' MUHAMMAD IQBAL KALHORO, J.--- This appeal is concerned with the controversy arising out of assertions made by the appellant against the Hongkong and Shanghai Banking Company/ Respondent No.1 (referred to hereinafter as the bank) in Suit No.428 of 1987, brought by him for the reliefs of Injunction, Declaration and Damages before this court on original side. His claim is regarding ownership of and correlative exercise of authority/right over 298600 shares in the then Boots Company, Pakistan/Respondent No.2 (now known as Abbott Laboratories Pakistan Limited and hereinafter referred to as the company) which he pledged as security with the bank in consideration of availing financial facilities aggregately amounting to Rs.20,000,000/- (20 million) against his two accounts maintained by him with the Bank. On his ostensible default to adjust the dues and following some correspondence with him to resolve the dispute, the bank started selling pledged shares of the company, which the appellant claims were sold on a lesser than market price fraudulently and illegally causing loss to his property and repute despite protest by him and his offer to purchase the same on a higher price.
2. Record reflects that financial facilities were granted to the appellant under express terms and conditions of two letters of the bank dated 18.2.1986 and in order to secure these facilities the appellant on the same day executed Two Agreements regarding pledge of shares in question, Two Demand Promissory Notes in the sum of Rs.12 million, Two Personal Guarantees and Two Agreements for financing on mark-up basis. The financial facilities were initially for a period of three months up to 20.05.1986 and by that time credit was to be repaid, however it was subject to the bank's right to review the position. The appellant through a letter dated 22.2.1986 expressly undertook to fully compensate the bank and to honor fully any commitment made by it, if it suffered any loss, due to adverse fluctuation in the market price of the shares. It was also agreed between the parties that the facilities would not exceed more than fifty percent of the current market value of the shares held in pledge. When the facilities were granted, the market value was Rs.130/- per share hence the facilities were duly secured at that rate. However within short time value of the share fell down to Rs.91/reducing the value of the securities substantially. Therefore on 6.3.1986 two letters were written to the appellant by the bank asking him to place additional shares with the (then) current market value to cover the shortfall but with no response from the appellant.
The bank continued its efforts and wrote letters to the appellant in August and October, 1986 to do the needful but to no avail. Finally on 28.01.1987 the bank through the letters called upon the appellant to immediately adjust all dues including up-to-date mark-up against both the accounts with the caution that in case of noncompliance the bank would start selling off the securities. These letters were duly acknowledged by the appellant; however he made an endorsement to the effect that "I accept the letter on condition if you allow me thirty days from today". Subsequently, the appellant through a letter dated 10.03.1987 requested the company to forward dividend warrants in respect of the shares directly to the respondent. The facts of the case further show that when the appellant did not make any repayment to discharge his liability, the bank instructed stock broker (Respondent No.6) to start selling the shares through Karachi Stock Exchange and resultantly from 10.05,1987 to 17.05.1987 the shares in different lots were sold with diverse price. However on 18.05.1987 the remaining lot (186,600 shares) was put to sale for the price of Rs.55/- per share, although the market price on that day was Rs.65/- per share. The appellant tried to prevent such sale of shares on a lower price but he could not succeed hence finally he filed the suit alleging conspiracy, collusion, fraud, mala fide and maneuvering on the part of all the respondents to deprive him of his reputation and shekel (money). The suit after introduction of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 was converted into the banking suit on the objection raised by the then counsel of the appellant. After the evidence, the suit of the appellant was dismissed with no order as to costs vide judgment dated 08.08.2007.
3. Mr. Rashid Anwer, learned counsel for the appellant strenuously argued the case of the appellant. The main focus we found in string of his arguments was that the sale of pledged shares beyond 10% by the bank was in violation of section 62 of the Companies Ordinance, 1984, which mandated a prior permission from CLA/SECP before such sale to the public; that the pledged shares could only be sold after giving a reasonable notice to pawnor as required under section 176 of Contract Act, 1872, but in the present case no reasonable notice was served upon the appellant informing him of sale of his shares, if he failed to discharge his liabilities; that the respondent's letter dated 28.01.1987 could not be construed as a notice contemplated by the statute, as it was vague and not specific about the intended action against the appellant. Learned counsel further contended that if for the sake of argument the said letter was read to be a valid notice, yet the subsequent acts of the bank to extend time to the appellant and to agree to accept the dividend accruing on the pledged shares directly from the company had diluted its effect and it had become necessary to issue a fresh notice to the appellant in terms of section 176 of Contract Act to provide him a fair opportunity to offload his liabilities; that the bank's consent to extend time to the appellant to repay his loan beyond the period of ten days stipulated in the said letter and afterwards accepting the dividend on the pledged shares amounted to novation of original contract; that dividend was not expected until June 1987 and the bank's consent to take the dividend and writing to the company to pay it directly to it was sufficient to indicate a legal justification to the appellant to assume an unconditional extension of time, overlapping and replacing the terms and conditions contained in the original contract regarding repayment of the loan amount; that it was exactly a change in circumstances, qua any obligation of the appellant to fulfill the terms of the letter dated 28.01.1987, pointing to novation of the original contract. In relation to alleged mala fide of the bank to sell the pledged shares abruptly and surreptitiously, he pointed out that as late as 27th April, 1987 the bank had no intention of selling the shares as was evident from the letter of the bank and the dividend on shares was declared on 6th May, 1987, so indulging in selling the shares just after four days viz. On 10th May, 1987 was not without a collusive scheme and nefarious design on the part of all the respondents to cause loss to the appellant finance-wise and reputation-wise. He, relating to such point, further stated that market price of the share on the first day of the sale i.e. 10th May, 1987 was higher than Rs.65/ yet the bank gave instruction to its broker to sell the share at that lower price and then on 18th May, 1987 when the price was Rs.64/ per share, the shares were sold at Rs.55/ per share with mala fide intentions. He expressed that an artificial situation with the connivance of the bank was created during the relevant period by the Brokers to purchase the shares at lower price, the price of shares in the market was made to descend collusively to benefit Brokers/Respondents, which was so discernible from the pattern of sale as despite a high price in the market they were sold on pathetically lower price; that price of the shares recorded rise immediately after the collusive sale and on 03.06.1987 it was at Rs.91/- per share, therefore the plea of the bank that had the shares not been sold in bulk on 18.05.1987, their price would have drastically fallen down causing reduction in the revenue had no substance. He next stressed that it was inconceivable but only with mala fide scheme and preplanning that the two different persons (Respondents Nos.3 and 4) on 18.05.1987, when the shares in great volume were sold, came up in an off-market deal with the same price of Rs.55/ per share to purchase the shares although their number of shares were different and the market price a day before was Rs.65/- per share. While summing up his arguments, he led us through the evidence adduced by the parties in the trial and contended that there were several anomalies in sale memos raising questions about the competency of respondent No.6/Janhangir Siddiqui as an active stock broker.
Learned counsel also contended that due to insufficiency of transfer deeds relating to the pledged shares, the bank was not competent to sell off the shares even if it was presumed that the bank was within its right to do so. He in his arguments pointed out to delivery date of the shares, from whom the delivery was taken and money thus paid to underscore his contention of engineering and fraud in all the transactions that took place in the relevant period. He lastly relied upon following case laws in support of his points, PLD 1959 (W.P) Karachi 725, AIR 1955 Patna 288, PLD 1962 (W.P) Karachi 565, AIR 1966 Allahabad 134 and AIR 1932 Calcutta 524.
4. Mr. Sajid Zahid, learned advocate for the bank took lead in the arguments advanced on behalf of the respondents. He stated that the vires of subsection (1) of section 62 of the Companies Ordinance .Were not attracted in the present case and there was no need to seek a prior permission from the CLA/SECP for selling off the pledged shares of the appellant as the bank was a scheduled bank and it had obtained the shares in the normal course of its banking business; that in view of subsection (5) subsequently added to Section 62, the bank was excepted to follow such procedure. He further contended that in the trial the appellant had failed to establish any mala fide or fraud or collusiveness on the part of respondents in selling off the shares and his all pleas were based on surmises and conjectures; that the pledged shares were sold as per prevalent dynamics of market and even it could not be imagined of a bank of international stature, such as the present one, to collude and commit fraud to recover the money that was lent by it. According to him the compliance of Section 176 of Contract Act was made by the bank through its letter dated 28.01.1987, whereby the appellant explicitly and reasonably was put on notice concerning the sale of securities, if he failed to adjust all the outstanding against him; that the appellant completely failed to repay the loans to the bank and utterly neglected to fulfill his commitment expressed in the terms and conditions of the pledge agreements executed by him; that the bank had no option in such a situation but to instruct its broker to start selling off the shares to realize the dues. He also objected to the contention of the learned counsel for the appellant that by accepting dividends warrants from the company directly, the terms and conditions of pledge agreements had got metamorphosed replacing the original contract, he pointed out that acceptance of dividends was in fact in accord with the terms of pledge agreements, therefore no novation of contract had taken place. In support of his arguments, he relied upon PLD 1999-K 468, PLD 1966 W.P. 556, 1989 MLD 3394, PLD 1998 K 671, AIR 1960 Punjab 98 and PLD 1959 W.P.725.
5. Mr. Ejaz Ahmed, learned counsel contended on behalf of Respondents Nos.3 to 5 that they were bona fide purchasers and their rights in that capacity were secured under Section 31 of the Securities and Exchange Ordinance, 1969; that the purchase of shares admittedly took place without there being any notice to them of deficiency in the title of either the appellant or the bank; that the appellant had failed to bring on record any substance indicating fraud or collusion between the Respondents during the sale of pledged shares, which was done in the normal course of business prevalent in the market. He pointed out that fluctuation in the price of shares was not a noticeable activity and normally the sale of shares in bulk was always made through negotiations over the price. He next contended that the appellant was not entitled to the reliefs claimed by him in the suit as much water had flown from under the bridges since the sale of pledged shares took place and, it was undeniable, that meanwhile the shares must have changed many hands.
6. Mr. Khalid Jawed Khan learned counsel mainly focused on the points that that claim of the appellant against respondent No.6 was speculative as there was no evidence that he acted in concert with the bank to commit fraud with him; that he worked with the bank in a routine manner in the capacity of stock broker and in the said position no additional duty was cast upon him except the one expected in normal course; that in the market, if the shares were sold in bulk, the price was always determined through negotiation without being influenced by the prevalent market value of the shares. In that connection no fixed criterion could be applied nor had the appellant proposed any in his pleadings; that Respondent No. 6 did not violate any code of conduct by dealing with the bank nor breach of any laws could be alleged against him. He lastly added that Respondent No.6 behaved normally by working as stock broker in the subject transactions.
7. We have considered the contentions of the parties and gone through the material including the case laws cited at bar. A look at the record has helped us note down that on 18.2.1986 the bank granted credit facilities to the appellant on mark-up basis for three months only, against his two accounts No.01-030899-01 and 01-030907-01, on his name and the name of Habib and Habib International of which he was proprietor. The credit facilities so granted amounted to Rs.20 million and were under the express terms and conditions set out in the two letters of the bank dated 18- 02-1986. The appellant in order to secure the financial facilities executed following documents (a)
Two Agreements relating to the pledge of shares dated 18.2.1986, (b) Two Demand Promissory Notes dated 18.2.1986 in the sum of Rs.12 million each, (c) Two Personal Guarantees dated 19.2.1986 and Two Agreements for Financing on mark-up basis dated 18.2.1986. It was agreed between the parties that the facilities so granted to the appellant would not exceed more than fifty percent of the current market value of the pledged shares. And through letter dated 22-02-1986 the appellant also undertook to fully compensate the bank should the bank suffer any loss or problem on the basis of any dispute in respect of title of pledged shares or due to any adverse fluctuation in the market price of the shares. The appellant accepted the credit facilities with a clear knowledge and understanding that he had imparted authority to the bank to sell the pledged shares on his default to clear his liabilities. Such consent of the appellant is recorded in the terms of the pledged agreement that for ready reference is reproduced herewith "AND we hereby agree with the said Bank that in the event of the Customer failing to pay on demand and/or in accordance with the Contracts any moneys payment whereof is secured by the said pledge or failing to maintain a margin of security as stipulated below, the said. Bank, in its absolute discretion, may on giving reasonable notice to the Customer sell and absolutely dispose of all or any of the securities in such manner as the said Bank may think fit and apply the net proceeds of sale in or towards discharging/reducing of the indebtedness/liabilities/ obligations of the Customer to the said Bank in respect of the Moneys due to the said Bank or on any other account and we agree with the said Bank that (subject to such of the provisions of Pakistan law as may be applicable), the said Bank shall have the right to sell the Securities to itself. "(Emphasis supplied). This categorical statement duly agreed by the appellant clearly demonstrates that in case of default all the bank was required to do was to give him a reasonable notice before embarking upon selling the pledged shares.
Obviously through the said agreement the appellant bound himself to an arrangement expressly contemplating sale of his securities in the event of his committing default. Learned counsel of the appellant however argued that such terms and conditions of the pledge agreements had lost their force in favour of a new arrangement when the bank accepted the dividend on the pledged shares after issuance of letters dated 28.01.1987, and granted further time to the appellant to repay his liabilities beyond the period of ten days stated therein. Admittedly the bank received Rs.8,21,150/- by way of dividend and applied it to the adjustment of appellant's liabilities. Still the question that begs and answer would be whether the acceptance of the dividend by the bank was beyond the terms of the pledge agreements and that such acceptance and initiating no immediate action by the bank against the appellant after 10 days stipulated in the above letters was equal to a novation of the original contract. We have minutely examined the record and have found a specific mention in the pledge agreement about right of the bank to receive payment of dividend interest and/or other income in respect of the securities and to that effect there is admission of appellant in his evidence that "as per the terms of the agreement, dividend was required to be collected by defendant No.1". It is therefore clear that by accepting the dividend the bank (may be beyond the period of ten days given to the appellant to adjust his dues through the above letters) did not act contrary to the terms of the agreement, rather it simply shows the willingness or anxiety of the bank to make adjustment in the liabilities of the appellant. That action of the bank, in our view, cannot be construed as a new arrangement frustrating the intrinsic intent the parties indicated and agreed upon while entering into the pledge agreements. There is no material on record suggesting that original contract between the parties was substituted by any new contract or the terms and conditions set out in the original contract had materially been modified. We are of the view that where original contract is in vogue holding the field and is justiciable, there arises no occasion to hold that it cannot be performed. Any correspondence (letters dated 28.01.1987), and when it is solely for the purpose of enforcing the right under the agreement, between the parties would not imply or be taken as novation of original contract. Novation would mean and be construed when contract already in existence is extinguished and a new contract is created where-under new emerge in favour of the parties. Unless the rights under the old contract are explicitly relinquished, no new contract comes into force. The procrastination by a party to abide by terms of the contract, which in the present context appears to gain benefit out of it, would not mean novation of the contract; it comes about where parties to the contract mutually agree to substitute it with the new contract. Therefore if a party alleges novation of a contract, it has to establish these prerequisites.
For reliance the case of Mrs. Mussarat Shaukat Ali v. Mrs. Saila Khatoon, etc. Reported in NLR 1995 SCJ 19 is referred to.
8. The credit facilities availed by the appellant on mark-up basis against his two accounts were granted to him by an entity (the bank) that is commercial in nature and approach whose sole purpose was to do business with him, which must reap some profit for it. However the appellant's undisputed failure to make any payment to the bank in the entire period covering almost 15 months strongly indicates his intentions to the contrary. On the analysis of facts and relevant documents, we have not found any material displaying efforts of the appellant meant for ridding his credit liabilities save writing a letter to the company for paying dividend to the bank, which is found to be in line with the express term acquiesced by him in the agreement. Given context requires therefore that the contention of the appellant that the pledged shares were sold out on lower price surreptitiously in a fraudulent manner in order to cause him loss, has to be looked at in the light of the way the parties conducted themselves in the course of asserting their respective rights-coupled with the documents adduced by them in the trial. Allegations, of fraud require specific evidence establishing unequivocally the maleficence or a mis-representation made with a design to get benefit for B oneself or misleading the other into a course of action detrimental to its rights. The fraud as per Black's Law Dictionary (Sixth Edition) is an act "as distinguished from negligence, it is always positive, intentional. It comprises all acts of omissions, and concealments involving a breach of a legal or equitable duty and resulting in damage to another. And includes anything calculated to deceive, whether it be a single act or combination of circumstances, whether the suppression of truth or the suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or by a silence, by word of mouth, or by look or gesture. Fraud, as applied to contracts, is the cause of an error bearing on material part of the contract, created or continued by artifice, with design to obtain some unjust advantage to the one party, or to cause an inconvenience or loss to the other. "The bank admittedly was maintaining an international stature having branches in many parts of the world and it does not require an extra ordinary ingenuity to make an estimate of billions it must have been dealing with in the normal course of its business.
Drooping low to commit fraud for the recovery of a just 20 million of its own money by such an entity cannot be ordinarily inferred in absence of some unimpeachable and explicit evidence evincing depravity on its part. We have minutely gone through the record, that includes evidence of the parties, searching for substance indicating what the appellant has asserted in his pleadings relating to mala fide comradeship between the bank and the other respondents in the transactions for selling off the pledged shares but found nothing. On the contrary, we have observed that during the relevant period the prices of shares were recording a gradual decline. On 10th May 1987 a share fetched a price of Rs.75/-, in the succeeding dates on 11th the share was sold at Rs.75/-, on 12th it was sold at Rs.78/-, on 13th the share brought a price of rupees between 76.50/ to 74/-, on 14th the share fetched the price of Rs.70/- and on 17th the share price dropped at Rs.65/-. The market fluctuation the share endured ranged between Rs.91/- to Rs.74/- on 6th May 1987; between Rs.75/- to Rs.78/- on the following day i.e.. 7th; on 10th May the share price fluctuated between Rs.73/- to Rs.76/-; and on 11th,- 12th, 13th and 14th May 1987 it was between Rs.70/- to Rs.76/- However, on 17th the market recorded downwards fluctuation of the shares between Rs.68/- to Rs.64/-. That clearly demonstrates a gradual decline in the share price. It appears that .
When they were put on sale, they could fetch the price, which could be envisaged as best at the relevant time. The appellant has not been able to bring on record anything cogent through -his evidence showing elements of fraud and collusion between the respondents.
9. Another contention raised by the leaned counsel for the appellant relates to the terms of section 62 of the Companies Ordinance, 1984 which, according to him, do not mandate sale of more than 10% of shares to the public in absence of a prior permission from the Commission. We in the process of this discourse would like to have a reference to what was stated by the learned Single Judge of this Court on the issue when he decided the application of the appellant under Order XXXIX Rules 1 and 2, C.P.C. Vide order dated 2nd July, 1987 that is reported in 1987 CLC 1919.
"12. The last submission of the learned counsel for the plaintiff that there was a bar to sell the aforesaid shares without the permission of the Authority as provided in section 62 of the Companies Ordinance, 1984, for purpose of deciding the above application, has also no force.
Section 62 of the Companies Ordinance, 1984 (`the Ordinance'), as in the Ordinance originally enacted contained 4 subsections reading as under:-
62. Offer of shares or debentures for sale by certain persons:
(1) No person who holds more than ten percent of the shares or debentures of a company shall offer for sale to the public any share or debenture of the company held by him except with the approval of the Authority.
(2) Any document by which an offer for sale to the public is made by any such person as is referred to in subsection (1) shall, for all purposes, be deemed to be a prospectus issued by a company, and all enactments and rules of law as to the contents, filing and registration of a prospectus and as to the liability in respect of statements in and omissions from a prospectus, or otherwise relating to a prospectus, shall apply with the modifications specified in subsections (3) and (4), and have effect accordingly, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.
(3) For the purposes of this section, section 57 shall have effect as if the person making the offer were a person named in a prospectus as director of a company.
(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in subsection (2) is signed on behalf of the company or firm by two directors of the company or not less than one-half of the partners in the firm, as the case may be; and any such director or partner may sign by his agent authorized in writing. By subsection (5) of the Banking and Financial Services (Amendment of Laws) Ordinance, 1984 (LVII of 1984) the following subsection was subsequently added with a view to except the scheduled banks and financial institutions from the restriction and prohibition of subsection (1) above:
(5) A notice, circular, advertisement or other document soliciting bids, offers, proposals or tenders for sale of shares or other securities acquired in the course of normal business or for negotiating sale thereof or expressing on intention to disinvest such shares or other securities issued by a scheduled bank or a financial institution shall not be deemed to be a prospectus or an offer for sale to the public for the purposes of sections 61 and 62.
13. The above amendment was brought about by insertion of an exception, such exception is to be noted for its need with force and emphasis and as an omission in the original contemplation.
Subsection (5), therefore, is an important exception and must .Be read in that context.
14. Section 62 refers to 'offer for sale to the public' of ten percent of the shares of a company held by a person. Such offer to the public, by subsection (2) is deemed to be a 'prospectus'. Prospectus is defined in clause (2) of section 2 and is governed by the provisions of Part V, especially sections 52 to 66 of the Ordinance.
15. Learned counsel for plaintiff submitted that, in any event, the purported sale is illegal and void by reason of noncompliance with the provisions of section 62 of the Companies Ordinance, 1984, which makes it mandatory to obtain the prior approval of the corporate law authority before selling more than 10% of the total shares of the Company.
16. Learned counsel for the Bank and Defendants 3 to 7 in reply submitted that in view of subsection
(5) added to section 62, Defendant No 1 being a scheduled bank and having obtained the said shares in the normal course of their banking business were excepted from the purview of subsection (1) of section 62. It was further submitted that it was a case of realizing the security by ordinary recourse to the sale of pledged shares after due notice to the plaintiff In the aforesaid circumstances, to my mind the sale does not mean an offer to the public as contemplated by subsection (i) and further it is not a prospectus as deemed in subsection (2) and in any case the exception in subsection (5) appears to cover the case of the Defendant No.1 making sale of the shares even if they exceed 10% of the issued capital of the Company. In any case if there is violation of provisions of section 62 of the Companies Ordinance, 1984, the penalty is provided in section 66.
17. It may, perhaps, be urged that it was the plaintiff himself who ought to have obtained the required permission, if any, at the time of pledging the shares with the Bank, coupled with authority to sell them, as per agreements of loan, and so he cannot be allowed to raise the said plea in his defence."
10. Evidently learned single Judge of this Court after comprehensively dealing with the issue has concluded that requirement of seeking approval from the commission does not apply on the bank in terms of subsection (5) of section 62. Admittedly these findings were not challenged by the appellant. In the impugned judgment again this issue was treated exhaustively and this time also the findings were not different. Before us also learned counsel for the appellant reiterated the same legal issue. Although no further elaboration is needed in view of what has already been observed by the learned single judge while deciding the application under Order XXXIX rules 1 and 2, C.P.C., however we would like to add that if a person holding more than ten percent of the shares or debentures of a company offers for sale to the public any shares or debentures of the company, he has to seek a prior approval of the commission and any document by which such offer is made is deemed to be prospectus issued by the company for all purposes. The prospectus is defined in clause (29) of section 2 of the Companies Ordinance, 1984, in the following words "prospectus means any document described or issued as prospectus, and includes any notice, circular, advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate, or inviting deposits from the public, other than deposits invited by a banking company or financial institution approved by the Federal Government, whether described as prospectus or otherwise". By dint of subsection (5) to the above section (62), if such prospectus is however issued by the scheduled bank or a financial institution, it would not be construed a prospectus or an offer for sale to the public in terms of Sections 61(i) and
62. The qualification of seeking a prior approval from the commission would not be read insofar as the facts of the present case are concerned; for the subject bank here is the scheduled bank and it in normal course of business instructed the stock broker to start selling the shares after the appellant went into default. The prices at which the shares were sold out on different dates are disputed by the appellant on the ground that they were lesser than the ones prevalent at the relevant time. A brief look at the price-figure during the time of sale of shares no doubt may ex- facie indicate some force in that statement, but it is in total disregard to the trend found in case of a bulk sale of shares which invariably result in crash of share prices in the market. Moreover, the appellant has also admitted in his evidence that the shares prices were recording nosedive since the time of pledge; and at one point of time (letters dated 6.3.1986) he was directed by the bank to make good of the difference (occurring due to reduction in the share price) to comply with the condition of the facilities not exceeding fifty percent of the value of shares. Such downfall is also noted above by us while detailing the prices at which the shares were sold at the relevant period.
11. So far the compliance of section 176 of the Contract Act, 1872 with reference to a prior notice to the pawnor of sale of his pledged property, it may be observed that the bank through letter dated 28.1.1987 put the appellant on notice of impending sale of his pledged shares, were he to fail to make an immediate adjustment of all dues including mark-up and in this regard he was given 10 days' time. The object of this requirement appears to communicate sufficient and reasonable information to the pawnor about liquidation of his property pledged as security, if he does not make up for the payment of dues within the period stipulated in the notice/letter. That qualification essentially is there only to extend due warning of an adverse action to the defaulting party, its purpose and object thus cannot be read beyond what is simply conveyable from its reading. That be the case, in our view the pawnor cannot seek to establish his defense in the given context on any ultra-technicality by pleading that thought it had received a letter informing him an adverse action within a certain period in the event of his non-compliance, but because no action was taken against him immediately as stipulated there under, the subsequent action of selling off the pledged property would be in violation of provisions of section 176 of the Contract Act. There is no cavil to the proposition that giving notice to the pawnor is a mandatory requirement of law that has to be fulfilled before selling his pledged property. That obligation will however stand complied with if the pawnor has been served with a letter telling him about the sale of his shares by the pawnee, in case of his non- C compliance of the terms of the pledge agreement. Regarding contents of such notice no hard and fast rule can be laid down and it is also not necessary that such letter shall contain actual date and place of intended sale, the only prerequisite is to convey reasonable information to the pawnor about the ensuing action in case he failed to pay the due amount, and to afford him a reasonable time to redeem his pledged property. As is said in preceding lines, the moot point that has been argued before us is whether the appellant was properly informed about the impending action of sale of his mortgaged shires in case of his non- compliance. For appreciating the same, reproduction of the letter dated 28.1.1987 would not be irrelevant here:- ' Mr. Habib Ahmed 722/ 723 Stock Exchange Building 1.1. Chundrigar Road, ' Karachi.
' Our Ref: CDT870266 Dear Sir, 28th January. 1987 ' RUNNING FINANCE FACILITIES AVAILABLE TO YOU UNDER A/C NO. 01-030899-01 ' Further to our letter No. CDT861529 dated 10 Aug, 86 we regret to note that you have not responded to our demand for adjustment of excess appearing under your above account.
' You would appreciate that as a commercial bank, we cannot permit the present position to linger on. As such we demand immediate adjustment of all the outstanding under the above account alongwith uptodate mark-up accrued thereupon.
' Please be advised, if our above demand is not complied with within 10 days from the date of issue of this letter we will be constrained to start selling of the securities pledged by you with us to eliminate the said outstanding.
' Please arrange to contact either the undersigned or Mr. M.K.G. Scott as a matter of some urgency in this connection.
' Yours faithfully, ' G.F. BOYLD DEPUTY MANAGER.
' A reading of this letter has indicated that the appellant in no ambiguous words was informed to comply with the demand of the bank and was required to immediately adjust all the outstanding along with up-to-date mark up within 10 days of issuance of letter. The explicit warning that if he failed to do so, the bank would be constrained to start selling off the securities to recover the said dues is also specifically mentioned therein. This letter also refers to a previous letter No.CTD861529 dated 10.08.1986 written by the bank to the appellant demanding for adjustment of excess appearing in his account that shows that the bank persistently kept on demanding its unpaid dues from the appellant but without any success. The appellant was aware that he was not paying any amount to discharge his liabilities and his failure was not only seriously noted by the bank but about his failure to comply with the conditions of the agreements he was continuously being kept abreast of through the letters. The situation that was obtaining at the relevant time was very obvious that the appellant was not paying any money back to the bank to discharge his burden and he was knowing (due to letters) that the bank had the authority to dispose of pledged property in terms of agreement and it would start selling off shares held in pledge on account of his failure to pay back. It was not a matter of some disputed figures qua money that the appellant was not sure about whether he still owed it to the bank or not, but here the appellant completely failed to pay anything except the dividend that the bank received directly. Therefore, his claim that when the bank started selling off his shares he was caught totally unaware is simply unbelievable.
Going by the common wisdom the human beings have, it would not be difficult for a person, who pledges his property as security against the loan which he despite being warned does not pay back, to understand and expect liquidation of his property; and any such action should not cause any surprise to him. In addition to it, the appellant in terms of the agreement (reproduced above in Para No.7) was aware that there were no limits to which he could stretch to avoid payment of loan to the bank. In the event of his default, the appellant knew that the bank was absolutely competent to dispose of all or any of securities in such manner as it deemed fit and apply the net proceeds of sale towards discharging or reducing his indebtedness after giving him a reasonable, notice. By committing himself to such an obvious term in the agreement, the appellant was not left with any option to plead default on his part and consequent liquidation of his mortgaged property as a result of some fraud or collusiveness played by the bank alongwith other respondents. On the letters dated 28.01.1987, the appellant made an endorsement that he accepted the letter on condition if the bank allowed him thirty days from that day. This endorsement of the appellant though has no value in the law insofar as his obligation to the bank is concerned, nor any record has been produced suggesting that the bank at any time had acceded to such condition and/or after the period of thirty days the appellant paid any amount to the bank, nonetheless, in our view, it is an indicative of the fact that the petitioner being duly informed about the pending action against him in the face of his default had sought to delay that approaching action for some time.
This endorsement of the appellant on the letters conveys the knowledge and state of his being duly informed about the bank's action against him, should he fail to comply.
12. Appellant's case against Respondents Nos.3 to 5 is based on no evidence. His allegations of fraud against them do not appear to be cogent ones and are merely hypothetical and speculative as except the word of the appellant, nothing has been brought on record to suggest that Respondents Nos.3 to 5 in any manner manipulated the purchase of shares in their favour at the stated price. The original contract in respect of financial facility availed by the appellant is between the bank and the appellant. The respondents Nos.3 to 5 purchased the shares of the appellant for value without notice to them depicting any defect to the title of the appellant or a bar in selling the shares by the bank. They appear to be bona-fide purchasers of the shares and there is nothing on the record to show that they were hands in glove with the bank in any manner to commit fraud with the appellant. Provisions of subsection (1) to section 31 of the Securities and Exchange Ordinance, 1969, provide a complete protection to the person who without fraud and for a lawful consideration becomes the possessor of a certificate of an equity security, script, debenture, stock or bond and he is without notice that the title of the person from whom he is deriving his own title is defective. Such person under the law is legally entitled to hold such certificate and all rights attached thereto free from any defect of title of prior parties and free from defences available to prior parties among themselves. In relation to the role of respondent No. 6, it may be stated that the record shows the company followed procedure for registering share transfer after receipt of duly executed, verified and properly stamped Transfer Deeds alongwith accompanying share certificates and issued receipts to the transferees. The respondent No.6 being stockbroker acted as an agent in the whole process culminating at the purchase of shares after all necessary verification were made and the documents of transfer were found to be in order. Learned counsel for the appellant tried to convince us during his arguments that as per record respondent No. 6 was inactive stock broker who had not indulged in any other activity of selling snares during the relevant period except the present one that was not only surprising but it constituted fraud, collusiveness and mala fide on his part. We hardly can subscribe to such view, mere non-activity of a stock broker at times would not mean that his particular dealing during that era is dubious or against the law. It does not in any manner lead to assume that by conducting subject transactions, Respondent No.6 violated either the call of his duty or committed offence of fraud as alleged by the appellant.
13. The above discussion has led us to conclude that this Appeal is without merits and is consequently dismissed. There is no order as to costs.