JUDGMBNT ' The plaintiffs are Banking Company. On 24th May, 1974 the defendant No, 1 as a sole proprietor of Iqbal & Co. Applied for opening an account with the Plaintiffs. After the account was opened in December, 1974, at the request of the defendant No, 1 he was allowed an overdraft facility to the extent of Rs, 50,000 with interest at 40% above the Bank Rate with a minimum of 14% per annum with quarterly rests. The defendant No, 2 executed a letter of Guarantee dated 13th December, 1974 for repayment of the amount due from defendant No,
1. As a security for repayment of the loan the defendant No, 1 executed a demand promissory note dated 13th December, 1974. Letter of Arrangement and a Letter of Undertaking. The defendant No, 1 received from plaintiffs various sums of money by overdrawing the aforesaid account from 2nd December, 1974, onwards. The debit balance on 2nd November, 1979 was Rs, 80,989.30. It has been alleged in the plaint that the plaintiffs by their letters dated 17th April, 1979, 12th May, 1979, 25th September, 1979 and 22nd July, 1979 called upon the defendants to clear and adjust the debit balance which they failed to do. The defendant No, 1 in spite of service of summons did not appear nor filed any written statement. The defendant No, 2 the surety has filed written statement in which it has not been denied that he stood surety for repayment of loan advanced to Iqbal I. Chundrigar, the defendant No,
1. He pleaded that the suit was time-barred. It was further pleaded that the letter of guarantee did not contemplate past transaction or liabilities and as such all the advances and claims prior to the date of the execution of the guarantee cannot be realised from defendant No,
2. It has been denied that any notice was served demanding the repayment of the loan from defendant No, 2 and, therefore, the suit is premature. It has also been stated that the demand has been made in respect of account of Iqbal & Co. Whereas he stood surety only for Iqbal I. Chundrigar therefore the demand is not valid and he cannot be held liable to pay in respect of a different account. From the order sheet dated 25th October, 1981 it seems that issues proposed by the defendant were adopted which are reproduced as follows :-
(1) Whether defendant No, 2 stood surety for "Iqbal & Co." holder of account No, 477 ?
(2) Whether defendant No, 2 is liable to pay interest on the principal amount said to have been advanced to defendant No, I, in terms of guarantee dated 18th December, 1974 ?
(3) Whether defendant No, 2 is liable to pay claims of the plaintiff arising prior to execution of guarantee dated 13th December, 1974 in terms of the guarantee ?
(4) Whether defendant No, 1 overdrew amounts on account of overdraft facilities granted to him by the plaintiff ?
(5) Whether any payment on account of partial reduction of liability was made by defendant No, 1 within 3 years prior to filing the suit ?
(6) Whether payments made three years prior to filing of the suit were authorised or made by defendant No, 1 ?
(7) Whether the suit is time-barred ?
(8) Whether the suit is not maintainable against defendant No, 2 being beyond the scope of guarantee ?
' Issue No, 1.--The defendant No, 2 has not denied the execution of the deed of guarantee dated 13th December, 1974. The opening part of the guarantee is as follows :- "In consideration of your making or continuing advances or otherwise giving or continuing credit or accommodation to Iqbal I. Chundrigar of Iqbal & Co. Hereinafter called the principal. I/we jointly and severally guarantee to you repayment, within 2 days after demand of all moneys which shall at any time due to you from the principal, in any shape or form together with interest, charges, cost, etc. Provided that a total amount recoverable from me/us jointly and severally under this guarantee shall not at any time exceeding principal sum of Rs, 50,000 exclusive of interest and charges."
' The main contention of the defendant No, 2 is that he stood surety for Iqbal Chundrigar and not Iqbal & Co. This situation has arisen because the account in which the overdraft was granted, moneys were withdrawn and debit balance was found due is in the name of Iqbal & Co. From the account opening form it is clear that Iqbal & Co. Is a proprietary firm of Iqbal I. Chundrigar. This has been not only mentioned in this form but Iqbal I. Chundrigar has signed on it as proprietor of Iqbal & Co. Similar statement has also been made by the plaintiff witness. It is, therefore, clear that Iqbal & Co. Is a proprietary concern of Iqbal I. Chundrigar. In the guarantee deed as reproduced above it has been mentioned that the loan advanced to Iqbal I. Chundrigar of Iqbal & Co. Was guarantee by defendant No,
2. As it has been established that Iqbal Chundrigar is the proprietor of Iqbal & Co.
The question arises whether they are two different and distinct persons for the purposes of incurring liability. A proprietary firm cannot have any legal status as distinct from its proprietor. It is the proprietor who is the legal person entitled to all the benefits and liable for the liabilities that accrue in that account. In the eye of law the proprietor and proprietary firm are A one and the same person. A reference can be made to AIR 1924 Born. 109 and AIR 1930 Born.
216. It is well-established that a proprietary Arm cannot sue in its own name. It is the proprietor who can sue for claims that may arise in the name of proprietary firm. It is thus established that each and every liability which the proprietary firm incurs is the liability of the proprietor himself. In fact it is the proprietor who is carrying on the business in the name and style of a firm taking upon himself the burdens and benefits. In the deed of guarantee also the reference has clearly been made to Iqbal Chundrigar of Iqbal & Co. This demonstrates that the defendant No, 2 was aware of the fact that Iqbal Chundrigar is or belongs to Iqbal & Co. Nothing has been stated that he is a partner of this firm. Therefore on the basis of evidence brought on record it is established that defendant No, 1 being the proprietor of Iqbal & Co. Had opened the account in the name of the firm and defendant No, 2 guaranteed repayment in respect of the same account. I, therefore, hold that the defendant No, 2 stood surety for Iqbal Chundrigar defendant No, 1 the proprietor of Iqbal & Co. And the guarantee related to the liability which may have been incurred defendant No, 1 whether in his personal name or in the name of Iqbal & Co. As his proprietary firm.
' Issue No, 2-The learned counsel for the defendant No, 2 has contended that this issue is correlated with issue No,
1. He contended that he would press the same grounds which he raised in issue No, 1.
The Deed of Guarantee itself provides that the defendant is liable to pay interest, charges and cost and his liability in respect of principal shall not exceed Rs, 50,000. Therefore the defendant No, 1 is liable to pay interest on the principal amount.
' Issue No, 3.-The learned counsel for defendant No, 2 referred to the provisions of the deed of guarantee and has laid emphasis that under the guarantee the defendant No, 2 was liable to pay only such amount which shall become due to the plaintiffs. He contended that the liability is prospective and can only be in respect of claims which may arise after the execution of the letter of guarantee. He has further contended that if any liability has been incurred by defendant No, 1 prior to the execution of this letter of guarantee it was not the responsibility of defendant No,
2. The defendant No, 2 had undertaken to pay all moneys which shall at any time be due to plaintiff from defendant No,
1. A perusal of the statements of account will show that from 13th December, 1974 till the 20th September, 1979 there were credit and debit balances and, therefore, even if the contention of the learned counsel for the defendant No, 2 is accepted the liability has been incurred by defendant No, 1 during continuance of the guarantee from time to time as is reflected by the statement of account. The liability of defendant No, 2 arises from the date of the letter of gaurantee.
' Issue No, 4-The plaintiffs have produced witness who has proved the statement of account which shows that as on 30th September, 1979 there was a debit balance of Rs, 87,249.30. This has not been disputed by defendant No, 1 who has not appeared and, therefore, this amount shall be deemed to have been admitted. No other evidence has been brought on record to prove otherwise. My finding on issue No, 4 is in the affirmative.
' Issues Nos. S, 6 and 7.-These issues can be taken together because the main object of all the three issues is to determine the period of limitation. The defendant No, 2 has contended that the suit against him is barred by time. Issues Nos. 5 and 6 are merely intended to show that as certain amounts were paid by defendant No, 1 within a period of 3 years prior to the filing of the suit the suit is within time. Defendant No, 2 seems to have challenged that no such payments were made or that if payments were made the same were not authorised and therefore, would not save the period of limitation. Both the learned counsel for the parties addressed on these issues at length.
Mr. Syed Hamid Ali, the learned counsel for defendant No, 2 has contended that the period of limitation will start running from the date of the execution of letter of guarantee and suit should have been filed within a period of 3 years from that date. He has contended that even if certain payments have been made by defendant No, I to discharge his liability, which is not admitted by him, it will not extend the period of limitation for purpose of filing suit against defendant No,
2. This is entirely based on the observations made in PLD 1975 Kar.
504. Mr. Hamid Ali, has after the arguments submitted a host of authorities relating to the sections 19 and 20 of the Limitation Act where it was observed that payment by one or several debtors does not bind others and that an acknowledgment by a principal debtor does not save the period of limitations against surety unless it is not shown that the latter allowed himself to be represented by person who made the payment. It has been contended that payment of interest by principal debtor with the acknowledgment and consent of the surety does not extend the period of limitation under section 20 of the Limitation Act.
' Mr. Pishori the learned counsel for the plaintiff has referred to PLD 1961 Pesh. 51 which also relates to acknowledgment of liability and extension of time. In my view reference to all these authorities and contentions on these issues is merely an exercise in futility. Both the learned counsel seem to have completely ignored the main point involved in the siut for the purposes of determining the period of limitation. The opening part of the letter of guarantee has been reproduced above. It is significant to note that it provides that the guarantor shall repay within 2 days after the demand has been made. It follows that before the liability o the defendant No, 2 accrues two days notice of payment has to be served upon him. If the surety does not pay within this period, only then the plaintiffs will have a right to sue. The period of limitation has, therefore, not to be computed from the date of the execution of the letter of guarantee. Nor in this case will the payments of monies, interest or acknowledgment of liability by the defendant No, (?) will at all be relevant. In paragraph 6 of the plaint the plaintiffs have averred that the defendants were called upon by letters dated 17th April, 1979, 12th May, 1979, 29th May, 1979 and 22nd July, 1979 to clear and adjust the dues but without any result. This has been denied by defendant No, 2 and it has been pleaded that the suit is premature. The plaintiffs do not seem to have realised the significance of the aforestated provision of the letter of guarantee and have pleaded that the cause of action arose from 2nd December 1974 to 20th July, 1977. No reference has been made to the demands made by the plaintiffs to defendant No, 2 for payment of money under the Letter of Guarantee. In the evidence the plaintiff has not said whether any demand was made on defendant No, 2 nor any notice has been produced. Therefore, in these circumstances the defendant No, 2 has pleaded though not argued that the suit is premature. The question of liability of the surety on a similar document was recently considered my learned brother K. A. Ghani, J. In suit No, 627/76 and after considering various authorities of our-Courts and English and Indian Courts following observation was made.
"Under the terms of Letter of Guarantee the cause of action to enforce the liability against the defendant No, 2 (guarantor) could not be deemed to have arisen until the demand was made by the plaintiffs upon the guarantor/defendant No, 2 and the payment was not made within the stipulated period of two days."
' I am in respectful agreement with the above observation. The question arises whether the suit is premature and can a relief be granted to the plaintiffs against defendant No,
2. No doubt the plaintiffs have not produced any evidence to show that the demand had been made by the plaintiffs but it will be too technical to dismiss the suit on this ground. However, in the facts and circumstances of the case where the liability of the defendant No, 2 has squarely been established in order to avoid multiplicity of proceedings and in the interest of justice, the filing of suit and service of summons should be deemed to constitute sufficient notice within the meaning of this provision of the guarantee. I will treat that on the date, the summons was served on defendant No, 2 demand was made to the defendant No,
2. I, therefore, hold that the suit is within time. Although it was filed premature, with the passage of time it has ripened and matured.
' Issue No, 8-The relevant provision of the letter of guarantee has already been discussed above.
The defendant No, 2 stated that it is beyond the scope of the guarantee mainly because he has stood surety for Iqbal Chundrigar and not for Iqbal & Co. This has already been discussed and it has been held that defendant No, 2 is liable for the claim in suit. In view of the finding in issues Nos. 1 and 2 the finding on this issue is in the negative.
' In the result the plaintiffs have proved that defendant No, 1 owed a sum of Rs, 87,249.30 on 30th September, 1979. I, therefore, decree the suit jointly and severally against defendants for Rs, 88,898.30 with interest at the rate of 14% per annum with quarterly rests and costs. against defendants.