' Fakhruddin H. Shaikh. J.--The appellant's suit under section 37, C.P.C. For the recovery of Rs,46,211.75 and interest @ 7 per cent. Per annum was dismissed by a learned Single Judge of this Court vide his judgment dated 11th April, 1977. The appellant has challenged the above judgment by this High Court Appeal.
2. The case of the appellant as contained in his plaint before the learned Single Judge was that the appellant is a Banking Company with its head office and main branch at McLeod Road (now I.I.
Chundrigar Road), Karachi. In July 1964 the respondent is alleged to have approached the appellant Bank for grant of a loan of Rs,35,000. The request was accepted and a promissory note was got executed by the appellant from the respondent on 21st July, 1964 but the amount is said to have been advanced on 28th July, 1964 which, according to the appellant, was utilised by the respondent on the same date. The promissory note is said to have been executed by way of security for the repayment of the loan with interest at 21/2% over the public State Bank rate with a minimum of 71/2% per annum with monthly rests.
3. It is claimed by the appellant that the respondent failed to return the amount of loan in spite of repeated demands, hence a notice was issued by the Bank to the respondent on 26th November, 1966. On 26th December, 1966 the respondent executed a second promissory note by way of security for the repayment of outstanding amount of Rs,41,403.75 which included the original principal amount of loan and interest upto the date of the second promissory note. Even after this promissory note the respondent is alleged to have failed to liquidate his liability, hence the suit was filed in this Court on 28th September 1968.
4. The respondent admitted having executed the first promissory note dated 21st July, 1964 but denied having received any consideration for this note. He has also denied having executed the second promissory note dated 26th December 1966. The circumstances under which the first promissory note was executed by or got executed from the respondent are contained in para. 3 of his written statement which is reproduced hereunder:- "That with regard to contents of para. 2 of the plaint, it is submitted, that the defendant had not approached the plaintiff Bank for the grant of a loan of Rs,35,000 as such nor was any such amount paid over to him by the Plaintiff's Bank. One Mr. Bashir was the Manager of the Plaintiff's Bank at their Branch at Kotri where the defendant was maintaining his account. This Mr.Bashir their Branch Manager had committed defalcations and misappropriations of large amounts of money and was on that account in trouble apprehending Criminal prosecution. The Plaintiff's high officials entreated to save him from being prosecuted and desired to make good the amounts misappropriated and/or to facilitate for the above-said Mr.Bashir for making repayments. It was in these circumstances that the defendant was taken to the Plaintiff's Head Office at Karachi where some of the Directors and High Officials of the Plaintiff Bank induced him to sign the said pronote dated 21st July, 1964, on the assurances that this act was only to save the said Mr. Mohammad Bashir from the trouble which also involved the Plaintiff Bank's own reputation and that the defendant was given a clear understanding that this execution of the pronote being without consideration was not to involve him in a liability to repay the amount mentioned therein but that this was only a paper transaction required by the plaintiffs themselves for their own record."
' No replication has been filed by the applicant to controvert the above allegation of the respondent. The respondent has further denied execution of the second promissory note dated 26th December, 1966 for the repayment of the loan or any other amount and has alleged that the second promissory note is a forged document. He has admitted having received one notice but states that it was vague and not specific, therefore, no reply was given. It is also denied that the respondent had any account with the McLeod Road Branch of the appellant Bank. He admits that he had only one account with Kotri Branch of the Bank. Some legal pleas were also raised on the basis of which following issues were framed by the learned Single Judge:- "(1) Whether the suit filed is time-barred?
(2) Whether the signatures on pronote dated 26th December, 1966 are forged?
(3) Whether the plaintiff is entitled to suit amount?
(4) Whether the defendant is an agriculturist within the meaning of the Dekkan Agriculturists Relief Act and thereby entitled to all protections under the law?
(5) Whether the rate of interest stipulated by the plaintiff is excessive, oppressive and not warranted by law?
(6) What should the decree be?
5. In support of the case the Bank examined only one witness namely, Syed Ziaul Hassan Jafri (Exh.5), who has produced the first promissory not dated 21st July 1964 as Exh.5/1, the statement of account of the respondent in the McLeod Road Branch as Exh. 5/2, the second promissory note dated 26th December, 1966 as Exh.5/3 and notice dated 23rd January, 1968 as Exh.5/4. Syed Ziaul Hassin admits that he was not the officer concerned who had got the promissory note executed from the respondent nor was the money advanced by him. There is no explanation as to why the money on account of the promissory note which was executed on 21st July, 1964 was paid a week later i,e, on 28th July, 1964. In cross-examination the witness was asked whether the respondent had made any application for the loan to which he replied that his record does not show that any such application was made. He further stated that prior to this date i,e, 21st July, 1964 the respondent had no account with the McLeod Road Branch. He makes one more very significant admission: "the defendant had not issued any cheque for the payment of the amount."
' He further admits that Mr.Mohammad Bashir was a Branch Manager of their Bank at Kotri. A suggestion was made to him that 'the signature on the second promissory note (Exh.5/3) was forged', to which he replied in negative. He does not know whether Mr.Mohammad Bashir was removed from the Bank nor did he know whether he was in service. His statement was recorded on 6th March, 1973. A specific question was put in cross-examination to the following effect:- "I put it to you that Mr.Bashir had committed defalcation of Rs,35,000 and procured the defendant to execute the first promissory note for that amount in order to save himself."
' The reply of the witness was that "this is not correct".
6. In rebuttal there is evidence of Kazi Amir Ali respondent, who has stated that he had opened an account in the Kotri Branch of U.B.L. And that in 1964 he came to know that Bashir Ahmed, who is related to him, was Manager of the Kotri Branch of the bank and had misappropriated the Bank's money and that he was likely to be arrested. The parents of Bashir Ahmed requested the respondent to help Bashir Ahmed and give security to the Bank that Bashir Ahmed will not run away and that the amount due against Bashir Ahmed shall be paid to the Bank. His further statement which is in the nature of his defence is as follows:- "Thereafter I went to the Head Office of the plaintiff bank at Karachi, accompanied by my step- brother Qazi Rasool Bux. I was told that I had an Over Draft with the Plaintiff Bank at Kotri of Rs, 8,000 or Rs, 9,000 and that if I give security with a view to ensure that Bashir Ahmed does not run away, they will continue to employ Bashir Ahmed and realize from him the amount due and payable. I was asked to sign certain documents. I do not exactly recall but they were four or five documents which were in blank on which my signature was obtained. I did not receive any money from the bank. I had not signed any document opening an account with the plaintiff Bank at Karachi nor was I issued any cheque book."
' He has specifically denied having 'executed any other promissory note in the year 1966 or that he had opened any account in the McLeod Road Branch of the Bank at Karachi. Another significant question which was put to the respondent and its answer need to be reproduced to determine the question of consideration of the first promissory note which is the main issue in this appeal. The question and the answer are as follows:- "Question: According to you, you had gone to the Bank to execute security for the production of Bashir Ahmed but then why you signed Exh. 5/1, a Promissory Note?.
' Answer:- I was forced to sign Exh. 5/1. I was told that Bashir Ahmed was going to be arrested by the Police."
' He further added that Bashir Ahmed was dismissed from service.
7. No question was asked from this witness about the fact that Bashir Ahmed was involved in misappropriation of bank money while he was Manager of Kotri Branch of the Bank.
8. The Order Sheet of the trial Court, dated 27th May, 1976 shows that the respondent had also called upon the appellant to produce the service record of Bashir Ahmed to prove the appellant's allegation that Bashir Ahmed was involved in misappropriation of Bank's money and that action was taken against him by the Bank. Learned counsel for the appellant, Mr.Inamul Haq, had undertaken to produce these documents on the next date i,e, the 28th May, 1976. On the last mentioned date the learned counsel gave a statement that the papers being 12 years old had been destroyed and were not available. From this it must be presumed that Bashir Ahmed, the then Manager of Kotri Branch of U.B.L., had committed defalcation in respect of the money of Kotri Branch of the Bank of which he was the Manager during the year 1964. These circumstances lend support to the plea of the respondent that the first promissory note was executed by way of security on behalf of Bashir Ahmed for repayment of the misappropriated amount.
9. Learned Single Judge disbelieved the appellant's evidence in respect of consideration of the first promissory note and held that the appellant had failed to prove that any amount was paid to the respondent on 21st July, 1964 when the first promissory note was executed, or thereafter. It was further held that execution of the second promissory note dated 26th December, 1966 was not proved. It was further held that even if the execution of second promissory note is accepted, it shall equally be ineffective and unenforceable for the same reason for which the first promissory note was uneforceable i,e, for want of consideration, because the second promissory note was executed only as security for the payment of the amount of first promissory note with interest.
10. Mr. Inamul Haq learned counsel for the appellant has argued that since the execution of the first promissory note is admitted, hence it shall be presumed under section 118 of the Negotiable Instruments Act that the same was executed with consideration and that the burden shall be upon the respondent to prove absence of consideration. It has on the other hand been argued by Mr.J.H.
Rahimatullah learned counsel for the respondent that presumption under section 118 of the said Act can be raised only if the consideration is valid but if from the evidence on record it transpires that the consideration was to stifle criminal prosecution, then it shall be void consideration according to section 23 of the Contract Act. In support of this plea he has relied on the case of Mohiuddin Baig Mirza etc. v. Jameel Bibi etc. PLD 1973 Kar. 63 in which Noorul Arfin, J. Held as under:- "The correct rule is that section 118(a) raises a presumption in respect of a consideration which is a valid consideration in law, and not necessarily in favour of a consideration which is stated in the negotiable instrument itself. However, if the consideration stated in the instrument turns out to be untrue and some other form of consideration is proved at the trial, either by way of admission in pleadings, or in the evidence of the holder of the instrument, or through some other evidence, then this inconsistency between the forms of consideration should be viewed in the context of the other evidence which comes before the Court for the purpose of coming to the conclusion whether the defendant has discharged the burden laid upon him with regard to the presumption of consideration under section 118 of the Negotiable Instruments Act."
' In the case of Salar Abdur Rauf v. Mst. Barkat Bibi 1973 SCMR 332 it was held by the Supreme Court that if the plaintiff undertakes to show that promissory note was for consideration but failed to produce credit worthy evidence, then he .Shall not be allowed to turn round and invoke presumption under section 118 of the above Act.
11. The next case relied upon in this connection by Mr.J.H.Rehimatullah is of Mahmood Hassan Ashraf v. Shakil Ahmad 1973 SCMR 595. The facts of this case were that Shakil Ahmed had filed a suit against Hamid Hassan predecessor-in-interest of appellant Mahmood Hassan Ashraf for recovery of Rs,5,000 on the basis of a promissory note executed by Hamid Hassan. The defendant resisted the claim of the respondent on the ground that he had received no consideration for the said promissory note which was executed by Hamid Hassan under threat of criminal prosecution.
The trial Lourt did not accept. This plea and decreed the 'All In favour of ',shakil Ahmed. On appeal before the District Judge the plea of the appellant was accepted and it was held that the promissory note was executed under duress and without payment of any money. The suit was, therefore, dismissed. On second appeal before the High Court the decision of the first appellate Court was set aside and that of the trial Court restored. On appeal to Supreme Court it was held in the above case that there was unequivocal admission of the plaintiff that no amount was paid to the defendant at the time of the execution of the pronote, that nothing was advanced in cash, that he failed to prove that he was capable of advancing any loan or had in fact advanced loans earlier and that under these circumstances the first appellate Court was right in holding that the promissory note had been executed under duress without payment of any money.
12. Mr.J.H.Rehmatullah learned counsel for the respondent has argued that the first promissory note was got executed from the respondent under threat of arresting Bashir Ahmed for misappropriating the Bank money and that the Bank has assured that if the promissory note was executed, then the appellant Bank would not take any action against Bashir Ahmed. He has, therefore, argued that the promissory note was intended to stifle criminal prosecution and would be void under section 23 of the Contract Act. In support of this plea he has relied on the case of Bhowanipur Banking Corporation Ltd. v. Sreemati Durgesh Nandini Dassi AIR 1941 Pr.C.95. The Judicial Committee observed as under in the above case which involved the question of executing a promissory note with the object of stifling criminal prosecution:-.
"In the case of an agreement to stifle prosecution, it is of the essence of the defence that the defendant should establish a contract whereby the proposed or actual prosecution agrees as part of the consideration received or to be received by him either not to bring or to discontinue criminal proceedings for some alleged offence. The fact that the debt forming the consideration was real is irrelevant. It is of course impossible for such a contract to be made unless both parties know of the proposed or actual proceedings. Proof that there has actually been a crime committed is obviously unnecessary. But it is necessary that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting. In all criminal cases reparation where possible is the duty of the offender, and is to be encouraged. It would be a public mischief if on reparation being made or promised-by the offender or his friends or relatives mercy shown by the injured party should be used as a pretext for avoiding the reparation promised. On the other hand to insist on reparation as a consideration for a promise to abandon criminal proceedings is a serious abuse of the right of private prosecution.
The citizen who proposes to vindicate the criminal law must do so wholeheartedly in the interests of justice, and must not seek his own advantage."
' In the case of Prem4i Damodar v. Firm, L.V. Govindji and Co. AIR 1943 Sind 197 following view was taken about the nature of consideration which was intended to stifle prosecution: "Even if a part of the consideration of an agreement is shown to be the stifling of a non- compoundable offence the agreement must be held to be void. This does not, of course, mean that the possibility of a prosecution, or the existence of a threat to prosecutor even an actual prosecution, make it necessarily impossible for the possible or actual prosecutor and the possible or actual accused and others to enter into a bona fide legal transaction regarding the dispute the consideration or object of which was not to stifle a prosecution. It would be a public mischief if on reparation being made or promised by the offender or his friends and relatives, mercy shown by the injured party should be used as a pretext for avoiding the reparation promised.
' In such a case the Courts have to examine the conduct of the parties after a survey of the whole circumstances to find whether there was a bargain made on the terms of not prosecuting, and whether the circumstances are such as necessarily give rise to an inference that there was an implied, if not an expressed, term that no prosecution would follow."
' In support of the above view reliance was placed by the Court on the cases reported in AIR 1937 Mad. 223, AIR 1926 Cal. 59 and AIR 1930 P C 100.
13. Perusal of the record shows that there are several circumstances in the case which militate against the promissory note having been executed for a valid consideration. These circumstances are as under:-
(1) The appellant has failed to prove that the respondent had any account with McLeod Road Branch of the Bank;
(2) It is unusual to advance loan simply on presentation of a promissory note on counter without getting any cheque from the customer for the amount advanced;
(3) No receipt was obtained by the appellant from the respondent in token of the amount having been received by the respondent;
(4) If the amount was by way of Over-Draft then the natural course would have been to advance loan through the Branch in which the respondent had an account i,e, the Kotri Branch. Instead of this the loan was advanced from McLeod Road Branch where admittedly the respondent had no account prior to 21st July, 1964;
(5) It is also admitted that at the time of execution of the promissory note on 21st July, 1964 no amount was paid to the respondent. The account sheet produced by P.W. Ziaul Hassan as Exh. 5/2 shows that the account started on 28th July, 1964 by a loan of Rs,35,000. This is quite unusual way of starting an account. The Bank is not supposed to start an account of a customer without getting some deposit from him in the first instance; and
(6) The fact that Mr.Bashir Ahmed the Manager of Kotri Branch of the Bank was involved in misappropriation of bank money and was ultimately dismissed from service, has not been disproved by the appellant. This is a very important circumstance which supports the respondent's plea that the promissory note was got executed under duress that is under threat to Bashir Ahmed of prosecuting him for misappropriation.
14. The cumulative effect of all the above circumstances is that the first promissory note was without consideration and if at all there was any consideration, it was to stifle criminal prosecution and was, therefore, void under section 23 of the Contract Act. No presumption under section 118 of the Negotiable Instruments Act and under these circumstances can be raised against the respondent. We are, therefore, of the view that the appellant's suit was rightly dismissed by the learned Single Judge. No other issue was pressed before the trial Court or this Court by learned' counsel for the parties.
' Consequently the appeal is dismissed with costs. These are the reasons for the oral order which was announced earlier today.