1. ' SAJJAD ALI SHAH, J.-This High Court Appeal is filed under section 3 of the Law Reforms (Amendment) Act (VIII of 1972) against the judgment and decree dated 22nd January, 1973 passed by a learned Single Judge of this Court in Suit No, 224/1965 filed by Government of Pakistan, Ministry of Information and Broadcasting appellant/plaintiff against National Bank of Pakistan and M/s. Dabistan Limited respondents/defendants for recovery of Rs, 1,78,128. The said suit has been decreed against M/s. Dabistan Limited and the guarantee of National Bank of Pakistan has been discharged and the suit against them dismissed. The appellants being aggrieved against dismissal of suit against National Bank of Pakistan has preferred this appeal.
2. Brief facts giving rise to this appeal are that appellant under an agreement dated 5th June, 1961 with respondent No, 2 M/s. Dabistan Limited agreed to advance a loan of Rs 1,50,000 with interest at the rate of Rs, 41.% per annum for completing cinematograph film title "CHIRAGH JALTA RAHA" and respondent No. 1 namely, National Bank of A Pakistan executed a guarantee in favour of appellant for refund of th amount of loan with interest if the said amount was not paid by M/s. Dabistan Limited within six months from the date of the advance of the loan. The loan was actually advanced on 20th June, 1961. Under the terms of the agreement it was open to the appellant to purchase the prints of the film or not and in case the prints were purchased, the amount of loan was to be adjusted against the price. It is the case of the appellant that it was decided not to purchase the prints and M/s. Dabistan Limited were informed accordingly. M/s. Dabistan Limited failed to repay the amount of loan and at their request time was extended on a few occasion and ultimately the suit was filed as stated above.
3. ' The case set up by M/s. Dabistan Limited in the written statement is that the money was advanced by the President as a subsidy amount to enable them to produce purposeful film of high educational and character building values. It was agreed to by such number of prints for exhibition in Pakistan and abroad. Safety clause was inserted in the agreement to reserve the right not to by any prints as Mr. Fazal Ahmad Karim Fazli was then relatively not to so well known in having such experience in the film making. When the film was ready it was appreciated by the President of Pakistan and other Ministers hence the appellant was bound to purchase the prints of the film and to adjust the price against the amount of loan.
4. ' National Bank of Pakistan respondent No. 1 in this appeal contested the suit on the ground inter alia that extension for repayment of loan by the appellant to respondent No, 2 M/s. Dabistan Limited was without their consent, as such the guarantee stood discharged. It was also claimed that variations were made in the contract.
5. ' Keeping in view the pleadings of the parties the following issues were framed :
(1) Was the sum of Rs, 1,50,000 advanced to defendant No. 1 as loan ? If the answer is in affirmative.
6. What are the terms of the loan ?
(2) Was the amount of Rs, 1,50,000 advanced to defendant No. 1 as subsidy as alleged in para. 8 of the written statement. If answer is in the affirmative, what were the terms and conditions of such subsidy ?
(3) Was the plaintiff bound to purchase the film "Chiragh Jalta Raha" produced by defendant No. 1 and adjust the amount of loan against the price. If the answer is in negative, did the plaintiff inform defendant No. 1 that they had decided not to by the prints of the film.
(4) Whether the defendant-Bank furnished any guarantee in favour of the plaintiff?
(5) Whether the guarantee stands discharged by reason of-(a) Variation in contract the defendant No, I and the plaintiff?
(h) The plaintiff extending the time for payment without consent of the defendant No, 2.
(6) Whether the plaint has been signed and the suit has been made by a competent person ?
(7) To what decree the defendant No,, 2 is entitled to against the third parties.
(8) To what relief, if any, the plaintiff is entitled ?
7. ' It would be pertinent to mention here that at the stage of trial no evidence was tendered by respondent No, 2 M/s. Dabistan Limited but respondent No. 1 National Bank of Pakistan contested the suit and advanced evidence. After appraisal of evidence and arguments the suit was decreed as mentioned above.
8. ' Before us Mr. Hassan Inamullah who had filed power on behalf of respondent No, 2 M/s. Dabistan Limited appeared and pleaded no instructions from his clients. The main contest was between the appellant and respondent No, I National Bank of Pakistan and that also on a limited question whether the guarantee stood by National Bank of Pakistan on behalf of M/s. Dabistan Limited to repay the loan could be deemed as discharged for the reason, that no consent was obtained from the said Bank when time was extended by the appellant to pay back the loan. In this context it was contended by Mr. Saeed A. Shaikh. Advocate appearing for the appellant that such consent was obtained from the National Bank of Pakistan for extension of time. There is no dispute about the fact that time was extended by the appellant for repayment of loan money. Agreement Exh. 511 on the record clearly states that the President shall grant to the company (M/s. Dabistan Limited) advance of Rs, 1,50,000 only bearing interest at 44% per annum and the company having, as required by the President, furnished the President with a Bank guarantee from the National Bank of Pakistan guaranteeing the repayment of advance together with interest thereon within six months from the date of the advance. Letter of the guarantee is Exh. 5/2 on the record which states that National Bank of Pakistan guarantee the refund and repayment by the said Dabistan Limited, Karachi to the President of Pakistan of the said loan of Rs, 1,50,000 and interest thereon if the same is not adjusted against the price of the prints of the film "Chiragh Jalta Raha" and is not repaid to the President of Pakistan by the said Dabistan Limited within six months from the date of the advance, provided that liability of the National Bank of Pakistan hereunder shall not at any time exceed the sum of Rs, 1,50,CCO and interest thereon 4i% as mentioned above. This letter of guarantee is dated 15th May/5th June.
9. 1961. There is also no dispute about the fact that in fact the loan was advanced on 20th June, 1961.
10. P. W. 1 Abdul Rashid, Administrative Officer, Bureau of National Research and Reference, has been examined on behalf of the appellant, who produced agreement Exh. 5/1 and guarantee Exh. 5/1. He has admitted in his deposition that the original period within which the loan was to be repaid was six months but this period was extended from time to time under intimation to the National Bank of Pakistan. He has further categorically admitted that guarantee given by respondent No, I was not got extended. It is further stated by him that the last extension to Mis. Dabistan Limited was granted in 1963 upto 15th July, 1964 and the appellant did not give intimation to National Bank of Pakistan of the first extension given to M/s. Dabistan Limited from February, 1962. He has categorically testified that whenever the Government gave intimation to National Bank of Pakistan, it was after Government had decided to give extension and did not obtain consent of National Bank of Pakistan for the extension of the period of repayment which was already decided to give to M/s. Dabistan Limited. It is very clear from the evidence of the witness produced by the appellant that at the time of giving extension to respondent No, 2, no consent was obtained from respondent No. 1 and decision in that regard was already taken by the C appellant and only intimation was given to the respondent No. 1. Letter dated 31st December, 1963 addressed by Assistant Director, Bureau of National Research and Reference, Government of Pakistan to Mr. Fazal Ahmad Karim Fazli, which is Exh. 5/8 on the record, clearly establishes this fact. It is stated in this letter that a loan of Rs, 1.50,000 was repayable within six months from the date of payment with interest of 4i% per annum, but owing to financial difficulties of the company the date was extended for a further period of six months which ended in June, 1962. The Company did not repay the loan within the specified period and approached the Government for further extension of time. On reconsideration the Government has since decided that if M/s. Dabistan will repay principal amount of Rs, 1,50,000 before 15th July, 1964, the Government would waive the interest for the entire period of loan. In other words only the principal amount would be recovered. In paragraph 4 of this letter it is stated that it is hoped that M/s. Dabistan Limited will avail of this last opportunity and save the Government from an embarrassing position in the case of their failure to comply with the Government orders. The copies of this letter were sent to A. G. P. R., Rawalpindi, Ministry of Education and Information and the Ministry of Finance and it appears that not even copy of this letter was sent to the National Bank of Pakistan for information or intimation as it is alleged. There is another letter, dated 27th April, 1964, addressed to Mr. Fazal Ahmad Karim Fazli which is Exh. 5/10 on the record for repayment of loan without interest up to 15th July, 1964, and copy of this letter was not sent to the National Bank of Pakistan. P. W. 1 Abdul Rashid has produced a letter, dated 15th July, 1963, which is Exh. 5/7 on the record which purports to be addressed to Mr. Mumtaz Hassan, Managing Director National Bank of Pakistan on behalf of the appellant. It is stated in this letter that this letter is in continuation of Mr. M.
11. N. Ahmed's telephonic conversation with the Managing Director some time back regarding the loan obtained by M/s. Dabistan Limited for production of the film -Chiragh Jalta Raba" and on representation from them it has been decided to defer the recovery of the principal and interest in respect of loan obtained by them from Government on the guarantee of the National Bank of Pakistan by a year. It has been decided as an incentive for earlier repayment of loan that no interest should be recovered for the period of deferment if the loan is repaid within a year. It is hoped that National Bank of Pakistan will also be able to accommodate them to defer the recovery of its own loan together with the interest. It is quite obvious from the contents of this letter as stated above that decision had already been taken for granting extension and only intimation of the said decision has been given to the Managing Director of- the National Bank of Pakistan, from which no inference can be made that National Bank of Pakistan had given its consent to the extension granted by the Government. Moreover no evidence has been produced as to what was the telephonic conversation between Mr. M. M. Ahmed and Mr. Mumtaz Hassan. None of them has been examined. In such circumstances it is rightly held by the learned Single Judge that this piece of evidence is based on hearsay and is not admissible. In this context on behalf of the appellant Mr. Majid Ali, Joint Secretary, Ministry of Finance was examined on interrogations and cross- interrogatories. He has stated that there was telephonic conversation between Finance Secretary and Managing Director, National Bank of Pakistan and the latter had agreed to the deferment for the repayment of the loan. First of all this witness does not say that he was present at the time of telephonic conversation secondly he does not say clearly whether it was with regard to the loan which is subject-matter of the suit, thirdly no documentary evidence has been produced to establish that it was agreed by the Managing Director of National Bank of Pakistan that recovery of loan may be postponed. This witness has further stated that extension of time was approved by the Board of Directors of National Bank of Pakistan for one year and the Bank also inquired from the Government as to whether extension for further period should be given after expiry of one year but this again is not substantiated by documentary evidence. Mr. Majid Ali has admitted his signature on letter Exh. 6/3 on the record which is addressed to Mr. Fazli in which it is stated that original period of the guarantee expired in December 1961 and during July 1963 this Ministry on a representation from M/s. Dabistan Limited decided to defer the recovery of the principal and interest in respect of the loan for a period of one year and the National Bank of Pakistan was informed accordingly. The extended period of one year had also expired in July 1964. It is further stated in the said letter that National Bank of Pakistan has now received a lawyer's notice from Mr. Shah Jamil Alam on behalf of the Government for payment of loan together with 4-1% interest from June 1961 and the Bank has been placed in an awkward position. Even this letter dcies not show that National Bank of Pakistan had given consent for extension of time to M/s. Dabistan Limited.
12. ' On the other hand respondent No. 1 National Bank of Pakistan has furnished evidence of D. W. 1 Abdul Aziz Khan who has clearly stated that Bank had not agreed to extend the period of guarantee without their consent. He has also produced documents Exh. 6/1 to 6/15 which supports his assertion. The legal position is also very clear as section 135 of the Contract Act clearly lays down as under :- ' A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the , surety unless the surety assents to such contract.
13. It is imperative that in case the extension is granted by the Government, consent of the surety must be obtained which is not done in the instant D case as is apparent from the evidence on the record as such the guarani stands discharged. In view of this legal position we, are entirely in agreement with the findings of the learned Single Judge and in conclusion we dismiss this appeal with cost.
14. Appeal (IL missed.