1. ' MRS. QAISER IQBAL, J.--- The appellant has challenged the judgment dated 26-6-2007 and decree dated 2-7-2007 respectively passed by the Banking Court No,V, Karachi in Suit No, 195 of 2007 whereby the appellant's suit for recovery was dismissed.
2. ' Succinctly the facts leading to the case are that the respondent No,1 has availed the finance facility from the appellant and the respondents Nos.2 and 3 stood guarantors for repayment obligations of the respondent No,
1. The respondent No,1 was granted a demand finance facility of Rs,3,00,000 on mark-up basis, for expansion of her business, repayable through easy instalment within seven years. On 8-5-1995 respondent No,1, the appellant entered into agreement for financing and the respondent No,1 executed an agreement along with demand promissory note on the. Terms and conditions mentioned in the sanction advice. Respondents Nos.2 and 3 executed personal guarantees to the extent of Rs,754,685 in favour of the appellant to secure the repayment obligations of respondent No,
1. The husband of the respondent No,1 executed letter of pledge of his shares. The respondent No,1 defaulted to pay the agreed instalments of the above-mentioned finance towards the appellant, in consonance of default of respondent No,1 on 2-9-2000 the husband of respondent No,1 wrote a letter to the appellant to sell the pledged shares, shares were sold out through authorized brokers of Karachi Stock Exchange amount thus received was adjusted towards outstanding liability. The. Respondent No,1 continued to commit default in her repayment obligation, appellant-Bank served legal notices on the respondent No,1 being principal debtor and invoking personal guarantees of respondents Nos.2 and 3 and demanding therein to make payment of outstanding amounts borne no fruit, Suit No,195 of 2007 was filed by the appellant and summonses were served through all prescribed modes. Respondent No,1 appeared before the Court and filed her leave to defend application. Respondents Nos.2 and 3 also preferred leave to defend applications, they were debarred from filing the same declared ex parte. On 26-62006 the case was fixed for hearing dismissed the suit of the appellant on the ground being barred by law of limitation, hence this First Appeal.
3. ' Learned counsel for appellant has contended that the bank granted finance facility in a sum of Rs,3,00,000 to the principal borrower while the respondents Nos. 2 and 3 executed bank guarantee on 8th May, 1985. After the suit for recovery came up for hearing before the learned Banking Court, suit against the principal borrower was held to be barred by limitation, so far as the suit, against the respondents Nos. 2A and 3 is concerned they had acted as guarantors, undertaken to pay all liability of respondent No,1 in terms of Clauses 2 and 3 of the guarantee which are reproduced herein below:-- "Clause 2.
4. ' This guarantee shall continue to remain binding on me/us until receipt by you of written notice of discontinuance thereof and notwithstanding such notice I/We shall continue to remain liable to you of all sums A due and owing to you by the customer.
5. Clause 3.
6. ' This guarantee shall not be discharged or prejudiced by any partial payments of settlement of account or existence of a credit balance of the customer at any time or by discharge of the customer by operation of law, or for any other reason".
7. ' The respondents Nos.2 and 3 were served by the bank with legal notice dated 30-10-2006, they were required to discharge their obligation for repayment of the loan advanced to the respondent No,1 under the guarantees, the demand of the bank on 30-10-2006 as against the guarantors connotes that the suits was not time-barred. Learned counsel for appellant further contended that the suit as against the principal borrower filed by the bank was time barred whereas suit based upon the personal guarantees securing the loan advanced to the principal borrower dated 8-9- 1995 was continuing and binding until receipt of notice of discontinuance thereof. On account of service of the notice dated 30-10-2006 a valid cause has arisen to the bank to file suit before the Banking Court, it cannot be held to be barred under law of limitation.
8. I have considered the arguments advanced at bar, perused the case-law. There is no cavil that the liability and surety was determined on the basis of the contract of B guarantee, the letter of guarantee which is subject-matter of the suit governs the right of the parties. The guarantors have candidly agreed that their liability will start on demand and limitation will run from the date of the demand as per clauses 2 and 3 reproduced herein above, the time shall begin to run against the respondents Nos. 2 and 3 after the notice of demand has been served. In case of United Bank Limited v. Business Investment Ltd. And 3 others 1982 CLC Karachi 1101, this issue was decided in favour of the bank in the following terms:- "The liability of surety is determined on the basis of the contract of guarantee. In this regard reference can be made to AIR 1940 All. 116; 1981 CLC 89. Mr. Mamnoon-ul-Hassan the learned counsel for the plaintiffs has referred to AIR 1919 Mad. 464; ILR 1922 Mad. 20; (1978)4 CLR 34; (1893)2 where payment by surety is to be made on demand his liability will start after the demand has been made and limitation will run from the date of the demand or when the liability to pay accrues.
9. Relevant clause of the surety bond has been reproduced above. It clearly provides that on demand being made the surety shall pay within a period of 2 days. It, therefore, follows that the liability of the surety accrues after 2 days of the demand, in case he fails to pay. Similar clauses were considered in the judgment passed in 1981 CLC 161(?). In a recent judgment of my learned brother K.A. Ghani, J. In Suit No,627/76 while interpreting similar clause in a guarantee deed it was held as follows:-- "The cause of action to enforce the liability against the defendant No,2 (guarantor) could not be deemed to have arisen until the demand was made by the plaintiff upon the guarantor/defendant No,2 and payment was not made within the stated period of two days".
10. ' I am in respectful agreement with the above observation and following the same, I hold that the time begin to run against the defendant No,2 two days after notice of demand has been served. In the present case the plaintiffs have stated that notice of demand to the defendant No,2 was sent on 27-8-1978 but it has returned back because he was out of Pakistan".
11. ' Similar issue was raised in case of Messrs Huffaz Seamlen Pipe Industries Ltd. And 2 others v.
12. Messrs Security Leasing Corporation Ltd. 2002 CLD 505, it is specifically laid down that as regards contract of guarantee, rights and liabilities of the parties are to be determined with reference to terms and conditions of the guarantees. The guarantors cannot take advantage of any condition incorporated in the principal agreement, unless the same is reflected in a contract of guarantee executed by the guarantors, as liabilities of the principal and of guarantors though arising from the same transaction, are distinguished. In an action by a creditor against a guarantor the former is only required to establish the liability of the principal debtors and occurrence of default or breach of the terms leading to the liability. The guarantor cannot resort to technicalities to defeat the claim of the creditor. Even where the contract becomes unenforceable against the principal debtor, yet the guarantor would still be liable for the surety he had executed, unless there was any covenant to the contrary.
13. ' In case of Messrs United Bank Limited v President, Bazm-e-Salat and another PLD 1986 Karachi 464, in terms of section 57 of the Limitation Act, computation of period for purposes of limitation of the guarantee are governed in terms of the guarantee and cause against the guarantors would have arisen two days after notice and as no notice was served on defendants from the date of filing of the suit would be deemed to be notice to the defendant, suit could not be barred by time.
14. This issue was also dealt by a learned Single Judge of this Court in case of United Bank Limited v.
15. Haji Bawa Company Ltd. And 3 others 1981 CLC Karachi 89, it was held that for the repayment of loan from principal debtor had become impossible due to cession of East Pakistan and it is emerging as a new independent State, remedy being barred by time, cannot be invoked against the guarantor available by virtue of letter of guarantee read with section 137 of the Contract Act.
16. Learned counsel for respondent has attempted to argue that the notice was not served upon the guarantors therefore, by no stretch of imagination they can be held liable to make payment of the suit amount. Even if it is presumed that the notice was not served upon the respondents Nos. 2 and 3 as envisaged under the law, filing of the suit in the Banking Court against the contesting respondents will tantamount service of the notice therefore, the plea raised is not sustainable in law. The liability cannot be of the guarantors is co-extensive with the principal debtor with reference to the quantum of the liability as per Clauses 2 and 3 of the letter of guarantee, the guarantee was continued notwithstanding the discharge of the principal debtor by operation of law or any other reason. I am of the view that the remedy against Respondent No,1 had become barred by time by operation of law whereas the guarantors by virtue of Clauses 2 and 3 of the letter of guarantee read with section 137 of the Contract Act will be liable to pay the suit amount.
17. In view of what has been discussed above the impugned judgment to the extent of the respondents Nos.2 and 3 is hereby set aside and the plaintiffs suit is decreed in the sum of Rs,3,07,545 against the respondents Nos.2 and 3.
18. ' With the above modifications in impugned judgment, the appeal stands allowed in above terms with no orders as to costs.