SYED HAMID ALI SHAH, J.- Respondent No. 1 instituted the suit for recovery of Rs. 84,62,598. 28/- (rupees eighty four lac sixty two thousand five hundred ninety eight and twenty eight paisa) with interest at the rate of 16% per annum with quarterly rests. Appellants were impleaded in the array of defendants as defendants Nos. 3 and 6 respectively. The appellants were sued in the capacity of guarantors to loan, on the basis of letter of personal guarantee dated 25.10.1980. Suit was filed on the basis of Bridge Finance Facility accorded to respondent No. 2 on 27.10.1977 which was subsequently increased to Rs. 90,000/- on 25.07.1979. The loan was secured by way of mortgage of property of respondent No. 2, situated at Chak No. 103-JB, Tehsil Chiniot, District Jhang measuring 102 Kanals 2 Marlas. A charge under Section 127 of the Companies Ordinance, 1984 was also registered. Another facility i.e. Overdraft facility up to Rs. 25,000/- was also availed on 25.10.1980, from Napier Road Branch, Lahore.
2. Appellants filed separate applications for leave to defend the suit under Section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, seeking leave to defend on the grounds: that suit is hopelessly time-barred; that liability of the applicant, if any, arises only to the extent of overdraft facility; that highly exaggerated amounts have been charged as interest as well as penal interest; that letter of personal guarantee is forged and false document; that the guarantee is for specific amount and nothing beyond that amount is recoverable; that assertions made in the plaint are vague; that agreements are unconscionable and that nothing in the plaint has been asserted against applicants. Respondent No. 1/plaintiff bank contested application by submitting its reply to the application wherein the averments made in the application were controverted. Learned Banking Court, dismissed the application for leave to defend the suit on the grounds: firstly for non-compliance of provisions of Sections 3 & 4 of Ordinance, 200I' secondly the signatures were compared by Court on letters of personal guarantee with application for leave to defend and the affidavit and were found identical and thirdly fresh cause of action for the purpose of limitation accrued to the plaintiff Bank on promulgation of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (now repealed). Learned Court, on dismissal of the application for leave to defend the suit, decreed the suit without passing a speaking order/judgment. Hence this appeal.
3 Learned counsel for the appellant has contended that various grounds were taken in application for leave to defend the suit but learned Court failed to consider these grounds while passing the impugned judgment and decree. Court has passed the decree without appreciating the fact that guarantee was for a specific amount i.e. Rs. 25,000/- and appellants are not liable on the basis of letters of personal guarantee dated 20.10.1980 to pay a sum, more than the one stipulated in the documents. No amount or rate of interest-has been mentioned in the guarantee letter to be charged from the guarantor. The guarantee was furnished regarding overdraft and that too for particular amount, but learned Banking Court has passed the decree in respect of Bridge Finance Facility against the appellants. No guarantee whatsoever was furnished in respect of Bridge Finance Facility, It was argued that the loan is time-barred and as such not recoverable. Learned counsel in this respect has placed reliance on the case of "Khalid Qureshi and 5 others vs. United Bank Limited" (2001 SCM R 103). The suit in respect of Bridge Finance was not competent before Banking Court at Lahore as the same was granted and disbursed at Karachi.
4. Learned counsel for respondent No, 1, on the other hand, has fully supported the impugned decree. He has submitted that leave application was rightly dismissed under the provisions of Section 10(6) of the Ordinance, 2001. The suit was within the period of imitation as the same was filed within three years of coming Into force of the repealed Act of 1997: The guarantee was continuing and the appellants were under, an obligation to pay the loan, which they guaranteed.
5. Heard learned counsel for the parties and perused the record.
6. The loan-subject-matter of the suit is an interest bearing loan granted to the appellant during the years 1977-1980. The suit was filed on 31.05.2000. The loans became time barred as per provisions of Limitation . Act, 1908 prior to the coming in force of the provisions of the Banking Companies (Recovery of Loats Advanced Credit and Finances) Act, 1997 (now repealed). Thus the right of the respondent Bank to recover the amount of finance stood extinguished due to bar of limitation as the provisions of Limitation Act were applicable to the interest bearing loans and respondent Bank has failed to file the suit against the appellants within the period of limitation. The rights, which were past and closed transaction cannot be revived. Fresh cause of action under the provisions of Section 22 of the repealed Act, 1997 arises only in the cases where the loan was granted on mark-up basis according to the Islamic Banking to overcome the hardship and inconvenience in the cases where no limitation was provided by Ordinance XIX of 1984. The provisions Of Section 22 are not made applicable to all cases instituted or filed in a Banking Court after coming into force of the Act, 1997. The loans disbursed under the non-Islamic Banking System, wherein period of limitation was provided, fall outside the purview of Section 22 of the repealed Act, 1997. The rights thus extinguished, cannot be revived by resorting to the provisions of Section 22 ibid. Reference in this regard can be made to the cases "Khalid Qureshi and 5 others vs. United Bank Ltd. (2001 SCM R 103) and TV.D.F.C, vs. Anwar Zaib White Cement and others" (1999 M LD 1888).
6. Additionally, the letters of guarantee pertain to a particular amount which has been guaranteed by the guarantors. The sum specified is Rs. 25,000/-. No other amount or rate of interest has been mentioned in letter of guarantee. No interest or rate of interest has been stipulated in the letters of guarantee and relevant portion is left blank, which gives presumption that ho interest was agreed to be charged or levied on contract of guarantee. Bridge Finance Agreements were signed and executed on 24.09.1977 and 25.07.1979. The letters of personal guarantee have no nexus with Bridge Finance Facility as Bridge Finance Facility was granted at Karachi and agreements were also signed and executed at Karachi. Letters of personal guarantee are for. Specific amount and in no manner can legally be stretched to liabilities arising under the Bridge Finance Facility.
8. Banking Court has passed the decree against the appellant jointly and severally for a sum of Rs.
84,62,598.28/- which is legally not sustainable. The appellants' guarantee is for a limited amount and they cannot be held liable for anything more than what they have guaranteed. The claim even otherwise is time-barred and fresh cause of action does not arise on promulgation of repealed Act, in respect of interest bearing loan.
9. For the foregoing the appeal is accepted and the impugned decree to the extent of appellants is set aside and the suit to their extent is dismissed with no order as to costs.