' This is a mortgage suit filed by United Bank Limited for the recovery of Rs, 2,04,821.66. Originally, Amin Corporation was shown as defendant No, 1 and Chowdhury Abdul Ghafoor, its sole proprietor, as defendant No,
2. Defendant No, 2 died during the proceedings and his legal heirs were brought on record as defendant No, 2 (a) to 2 (g). Defendant No, 1 had been granted cash credit facility by the plantiff bank (previously Commerce Bank Limited} of Rs, 85,000, which was later on increased to Rs, 2,00,000. As an additional security for the repayment of the loan, equitable mortgage was created by defendant No, 2 in respect of his property being industrial plots of land bearing No, 190- G and 190-H, Korangi Town, Karachi, and memo of deposit of title deeds was executed on 29th July, 1974. As the account was not adjusted by the defendants, the present suit was filed for recovery of Rs, 2,04,821.66 against the defendants and, as observed earlier, after the death of defendant No, 2, his legal heirs were brought on record as defendants.
2. In the written statement certain preliminary objections were raised and it was averred that certain stocks had been pledged against the cash-credit facility granted to the defendants and which stocks were valued at Rs, 2,12,625. It may be observed that the stocks, which were pledged, were rape-seed and rape-seed oil-cakes. It was pleased that the plaintiff bank had not given credit to the defendants to the extent of the value of the stocks that were pledged with the plaintiff and which were lying in their custody. It is the case of the defendants that no amount was due from the defendants to the plaintiff, as, after adjustment of the price of the pledged goods, the defendants had a claim against the plaintiff and the defendants reserved their right to file a suit for recovery of the amount due to them from the plaintiff. No suit was, however, filed. As regards the equitable mortgage of immovable property as additional security, the allegation in that regard was denied and it was averred that this mortgage was created in respect of a fresh loan that was to be granted for installing a new factory by the defendants and as this fresh loan was not granted, the mortgage created in favour of the plaintiff bank for the fresh loan could not be taken as a security for the earlier cash credit limit.
3. By consent of the learned counsel for the parties, the following issues were adopted by this Court on 21st August, 1977 :- "(1) Whether the suit is liable to be dismissed for the reasons stated in the preliminary objections ?
(2) Whether the defendants pledged stocks worth Rs, 2,12,625 with the plaintiffs as against the cash credit limit and the same were lying in the godown of the plaintiffs ?
(3) Whether the said stocks were damaged and the plantiffs avoided to recover damage from the Insurance Company ? If so, what is its effect on the suit ?
(4) Whether the plaintiffs are liable to account for the value of the said stocks ? If so, to what effect ?
(5) Whether the Industrial Plots were mortgaged as security of the mortgage money despite execution of necessary documents by the defendants ?
(6) What amount, if any is due from the defendants to the plaintiffs ?
(7) What should the decree be ?
4. On behalf of the plaintiff bank, Azmatullah Siddiqui, an officer of the bank was examined as P.W. 1 (Exh. 5). He produced documents in respect of the plaintiff's claim in the present suit as Exhs. 5/1 to 5/56. It may be mentioned here that his evidence was recorded on 16th September, 1978 and 22nd April, 1980. After his evidence, the plaintiff closed their side, and then on behalf of the defendants,'
Abdul Sabur, Defendant No, 2 (b), was examined as Exh. 6 and he also produced certain documents. The evidence of D. W. 1 (Exh. 6) was recorded on 8th September, 1981 and thereafter the suit was fixed for arguments on various dates but for one reason or the other arguments could not be heard. When the case came to be fixed on 5th May, 1982 for arguments, another opportunity was granted to the plaintiff to produce evidence on preliminary issue, that is, issue No, (1) and the case was then adjourned to 6th May, 1982. On 6th May, 1982, P.W. 1 (Exh. 5) gave further evidence and produced a copy of the power-of-attorney given in his favour by the plaintiff bank as Exh. 5/57.
He also produced a copy of the power of attorney executed by the plaintiff bank in favour of Muhammad Shafi Khan, another officer of the plaintiff bank as Exh. 5/58. P. W. 1 then stated that be and Muhammad Shafi Khan had verified the plaint in the present suit and at the time of filing of the present suit the original power-of-attorney were shown to the concerned officer of this Court and that the present suit was instituted under the instructions of the plaintiff bank. After this, his evidence was closed. I have heard the arguments of Mr. Saleem Karamally, learned counsel for the plaintiff and Mr. Ahmad Saeed Qureshi, learned counsel for the defendants. I will deal with issue No,
(I) after I have dealt with other issues.
5. As regards issue No, (2), it has not been denied that the defendants had pledged stocks worth Rs, 2,12,625 with the plaintiff bank as security for the repayment of the amount due from the defendants to the plaintiff against the cash credit limit and that the same were lying at the godown of the plaintiff. Issue No, (2) is therefore, answered in the affirmative.
6. Issue No, (3) relates to the damage to the pledged stocks and whether the plaintiff avoided to recover the damages to the stocks from the insurance company. Issue No, (3) is being taken together with issue No, (4) which relates to the liability of the plaintiff to account for the value of the said pledged goods. Learned counsel for the plaintiff, in relation to issues Nos. (3) and (4) referred to various exhibits including Exhs. 5/14, 5/39, 5/17, 5/23, 5/24, 5/30 and 5/25. Exh. 5/14 inter alia refers to the pledge of a consignment of oil-cakes and that the stocks had been damaged, and therefore, delivery of the oil-cakes was not taken by the purchasers. It is mentioned in this letter addressed to the plaintiff bank by the defendants that claim for damage of stocks had been lodged by the defendants with the insurance company but no satisfactory reply bad been received by the defendants from the insurance company. Exh. 5/39 is a letter dated 16th June, 1973 of the bank addressed to the defendant No, 1 in which the position of the stocks pledged as per daily stock report dated 16th June, 1973 is given. Ex. 5/17 is an important letter. It is dated 1st May, 1974 and is written by the defendants to the bank. The said letter may be reproduced here : "Re : Our 1800 mounds of oil rape-seed oil-cakes pledged with you.
' You are aware that the above goods have been damaged due to self-heating and it is difficult to be sold during off season.
' The selling season for this item is May/June, every year. You are, therefore, requested to kindly wait till the end of this month by this time the rate will increase and you will get reasonable price, if the goods are sold.
' We are making arrangement for the sale of the goods within this time positively."
' What emerges from the letter dated 1st May, 1974 of the defendant is that the stocks had been damaged due to self-heating and that it was difficult to sell the same during off season and that the defendants were making arrangements for the sale of the goods.
7. Exh. 5/23 is a letter of lien dated 29th July, 1974 sent by deceased defendant No, 2 as proprietor of defendant No, 1 and this document states that the defendants "shall be responsible for any defects, shortcomings and in accuracies in our goods at any time hereafter. We shall further be responsible for any deterioration, .Decay or loss of the goods arising from any cause whatsoever." Exh. 5/24 is the agreement for cash credit relating to hypothecatio" of goods signed by Defendant No,
2. Clause 5 of this agreement states that the goods pledged shall be kept at the borrower's risk and expense in good condition and fully insured against loss or damage as may be required by the bank. Exh.
5/25 is an agreement for cash credit in respect of the pledged goods. Exh. 5/30 is the stock report dated 31st January, 1978, from United Bank Limited, Warehouse SITE, Karachi, addressed to the Manager of United Bank Limited, City Branch, Karachi, in which it was mentjoned that 1220 seed oil- cakes bags are lying with the bank in "worst condition".
A perusal of the documents referred by the learned counsel for the plaintiff and mentioned hereinabove shows that the damage had been caused to the pledged goods on account of self- heating and that the defendants themselves had informed the plaintiff bank that they were making arrangements for the sale of the pledged goods. The document further show that the defendants themselves had taken up the matter with the insurance company on account of the damage caused and that at no point of time any request or demand was made upon the plaintiff bank that they should take up the matter with the insurance company. In any case, the documents produced by the plaintiff's witness show that the goods had deteriorated to such extent that even the defendants were finding it difficult to dispose of them. In the circumstances, no responsibility could be placed upon the plaintiff bank for the damage caused to the goods for not making claim upon the insurance company. On issue No, 3, therefore, my finding is that the stocks were damaged but the damage was on account of the self-heating and there was no responsibility of the plaintiff bank in respect of such loss. Neither documentary evidence has been produced nor any oral evidence on behalf of the defendants t establish that the stocks had been damaged on account of any negligence or carelessness on the part of the plaintiff bank. It has also not been established that the plaintiff bank avoided to recover damage from the insurance 'company. Issue No, 3 is decided accordingly. As regards issue No, 4, it may be observed that the goods had been lying with the plaintiff bank in apparently very bad condition. Even the defendants were not able to bring any offer for the sale of the pledged stocks. In the circumstances the plaintiffs are not liable to account for the value of the said stocks.
8. Issue No, 5 relates to the mortgage of the industrial plots of the defendant as security for repayment of amount due from the defendants to the plaintiff. The case of the defendants in their written statement is that the cash credit facility granted to the defendants by the plaintiff bank was secured by pledge of the goods and the equitable mortgage of the immovable properties was created at a later stage and this was intended to be a security for a fresh loan and as no fresh loan was granted, this security of immovable properties could not be relied upon by the plaintiff bank as security for the earlier cash credit facility. The fact that the documents of title in respect of the said properties had been deposited by the defendants with the plaintiff bank is not denied. Then Exh.
5/27 is the memorandum of deposit of title deeds executed by defendant No, 2 as proprietor of defendant No,
1. This is dated 29th July, 1974. This memorandum confirms and records that the defendants had already deposited with the plaintiff the documents mentioned in the schedule as Exh. 5/27 "for the purpose of securing the payment to the bank on demand of all moneys now owing from me/us/them either solely, or jointly with any person or persons to the bank whether on balance of account or by discount or otherwise in respect of bills of exchange, promissory notes, cheques, and other negotiable instruments or in any manner whatsoever and including interest accruing on or in connection with the dues". This has not been denied by the defendants. Exh. 5/27 accordingly establishes that the equitable mortgage created was not only for any future loan or facility that might have been granted by the plaintiff bank to the defendants but it also was a security for repayment of the money due from the defendants to the plaintiff. Then there is also Exh.
5/14 which is a letter dated 4th March, 1974 of defendants addressed to the bank in which the defendants acknowledged that the cash credit limit was against the security of oil-cakes and some immovable property. It is also stated by the defendants in Exh. 5/14 as follows :- "A claim for the damage of stocks was lodged with Insuring Company, Messrs New Jubilee Insurance Co. Ltd., vide our claim form dated 10th November, 1973 but so far no satisfactory reply has been received by us to finalize the matter.
' Thus it is concluded that the consignment of oil-cakes and the immovable property is pledged with you against the satisfaction of the outstanding cash credit limit, which we wish to clear."
Exh. 5/14, therefore, further confirms that the cash credit limit was further secured by the mortgage of immovable property. Issue No, 5 is, therefore, decided in the affirmative to the effect that the plots in question were mortgaged by the defendants with the plaintiff bank as security for the repayment of the amount being due from the defendants to the plaintiff against the cash credit limit.
9. Issue No, 6 relates to the amount being due from the defendants to the plaintiff. The amount claimed is established from a statement of account as Exh. 5/42 and also the balance confirmation slip dated 28th August, 1974 executed by the defendants and produced as Exh. 5/28.
This document is not denied by the defendants. Then there is the evidence of the plaintiff's witness.
I, therefore, find that on the date of the filing of the suit a sum of Rs, 2,04,821.66 was due from the defendants to the plaintiff.
10. I will now take up issue No, 1, which relates to the preliminary objections. In the written statement of the defendants the following preliminary objections were raised : "(1) That the Commerce Bank Limited (now United Bank Limited), which has been merged with the plaintiffs, had got the pledged goods and stocks of the defendants insured with the New Jubilee Insurance Company Limited, Karachi. The said Insurance Company is necessary party to the above suit. The suit, therefore, is liable to be dismissed for failure to implead the necessary party.
(2) That the suit is bad for misjoinder of causes of actions.
(4) That the suit is liable to be dismissed as the persons, who have verified the plaint, are not legally competent to do so."
' As regards preliminary objection No, I, I have already discussed the point relating to the insurance company. The defendants themselves had filed a claim with the insurance company and they were pursuing the same. No demand or request was made by the defendants upon the plaintiff to take up the matter with the insurance company. It has not been shown how the insurance company was necessary party to the suit. This preliminary objection has no substance and is rejected. The second preliminary objection relates to misjoinder of causes of actions. It has not been shown by Mr. Ahmad Saeed Qureshi, learned counsel for the defendants how the suit is bad for misjoinder of causes of actions. This preliminary objection has no merit and the same is dismissed.
' The third preliminary objection relates to the competency of the persons who have verified the plaint. On behalf of the defendants it was urged that the two persons who had verified the plaint, namely Azmatullah Siddiqi and Shah Khan were not competent to file the suit that is they had no authority to sign the plaint on behalf of the plaintiff bank. In evidence Azmatullah Siddiqui has produced his power-of-attorney as well as power-of-attorney granted by the bank in favour of Shafi Khan. These two persons had verified the plaint and also signed the plaint on behalf of the plaintiff bank. Mr. Ahmad Saeed Qureshi, learned counsel for the defendants, had argued that mere production of a power-of attorney was not sufficient to establish on record that the two attorneys had been competently delegated the powers and what was further required was the memorandum and articles of association of the plaintiff bank showing that the Directors of the board of the plaintiff bank had the authority under the memorandum and articles of association to execute the power-of-attorney and delegate the powers, as had been delegated in the two powers-of-attorney, copies whereof have been produced as Exbs. 5/57 and 5/58. Learned counsel in this connection relied upon a dictum of the Supreme Court in the case of Muhammad Siddiq Muhammad Umer v. The Australasia Bank Limited. The relevant observations of the Supreme Court on which specific reliance was placed by the learned counsel appear at pages 695 to 697 :- "It was apparent from the pleadings that the suit was being instituted by a constituted attorney of a public limited company. He could only do so if he was duly authorised in that behalf and occupied one or other of the offices mentioned in rule 1 of Order XXIX of the Civil Procedure Code. A copy of the power-of-attorney had been produced which showed that Muhammad Khan had been empowered in that behalf but the question still remained to be ascertained as to whether those who gave him that power were competent to do so, as the authority was on behalf of a public limited company. For this purpose a reference to the Articles of Association of the company was certainly necessary to see whether the Directors were competent to delegate such power. It was not necesssa ry to see whether the Directors had in fact approved of the giving of such power- of-attorney to the person who presented the plaint. This was, however, proved by the production of the resolution of the Board of Directors as a matter of abundant caution. The additional evidence was to the extent, therefore, in our opinion, rightly admitted. This was all that was required. It was not necessary to call the Managing Director as the Court calling for the additional evidence itself realized subsequently. Even the production of the resolution could have been dispensed with, as it was not strictly necessary.
' This brings us to the next question as to whether the suit had been competently filed. As already stated, one of the learned Judges of the High Court had taken the view that since the power-of- attorney had affixed to it the common seal of the company, there was a presumption that the power-of-attorney was lawfully executed, and then the onus was on the other side which challenged the validity of the power-of attorney to show that it was ultra vires the powers of the company. The third learned Judge evidently did not agree with this view, for, if he had done so he would not have called for the additional evidence.
' We are unable to uphold the view that the production of the power-of-attorney bearing the common seal of the company was by itself sufficient. In saying this the learned Judge has evidently overlooked that as a rule the Articles of Association of a company contain special provisions prescribing for the manner in which the seal of the company may be affixed and that1 those who deal with a company are bound to see that the document on the face of it accords with those provisions of the Articles. It is only when it does so and the instrument is on the face of it regular, persons dealing with a company have a right to presume that the seal so affixed has been duly affixed, that the Directors were duly appointed and their signatures duly made. The burden only then shifts to prove the contrary on those who allege it. Again, the law requires that, prima fade, those who deal with a person acting under or purporting to act under a power-of attorney are put upon enquiry and are bound to satisfy themselves as to the authenticity of that power. It is only when such a person acts or purports to act under a property executed power that the principal cannot repudiate his action.
' This rule has been accepted as settled eversince the decision of the Court of Exchequer Chamber in England in the case of Royal British Bank v. Turquand. According to this rule persons dealing with a company are bound to read the public documents of a company, i,e, its Memorandum and Articles of Association, and to satisfy themselves that the transaction entered into or proposed to be entered into is not inconsistent therewith, but they are not bound to do more, nor are they required to enquire into the regularity of the 'internal proceedings or what has been called "the indoor management of the company", for, they are entitled to assume that all other things have been done regularly. There are, of course, exceptions to this rule, but we are not concerned with those exceptions here.
' We have referred to these provisions in order to indicate that once the authority of Muhammad Khan to present the plaint was challenged, a reference not only to the power-of-attorney was called for but also to the Articles of Association of the company. It will be observed that in the preamble to the Articles of Association it is clearly stated that the regulations contained in Table 'A' of the First Schedule to the Companies Act shall not apply to this company but only the Articles adopted shall apply. Under Article 125 thereof Khawaja Bashir Bakhsh was appointed the permanent Chairman of the Board of Directors for as long as he was qualified and willing to act as such. Under Article 123 two Directors were sufficient to form a quorum and at a meeting at which this quorum was present the meeting could under Article 126 exercise all or any of the authorities and powers and directions given by or under the Articles of the company. Article 131 vested the general control of the company in the Directors and Article 132, inter alia gave them power to institute, conduct, defend, compound or abandon legal proceedings and to authorise or empower "the managers or other officers for the time being of the company to exercise and perform all or any of the powers, authorities and duties conferred or imposed upon the Directors". Article 135 provided that the custody of the common seal of the company shall be with the Chairman of the company and that the seal shall not be used except by the authority of the Directors or a Committee of the Directors in the presence of one Director at least who shall sign every instrument to which the seal is affixed any every such instrument shall be countersigned by the permanent Chairman or some other person appointed by the Directors."
' The observations of the Supreme Court of Pakistan in the aforesaid case about proving by evidence the authority of an attorney of a public limited company to institute a suit on behalf of the public limited company would have been relevant in case the authority of these persons to institute the suit had been challenged. From the preliminary objection raised in para. 1 of the written statement of the defendants and issue No, 1 framed in the present suit it is apparent that the preliminary objection was only in regard to the competency of the aforesaid two persons as regards their verification of the plaint. Issues bad been framed by consent of the learned counsel.
In fact if the draft issues, which were adopted by this Court on 21st August, 1977 are seen it will be seen that the same were drafted by the learned counsel for the defendants and were consented to by the learned counsel for the plaintiffs. Specific issue as framed is whether the suit is liable to be dismissed for the reasons stated in the preliminary objections. In the preliminary objections, the relevant objection in this regard is, as above, that whether the suit is liable to be dismissed as the persons, who have verified the plaint, are not legally competent to do so. What is, therefore, relevant is whether the two persons who have verified the plaint, were competent to do so or not. It is noticed that the two persons acting as the Principal Officers and Attorneys of the United Bank Limited have signed at the end of the plaint on behalf of United Bank Limited and then they have verified the plaint on solemn affirmation and have again signed in token of verification. Reference may in this regard be made to Order VI, rules 14 and 15 of the Code of Civil Procedure. Order VI, rule 14 relates to the signing of the pleadings whereas rule 15 of Order VI is in regard to verification of pleadings. A pleading can be signed by the party and his pleader or a person duly authorised to sign the same, whereas verification of the pleadings can be done by one of the parties pleading or "by some other person proved to the satisfaction of the Court to be acquainted with the facts of the case." It, therefore, follows that the verification of the pleadings can be done not only by a party or by a duly authorised agent of the party but it may be done by another person, who is proved to the satisfaction of the Court to be acquainted with the facts of the case. In this case Azmatullah Siddiqi P. W. 1 (Exh. 5) had given evidence stating that he was the Recovery Officer of United Bank Limited.
City Branch, Karachi. He has produced all the documents on behalf of the bank and he has also given oral testimony regarding the facts relating to the claim of the bank. The fact that he is Recovery Officer of United Bank Limited, City Branch, Karachi, has not been controverted on behalf of the defendants. No question was asked challenging the knowledge of Azmatullah Siddiqi about the facts of the instant case. I am, therefore, satisfied that Azmatullah Siddiqi was a person, who was not only an Officer of United Bank Limited but he also was acquainted with the facts of the case and resultantly was competent to verify the pleadings on behalf of the plaintiff bank. The preliminary objection relating to the competency of the two persons, who have signed the plaint, is also dismissed.
11. As a result of my findings on issues Nos. 1 to 6, plaintiffs are entitled to the preliminary decree. I grant a preliminary decree as prayed for in para (a) of the prayer clause of the plaint. That plaintiffs shall also be entitled to interest and costs as claimed. PLD 1966 SC 684