MUHAMMAD RAZA QURESHI, J. This is Regular First Appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as the "FIO, 2001 "), challenging the Judgment and Decree dated 18.10.2017 passed in C.O.S No.21/2016, whereby the Suit filed by the Respondent Bank was decreed to the tune of Rs.208,378,260.49 along with cost of funds and costs of the Suit (hereinafter referred to as the "Impugned Judgment and Decree ") against the Principal Debtor Company impleaded herein as Respondent No.2 as well as the present Appellants impleaded in the Suit being guarantors for the subject matter finance facilities extended by the Respondent No.1.
Though the Appeal was filed by the Appellants No.1 to 7, but subsequently upon withdrawal of the Power of Attorney by the learned counsel, notice s were issued to the Appellants No.1, 2 and 5 to 7. Upon their non- appearance, pursuant to Order dated 18.02.2019 passed by this Court, the Appeal was dismissed for non- prosecution to the extent of said Appellants and accordingly , the Impugned Judgm ent and Decree attained finality .
Therefore, the fate of the instant Appeal is decided only to the extent of remaining Appellants No.3 & 4 namely Mian Muhammad Aslam Bashir and Mrs. Farah Aslam.
3. Upon institution of the Suit, the Respondent No.2, Brothers Sugar Mills Limited (hereinafter referred to as the "Principal Debtor Company ") filed its Application for leave to defend bearing PLA No.51-B/2016, the Respond ent No.3, Mian Nishat Ahmed filed PLA bearing No.52-B/2016, whereas, the present Appellants filed their PLA bearing No.45-B/2016. Pursuant to the Impugned Judgment and Decree, the PLAs filed by the Respondent No.2 as well as the present Appellants were dismissed and consequently , the Suit was decreed. Therefore, the subject matter of the present Appeal is PLA No.45- B/2016 filed by the Appellants.
4. Learned counsel for the Appellants has argued before us that pursuant to an Agreement dated 08.10.2015, the Ex-Management comprising of Appellants No.1 to 7 sold the shares and assets of the Principal Debtor Company to the Respondent No.3, namely Mian Nishat Ahmad and others (hereinafter referred to as the "New Management ").
Consequently , the present Appellants submitted their respective resignation letters on 10.10.2015, whereby they resigned from the Board of Directors of the Principal Debtor Company and accordingly the New Management appointed its own Directors. Subsequently Form-29 was submitted on 22.10.2015 before Securities & Exchange Commission of Pakistan.
5. Learned counsel for the Appellants submits that the Respondent Bank despite having knowledge of the sale agreement for the assets and shares of the Principal Debtor Company did not implead the members of the New Management in the Suit and illegally obtained a decree against the present Appellants. Additionally , learned counsel for the Appellants has argued before us that the finance facilities extended by the Respondent Bank to the Principal Debtor Company were rescheduled and by virtue of rescheduling/restructuring the subject matter guarantees executed by the Appellants stood discharged in terms of Section 133 of the Contract Act, 1872.
According to learned counsel, since the guarantees of the Appellants stood discharged by operation of law, therefore, the Suit filed by the Respondent Bank to their extent was malicious and unlawful and learned Single Judge fell in error by passing the Impugned Judgment and Decree against the Appellants.
6. Learned counsel for the Appellants further argued that despite having rescheduling/restructuring Offer Letter dated 04.11.2015 issued to the New Management, the Respondent Bank instead of impleading the members of the New Management illegally and maliciously filed Suit against the present Appellants and learned Single Judge failed to advert to the crucial aspect in the matter . According to learned counsel, the Respondent Bank had no actionable claim against the Appellants and the plaint failed to disclose the cause of action against the present Appellants.
Therefore, their impleadment was neither necessary nor proper . Lastly , learned counsel for the Appellants has argued that the Impugned Judgment and Decree is not only illegal but also not sustainable in the eyes of law as the claim of the Respondent Bank against the Appellants being guarantors and mortgagors was not maintainable as the Respondent Bank admittedly had entered into rescheduling/restructuring Agreement for the subject matter finance facility with the New Management.
7. Learned counsel for the Respondent Bank seriously contested the Appeal and supported the Impugned Judgment and Decree by arguing that there is fundamental fallacy in the arguments raised by the Appellants as the whole edifice has been structured on the presumption that the Respon dent Bank had entered into rescheduling/restructuring Agreement with the New Management, which actually never took place. The instant Appeal to the extent of the Appellants No.1,2 & 5 to 7 has already attained finality and for the present Appellants is also liable to be dismissed.
8. We have heard learned counsel for the parties and minutely analyzed the record as well as considered their respective arguments.
9. There is inherent flaw in the argument of the learned counsel for the Appellants regarding malicious attempt of the Respondent Bank not to implead the members of the New Management. The members of the New Management did not fall within the definition of 'customer ' as defined under Section 2(c) of FIO, 2001, as neither the finance was extended by the Respondent Bank in their favour nor any of them stood guarantors or surety for the repayment of finance or defaulted in performance of their obligation towards the Respondent/Bank. Therefore, their impleadment was neither necessary nor proper , rather as per mandate contained in Section 9 of FIO, 2001 the Suit filed by the Bank was not maintainable against the said members of the New Management.
10. The condition precedent for maintaining a Suit under Section 9 of FIO, 2001 by a financial institution is the commission of default by a customer in the fulfilment of any obligation with regard to finance. In the instant case, neither the members of the New Management fell within the definition of 'customer ' who would have committed any default nor any finance was extended by the Respondent Bank to the members of the New Management nor they ever defaulted in the fulfillment of any obligation. It is rather admitted by the Appellants that the members of the New Management never executed or replaced the guarantees executed by the Appellants. In terms of law, the Principal Debtor Company being separate juristic person its liability cannot be transferred to its shareholders. The members of New Management were only shareholders and not guarantors. Therefore, we do not see any strength in the argument raised by learned counsel and learned Single Judge had rightly dismissed the Suit against the Respondent No.3 who was leading the New Management.
11. The second argument raised by learned counsel for the Appellants that their guarantees stood released or discharged by operation of law as the Respondent Bank had rescheduled/restructured the loan or finance facility without the consent or knowledge of the present Appellants, is also misconceived and not well founded. Despite our query whether the Appellants can demonstrate through any cogent material that the subject matter finance facilities were actually rescheduled or restructured, the Appellants failed to identify or place before us any document or rescheduling Agreement in this regard.
12. The referred purported letter dated 04.11.2015 for restructuring of the finance facilities is just an offer from the Respondent Bank to the members of the New Management, which actually never materialized. Learned counsel for the Respondent Bank candidly stated at bar that since terms of the said offer letter were never met with, therefore, rescheduling/restructuring of the Principal Debtor Company never materialized, inter se, parties. In such scenario, the whole foundation of the argument of the Appellants stands demolished as if there is no restructuring, how could the Appellants seek refuge of Section 133 of the Contract Act, 1872 claiming discharge of their respective guarantees?
13. In terms of Section 128 of the Contract Act, 1872, the liability of the surety is coextensive with that of the principal debtor and unless the contract provides otherwise, the guarantor and principal debtor are jointly and severally liable to pay the outstanding amount to the creditor . Reliance in this regard is placed in the case titled 'RAFIQUE HAZQUEL MASIH vs. BANK ALFALAH LTD. and others 2005 SCMR 72 and case titled 'M/S STATE ENGINEERING CORPORA TION LTD vs. NATIONAL DEVELOPMENT FINANCE CORPORA TION and others'
14. In the instant case, what the Respondent Bank being a creditor was obliged to do against the present Appellants being guarantors was to merely show existence of a liability of the Principal Debtor Company and occurrence of default or breach of the terms leading to its liability . Therefore, the defence on technicalities that any purported covenant or change of management discharged the guarantor cannot be pressed by the Appellants.
15. We have also examined the contents of Guarantee dated 14.01.201 1 executed by the present Appellants which itself pursuant to its clauses 1 to 4 clearly stipulates as under: "1. My/our liability under this guarantee shall be co-extensive with that of the Customer as principal debtor and you may at your option hold me/us primarily responsible for the liabilities of the Customer .
2. This guarantee shall continue to remain binding on me/us until receipt by you of written notice of discontinuance thereof and notwithstanding such notice I/we shall continue to remain liable to you for all sums and amounts due and owing to you by the Customer , wheth er certain or contingent up to 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 honored after the date.
3. This guarantee shall not be discharged or prejudiced by any partial payments or settlements of accounts or existence of credit balances 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 us grant to the customer time or other indulgence or make or accept any arrangement for composition with him in respect of any payment whereby guaranteed and also vary or renew any agreement(s) under or pursuant to which the facilities were extended, or release, realize or substitute in any way deal with any securities or rights now are hereafter held by you in respect of the sums or amounts due or that become due and payable to you in respect of the said facility ."
16. In pursuance of these clauses, the present Appellants cannot be allowed to approbate and reprobate as through their guarantee the Appellants expressly relinquished/waived their right to any future liability or rescheduling by or on behalf of Principal Debtor Company and covenanted at the relevant time that their liability in all circumstances would remain intact. The argument of learned counsel for the Appellants that in presence of these clauses, the waiver or estoppel cannot operate as they are asserting a right arising out of law and there cannot be any estoppel against the law is also without a legal substance.
17. There is a fallacy in the reasoning and the argument of the learned counsel for the Appellants as the provisions of law may confer two rights, firstly a right based on public policy , obviously those rights cannot be waived in terms of law and secondly , the law can create private rights which through a consensual arrangement can always be dispensed with or waived by the parties. The mandate of law contained in the provisions of Sections 129, 133, 135 and 136 of Contract Act, 1872 create a right in favour of the surety which is private in nature and parties by fiction of law are allowed to surrender , relinquish or waive those rights by agreeing with each other . In the instant case, though there is no restructuring/rescheduling which may establish the case of the Appellants, yet had there been any, the perusal of guarantees annexed with LCR demonstrate that the Appellants had agreed with the Respondent Bank to waive their right and therefore, cannot shield the accrual of their liability in the garb of the arguments raised by the Appellants. Reliance in this regard is placed in case titled 'Messrs DADABHOY CEMENT INDUSTRIES LIMITED and others vs. Messrs NATIONAL DEVELOPMENT FINANCE CORPORA TION' 2002 CLC 166, wherein it was held that: "Article 114 of the Qanun-e-Shahadat Order deals with waiver or acquiescence and describes it as intentional relinquishment of a known right or such conduct as would warrant an inference of relinquishment of such right; implying consent to dispense with or forgo something to which a person is entitled; an agreement to release or not to assert a right; to constitute waiver there must be some conscious giving up of a right and a person cannot be held bound unless he is aware of what exactly he was waiving and what right he was giving up with knowledge of all the facts. It has been observed that where a person in spite of having full knowledge of violation of any of his rights of personal nature remained silent and did not take any measure for safeguarding it then he would be deemed to have impliedly waived it."
18. In the facts and circumstances of the case, it is held that since the members of the New Management did not fall within the definition of 'customer ', therefore, their non-impleadment was neither malicious nor unlawful.
Likewise, the resignations of the Appellants from the directorship or selling the project of Principal Debtor Company to third party or transferring the shares in their favour by any stretch of imagination cannot absolve the Appellants from their liability as guarantors' liability as held above, is coextensive with that of the Principal Debtor Company and they are jointly and severally liable to pay the decretal amount. Lastly since there is no restructuring or rescheduling between the Respondent Bank and the New Management, therefore, the Appellants' liability as guarantors never stood discharged.
19. We see no legal infirmity in the Impugned Judgment and Decree and we uphol d the same. Learned counsel for the Appellants has failed to point out any illegality or irregularity in the findings contained in the Impugned Judgment. Consequently , the present Appeal is dismissed being devoid of any force with no order as to costs.