the original contract need not to be performed. It gives effective discharge to the party liable under the predecessor contract.
29. Only contract under the circumstances is the successor contract where the creditor himself is party to a contract and accepts its performance by another set of person who not only assumes the previous liability but also agree to discharge the same. In such circumstances, novation (sic).
30. In this case the creditor has for all intent and purpose discharged the earlier debtors. Mr. Zubair Qureshi, learned counsel for the plaintiff, failed to point out any clause in the agreement, whereby plaintiff reserved to itself, any right to enforce the liability in suit against the original debtors namely the defendants Nos.1, 2 and 3 either jointly and or severally with the new set of the debtors namely defendants Nos.4 to 10.
31. ' Mr. Zubair Qureshi, has drawn my attention to clause (13) of the agreement to emphasize that the First Party (defendants Nos.4 to 10) agreed to execute and deliver fresh documents which they failed D therefore, the contract was not, at all performed, therefore, defendants Nos . 1 and 3 were not discharged. I am afraid such inferences cannot be drawn. On the plaintiff unequivocally accepted the assumption and discharge of suit liability y by the defendants Nos.4 to 10 in fact exonerated and discharged the defendants Nos.1 to 3 of any suit liability.
32. ' Under facts and circumstances, defendant No,4 has not made out any case for the grant of leave to defend. Defendants Nos.5 to 10 chose not to file any application. Accordingly application for leave to defend filed by the defendant is dismissed. Consequently suit is decreed as against the defendants Nos.4 to 10 only.
33. ' Mr. Zubair Qureshi learned counsel vainly contended that C.M.A. 456 of 2004 under Order I, rule 10, C.P.C. Whereby plaintiff prayed "to add the names of the First Party (i,e, defendants Nos.4 to 10) mentioned in the agreement dated 27-8-2002 in the plaint and decree the above suit jointly and severally on terms mentioned in clause (13) of the settlement agreement hereinabove with no order as to cost" was allowed, therefore, suit is to be decreed against all the defendants.
34. Arguments are fallacious, on application Court may add or delete a party but do not decree the suit. Even otherwise plaintiff sought decree in terms of clause (13), which provided discharge of suit liability by the defendants Nos.4 to 10. It may be observed that, under Order I, rule 10, C.P.C. At the best E Court may either join or refuse to join or delete any party. Since by virtue of novation of contract the defendants Nos.1 to 3 stood absolved of the suit liability no purpose would be served to keep the suit pending as against the defendants Nos.1 to 3, suit is accordingly dismissed as against defendants Nos.1 to 3 with no order as to costs.