ANWAR ZAHEER JAMALI, J.---This appeal, under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is directed against the judgment and decree dated 16-5-2005, passed by learned Single Judge of this Court in Suit No.418 of 1999, whereby the suit of respondent No.1 has been decreed against the appellants jointly and severally.
2. In a nutshell, relevant facts of the case are that on 1-2-1999 the respondent No.1 had instituted a suit for recovery of Rs. 176,798,825.00 against the appellants (predecessor-in-interest of appellant No.3) and respondents Nos.2 and 3. This suit was based on the loan sanction advice dated 1-9-1982 and consequent disbursement of Rs.29.00 million to the respondent No.2-Company, out of which Rs.26.00 million were for the import of machinery and Rs.3.00 million were for the purchase of local machinery. The loan was recoverable in eight years in equal half-yearly instalments with two years' grace period at an agreed rate of interest, 2% above the Bank rate, subject to the maximum of 12% per annum. The Directors of respondent No.2, named in para-4 of the plaint, had subsequently sold their shares to the appellants (predecessor-in-interest of appellant No.3), and therefore, the possession of the project was taken over by them from the previous Directors, with the permission of respondent No. 1-Bank.
3. On the basis of such arrangements and purchase of shares of the previous Directors by the appellants in their capacity as new Directors of respondent No.2, they had accepted and taken over the liabilities of the respondent No.2 and for this purpose also executed their personal guarantees. Upon failure of the appellants and respondent No.2 to repay the balance loan amount of Rs. 176,798,825.00, despite repeated reminders, the suit was instituted by the respondent No.1 against the appellants (predecessor-in- interest of appellant No.3, who expired during the pendency of the suit) and respondent No.2 and also against respondent No.3, having paripassu charge in their favour.
4. During the pendency of the suit the application for leave to defend moved on behalf of respondent No.2 was dismissed on 14-9-1999 and consequently on 30-9-1999 suit in the sum of Rs.34,691,464.00 with mark-up at the rate of 12% per annum from the date of institution of the suit till payment was decreed against them. However, the application for leave to defend moved on behalf of the appellants was allowed by the same order and they were directed to file written statement, wherein, inter alia, they took the plea that the Bank guarantees furnished by them were subject to certain conditions, therefore, they are not liable to pay the suit amount until the fulfillment of such conditions. The respondent No.3 had also filed their written statement with a claim against the respondent No.2.
5. In order to resolve the dispute raised by the present appellants, as regards their liability towards the respondent No.1, following issues were framed in the suit:--
(1) Whether the defendants Nos.2, 3, 4 and 5 are guarantors of the loan amount?
(2) Whether the personal guarantees executed by the defendants Nos.2, 3, 4 and 5 are conditional and or without considerations?
(3) Whether the defendants Nos.2 to 5 are liable to pay plaintiffs outstanding amount on the basis of guarantees executed by them?
(4) What should the decree be?
6. After recording of evidence of the parties and production of relevant documents by them the learned Single Judge heard the arguments of the parties' counsel and recorded his findings on Issues Nos.1 and 3 in the affirmative and Issue No.2 in the negative and consequently decreed the suit against the appellants in the same terms as contained in the earlier decree dated 20-10-1999, passed against the respondent No.2.
7. We have heard Mr. A.H. Lakho, Advocate for the appellants. He vehemently contended that though there was no denial from the side of the appellants (predecessor in-interest of appellant No.3) about the execution of guarantees by them in favour of the respondent No.1-Bank, but such guarantees executed and furnished by them were subject to several other conditions contained in the letter dated 16-5-1990 Exh.P.4/12, therefore, passing of impugned judgment and decree without taking into account such conditions is illegal.
He further contended that the Bank guarantees executed by the appellants Nos.1, 2, 4 and predecessor-in-interest of appellant No.3, though executed on 9-5-1990, were delivered on 16-5- 1990 to respondent No.1-Bank, along with the letter Exh.P.4/12, thus the same were integral part of such letter and subject to the conditions contained therein and therefore, cannot be enforced against them for recovery of suit amount without fulfillment of such conditions. He also contended that such Bank guarantees executed by the appellants are ab initio void for the reason that the same were got executed from them without any consideration and thus hit by the provisions of section 127 of the Contract Act. In support of his submissions, learned counsel made reference to the following cases:--
(1) Custodian of Enemy Property, Islamabad v. Hoshang M. Dastur and 6 others PLD 1977 Karachi 377;
(2) Saudi-Pak Industrial and Agricultural Investment Company (Pvt.) Ltd. v. Messrs Allied Bank of Pakistan and another PLD 2003 SC 215;
(3) Sadar Din v. Mst. Khatoon and others 2004 SCMR 1102.
8. Learned counsel concluded his submissions by reiterating the purported illegalities in the Bank guarantees executed by the appellants Nos. l , 2, 4 and predecessor-ininterest of appellant No.3, and the conditionality attached thereto in terms of Exh.P.4/12. However, he did not dispute that the letter dated 16-5-1990 (Exh.P.4/12) was not written by the appellants, but by the respondent No.2 and it was replied by respondent No.1 on 16/17-6-1990, wherein clarification/ denial of various terms of such letter was made, and thereafter no further correspondence on the subject had taken place between the parties.
9. Since the learned counsel has placed reliance upon section 127 of the Contract Act in support of his last submission, it will be advantageous to reproduce the same as under:-- "127: -Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee."
Further a reference to the judgments cited by Mr. A.H. Lakho will show that in the case of Custodian of Enemy Property (supra) it was held that the question whether the parties had reached a concluded contract or not, is a question of fact to be deduced from the correspondence, and other documentary and oral evidence. The true test for deciding this question is to ascertain whether the parties were of one mind on all the material terms at the time it is said to have been finalized between them and whether they intended that the matter was closed and concluded between them. In the case of Saudi-Pak Industrial and Agricultural Investment Company (Pvt.) Ltd. (supra), taking into consideration the scope of section 127 of the Contract Act, it was observed by the Honourable Supreme Court that principles of construction, governing contracts in generality apply equally to contracts of guarantee. It was further observed that it is a fundamental principle of interpretation of documents and statutes that they are to be interpreted in their entire context, following a full consideration of all provisions of the document or statute, as the case may be; every attempt shall be made to save the document and for this purpose a difference between general statements and particular statements of the document be differentiated properly to save the document rather to nullify it and no provision of the document be read in isolation or in bits and pieces, but the entire document is to be read as a whole to gather the intention of the parties. For this purpose the Court can resort to the correspondence exchanged between the .Parties and it will lean to an interpretation, which will effectuate rather than one, which will invalidate an instrument.
In the case of Sadar Din (supra) the Honourable Supreme Court has taken the view that the transaction of relinquishment of share which had taken place without consideration, was nullity in the eye of law on account of section 25 of the Contract Act, 1872.
10. We have carefully considered the submissions of the learned counsel, perused the material placed on record, particularly the impugned judgment, which shows that in Paragraphs Nos.13 to 16 of the judgment the learned Single Judge has examined in detail similar submissions of the learned counsel and has answered the same in favour of respondent No.1 for the following reasons:-- "13. I have gone through the personal guarantees Exhs.P.4/6 to P.4/9 and find that the defendants 2 to 5 had executed these agreements separately and the same were addressed to Manager, Agricultural Development Bank of Pakistan, Hyderabad.
In these guarantees no condition whatsoever has been mentioned for being guarantee of the loan advanced to the defendant No.
1. However, these guarantees were sent to the plaintiff through Exh.P.4/12 by the defendant No.
1. In this letter it has been mentioned that the guarantees were being supplied to the plaintiff subject to specific conditions enumerated under clau'ses (a) to (e) mentioned in the letter.
14. A perusal of this letter reveals that it was not sent by the defendants 2 to 5 to the plaintiff, but it was the defendant No.1 who had sent this letter to the plaintiff. As already observed that the Bank Guarantees executed by defendants 2 to 5 in favour of the plaintiff do not show any condition, as such, when the defendants 2 to 5 executed the Bank Guarantees they were unconditional under which they bound themselves to stood guarantees of the loan advanced to the defendant No.
1. It was the defendant No.1, who put the conditions in the letter Exh.P.4/12 and not the defendants 2 to 5.
15. The suit has already been decreed against defendant No.1 when the defendant No.1 obtained the Bank Guarantees from defendants 2 to 5 he did not ask them to put any condition in the documents. If that would have been so, then the defendants 2 to 5 would have easily put conditions in the guarantees. As such, the defendants 2 to 5 stood guarantors unconditionally.
Thus, the conditions mentioned in the letter Exh.P.4/12 by the defendant No.1 would not affect the clear and unambiguous terms and 'conditions mentioned in Exhs.P.4/6 to P.4/9. Hence, the said Bank guarantees were unconditional under which the defendants 2 to 5 became the guarantors of loan amount of Rs.29.00 million.
16. The learned Advocate for the defendants 2 to 5 has argued that the Bank Guarantees were without consideration. It is an admitted position that the loan of Rs.29.00 million was sanctioned to the defendant No.1 which was already disbursed by the plaintiff to the defendant No.
1. The defendants 2 to 5 stood guarantees for the said amount on 9-5-1990. The plaintiff, in return for the guarantee, undertook to continue to deal with the defendant No.1 and this conferred a benefit on it. The guarantees were, therefore, good as to both past as well as future transactions.
Furthermore, the defendants 2 to 5 are the Directors of defendant No.1 and the Bank guarantees were furnished by the defendants 2 to 5 being its Directors. Under these circumstances, the guarantees in question were thus given for sufficient consideration. As such, the same can be taken as sufficient consideration for giving guarantee and the said Act comes within the ambit of section 127 of the Contract Act. Furthermore, under the guarantees the defendants 2 to 5 made promise to repay the loan amount to the plaintiff which is for the benefit of defendant No 1 The argument has no force at all. The issues are replied in affirmative and negative respectively."
11. In order to re-examine the merits of the submissions of the learned counsel, it will be advantageous to reproduce hereunder the contents of the Bank Guarantees executed by the appellants Nos.1, 2, 4 and the predecessor-in-interest of appellant No.3 (which are identical), as well as letter of the respondent No.2 dated 16-5-1990 and its reply by the respondent No.1, which read thus:- "Exh. P. 4 / 9 The Manager, Agricultural Development Bank of Pakistan, Hyderabad.
At the request of Messrs Mas Dairies Limited and in consideration of your having granted the above said party a loan of Rs.29.00 million vide sanction letter No.Hyd-851 dated 13-9-1982 which the said party utilized for manufacture of UHT Milk.
I, Mian Absar Akhtar, Director, Mas Dairies Limited son of Mian Muhammad Akhtar Residence of 238, Staff Lines, Fatima Jinnah Road, Karachi, hereby guarantee payment of demand by you of all the above mentioned sum of Rs.29.00 million (Rupees Twenty Nine Million) along with all other sums due on account of interests, costs, charges, and expenses due to the A.D.B.P. In accordance with the terms and conditions of the sanction letter or any existing and further terms and conditions, rules or administrative instructions and orders of the Chairman of the Bank issued from time to time. I also agree:--
(1) That the said loan is subject to any variation in terms and conditions mentioned in the sanction letter which may be made from time to time pursuant to the provisions of Central Ordinance IV of 1961, the rules and the administrative orders or instructions of the Chairman of the Bank.
(2) That this guarantee shall be irrevocable and shall be a continuing guarantee binding upon me till full payment along with interest has been made to you of all sums hereby guaranteed.
(3) That the entries in your books of accounts and a certificate of your duly Authorized Officer shall be conclusive evidence of indebtness upon which payment will be made by me to you under this guarantee.
(4) Notwithstanding that as between me and the said (sic) I stand for the Company yet as between me and you I shall be treated as principal debtor for the sum of Rs.29.00 million (Rupees Twenty Nine Million) guaranteed above and I shall not be released from the liability arising out of the said loan of Rs.29.00 million (Rupees Twenty Nine Million), with interest etc., being given to the said Messrs Mas Dairies Limited until the entire amount of Principal along with interest etc., is repaid to you "Exh.P.4/12.
Mr. M.A. Haq, May 16, 1990 Regional Manager, Agriculture Development Bank of Pakistan, 1st Floor, "N. I. C. Building, Karachi.
Re: documentation Dear Sir, We acknowledge with thanks receipt of your letter No. PRM/ 061/ 90/ 1594, dated 15-4-1990 but incidentally received by us today only.
Before proceeding to narrate our comments upon the subject-matters of your letter and other pending issues, we request for your favour of making it convenient to address your communications in the name of "Mas Dairies Ltd." or in case there be something needing immediate attention then the some may please be sent in the name of Mian Nisar Akhtar.
We highly appreciate the contents of your letter, under reference, for the apparent reasons that the discussion and developments taken place during the course of a meeting at Islamabad in your Head Office could not have come to your knowledge. Anyhow, in due regard to the promise made by us with your Chairman, Chaudhary Ahmed Saeed Khan, we are taking the opportunity of enclosing herewith, personal guarantees of our Directors namely, (1) Mian Vaqar Akhtar, (2) Mian Nisar Akhtar, (3) Mian Absar Akhtar and (4) Mrs. Kaniz Akhtar for your kind perusal. It gives us an immense pleasure to place on record that during the month of March, 1990, we have had the privilege of a meeting in the Chamber of the A.D.B.P's./Chairman, Chaudhary Ahmed Saeed Khan.
The meeting was held in an atmosphere of utmost cooperation, goodwill and harmony and frankly speaking we have no words to express our appreciation, and gratitude towards the very kind courtesy extended to us by your esteemed Chairman during the course of the said meeting. As to the matters of, discussions, there does not appear to be any reason to reiterate that the loan pending against this Company was taken over by our predecessors and not by us. It is, however, a matter of record, and we hope you would please appreciate the fact, that at the tine of our take over the said Diary Unit had virtually turned to be a dead horse. It would please be further appreciated that a unit taken up by us merely from a thread has, now, been brought up on a commendable status but such a progress could only be achieved through hard labour of day and night and so also, by providing a huge amount of funds to the Company. The balance sheet for the fiscal ended 30-6-1989, copy already supplied, would bear out the fact that at the close of this year the Directors loan to the Company stood as high as to Rs.1,17,25,123.00.
All of the facts relating to this Company were brought to the kind notice of your Chairman who on giving a very patience hearing to the whole matter, and in appreciations of our submissions, was pleased to accord his valuable consent to afford necessary assistance as may be required by these dairies to come up on such a sound level from where besides meeting its liabilities it could also become capable of showing good profits. It is for due regard and in appreciation of the gesture of goodwill extended by the Chairman, A.D.B.P. That the Directors of Mas Dairies Ltd. Have been pleased to sign and send necessary personal guarantees - per drafts supplied by the A.D.B.P.-Hyderabad.
In order to straighten and smoothlining the business of these dairies the worthy Chairman of the A.D.B.P. Was pleased to underline the following matters for due consideration:---
(a) To consider and find out ways and means to offload the existing burden of piled-up interest till the cut-off date of 31-12-1992.
(b) Repayment of the principal amount and accruing interest thereon to be made simultaneously.
In terms of (a) above, however, the payment of 1st instalment due to be made on 31-2-1992 shall cover instalment of principal amount only while the subsequent instalments would cover repayments of both principal and interest.
(c) Repayment of the agreed amount to be made in 20-semiannual equal instalments.
(d) To finance Mas Dairies Limited, per application already submitted, and another copy enclosed to facilitate easy reference, upto the extent of Rs.37 million (Thirty Seven Million Only) for making the unit to be complete and uptodate as it has already been recommended to you by Messrs Tetra- Pak Limited, after ascertainment of existing facilities and conducting thorough study and being satisfied with the excellent performance recommended for making it to be viable and capable of efficient performance/operation.
(e) There will be no embargo for the approval of our processing and production of fruit pulp plant submitted in the name of "Pak Food Limited", (Copy already supplied and another copy being enclosed herewith for ready reference) and that the same would be approved in the next Board's meeting. It may, however, be noted that the aforesaid guarantees are being supplied/delivered by us to the A.D.B.P. Subject to the specific condition(s) that your august house in due performance of the obligations enumerated under (a), (b), (c), (d) and (e) above shall take immediate steps for their implementation. While appreciating and thanking the A.D.B.P's. Chairman for his high business acumen of live and let live policy in business and Industrial fields we ensure you that we will not lag behind to honour the commitments made in this behalf. Thank you, Yours faithfully, for Mas Dairies Limited "Exh.P.4/ 10:--- Dated: June 16/17, 1990 Mian Nisar Akhtar, Director, Mas Dairies Limited, 30-A, Muhammad Ali Housing Society, Karachi.
Subject: Documentation Dear Sir, Please refer to Secretary Mas Dairies Limited letter No.MAS/A.D.B.P. /5/87-88/90 dated 16-5-1990 addressed to Mr. M.A. Haq, Regional Project. Manager, A.D.B.P., Karachi and copy thereof endorsed to the Chairman, A. D. B. P. , H. O. Islamabad. In this connection I am directed to inform you that the points raised at a, b, c, d and e (pages 2 and 3) of your letter under reference have been duly considered and you are informed as under:--
(a) It was not agreed that the Bank will remit the entire interest accrued so far or to accrue upto 31- 12-1992. The matter of remission of sortie % age of interest will be considered only when the project starts servicing its debt liabilities. At the moment we can book the accrued interest as well as the interest likely to accrue upto 31-12-1992 to a separate Account for identification purposes only.
(b) It is agreed that you may start repayment of loan instalment after 31-12-1992. The first repayment of principal amount may be made by you on 7-1-1993, 2nd on 7-7-1993 and the subsequent instalments of principal + interest or 7th Jan/July each year.
(c) Repayment in 16 and not 20 half yearly instalments commencing from 7-1-1993 is agreed. After the repayment of all the 16 half yearly instalments on time by you, the remission of some %age of accrued interest upto 31-12-1992 will be taken up for consideration. If, however, there is any default in repayment of any of the revised 16 half yearly instalments, no remission of interest accrued upto 31-12-1992 will be considered.
(d) The proposal for additional loan of Rs.37.000 Million submitted by you will be examined and it will be decided on its merits as the Bank is not bound to accept the recommendations of Messrs Tetra Pak Ltd.
(e) The proposed Messrs Pak Food Limited for a plant for processing and production of Fruit Pulp will be entertained, pre-appraised first and if found feasible in pre-appraisal then detailed appraisal will be undertaken of the project. After the detailed appraisal of the proposal it will be submitted to the Board of Directors of the Bank for . Sanction. If the Board agrees to the proposal then the same will have to be referred to A.D.B. Manila for their approval for funding the project. It is not in the Chairman's competence to make any commitment, all that is in the Chairman's competence will be done which is already stated above. It may please be noted that the delivery of personal guarantees by the Directors of Mas Dairies Ltd. To the A.D.B.P. Was their legal obligation which they have fulfilled after a long time but still the guarantees of the Directors other than the four in, respect of whom these have been furnished, are required. Yours faithfully, (Sd.)
(Muhammad Ishaq)
Director General (PLD)"
12. A careful reading of the above-referred three documents reveals that all the personal guarantees executed by the appellants Nos.1, 2, 4 and predecessor-in-interest of appellant No.3 were executed on 9-5-1990, i.e. One week prior to the letter dated 16-5-1990 which was written by the Secretary of respondent No.2 to the respondent No.1 and its enclosed documents were Photostat copies of such guarantees. If at the time of execution of such Bank Guarantees there was any understanding between the appellants or the respondents Nos.1 and 2 for the implementation of certain other conditions referred in the letter dated 16-5-1990, nobody had restrained A the appellants from incorporating such terms in the personal guarantees executed by them, which are self-contained documents in all respects. To be more explicit where the main contract exists in writing and its terms are clear and unambiguous, as a rule, this Court will be reluctant to add/edit, modify or vary its terms on the basis of any other evidence, oral or documentary, unless such intention of both B the parties is obvious, which is not the position in the instant case. The reference to the letter dated 16-5-1990 made. By Mr. Lakho regarding various terms incorporated therein only seems to be an after- thought as the. Bank guarantees were executed a week prior to this letter and only photostat copies were attached with this letter, probably for the reasons that the originals were already surrendered before the respondent No.
1. The letter dated 16-5-1990 containing various conditions, which according to the learned counsel were the conditions precedent for furnishing of personal guarantees, had also lost its foothold for the reason that these were unilateral conditions proposed by the respondent No.2, which were not accepted by the respondent No.1, as point to point, detailed in their reply letter dated 17-6-1990.
Moreover, the letter dated 16-5-1990 was not written by any of the four guarantors as per Exhs.P.4/6 to P.4/9, but by the Secretary of respondent No.2, which is an C independent legal entity. Thus the terms contained therein could not form part of the guarantees separately executed by appellants Nos.1, 2, 4 and predecessor-in-interest of appellant No.3. Here a reference to the contents of the letter of respondent No.1 dated 15-4-1990, which is also cited in Para.1 of the letter of respondent No.2 dated 16-5-1990, is also pertinent to show that in substance the suggestions/terms contained in the letter dated 16-5-1990 (Exh.P.4/12), when earlier brought to the notice of respondent No.1, were rejected in the terms contained in the said letter, which position was reiterated by the respondent No.1 in their reply letter dated 17-6-1990, as detailed above.
13. The other submission of Mr. Lakho with' reference to section 127 of the Contract Act is also equally without force, as the learned single Judge, for valid reasons, has held that the execution of Bank guarantees by the appellants was for sufficient consideration. This proposition is fully confirmed from the contents of various undisputed documents placed on record by the parties, which show that the project of respondent No.2, with all its assets and liabilities was purchased. By the appellants and it was in this background that, as a part of such deal, Bank Guarantees were executed by them in their capacity as the new Directors of the Company, thus it cannot be said the execution of such Bank Guarantees was without consideration.
14. There is no cavil to the proposition of law propounded in the judgments referred by Mr. Lakho, as summarized above, but based on the above facts the case-law cited by the learned counsel is distinguishable and of no help to the case of the appellants.
15. Foregoing are the reasons for our short order dated 5-9-2007, whereby this appeal was dismissed in limine.