' This is a suit filed under Order XXXVII, rule 2, C. P. C. For the recovery of Rs, 3 lacs based on a demand promissory note dated 27-10-1980. In the plaint, reference is made to the execution of the aforesaid promissory note by the three defendants for valuable equivalent consideration received from the plaintiff and then it is averred that the demand was made upon the defendants in January, 1981 to make payment due under the promissory note but the defendants avoided payment and as such the present suit was filed. No other facts are mentioned in the plaint. The original demand promissory note for Rs, 3 lacs was filed alongwith the plaint. The promissory note on which the present suit is based reads as follows :- "PROMISSORY NOTE ' We, (1) Mr. Hasan Al-Adawi son of Abdul Monem Al-Adawi, resident of 39, Khayaban-e-Shamsher, Phase-V, Pakistan Defence Officers' Housing Authority, Karachi, (2) Mr. Abdul Bari son of Abdul Jabbar resident - of 36-9th, Commercial Street, Phase-IV, Pakistan Defence Officers' Housing Authority Karachi and (3) Mr. Mustafa Khan son of Firoz Khan resident of 87-B, P. I. B. Colony, Karachi do hereby promise to pay on Demand a sum of Rs, 3,03,000 (Rupees Three Lacs only) to Mr. Azmat Wali son of Late S. Barkat Ali resident of B-23, Block-10, Federal 'B' Area, Karachi for an equal amount due and payable by us. Karachi dated 27th October, 1980.
1. Hassan Al-Adawi.
2. Abdul Bari.
3. Mustafa Khan."
2. C. M. A. 1762/81 has been filed by defendants Nos. 1 and 2 under Order XXXVII, rule 3, C. P. C. Asking for grant of un-conditional leave to defend the suit. C. M. A. 1960/81 is a similar application filed by defendant No, 3 also seeking unconditional leave to defend the suit. This order will dispose of these two applications filed on behalf of the three defendants. In both these applications the main ground asking for unconditional leave to defend is that on the carbon copy of the promissory note the following endorsement was made by the plaintiff: "The original pronote is received and the said pronote is subject to the terms and conditions contained in the Agreement of Sale of Shares dated 27th October, 1980."
It may be observed that this endorsement by the plaintiff is not there on the original promissory note. It is only to be found on the carbon copy of the promissory note. This fact has been admitted by the learned counsel 'for the plaintiff.
3. It had been argued by the learned counsel for the plaintiff that as there is no endorsement on the original promissory note and the same appears only on the carbon copy, no reference can be made by the defendants to it and reliance cannot be placed on the agreement of sale of shares dated 27-10-1980. It was further contended that even if reference is permissible to the endorsement on the carbon copy, the said endorsement is in the nature of a receipt of the original promissory note and nothing more. I do not agree. As observed earlier, it is an admitted position that the aforesaid endorsement has been made on the carbon copy of the promissory note by the plaintiff and endorsement is to the effect that the promissory note is "subject to the terms and conditions contained in the Agreement of Sale of Shares dated 27-10-1980." In my view, on account of this admitted endorsement on the carbon copy of the promissory note, the defendants are entitled to refer to the terms and conditions contained in the Agreement dated 27-10-1980 to make out a defence to the suit. The other contention of the learned counsel for the plaintiff that this endorsement is in the nature of a receipt simpliciter of the original pronote has no substance. The endorsement has two parts. The first part refers to the acknowledgement by the plaintiff of the receipt of the original promissory note and the other part of the endorsement makes the promissory note- subject to the terms and conditions contained in the Agreement dated 27-10- 1980. The endorsement is not a mere receipt. I am, therefore, of the view that on the facts of the present case the defendants have the right to refer to the Agreement dated 27-10-1980, in support of their applications for grant of leave to defend this suit.
4. Learned counsel for parties have taken me through the Agreement dated 27-10-1980. This Agreement relates to the sale of 10,500 shares of the total face value of Rs, 10,50,000 of the Company, Wali Brothers Ltd., and was entered into at Karachi on 27-10-1980 (which is also the date of the promissory note in, suit) and is made between the plaintiff Azmat Wali and six other persons as the vendors, and the three defendants as the vendees. In this Company, the paid-up capital was Rs, 19 lacs represented by 19,000. Ordinary shares of Rs, 100 each. Out of these 19,000 shares, 10,500 shares were owned by the vendors whereas the balance 8,500 shares were held by the vendees. The vendors were, therefore, the majority shareholders of this Company. In the preamble to the Agreement dated 2 /-10-1980, it is mentioned that certain disputes had arisen between the parties regarding operation and functioning of the Company and the break-up value of the shares and that "the said dispute has now been amicably resolved in suppression of all previous arrangements, resolutions and/or agreements, if any". By this Agreement, the vendors agreed to sell their entire shareholdings to the defendants at the face value i,e, Rs, 100 for each share and the defendants agreed to purchase these shares. The agreement recites that the defendants had paid to the vendors Rs, 3 lacs as full sale consideration for the purchase of 3,000 shares out of the total shareholding of .10,500 shares of the vendors and this was done through two pay orders made out in the name of Azmat Wali (the plaintiff) and shares certificates of 3,000 shares alongwith blank transfer deeds were handed over to the defendants. As regards the balance of 7,500 shares, reference may be made to clause 1(b) and (c) of the Agreement which are in the following terms :- "l(b) The vendees shall further make a payment of Rs, 3,00,000 (Rupees three lacs only) in respect of 3,000 shares on or before 27th January, 1981 and the vendors shall deliver to the vendees against the receipt of the said payment Share Certificates of 3,000 shares of the value of Rs, 3,00,000 (Rupees three lacs only) alongwith blank transfer deeds.
(c) The remaining balance of Rs, 4,50,000 (Rupees four lacs and fifty thousand only) shall be paid by the vendees to the vendors on or before 27th April, 1981 against the delivery of 4,500 shares of Rs, 100 each alongwith blank transfer deeds ' Clauses 2 and 3 of the Agreement may also be referred and these read as follows :- "2. That simultaneously the vendees have handed over to the vendors two promissory notes of the value of Rs, 3,00,000 (Rupees three lacs only) and Rs, 4,50,000 (Rupees four lacs and fifty thousand Only) as a collateral security for due performance of the contract referred to in clause 1(b) and 1(c) above and the said promissory notes shall be returned by the vendors to the vendees on receipt of the sale consideration referred to in clause 1(b) and 1(c) above.
3. That the time for the payment of the amounts referred to clause 1(b) and 1(c) above shall always be deemed to be the essence of the contract.'
' Reference may also be made to the other terms of the Agreement dated 27-10-1980 as reliance was placed on them by one or other counsel appearing for the parties. Clause 4 records that blank proxy forms had been signed by the vendors in favour of the defendants in respect of shares referred in clauses 1(b) and 1(c) and that it had been agreed that the vendors would not attend the meetings of the Company and the defendants will send their representatives to attend the meetings on the basis of the said signed proxy forms. Clause 6 refers to the resignations of the vendors as directors of the Company. Clause 7 states that a meeting of the Company would be immediately, held to elect the defendants and/or their nominees as directors and for transfer of 3,000 shares (of which payment had already been made by the defendants) in the name of the defendants. This was to be done to give full control of the Company to the defendants. Clauses 8 and 9 confirm that the defendants have been put in full and complete possession of the Company as a running and going concern on 27-10-1980 and the Company's office, other assets, all records and books had also been handed over to them. In clause 10, the vendors have warranted that no contravention of any applicable laws had taken place and that to the best of their knowledge no returns to any Government department or agency were over due or had not been filed and if any dues were found against the Company, the same would be paid by the vendors. Clauses 11, 12 and 13 of the Agreement are reproduced here :- "11. That the vendors and vendees jointly and severally also undertake to complete all the actions for proper conveyance of the shares to the vendees, and such other actions which may be deemed necessary be the vendees in this behalf including the following :
(i) To record necessary resolution by the Board of Directors to effect the transfer of the shares in terms of the Articles of Association of the Company for which payments have been made as per clauses 1(a), 1(b) and 1(c) above viz. Transfer of 3,000 shares of Rs, 100 each. Shall be registered immediately. Transfer of other 3,000 shares of Rs, 100 each shall be registered on payment on or before 27th January, 1981, and transfer of remaining shares of 4,500 shares of Rs, 100 each shall be registered on payment on or before 27th April, 1981.
(ii) To take all other actions in terms of the Articles and Memorandum of Association of the Company and/or amending the same should it be expedient for the purpose of this agreement.
(iii) To give effect to the terms and conditions contained in this agreement.
12. That the vendors have thoroughly scrutinised the books of the Company and have checked the accounts and have made a full, true and complete disclosure of the same. That on the basis of the account a Balance Sheet as at 15th July 1980 Annexure "E" has been drawn up on the basis of the said Balance Sheet the sale and purchase hereinabove envisaged has been agreed upon the vendors have also disclosed that there are no material alterations or creation of liabilities from the date of the Balance Sheet till this day of signing of the agreement and vendees have accepted the same for signing of this agreement. It is specifically agreed, by and between the parties that Mr. Azmat Wali of the vendors have forgone/withdrawn his claim for the loan of Rs, 10,50,145.29 (Rupees ten lacs fifty thousand one hundred forty-five and paisas twenty-nine only) advanced to the Company. Likewise the vendees have agreed that the amount of Rs, 8,26,770.72 (Rupees eight lacs twenty-six thousand seven hundred seventy and paisas seventy-two only) shown in the Balance Sheet under heading "Due from Directors" as due to the Company from Mr. Azmat Wali have also forgone/withdrawn the claim in respect of the said amount by the vendees.
Subject to what has been stated above, the said Balance Sheet is hereby accepted between the parties as a correct statement of all the assets and liabilities on the basis of which this transaction has taken effect. That the vendors hereby explicitly declare that there are no claims, demands, liens, burdens, charges, mortgages, suits or any other liabilities or encumbrances, whatsoever except those declared in the Balance Sheet as at 15th July, 1980 more particularly stated in Annexure "E" attached herewith and what has been specifically provided hereinabove. The vendors shall keep the vendees harmless and indemnified against all claims, burdens, liens, demands, charges, mortgages or encumbrances which have not been stated in the Balance Sheet Annexure "E" and which may arise due to non-disclosure, error, materials, mis-statement or concealment of any facts as stated aforesaid. The vendors at all times hereinafter shall be responsible for the said liabilities.
13. That the vendors hereby warrant and represent that there has been a due compliance by the Company with all applicable labour laws, rules and regulations and connected enactments which position is agreed to by the vendees."
5. I have heard at length the arguments of Mr. Khalid Anwar and Mr. A. Rauf on behalf of the defendants in support of these applications and of Mr. Nasim A. Faruqui opposing these applications on behalf of the plaintiff. Contention of learned counsel for the defendants is that in the present case all the defendants are entitled to unconditional leave to defend as the defendants have not only raised a plausible defence but have a strong case. On the other hand it was contended on behalf of the plaintiff that this was an "open and shut" case and, therefore, the defendants were not entitled to any leave to defendant, not even conditional leave. Before I deal with the contentions of the learned counsel, reference may be made to the case-law cited before me.
6. Mr. Khalid Anwar, learned counsel for defendants 1 and 2 relied upon the following :
(i) Fine Textile Mills Ltd. v. Haji Umar PLD 1963 SC 163.
(ii) Nazim v. Habib Bank Ltd. 1980 CLC 1185.
(iii) Habib Bank Ltd. v. Kaycee Corporation PLD 1980 Kar.
143.
(iv) Muslim Commercial Bank Ltd. v. Tayab Sharif 1975 SCMR 393.
(v) Ismail v. Fida Ali PLD 1975 SC 634.
(vi) Khalid Rifat Transport v. Commerce Bank Ltd. 1973 SCMR 587.
' Mr. Nasim A. Faruqui for the plaintiff also relied upon some of the cases cited by Mr. Khalid Anwar.
In addition, reliance was placed on the following reported judgments :-
(vii) Fulbrite (Pakistan) Ltd. v. United Bank Ltd. PLD 1976 Kar.
478.
(viii) Bank of Bahawalpur Ltd. v. Sind Punjab Agencies PLD 1966 Kar.
249.
(ix) Milkhiram (India) Private Ltd. v. Chamanlal Bros. AIR 1975 SC 1968.
(x) Kishomal Kirpomal v. Vishindas Sukhrandas 9 I C 299.
(xi) Pessumal v. Gaganmal AIR 1921 Sind 77.
' In PLD 1963 SC 163, the Supreme Court of Pakistan, while dealing with a suit under Order XXXVII of the Code of Civil Procedure, laid down the following principles : "In a suit of this nature where the defendant discloses upon his affidavits facts which may constitute a plausible defence or even show that there is some substantial question of fact or law which needs to be tried or investigated into, then he is entitled to leave to defend. What is more is that even if the defence set up be vague or unsatisfactory or there be a doubt as to its genuineness, leave should not be refused altogether but the defendant should be put on terms either to furnish security or to deposit the amount claimed in Court."
' In that case the High Court bad not granted leave to the defendant to defend the suit filed on the basis of cheques issued by the defendant which were dishonoured. Supreme Court of Pakistan allowing the appeal of the defendant granted them leave to defend on the ground that the defence on facts put up by the defendant was so plausible that it could not be rejected outright without giving the defendant an opportunity of establishing its truth. It has, however, been noticed that unconditional leave was not granted but the defendant/appellant was given leave to defend the suit on his depositing Rs, 90,000 in Court "since the conduct of the appellant is not entirely free from suspicion."
' In 1980 CLC 1185 it was held by a learned single Judge of this Court that if a defendant has a plausible case based upon averments of facts or law contained in hisdefence, he would be entitled to defend the suit filed under Order XXXVII of the Code of Civil Procedure.
' In PLD 1980 Kar. 143, it was observed by a learned single Judge of this Court that the mandatory requirement of Order XXXVII, C. P. C, is that the plaint should disclose an open and shut case for the plaintiff to prove and the defendant to defend, with reference to the instrument relied upon in the plaint and no more and that the nature of the pleadings under Order XXXVII, C. P. C. Are aimed at speedy disposal of the suits, leaving little for the Court to do by way of framing of issues and recording of evidence, the only proof required being in respect of the instrument relied upon.
' In 1975 SCMR 393 unconditional leave to defend a suit under Order XXXVII, C. P. C. Had been granted by the Sind and Baluchistan High Court. The suit had been filed by the Plaintiff Book on the basis of a promissory note. The bank filed a petition for special leave to appeal before the Court on the ground that the defendant should have been granted leave to defend only on depositing the amount in Court or at least furnishing security for the claim. Supreme Court of Pakistan dismissed the petition observing that on the facts of that suit it was eminently a fit' case for grant of leave and whether conditions should have been imposed or not was in the discretion of the High Court and depended on the facts and circumstances of the case. Supreme Court was of the view that in that case the grant of unconditional leave could not be said to be unjustified or unreasonable.
' In PLD 1965 SC 634 the facts were that on a promissory note executed by the respondent No, 2, the appellant on its back made the endorsement "I Ismail Bhai guarantee this" and placed his signature underneath. The person in whose favour the promissory note was made, endorsed the promissory note in favour of respondent No, 1, who filed the suit against the appellant and respondent No, 2 under Order XXXVII, rule 2, C. P. C. Unconditional leave was granted to the appellant but leave was refused to respondent No, 2 on account of his failure to furnish security for the amount claimed and costs. Suit was decreed against the respondent No, 2 as well as the appellant. The High Court held that the appellant had guaranteed the payment of the promissory note and the guarantee was assignable and valid and the appellant was liable to pay the amount under the promissory note. Supreme Court of Pakistan allowed the appeal holding that the High Court was wrong in coming to the conclusion that the guarantee given by the appellant was a promissory note as this construction by the High Court was contrary to the definition of the promissory note in section 4 of the Negotiable Instruments Act of 1881. The Supreme Court also held that the suit as framed could not be filed under Order XXXVII, C. P. C. However, the Supreme Court granted permission to withdraw the suit against the appellant with permission' to file a fresh suit for such relief as might be available under the law.
' In 1973 SCMR 587, conditional leave to defend was granted by the High Court and the Supreme Court, in the facts and circumstances of that case, took the view that High Court was perfectly justified in demanding security from the petitioner for giving leave to defend the suit. In the petition for special leave to appeal, unconditional leave to defend the suit was sought: The Supreme Court observed that the question whether unconditional leave or conditional leave should be granted is a question, which is entirely within the discretion of the trial Court.
' In PLD 1976 Kar. 478, a learned single Judge of this Court observed that the reported judgments of Pakistan Courts indicate that where an arguable case is made out, leave to defend should be given, but if conditions are attached to it that would be proper exercise of the discretion allowed to the Court under Order XXXVII, rule 2, C. P. C.
In PLD 1966 Kar. 249, it Was held that where a lender such as the bank obtains a promissory note by way of collateral security and opens an account in which advances are made, the mere reference to such account or accounts in the plaint does not alter the character of the suit based on such promissory note and that a suit can be filed on the basis of such promissory note under Order XXXVII, C. P. C. Even though the amount could be determined with the help of account.
' In R 1965 SC 1698, it was observed that if the Court is of the opinion that the case raises a triable issue then leave should ordinarily be granted unconditionally. But if on the other hand the Court is of the opinion that the defence raised is frivolous or false or sham, Court should refuse leave to defend altogether. It was further observed that if the Court has a genuine doubt whether the defence is genuine or sham, conditions granting leave may be imposed and the matter lies in the discretion of the trial Court, which discretion has to be exercised judiciously.
' In 9 I. C 299, a decision of the Sind Judicial Commissioner's Court, a suit was filed on a promissory note under Order XXVII, C. P. C. The defendant admitted execution of the promissory note but contended that the note formed part of an account and mutual dealings between him and the plaintiff and other partners. It was held that the contract embodied in the promissory note was an unconditional agreement to pay to the plaintiff and the promissory note being admitted it was not open to him to contradict or vary its terms by showing that the contract sued on was a conditional agreement. It was further observed that the object of a promissory note is to show that the particular transaction represented by the note is a separate transaction, and it is intended that the remedies in respect of that transaction should be separately pursued.
' In AIR 1921 Sind 77, it was held that the criterion for determining whether a stamp has been effectually cancelled within the meaning of section 12 of the Stamp Act is, whether the ordinary conscientious man would on seeing the stamp, come to the conclusion that it has already been brought to use.
7. On a view of the case-law, the following general principles can be enunciated in regard to the grant or refusal of leave to defend a suit filed under Order XXXVII of the Code of Civil Procedure :-
(a) If no defence is spelt out, on facts or in law, in the application for leave to defend or documents filed by the defendant, leave is to be refused. Result will be that the suit shall be decreed ;
(b) If any kind of defence is made out, be it plausible or even illusory, the defendant is to be granted leave to defend the suit ;
(c) If leave is to be granted to the defendant to defend the suit; it can be 'unconditional leave or conditional, depending on the strength of the defence put up by the defendant. If, a plausible defence, whether on facts or in law, is made out, unconditional leave is, as a general principle, granted ; (d)' Even if the defence is plausible, leave may not be granted unconditionally if the conduct of the defendant is mala fide or is not free from suspicion;
(e) If a defence is set up which is not plausible, leave to defend should not be refused but should be granted on condition of furnishing security or deposit of amount. Such cases will be where, to adopt the words employed by the Supreme Court of Pakistan in PLD 1963 SC 163, "the defence set up by vague or unsatisfactory or there be a doubt as to its genuineness" ;
(f) Whether conditions are imposed or unconditional leave to defend is granted, the appellate Court generally does not interfere as this is the discretion to be exercised by the trial Court. If, however, the discretion is exercised arbitrarily, the appellate Court will interfere ;
(g) A suit can be filed under Order XXXVII, C. P. C. On the basis of a promissory note even if it was given as collateral security for repayment of a loan. Mere argument that it was a collateral security will not entitle the defendant the right to defend the suit.
8. It was argued by Mr. Khalid Anwar that the promissory note in suit is a conditional document inasmuch as it is subject to the agreement dated 27-10-1980 and as such it was not a promissory note as defined in section 4 of the Negotiable Instruments Act, 1881. Reference to section 4 shows that a promissory note is an instrument containing an unconditional undertaking to pay a certain sum of money. According to learned counsel, in a promissory note the element of uncertainty is missing, whereas in the present instrument reference is made to an agreement, and an agreement always contains counter-obligations. It was, therefore, contended that the promissory note in suit contained an element of uncertainty and it fell outside the definition of promissory note in section 4 of the Negotiable Instruments Act, 1881. It has to be observed that the endorsement regarding the instrument begin subject to the agreement dated 27-10-1980 does not appear on the original promissory note but on the carbon copy of the instrument. Suit has been filed on the original promissory note and not on its carbon copy. In my view the original promissory note is covered by the definition in section 4 of the Negotiable Instruments Act, 1881 as it contains an unconditional promise to pay.
9. Learned counsel for defendants Nos. 1 and 2 next contended that payment of Rs, 3,00,000 was to be made by the defendants against delivery of 3,000 shares as per Claus:, 1(b) of the agreement, and neither there was any letter from the plaintiff that the shares to be delivered were ready nor powers of attorney of six other vendors were produced. It is an admitted position that prior to the execution of the agreement dated 27-10-1980, the defendants were minority shareholders of the Company, but on acquiring 3,000 shares under clause 1(a) of the agreement, they acquired majority shares and took over full and absolute control and management of the Company to the exclusion of the vendors including the plaintiff. The agreement further shows that blank proxy forms in respect of the balance shares mentioned in clauses 1(b) and 1(c) signed by the vendors had also been delivered to the defendants. Possession of assets and records of the Company had also been delivered to the defendants. It has also come on record that before the deal was struck, books and accounts of the Company were checked and verified by a well-known firm of Auditors and Chartered Accountants nominated by the defendants. Payment of Rs, 3,00,000 was to be made on or before 27-1-1981. However, before that date the defendants on behalf of the' Company informed the plaintiff that the Auditors of the Company had raised objections about the issuance of 10,500 shares to the vendors for consideration other than cash and that the said shares were, therefore, non-transferable. Later od these 10,500 shares were cancelled, as, according to the defendants, these shares were issued at the instance of the plaintiff without the Company having received the par value of the shares. It has further been alleged by the defendants, that according to the Auditors' report the plaintiff illegally and fraudulently showed that the Company had received non- existent assets.
' It is an admitted position that the defendants were shareholders of the Company for over an year prior to the agreement dated 27-10-1980 and they also held two directorships on the Board of the Company and, therefore, a presumption can be raised that they were aware of affairs of the Company. It is also an admitted position that the Auditors nominated by the defendants had thoroughly checked and inspected the accounts and records of the Company before the agreement dated 27-10-1980 was executed. The objections raised later on- by the Auditors had not been raised (earlier, that is, before 27-10-1980. In my view these defences set up cannot be termed as plausible defences. They are unsatisfactory defences apparently raised with the intention to avoiding liability under the promissory note. As regards the contention that shares were not ready, it may only be observed that at no point of time the defendants made a demand for the shares.
Prior to 27-1-1981, the date by which payment had to be made by the defendants, by their unilateral act made the shares non-transferable and later on cancelled the same. They had made their intentions of non-payment very clear. The demand of the defendants for powers-of-attorneys of six other vendors is also apparently not bona fide. They should have made it clear that they are ready to pay the amounts and called upon the plaintiff to have the shares and powers-of-attorney ready. It appears that at no stage the defendants were inclined or ready to make the payment.
' The point raised on behalf of the defendants about non-filing of the Company forms and contravention of section 3 of the Capital Issues (Continuance of Control) Act, 1947 is also apparently of not such weight in the facts of the present case. Mr. Nasim A. Faruqui, learned counsel for the plaintiff had drawn my attention to clauses 2 and 3 of the agreement dated 27-10- 1980. Clause 2 makes the promissory note a collateral security for due performances of the contract referred to in clause 1(b) which refers to the payment of Rs, 3,00,000 against delivery of 3,000 shares and clause 3 makes the time for payment of the amount referred in clause 1(b) always to be the essence of the contract. These clauses prima facie show that it was the intention of the parties that payment under clause 1(b) must be made on or before 27-1-1981. The promissory note in suit was executed by the defendants as security for the payment of this amount.
' Mr. Khalid Anwar had also relied upon clause 12 of the agreement, which has been reproduced above. It refers to a balance-sheet dated 15-7-1980 on the basis of which the sale and purchase of shares had been agreed. According to learned counsel, the Auditors have found certain incorrect figures in the balance-sheet and as this was the basis of the agreement dated 27-10-1980, a plausible defence has been set up entitling the defendants to unconditional leave to defend this suit. Clause 12 itself states that the defendants had themselves thoroughly scrutinized the books of the Company and checked the accounts. Then the defendants were substantial shareholders of the Company with two of them also on the Board. Further the Auditors nominated by the defendants had also checked the books and accounts of the Company. These admitted facts coupled with the 'obligation of the defendants to pay Rs, 3,00,000 on or before 27-1-1981 and the time being the essence of the contract to pay the amount, makes the defence set up by the defendants unsatisfactory and apparently not bona fide. 1 may not be taken to hold that there is no defence. According to me no plausible defence emerges from the case pleaded on behalf of the defendants.
10. Mr. A. Rauf, learned counsel for defendant No, 3, adopted the arguments addressed by Mr. Khalid Anwar but also made certain additional submissions. It was contended by Mr. A. Rauf that the pronote in suit was not properly cancelled inasmuch as each stamp does not bear the signatures of the defendants. Reference was made to section 2(11) and section 12(1)(a) and 12(2) of the Stamp Act, 1899. Section 2(11) gives the meaning of the words duly stamped." Section 12(0(a) relates to cancellation of adhesive stamps and requires the cancellation of the stamp by the person executing the C instrument concerned in such a manner that the stamp cannot be used again.
According to section 12(2) of the Stamp Act, any instrument bearing an adhesive stamp which has not been cancelled so that it cannot be used again, shall, so far such stamp is concerned, be deemed to be unstamped. According to Mr. A. Rauf, all the stamps should have been signed by the defendants which has not been done. According to learned counsel on several stamps there is only a line crossing the stamps. The original promissory note has been filed alongwith the plaint. An inspection of the promissory note shows that each stamp has been cancelled and no stamp comes within the mischief of section 12(2) of the Stamp Act. It may be observed here that the execution of the promissory note has been admitted by the defendants. It is further admitted that the signature and crossings on the stamps and the instrument were made by the defendants. I find no substance in this argument of the learned counsel for defendant No, 3.
11. It was then contended by Mr. A. Rauf that the shares belonged to 7 persons and they were parties to the agreement dated 27-10-1980 as the vendors, and as such all 7 vendors should have filed the present suit and the present suit by one plaintiff is incompetent. There is hardly any merit in this condition. The agreement no doubt shows 7 vendors but the promissory note was made out in favour of the present plaintiff only. Suit has been filed on the promissory note in which the other six vendors are not the beneficiaries. I find no illegality committed in the filing of the present suit only by the present plaintiff.
12. It was also contended by Mr. A. Rauf that the present instrument was without consideration as shares had to be delivered against payment which cannot be done due to cancellation of the shares by the Company. I have already discussed this point earlier in this judgment that the defendants by their own action cancelled the shares. Mr. Nasim A. Faruqui, learned counsel for the plaintiff, had stated that the share scripts were ready for delivery and can be delivered to the defendants whenever required. There is prima facie force in the contention of learned counsel for the plaintiff that the promissory note has been issued for consideration and the defence raised by the defendants is unsatisfactory as also not bona fide as, firstly, the promissory note itself records the promise to pay the amount "for an equal amount due and payable by us" ; secondly, the management and control of the Company was delivered to the defendants ; thirdly, blank proxy forms signed by the vendors for all the shares were given to the defendants with the right to exercise the rights in respect of the shares ; fourthly, the vendors who were directors resigned from the board which after the agreement dated 27-10-1980 came to be composed of the defendants and/ or their nominees ; fifthly, the assets and record were taken possession of by the defendants and vendors were divested of all control over the Company ; sixthly, the defendants were associated with the Company for over one year prior to the agreement dated 27-10.1980 and also held two directorships on the board of directors of the Company and the accounts of the Company were thoroughly checked by their auditors ; and finally the defendants by their own action purported to cancel the shares.
13. In my view the defences set up by the defendants are not plausible ; they are unsatisfactory and also apparently not bona fide. In view of the law laid down by the Supreme Court of Pakistan, the defendants are entitled to grant of conditional leave to defend the suit. C. M. A. 1762/81 and C. M. A.
1960/81 are disposed of by granting leave to the defendants to defend this suit on their furnishing security in the sum of Rs, 3,00,000 to the satisfaction of the Nazir of this Court within 30 days of the date of this order.
Leave to defend .