M. SOHAIL IQBAL BHATTI, J.---Through this single judgment we are inclined to decide the instant appeal as well as Cross Objection No.889/2012 filed in the instant appeal by respondent No.2/ defendant No.2 in the Suit for Recovery filed by the respondent No.1/plaintiff-bank in the capacity of guarantor filed against the impugned order and decree dated 27-8-2011 passed by learned Judge Banking Court No.IV, Lahore.
2. The facts of the case are that respondent No.1 filed a Suit for Recovery of Rs.2,557,107.70 against the appellant and respondent No.2 on 3-10-2009. In response to the summons issued by learned Judge Banking Court No.IV, Lahore the appellant and respondent No.2 filed two different applications for grant of leave to defend the suit. The present appellant during the pendency of the suit also filed an application under Order XII, rule 2, C.P.C. For production of original documents. The learned Judge Banking Court through impugned order dated 27-8-2011 dismissed the applications for grant of leave to defend the suit as well as application filed under Order XXII, Rule 2, C.P.C. And passed the decree for recovery of Rs.20,80,997 against the appellant and respondent No.2 along with cost of suit and cost of funds. Hence, this appeal.
3. Learned counsel for the appellant argued that the impugned order and decree is against law and facts of the case. The learned Judge Banking Court had not appreciated the legal position that no actual disbursement had been made and it was only a case of restructuring (Ground-"G" of the appeal). It has been further argued that since no actual disbursement had been made to the appellant, therefore, all the documents annexed with the plaint were documents without consideration, hence the impugned order and decree is liable to be set aside.
4. Learned counsel for the respondent No.2/cross-objector argued that respondent No.2 was only the guarantor for the finance facility provided to the appellant in the year 2004 and at the time of filing of that finance facility the objector executed his personal guarantee but certain blank documents were obtained from the respondent No.2 which were subsequently filled and were used by respondent No.1-bank at the time of filing of Suit for Recovery. It has been further argued that the learned Banking Court did not appreciate the fact that the plaint had not been drafted in accordance with section 9(3) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and, therefore, the Suit filed by the respondent No. 1/plaintiff-bank was liable to be dismissed.
5. On the other hand, learned counsel for the respondent No.1 argued that neither the appellant nor respondent No.2 has denied the execution of documents. It has been further argued that restructuring/rescheduling has been recognized as an "obligation" as defined in section 2(e) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Learned counsel has further argued that appellant has admitted the availing of finance facility in the year 2005 but has only raised the ground that the running finance facility availed by the appellant was converted into demand finance.
6. We have considered the arguments advance by the learned counsel for the parties and have perused the record.
7. It is established from record that the appellant applied for finance facility through application dated 5-5-2004 which was duly availed and all the charge documents were executed by the appellant. The finance facility availed in the year 2004 and respondent No.2 executed his personal guarantee to secure the finance facility availed by the appellant. Lastly this facility was renewed on yearly basis. The appellant failed to discharge his liability and made a request with the Manager of respondent No.1-bank to allow repayment of the outstanding finance facility in installments which was allowed through Sanction Letter dated December 26, 2007. It also stipulates the schedule of repayment and according to the said schedule the repayment is to be made till 30-9-2008. We have noticed that this Sanction Letter has been accepted by the appellant and all the charge documents including Agreement for Finance, Demand Promissory Note, Letter of continuity, Letter of hypothecation, Personal guarantees were executed by the appellant and respondent No.2. We have further observed that the appellant-respondent No.2 also executed the Memorandum of Deposit of titled Deed.
8. As far as the contention of the appellant raised in Ground-"G" of his Memorandum of Appeal that no actual disbursement has been made and it was only a case of restructuring.
9. While relying upon Habib Bank Limited v. Service Fabrics Ltd. And others (2004 CLD 1117) [Lahore] we are of the opinion that renewal/ rescheduling/ restructuring of the finance facility only ensues upon default, non-payment, delayed payment or inability in payment of outstanding liability by a customer who normally seeks such concession upon admission of his liability. In fact, through rescheduling or restructuring the customer requests postponement of repayment of finance on renewed terms as agreed between the parties. By approving rescheduling/restructuring/renewal of the finance facility the bank foregoes its immediate right of recovery and enforcement of securities against the customer which is absorbed through mutual agreed interest or mark-up charges till the agreed date of liquidation. Thus, restructuring or renewal is also a facility or accommodation granted by the bank to a customer. This facility has been recognized as an "obligation" as defined in section 2(e) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001.
10. In a judgment reported in Habib Bank Ltd. v. Taj Textile Mills Ltd. Through Chief Executive and 5 others (2009 CLD 1143) [Lahore] while discussing the scope of non-disbursement in case of renewal of finance facility it has been observed by this Court that in case of restructuring/rescheduling of previous finance the financial institutions is not obliged to have brought on record the statements of accounts prior to the agreement through which restructuring had been made as this was an admitted amount duly acknowledged by the borrower. No disbursement of amount was involved in the matter as the case being that of restructuring and not in the nature of fresh finance.
As far as the argument raised by the learned counsel for the respondent No.2 that respondent No.2 had signed only one guarantee form and certain blank documents were signed by respondent No.2 which have been filled by the bank and used as a guarantee. We are not inclined to agree with this argument as it has become common practice to argue that although the document was signed but the same was a blank document. We are of the opinion that where a person signs and delivers to another a document stamped in accordance with law which is subsequently filled then a strong presumption would be drawn that the person who has signed these documents was aware of the fact that those were filled. Even otherwise respondent No.2 is also a mortgagor and the original title documents are in possession of respondent No. 1-bank. At this stage, it would be useful to reproduce the stipulations Nos.(2), (3), (4) and (12) of the Guarantee Form:-
(2) This guarantee shall continue to remain binding on me/us until receipt by your of written notice to discontinuance thereof and notwithstanding such notice I/we shall continue to remain liable to you for all sums due and owing to you by the Customer whether certain or contingent at the time of receipt by you of such notice and also for any credits established for the Customer and or all instruments drawn on you or accepted by you, for the benefit of the Customer and purporting to be on a date on or before the date of receipt of such notice, even, though actually paid or honoured after that date.
(3) This guarantee shall not be discharged or prejudiced by any partial payments or 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.
(4) You may as you think fit and without reference to me/us grant to the Customer time or other indulgence or make or accept any arrangement or composition with him in respecT of any payment hereby guaranteed and also vary, renew, release, realize or in any way deal with any securities or right now or hereafter held by you in respect or the sums due under the said Agreement.
(5) .........................................
(6) .........................................
(7) ............................................................
(8) ...............................................
(9) ...............................................
(10) .........................................
(11) .........................................
(12) Until all moneys and liabilities due from or incurred by the Customer to you shall have been paid or discharged I/we shall not either by paying off any sum recoverable hereunder or by any other means or ground, claim any set-off or counter claim against the Customer in respect of any liability on my/our part or claim or prove in competition with you in respect of any payment by me/any of us hereunder or be entitled to claim or have the benefit of any set-off counter claim or proof against or dividend composition or payment be the Customer of his estate or the benefit of any other security which you may now or hereafter hold for any money or liabilities due or incurred by the Customer to you or to have any share therein.
(13) ..................................................................................................................
(14) ..................................................................................................................
12. These clauses are meant to allow and protect such subsequent changes, without effecting release of guarantors in terms of sections 133 and 135 of the Contract Act, 1872. The relevant provisions i.e. Section 133 and section 135 of the Contract Act read as under:- "Section 133. Discharge of surety by variance in terms of contract. Any variance, made without the surety's consent, in the terms of the contract between the principal [debtor] and the creditor, discharges the surety as to transactions subsequent to the variance.
Section 135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor. 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. The settled rule appeals to be that if variation or composition of the loan or time etc., as to its repayment was allowed by the creditor to the borrower and consent/assents in advance was given by the guarantor in the letter of guarantee, subsequent to the date of guarantee, such variation, composition, extension, change or indulgence being within the contemplation of the parties at the time of execution of guarantee did not effect discharge of the surety/guarantor from obligation under the guarantee. And as such surety continued to be bound by the terms of the guarantee despite enlargement of time, composition and variations between the creditor and the principal borrower. The rights available to the surety under the Contract Act can be waived by the surety. Although, we have observed that in consideration of the renewal/restructuring the respondent No.2 had executed a new guarantee; however, without prejudice to this effect even if it is assumed that no such guarantee was executed then in view of the law laid down by this Court in Mian Aftab A. Sheikh and 2 others v. Messrs Trust Leasing Corporation Limited and another (2003 CLD 702) ((Lahore] and H.B.L. v. Crescent Softwear Products (Pvt.) Ltd., (2009 CLD 412) the surety remains bound for repayment of the finance facility along with the principal debtor.
14. For what has been discussed above, this appeal stands dismissed.