' MIAN SAQIB NISAR, J.---Messrs Malik Textile Mills Limited availed some roan facility from the appellant prior to 1979 and the respondents Arif Noor and Mrs. Shaheen Noor stood as the guarantors for the repayment thereof; as the loan was not returned by the principal borrower, therefore, the appellant brought a winding up petition i,e, C.O.No,70 of 1981 against the defaulting company and a winding up order dated 29-10-1995 was passed by this Court;. Pursuant thereto, the assets of the company were sold, yet the appellant's claim was not satisfied. Be that as it may, on 30-5-2000, the appellant under the provisions of section 9 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 ("the Act, 1997") instituted a suit against the respondents for the recovery of an amount of Rs,223,181,132.62, being liable as the guarantors; the respondents filed their leave application, which according to the learned counsel for the appellant was withdrawn and after the enforcement of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 ("the Ordinance, 2001"), a new leave application was filed by them. Anyhow, this. Is not an issue in the matter, as the learned Banking Judge vide judgment dated 31-10-2002 has rejected the plaint of the appellant as being barred by time, holding:-- "(9) I have examined the entire plaint including paras Nos.8, 9, and 11 therein. In para. 9, the plaintiff has specifically pleaded "that the plaintiff continued to ask the defendants to fulfill their obligations under the afore-said guarantee and to liquidate outstanding . Liability guaranteed by them but to no avail." Further in para. 11, it was pleaded "that .Cause of action arose secondly when dues against the loan were not paid on due dates, despite demands.
(10) In view thereof, the plaintiff in its own pleadings has admitted making repeated demands upon the defendants to settle the outstanding liabilities of the company on the basis of their guarantees.
It is intriguing to note that despite specifically asserting demands, plaintiff has withheld the dates of demands made by it upon the said defendants. In order to show that its claim as well as suit were within time against the defendants, it was the sanctimonious duty of the plaintiff to bring all necessary and essential facts before the Court and to plead that same in its plaint. Withholding of dates as well as record thereto relating to demands, leads to an obvious presumption against the plaintiff.
(11) In view of the above admission of making repeated demands and withholding of record thereto qua dates of demand, leads me to only possible conclusion that said demands were made by the plaintiff obviously when it made the demand for payment of its claims on the company against which winding petition was filed in 1981. The present suit is, therefore, held to be beyond the period of limitation and the plaint therein is rejected with no order as to costs."
2. The learned counsel for the appellant contends that though in the plaint, the specific dates of demand have not been mentioned, yet the plaint itself could be considered as a demand and thus, the cause of action shall arise from the date of the institution of the suit, resultantly the appellant's suit shall be well within time. It is also argued that at the best, the learned Banking Judge, on account of the above, could have granted the leave to the respondents, but the plaint could not be rejected on the point of limitation, because such question was/is dependent upon the ascertainment of the facts. It is also argued that the judgment reported as Khalid Qureshi and 5 others v. United Bank Limited I. I. Chundrigar Road, Karachi 2001 SCM R 103 shall be inapplicable to the case in hand as in the said dictum it has been held that the extinguished right shall not be survived on account of the provisions of section 22 of the Act, 1997, but in the instant case, the right of the appellant to recover the amount from the guarantors never extinguished, because in response to the demands made from them (as guarantors), they have never denied their liability to pay off the amount due to the appellant. In support of his contentions, the learned counsel has placed reliance on Emirates Bank International Ltd. v. Super Drive-In Ltd. And 8 others 1990 M LD 538, National Bank of Pakistan v. General Tractor and Machinery Co. Ltd. And another 1996 CLC 79, United Bank Limited v. Aftab Ahmad 1998 M LD 1744, First Women Bank Ltd. v. Mrs. Afifa Iftikhar and 2 others 2009 CLD 226, V.- Somanath Raju and -another v. Konchada Ramamurty Subudhi and others AIR 1957 Orissa 106 and Brojendro Kissore Roy Chowdhury v. Hindusthan Cooperative Insurance Society Ltd. AIR 1918 Calcutta 707. It is further argued that in para No,9 of the plaint, it is mentioned "the plaintiff continued to ask the defendants to fulfil their obligations under the aforesaid guarantee and to liquidate outstanding liabilities guaranteed by them but to no avail" further that they have acknowledged their liability in various meetings; but in corresponding paragraph No,9 of the PLA this has been denied, by particularly stating that no demand was ever made; thus in the, circumstances, the' plaint shall be deemed to be a final demand, therefore the limitation shall start from that date; he in support of his submissions that the guarantee documents required demand, has made reference to clause 1(i) of the Letter of Guarantee.
' The learned counsel for the respondents has argued that in the present case, the loan was advanced much= before the enforcement of the Banking Companies (Recovery of Loans)
Ordinance, 1979 ("the Ordinance, 1979") and on the enforcement of the said Ordinance, the suits for the recovery of loans from the borrower or even the guarantors could be filed within the extended period of two years of the original limitation, but the case was not instituted within that. It is submitted that on the promulgation of the Act, 1997, as per proviso to section 22, no fresh cause of action had arisen in favour of the appellant enlarging the limitation as the case was covered under the Ordinance, 1979 i,e, interest related matter; rather fresh period was provided for the cases pertaining to non-interest matters falling under the Banking Tribunals Ordinance, 1984 ("the Ordinance, 1984"); as there was no limitation period in such cases, earlier and the proviso (to section 22) has been caste to protect these cases, it was for this reason it (the proviso) provides "past transaction" and not "past and closed transaction", reliance is placed upon Khalid Qureshi and 5 others v. United Bank Limited I. I. Chundrigar Road, Karachi 2001 SCM R 103. It is further argued that on account of the lapse of limitation, a vested right has been created in favour of the respondents, which cannot be dislodged, in view of the provisions of law, particularly Article 264 of the Constitution of Islamic Republic of Pakistan, 1973. Mr. Salman Aslam Butt, the learned counsel for the respondent further states that admittedly the appellant in this case filed the winding up petition against the principal borrower in 1980 and the order (winding up) was passed on 29-10- 1995, thus reading paragraphs Nos.8 and 11 of the plaint, it can clearly be spelt out, rather is an admitted position that the demand from the respondents has been made prior to the said order, resultantly, the suit instituted on 30-5-2000 was undoubtedly out of limitation. It is also submitted that according to clause 1 of the Letter of Guarantee, the status of the respondents is not that of the guarantors, rather of the principal debtors/obligators and according to MS. Fashions Ltd. And others v. Bank of Credit and Commerce International SA (in liq) and others 1993 All England Law Reports 769) and Law of Guarantees by Geraldine Mary Andrews and Richard Millet, the respondents are not the guarantors, but principal debtors and therefore, the question of making of the demand and their refusal does not arise at all; he has also argued that neither Article 57 nor 115 of the Limitation Act is applicable to the instant case as both relate to different circumstances and situations; if Article 57 as argued by the learned counsel for the appellant is applied, the limitation shall start from the date of loan and the loan admittedly was advanced much before the Ordinance, 1979.
3. Heard. Prior to the Ordinance, 1979, the dispute .Or a claim inter se a banking company and a borrower in respect of or arising out of a loan like any other dispute of the civil nature was within the jurisdiction of the civil Courts of plenary jurisdiction and the provisions of the Limitation Act, 1908 were accordingly applicable, keeping in view the nature of the dispute. By virtue of the Ordinance, 1979, the noted jurisdiction was taken away and conferred upon the special Courts established under the law. Section 6-A of the Ordinance envisages the extension of the limitation and provided:-- "A suit for the recovery of a loan other than a loan referred to in section 4 may be entertained by a Special Court within two years of the expiration of the period of limitation applicable to such suit if the Special Court is satisfied that the banking company filing the suit had sufficient cause for not filing it within the said period."
From the above, it is clear that two years' limitation was extended if the suit of the banking company under the ordinary law had become barred by time, however, such extension was subjected to a sufficient cause to be shown by the plaintiff in this regard and satisfaction of the Court. And if the extension as prescribed by the law was not availed, the suit shall be out of limitation.
4. While this law (the Ordinance, 1979) was still in force, under the process of Islamization, the interest-free banking system was introduced in the country, and for the resolution of the disputes in relation thereto, the Banking. Tribunals Ordinance, 1984 was enacted. However, for the suits covered by the law, no period of limitation was provided, as by section 12 thereof, the application of the Limitation Act has been excluded:-- "The provisions of the Limitation Act, 1908 (Act IX of 1908), shall not apply to any suit, application or other proceedings filed by a banking company under this Ordinance."
' Anyhow, throughout the proceedings under the two enactments continued before the different and independent forums created by the said laws, till these were repealed and replaced by the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997), which was enforced on 2.6.1997. The cases pending under both the jurisdictions stood transferred (see section 25) to the Courts established under this law. An the relevant section 22(2) of this Act reads as below:-- ,"The provisions of the Limitation Act, 1908 (Act IX of 1908), shall apply to all cases instituted or filed in a Banking Court' after the coming into force of this Act: ' Provided that in relation to past transactions a fresh cause of action will be deemed to arise, for purposes of limitation only, on the date on which this Act comes into force."
The above provision (proviso) of the law by no means has given rise to any fresh cause of action for the "interest bearing loan" and therefore, no extension of limitation can be constructed in this category of the cases i,e, those earlier covered under the jurisdiction of the Ordinance, 1979, rather as there was no limitation provided for the suit falling in the purview of the Ordinance, 1984 and under the Act, 1997, the limitation was being provided and enforced for the fresh institution, thus with an obvious object and view to provide the banking companies/institution with the requisite period of time and in order to avoid the possibility that any suit under that law (Ordinance, 1984) may not be claimed to have become time barred, the proviso was added to ensure the noted protection. The "past transaction" as has been held by the Honourable Supreme Court in the judgment reported as 2001 SCM R 103 does not mean the "past and closed transaction", but only refers to the past transactions, which expression should be strictly construed in the context having nexus and the relevance to the Ordinance, 1984 alone. This proviso in no manner and by no means has revived the limitation for the purposes of 1979 Ordinance as "fresh cause of action" shall not be deemed to have arisen for such cases that have become blatantly time barred even under the Ordinance. Therefore, the suit of the appellant/plaintiff if only based upon subsection 2 of section 22 (read with its proviso) would be undoubtedly barred by time.
5. As regards the question, if the appellant had made the demand from the respondents, the learned counsel for the appellant has not been able to show the precise and specific date as to when such demand was raised. This has been conspicuously considered by the learned Banking Judge in holding that the demand could at the best be at the time when the claim was enforced against the borrower company on account of the winding up proceedings. Even otherwise, in paragraph No,8 of the plaint, it is mentioned, "That from the very beginning the repayment by the company against the above referred loan remained unsatisfactory and irregular and it failed to pay its debts." It is then described as to how the winding up petition was filed, the order was passed on 29.10.1995, the joint official liquidators were appointed; it is mentioned "clue to various difficulties including illegal sale of machinery etc. Of the company by the defendants, plaintiff was unable to recover its dues under the agreement." The defendants in this case are none else except the respondents. It is further mentioned in paragraph No,9 "the plaintiff continued to ask the defendants to fulfil their obligations under the aforesaid guarantee and to liquidate outstanding liabilities guaranteed by them but to no avail. Although defendants in various meetings acknowledged their liability under the guarantee but failed to liquidate the same on one pretext or another. However, last week they flatly refused to pay the guaranteed amount." In paragraph No,11, it is mentioned, "That the cause of action arose firstly when foreign currency loan was granted to the company on the request of the defendants against their guarantee, secondly when dues against the loan were not paid on the due dates despite demands." These demands undoubtedly could only be during the period prior to enforcing its fight of winding up against the borrower company or at the best during the winding up proceedings.
6.With reference to the judgments cited above, it is stated by the learned counsel for the appellant that in 1990 M LD 538, it has been held that "Period of Limitation, in case of guarantor of Bank loan would start running from the day when guarantor had for the first time denied to honour his guarantee." This judgment, however, has provided that the starting period would be three years by making reference to Article 115 of the Limitation Act, 1908. In 1996 CLC 79, Article 57 of the Limitation Act, has been held to be applicable in the cases pertaining to the liability of the guarantor and the starting point of limitation is prescribed as "Period of limitation in case of guarantee would begin to run from the date of demand and in absence of any prior demand, filing of suit would amount to demand of payment." In 1998 M LD 1744, the ratio is "Time for enforcement of liability under a guarantee would start from date of revocation of guarantee under section 130 of Contract Act, 1872 or upon failure by the guarantor to make payment in pursuance of notice of demand---Mere denial of liability by a guarantor, would not afford cause of action to the guaranteed party." In AIR 1957 Orissa 106, it is held that nature of the surety's liability depends upon the terms of the contract and in the contract of surety it is provided that he is liable to make the payment on demand. AIR 1918 Calcutta 707 has laid down "The remedy of the creditor against the surety may continue notwithstanding that the remedy against the principal debtor has become barred."
' On the basis of the above case-law, it is argued that because the demand had been made to the respondents and the defendants have been acknowledging their liability and have finally refused to discharge their liability a week before the filing of the suit, therefore, three years' time shall commence from the refusal.
7. We are afraid that on account of the vital omissions and lapses on part of the appellant to give the details and particulars of the demands so made to bring its case within the purview of Article 57 or 115 of the Limitation Act or section 130 or any other provision of the Contract Act, renders the appellant's case as barred by time; no document in this regard has been brought on the record and the object in this, behalf is very clear, if produced would go against the appellant; moreover, it is improbable that a banking institution would make verbal demands and the acknowledgement would also be of that nature; besides, the alleged acknowledgements in terms of section 19 of the Limitation Act, must only be in writing and that too should have been made within the period of limitation, but nothing in this behalf has been brought on the record. It seems that the time period against the respondents had elapsed and in order to take advantage of the proviso to section 22, the case has been instituted and it is for such reason, that all the important and vital information and particulars for bringing the case within the timeframe have been deliberately withheld, thus a valid presumption can be duly drawn against the appellant in that behalf.
8. As regards the plea, that the plaint itself should be deemed to be a demand, is concerned, suffice it to say that the submission is in serious contrast of the plaintiffs case set out in the plaint; on the one hand, the appellant in unequivocal terms has mentioned therein that the demands were made and the liability was acknowledged by the respondents, how could a different case to be set out during the course of arguments. The learned Banking Judge for valid reasons had held that the case of the plaintiff/appellant is out of limitation, and we endorse the view. The judgments cited by the appellant's counsel are not relevant to the facts and circumstances of the case rather are distinguishable. -
9. There is another very important aspect of the matter. Paragraph No,1 of the Letter of Guarantee reads as "our liability to you hereunder shall be that of Principal Debtors and at your option you may treat us as primarily liable for the debt, together with interest, commission, other charges payable thereon and expenses connected therewith, of the Borrower or the balance from time to time due in respect thereof." Mr. Salman Aslam Butt, the learned counsel for the respondents has rightly made reference to the judgment reported as MS. Fashions Ltd. And others v. Bank of Credit and Commerce International SA (in liq) and others 1993 All England Law Reports 769, which lays down the law that "It followed that if a bank lent money to a company secured by a guarantee provided by a person who had a deposit account with the bank, the guarantee being on terms that the guarantor was the principal debtor, and the bank subsequently became insolvent, the guarantor could set off his claim for the return of his deposit against his liability to pay the company's debt, so that the debt was wholly or pro tanto extinguished. Accordingly, the plaintiffs having accepted liability as principal debtors and being under immediate liability to pay the companies' debts without demand being made the companies' liability was extinguished or reduced, as a result of a set-off between the bank and the plaintiffs."
' On account of the above, it is clear that the relationship between the appellant and the respondents was that of the principal debtors, therefore, the question of demand from a guarantor does not arise in the matter.
' In the Law of Guarantees by Geraldine Mary Andrews and Richard Millet, it is mentioned:-- "The question whether a demand is necessary is always a matter of construction of the relevant contracts. In principle, a demand is necessary to terminate a bank overdraft facility and require repayment of the balance: Rouse v. Bradford 'Banking Co. [1894] AC 598, Cripps and Son Ltd. v.
Wickenden [1973] 1 WLR 944 per Goff J at 954---5. If the guarantee covers obligations which prima facie require a demand to be made on the principal before the creditor can sue the guarantor, the device most commonly used to try to exclude this obligation is a 'principle debtor' clause. In Esso Petroleum v. Alstonbridge (supra) Walton J expressed the view, obiter, that a clause which provided that as between the sureties and the lenders the sureties were to be considered as principal debtors would obviate the need for a demand, but that view was premised on the basis that the clause turned the contract into one of indemnity, which is not necessarily the case. In the unreported Australian case of Commonwealth Bank of Australia v. Stow (21 February 1989, New South Wales Supreme Court), a demand had been served on the principal debtor requiring payment within 14 days. The creditor sued the guarantor before that period expired; Brownie J. Held that this was not a premature action because the 'principal debtor' clause in the 'contract made the guarantor liable to pay the creditor upon demand. 'The effect of a principal debtor clause may even be to overrule an express provision in a contract to the effect that payment will be made 'on demand'. MS Fashions Ltd. v. Bank. Of Credit and Commerce International SA (in liquidation) [1993] Ch 425 concerned three company directors who had signed 'as principal debtor' an agreement with BCCI whereby as guarantee for repayment of loans by BCCI to their respective companies, the bank could withdraw money from their deposit accounts and apply it to satisfaction of the company's debts."
The above propounds the rule that where the guarantor has been described as Principal Debtor, the question of raising the demand against it is not relevant. As has been shown from the clause of the Letter of Guarantee in this case, the respondents were the principal debtors, resultantly the plea raised by the appellant that the demands had been made from them but they acknowledged etc., has no force.
' In the light of above, we find no substance in this appeal, which is hereby dismissed.