' SHAMS MEHMOOD MIRZA, J.---This is a suit filed under the provisions section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 seeking recovery of Rs.40,605,471.68 against the defendants.
2. Before proceedings in the matter, it may relevantly be pointed out that three applications for leave to defend were filed by the defendants. Apart from PLA number 23B of 1999 all other PLAs were dismissed vide order dated 28-6-1999 and the suit was decreed. Defendant No.5 was granted leave to defend the suit but ultimately the suit against him was also decreed on 16-1-2001.
Defendants Nos.6, 7 and 8 filed R.F.A. 530 of 1999 against judgment and decree whereas defendants Nos.3 and 4 filed cross objections therein bearing No.322/2005. The aforementioned appeal was accepted on 22-9-2011 only to the extent of defendant No.8 and the cross objections filed by defendants Nos.3 and 4 were also accepted. Resultantly leave to defend the suit was granted to defendants Nos.3, 4 and 8. After remand of the case, summonses were issued to defendants Nos. 3, 4 and 8 in accordance with law. Vide order dated 21-1-2014, defendant No.8 was proceeded against ex parte as he did not enter appearance with the result that only defendants Nos. 3 and 4 contested the suit.
3. On 1-4-2014 the following issues were framed:--ISSUES:
(1) Whether the contracts of guarantees were duly executed by the defendant to secure the liabilities of Messrs Toweline Pvt. Limited? OPP
(2) Whether the defendants, in their capacity as guarantors, are jointly and severally liable for repayment of the finances facilities extended to defendant company? OPP
(3) Whether the contract of guarantees, executed by the defendants, is an independent contract enforceable under law? OPP
(4) Whether the suit is misconceived against the defendants? OPD No.3
(5) Whether the guarantees of the defendant No.3 had been replaced by the subsequent guarantees of new directors (defendants Nos.5-8)? OPD No.3.
(6) Whether the personal guarantee of defendant No.3 stood discharged with the induction of the new management who gave their own guarantee and the plaintiff consented and approved this arrangement? OPD No.3
(7) Relief
4. The plaintiff examined Sohail Akhtar, Senior Manager, Habib Bank Limited as P.W.1 who produced guarantees executed by defendants Nos.3 and 4 on 19-12-1991, 25-11-1991, 29-12-1993 and 29-12- 1994 as Exh.P-1 to Exh.P-8. During the course of cross-examination of P.W.1, he was confronted with Mark D-1 to Mark D-5. Defendants Nos.3 and 4 examined Masood Raza as D.W.1 who appeared in his capacity as special attorney of defendant No.
4. D.W.1 produced in evidence his affidavit, special power of attorney, Forms 29 dated 16-8-1995, 23- 7-1996, 1-4-1997, 21-8-1998 and certified copy of R.F.A. 530 of 1999 as Exh. D.W.1/1 to Exh. D.W.1/7. D.W.1 also produced copies of certain letters which were exhibited as Mark-D.W.1/A, Mark-D.W.1/B, Mark D.W.1/C and Mark-D.W.1/D.
' ISSUES NOS. 5 AND 6:
5. Both the issues are being decided together as these are the most crucial issues on which evidence was led by both the parties. P.W.1 in his evidence clearly stated that defendants Nos. 2 to 8 executed their guarantees in favour of the plaintiff bank to secure the amounts of the finance facilities granted to defendant No.1 company from time to time. He also produced in evidence Exh.P-1 to Exh.P-8, the guarantees executed by defendants Nos.3 and 4 and stated that these guarantees were still subsisting and have not been released by the plaintiff bank. His testimony remained consistent during the cross-examination.
6. In the affidavit submitted by D.W.1 as holder of special power of attorney on behalf of defendant No.3, he categorically admitted the execution of personal guarantees by defendant No.3. It was, however, stated therein that the plaintiff bank vide letter dated 2-7-1995 (Exh.D.W.1/C) approved the change in management of defendant No.1 company and as such the guarantees executed by the old management stood released when the new management executed their guarantees in favour of the plaintiff bank. D.W.1 during the cross-examination admitted that he has not produced any document in evidence demonstrating that the plaintiff bank had ever confirmed that the guarantee of defendant No.3 would be released.
7. In this case nothing turns on the oral evidence led by the parties as both the parties relied on the documentary evidence produced by them and the legal consequences flowing therefrom. From the examination of the documentary evidence produced by the parties, it is clear that the old management of defendant No.1 company did make a request to the plaintiff bank vide letter dated 12-2-1995 (Mark D-1 and Mark D.W.1/A) for change in management and release of their guarantees.
Vide approval dated 2-7-1995 (Mark D-5), the plaintiff bank granted its consent to the change in management. However, it is apparent from the documentary evidence led by the parties that the plaintiff bank did not expressly allow the release of the guarantees of defendants Nos.3 and 4.
8. The thrust of the argument advanced by the learned counsel for defendants Nos.3 and 4 was that by introduction of the new management in defendant No.1 company, their guarantees, Exh.P-1 to Exh.P-8, have been discharged by virtue of section 133 of the Contract Act. It was argued by the learned counsel for the defendants that the proposal for rescheduling of the dues of the defendant No.1 company as also the change in its management was put forward to the plaintiff bank and when the approval for change of management was granted by the plaintiff bank, it would also mean that it had also approved the release of the guarantees of defendants Nos.3 and 4. Learned counsel for the defendants Nos.3 and 4 has also drawn the attention of this Court's towards mark D-5 to state that the plaintiff bank approved the release of the guarantee of one of the incoming directors namely lady Rubbab Zohra. The learned counsel for the defendants also placed reliance on the judgments reported as 2000 CLC 819, 200(sic.) MLD 100 and PLD 1986 Karachi 107 in support of his contentions. Learned counsel for the plaintiff bank, on the other hand, stated that there was nothing in Mark D-5 to suggest that plaintiff bank had granted approval for the release of the guarantees executed by defendants Nos.3 and 4. He place reliance on S.A. Hameed and another v.
Allied Bank of Pakistan Limited 2004 CLD 1620 and Malik Iftikhar Ahmad v. RDFC 2003 CLD 1050.
9. It is quite clear from the approval (Mark D-5) that it did not contain any condition for the substitution or release of the bank guarantees executed by defendants Nos.3 and 4. The arguments put forwarded by learned counsel for defendants Nos.3 and 4 that the guarantees have been revoked by operation of section 133 of the Contract Act has no force and this argument impliedly acknowledges the fact that the guarantees of defendants Nos.3 and 4 were never released. A perusal of the guarantees (Exh.P-1 to Exh.P-8) shows that these were continuing guarantees. The law relating to the revocation of the continuing guarantee is contained in section 130 of the Contract Act, which quite clearly states that a continue guarantee for future transactions can only be revoked if a notice in writing for its revocation is given by the guarantor. The evidence of P.W.1 remained consistent that the approval Mark D-5 did not contemplate the substitution of the guarantees of defendants Nos.3 and 4 with those of the incoming management and his testimony has not been shaken in cross examination. The judgments cited by the learned counsel for the defendants have no relevance to the facts of this case. On the other hand the judgments cited by the learned counsel for the plaintiff bank are squarely applicable to the facts of the present case. From the documentary as well as the oral evidence, it is clear that defendants Nos.3 and 4 have been unable to discharge the onus of both these issues. Both the issues are, therefore, decided against defendants Nos.3 and 4.
' ISSUES Nos.1, 2, 3 and 4:
10. The original guarantees executed by defendants Nos. 3 and 4 were produced in evidence by P.W.1 as Exh.P-1 to Exh.P8 without any objection from the defendants. The execution of these guarantees has not been denied by defendants Nos.3 and 4. The perusal of the guarantees show that defendants No. 3 and have executed these guarantees in lieu of the finance facilities granted to defendant No. 1 and that their liability is co-extensive with that of defendant No. 1 as under Clause 1 of the said guarantees it is expressly stated that the liability of defendants Nos.3 and 4 will that be of principal debtor. Although P.W.1 in his examination-inchief (affidavit) stated that defendant No. 8 also executed his personal guarantee in favour of the plaintiff bank but no such guarantee was produced in evidence. These issues, therefore, stand proved by the plaintiff against defendants Nos.3 and 4 only.
11. The total amount mentioned in the guarantees comes to Rs.38,520,774. In view of findings rendered on the above issues, the suit is decreed in favour of the plaintiff bank and against defendants Nos.3 and 4, jointly and severally, for a sum of Rs. 38,520,774 together with the costs of funds as contemplated by section 3 of the Ordinance.