This suit has been filed for recovery of Rs. 2,91,973.04. The plaintiff had allowed to the defendant cash credit facility to the extent of Rs. 5,00,000 and account was opened by him on 10th May 1969.
As a security for the repayment of the loan that was to be advanced to the defendant he executed a promissory note and agreement of hypothecation of the goods. The defendant was allowed to draw the money on the said account and on 31st January, 1970 his indebtedness was at Rs.
2,79,433.54 and on 31-1-1972, Rs. 2.69,677 was due and payable. The defendant executed and confirmed the debit balance acknowledging his liability. Again on 27th March, 1972 a promissory note for Rs. 5,00,000 was executed by the defendant. On 1st May, 1978 a revival letter was executed, acknowledging the liability under section 19 of the Limitation Act. The defendant paid Rs. 16,000 in four equal instalments which were credited to his account. According to the statement of account till the filing of the suit a sum of Rs. 2,91,973.04 was due and payable and on defendant's failure to pay the suit was filed.
2. The defendant has admitted that overdraft facility was granted to him but it is alleged that tote amount to that extent was never paid. He has pleaded that the promissory note and other documents executed by the defendant were obtained in blank and were latter completed by the plaintiffs themselves. The defendant has pleaded that promissory note and hypothecation agreement were without consideration and fictitious. The defendant however denied that he had acknowledged the amounts mentioned in the confirmation slip and ,pleaded that the claim is barred by limitation. It has been stated that the statement of account is incorrect and that in fact the defendant is entitled to recover Rs. 1,20,596.93 from the plaintiff. On the basis of the pleadings the following issues were framed :-
(1) Whether account No. 13-Bin the name of the defendant with the plaintiff's Bank is a dormant account and is not being operated upon by the defendant ? If so, what is its effect.
(2) Whether the plaintiffs obtained the signatures of the, defendant on various blank forms ? If so to what effects
(3) Are the alleged Promissory Notes without consideration and fictitious ? If so, what is its effects ?
(4) Whether the alleged Promissory Notes are conditional ones and are not properly stamped ? If so, what are its effects ?
(5) Is the claim of Rs. 3,16,740.30 is barred by time ? If so, what is the effect ?
(6) Whether the Promissory Note (Annexure "E" to the plaint) is without consideration, fictitious and fabricated document ? If so what are its effect ?
(7) Whether the Promissory Note dated 27-3-1972 (Annexure "E" to the plaint) or the Revival Letter (Annexure "F" to the plaint) were not executed by the defendant but they are fabricated on the blank forms on which the signatures of the defendant were obtained frau--dulently at the time of opening the account in the Bank ?
(8) Whether the amount as mentioned to para. 13 of the written statement is at the credit of the defendant, which the defendant is entitled to recover from the plaintiffs Bank ?
(9) Whether the entries in the statement of account (Annexure "G" to the plaint) are incorrect and not maintainable ?
(10) To what amount, if any, the plaintiff is entitled to ?
(11) General?
At the time of arguments Issues Nos. 1, 4 and 8 were not pressed.
Issues Nos. 2 and 7
3. The plaintiff has produced two witnesses. P. W. 1 has produced all the documents including, the promissory notes, hypothecation agreement, letter of revival and balance confirmation slips. P. W. 2 has categori--cally stated that these documents except debit confirmation slips were signed by the defendant's proprietor in his presence on the dates mentioned in the documents. The defendant has not led any evidence to rebut these facts. Mr. Bukhari the learned counsel for the plaintiff has further contended that if for argument sake it is accepted that the documents were obtained in blank they were inchoate documents and under section 20 of the Negotiable Instruments Act the plaintiff' was entitled to complete it. The defendants have stated in the written statement that these documents were obtained in blank but it is not shown that while completing the documents the plaintiff has acted in a manner not permissible under the agreement between the parties. The best person to substantiate the defence was the executant himself who has refrained from coming to the Court or giving any evidence. An application was made at the time when the plaintiff closed his side that the defendant was at Lahore and could not come but the same was rejected by order dated 15-10-1981. The defendant after the matter was fixed by the Registrar for hearing had sufficient time to make arrangement for producing his evidence but nothing has been done: In the absence of any evidence to discharge the burden placed upon the defendant and .In the face of positive evidence produced by the plaintiff my finding on these issues is in the negative.
Issues Nos. 3 and 6
4. At the outset it may be mentioned that the suit has not been filed on the basis of the promissory notes. The suit has been filed on original consideration.
5. The defendant during cross-examination suggested that although the promissory note was obtained for Rs. 5,00,000 this amount was not paid to him at any time, particularly when the promissory note was executed. This is an admitted position that Rs. 3,00,000 were not advanced to the defendant. But the plaintiff through his witness P. W. 2 has explained that according to the banking practice where any cash credit limit is granted to a party the borrower is required to execute a promissory note as a security for the total limit and it is not necessary that the entire amount should be paid to him. In the present case the pronote will have an evidentiary value that the defendant had undertaken to pay to the extent of Rs. 5,00,000 and it was executed as a security for the cash credit limit granted to him. It will also prove the rate of interest which was chargeable by the plaintiff. The plaintiff's claim cannot be proved by only :r referring to the pronotes and for that purpose the plaintiff has relied upon '`s the statement of account, cheques and vouchers. The learned counsel for the plaintiff referring to section 45 of the Negotiable Instruments Act a contended that if there is a partial failure of consideration the document does not become invalid. It is an admitted position that some amount was paid to the defendant. The pronote will be a corroborative evidence to prove the plaintiff's claim. 1n such cases a plaintiff is entitled to recover the amount which has been paid. The defendant has not led any evidence and it has not been proved how the pronote is fictitious. The admitted position is that the defendant had maintained a cash credit account in which he had drawn the amount front time to time. This was a sufficient consideration for execution of both the promissory notes. In view of this discussion my finding on issues Nos. 3 and 6 is in the negative.
Issue No. 5
6. The defendant has not seriously pressed this issue. A perusal of the document ranging from Exh.
6/3 dated 10th May. 1969 till Exh. 6151 dated 27-9-1972 it is clear that the defendant has been from time to time by acknowledging the liability to pay the amount due to the plaintiffs.
Again by his letter dated 10-3-1973 be admitted liability and assured to pay. By these letters the period of limitation was extended. The defendant has also executed a ptonote dated 27-3-1973, letter of revival dated 1-5-1972 specifically admitted the liability under section 19 of the Limitation Act. Further defendant made four payments of Rs. 4,000 under the slips written by him. These payments were made on 1-4-1972, d 31-5-1972 and 26-9-1972. In view of these facts the period of limitation was extended and the suit is therefore within time.
Issue No. 9
7. In fact this is the main issue between the parties. From the documents produced by the plaintiff it seems that there is no dispute about the principal amount. In the written statement the defendant disputed the correctness of the plaintiffs' statement of account mainly on 3 counts. Firstly, that the interest was charged at a rate, higher than the agreed rate. Secondly, that the penal interest was charged illegally and thirdly, that the conveyance charge and salary for the godown staff were wrongfully debited.
8. According to the statement, of account filed by the plaintiff on 31st May, 1973 a total amount of Rs. 2,19,973.94 was due and payable. The defendant has charged interest at 13% and the justification for this, is that in the pronote the rate of interest is specified as 4% above the bank rate with a minimum of 9% with quarterly rests. The learned counsel for the plaintiff has contended that the bank rate fixed by the State Bank of Pakistan is always fluctuating and at the material dates would have been between 9 % and 10"/0. In fact the evidence led by the plaintiff clearly proves that the rate fixed by the State Bank fluctuated. In these circumstances unless the notification of the State Bank is produced it is not possible to state with precision the rate of interest prevailing on a particular date. In the absence of any evidence showing the rate of interest fixed by the State Bank it is not possible to presume that it was between 9% and 10% P. A. As the plaintiffs have failed to prove the bank rate they are entitled to charge interest at the rate of 9% per annum which is the minimum rate agreed between the parties. The plaintiff were to charge interest with quarterly rests.
The first entry in the statement of account shows that it had charged on monthly rests. This has been confirmed by both the witnesses. Besides this there seem to be entries in June and July in the sum of Rs 1,957.32 and 1,800.14 which relate to the interest. Again September interest was charged and thereafter it seems that the interest was charged on quarterly rests basis. This clearly shows that the interest charged in respect of first two months was not in terms of agreement. The defendant has also challenged the charging of penal interest. The learned counsel for the plaintiff on the basis of the statement of the witnesses has argued that once the defendant defaults in complying with the terms and conditions of the loan the account become irregular. He contended that according to the banking practice, a banker is entitled to charge one per cent. Penal interest.
To attract penal interest it is necessary to establish that the defendant had defaulted. The plaintiff's counsel pointed out to two defaults said to have been committed, vie. The defendant had verbally agreed to pledge his goods but he failed to do so and that the defendant had hypothecated the goods representing it to be his goods but later it transpired that those goods belonged to a third party and the defendant was not the owner of those goods. To substantiate these defaults the plaintiff has relied upon the statement of its witnesses and a legal notice which was served on 28- 3-1972. It seems that before this date the plaintiff had not taken any notice of the alleged defaults.
In the absence of any positive and convincing evidence to show that the default had been committed by the defendant as alleged by the plaintiff, on its own assertion the plaintiff cannot charge penal interest from 30th September, 1969. Merely because penal interest has been charged on 30th September and 30th December, 1969 it cannot be presumed that the defendant had defaulted in the performance of his obligations. In the absence of any evidence of default and the rate at which penal interest should be charged there does not seem to be any justification for penal interest.
9. The plaintiff alleges to have charged its. 13,200 as salary to the godown staff and Rs. 707.25 towards conveyance charges. According to P. W. 2 these figures are mentioned in the counter affidavit of P. W. 1 and is also borne out by the entries mentioned in the .Statement of account. The learned counsel for the plaintiff has contended that these amounts were charged, particularly the salary of the godown staff in respect of employees who had been engaged to keep a watch that the good's were not removed from the godown of the defendant. The plaintiffs have also admitted that as far back as on 30th September, 1969 the plaintiff had come to know that the goods hypothecated did not belong to the defendant and further that the promised pledge was not coming forward. In view of these facts there was no justification to appoint staff for the godown till the beginning of the year 1972. Furthermore vouchers and receipts have been produced by the plaintiff to show that such expenses were incurred and salary was paid to the godown staff. The learned counsel for the plaintiff has contended that as the statement of account has been certified to be correct according to the Bankers Books Evidence Act, it should be presumed to be correct and it is for the defendant to establish that the account is incorrect. The certification of statement of account in terms of the Bankers Books Evidence Act, does not absolve the bank from proving the entries if they are disputed by the other side or are found to be incorrect. The defendant has disputed the statement of account and even P. W. 2 has admitted that certain entries were made wrongly and rectification has not been made. From the above discussion it is clear that the plaintiffs had wrongly charged the penal interest. Further, interest with monthly rests up to the year 1972 was unauthorisedly charged and therefore admittedly this statement of account has not been properly maintained. As the statement of account had been challenged the plaintiff should have produced the entire evidence to prove at least the disputed entries.
10. The learned counsel for the plaintiff has further contended that since the defendant by Exh. 6/5 and 6/6 has confirmed the debit balance standing on 31st January, 1970 and 27th February, 1972, the same cannot be challenged. The confirmation slips are usually sent to the account holders fully filled in by the bank. It is based on the statement of account filed by the plaintiff. As the plaintiff has admitted that certain entries in the statement of account are incorrect, the evidentiary value of such confirmatory slips is lost. From the statement of account it seems that from September, 1971 onwards the interest has been charged with monthly rests. This fact: is borne out by the statement of account and contradicts the statement of the witnesses. In the circumstances the claim by the plaintiff on the basis of the statement of account cannot be granted. . The plaintiff will be entitled- to the principal amount plus interest at the rate of 9% per annum with quarterly rests which has been calculated by the plaintiffs till the date of filing of suit to, be Rs. 2, 61,093.15 .
11. The suit is therefore decreed against the defendant for Rs. 2,61,093.15 with interest at 9% per annum with quarterly rests from the date of suit till recovery with .Proportionate costs.
12. After the judgment was reserved the defendant has applied for grant of instalment. The defendant is a businessm an who had borrowed the money and would have utilised it, in his business. There is nothing to show that he suffered loss or is in such embarrassing financial position that he cannot pay the decretal amount. Since the defendant has contested the suit and succeeded in obtaining partial relief because of the plaintiff's. Failure to produce proper evidence and as the interest charged is at the minimum rate there, seems to be no justification to grant instalments. In the facts and circumstances of this case I am not inclined to exercise any discretion in favour of the defendant. The defendant's prayer for grant of instalment is rejected.