1. ' The plaintiffs have brought this suit for recovery of Rs, 99,812.50 with interest at the rate of 10 per cent per annum with monthly rests from the date of the suit until payment.
2. ' The facts on which the suit is based as pleaded in the plaint are :
1. That the defendant No, 1 is a partnership firm and the defendants Nos. 2 to 5 are its partners. The defendant Nos. 3 (a) to 3 (d) are the legal representatives of the deceased Haji Muhammad Bux, defendant No, 3, who died during the pendency of the suit). The plaintiffs (originally Messrs Bank of Bahawalpur Ltd.) on 27-12-1966, at the request of the defendants, granted a cash credit limit Rs, 5,00,000 to the defendant No, 1 repayable by 27-12-1967. The said amount was drawn by the defendant No, 1 in full.
3. ' As security for the repayment of the said cash credit and/or balance that may be found due and payable to the plaintiffs, the defendant No, 1 under the signatures of all its partners executed promissory note, dated 3-1-1967 for Rs, 5,00,000 payable on demand to the plaintiffs with interest at the rate 91 per cent per annum with monthly rests. As an additional security for the repayment, the defendants agreed to pledge their stock-in-trade consisting of cotton seeds and oilcakes and executed agreement of pledge, dated 3-1-1967. According to the plaintiffs, by their letter dated 23- 7-1968 the defendants acknowledge their liability and gave three post dated cheques of Rs, 30,000 for deposit in their account at a month's interval but upon due representation the same were dishonoured. The defendants also acknowledged their liability to the plaintiffs and confirmed that as on 31-12-1967 a sum of Rs, 1,91,975.98 was due by them; and subsequently by another document/confirmation slip acknowledged that as on 31-12-1968 they owned Rs, 91,201.27 to the plaintiffs.
4. ' That the defendants pledged the aforestated commodities at Karachi and Sargodha from time to time as security for the repayment of the plaintiffs' dues. According to the plaintiffs, the defendants either took delivery of the said pledged stock and/or sold them and that the entire pledged stocks were thus delivered to and/or sold by the defendants and that there was left no stock of the pledged goods with the plaintiffs.
5. ' According to plaintiffs Rs, 99,812.50 remained due and payable to them by the defendants, jointly and severally, which the defendants failed/neglected/ refused to pay in spite of their promises which led to the filing of the above-mentioned suit.
2. The defendants have filed written statement in which they admitted that cash credit limit mentioned above was granted and utilised by them. They also admitted that they delivered goods i,e, cotton seeds and oil cakes of high value to the plaintiffs which were treated as security. They also pleaded that the plaintiffs sold away their goods without due notice to the defendants and that the sad sales made by the plaintiffs were collusive far below the market price and that the sate proceeds have not been credited in their account. They also denied correctness of the plaintiffs claim.
3. The Court on 25-8-1975 framed the following issues :- "(1) What quantity of cotton seed and oil cake was pledged by the defendant with the plaintiffs?
(2) For what amount these two commodities have been sold by the plaintiffs and whether such sales were collusive, without notice to the defendants and at low price and whether its proceeds have been carried to the account of defendants?
(3) What amount, if any is due and payable by the defendants to the plaintiffs."
6. ' After the close of the evidence and during the period arguments were being heard the learned Advocate for the plaintiff on 15-5-1983 filed application (C. M. A. 186_/83) under Order v. Rule 5, C. P.
7. C. Praying there in that the Issue No, 1 framed as above, may be deleted being outside and scope of the pleading of the parties. The application was disposed of with the following observation "I have heard the learned counsel for the parties on the main suit and being of the opinion that it is open to the plaintiff to show that the issue No, 1 as framed is outside the scope of the suit it is not necessary to strike off the same."
2. At the trial of the suit, the plaintiffs examined (i) P. W. 1 Abdul Ghafoor Khan Exh. 35 and (ii) P. W. 2 Muhammad Gul Qureshi Exh.
36. The defendants on the other hand examined, partner Ahmed Bux (Exh. 37). Parties after examining their respective witnesses as above, closed their sides.
8. ' After hearing the learned Advocate and after examining the material on record I reached the findings on the Issues, as follows :- ' Issue No, 1.-This Issue does not arise out of the pleadings of the parties. The quantities of cotton seeds and oil cakes pledged by the defendants with the plaintiffs in the suit were not in dispute according to the facts pleaded by the parties.
9. ' Issue No, 2.-As under.
10. ' Issue No, 3.-Suit is decreed for Rs, 99,812.50 with costs and interest @ 10i% with quarterly rests.
11. ' My reasons for the conclusions reached as above are as follows :-
3. Re : Issue No, 1.-In para. 6 of the plaint it is stated that as "additional security for repayment of the each credit and/or any balance that may be found due and payable by the defendants to the plaintiffs, the defendants agreed to pledge their stock-in-trade consisting of cotton seeds and oil cakes and in this behalf executed an agreement of pledge, dated 3-1-1967 executed by the defendant No, 1 under the signatures of its partners, the defendants No, 2 to 5, together with a "letter of arrangement", copies of these documents have been produced with the plaint as Annexures 'D' and 'E'.
12. ' Having stated as above the plaintiffs in para. 10 of the plaint further pleaded as follows. :- "That the defendants pledged the afore-stated commodities at Karachi and Sargodha, from time to time as security for the repayment of the plaintiff's dues. The defendants either took delivery of the said pledged stocks and/or sold them. The entire pledged stocks have thus been delivered to and/or sold by the defendants. There is no pledged stock with the plaintiff any more."
13. ' In reply to para. 6 of the plaint the defendants in para. 5 of their written statement pleaded :- "Para. 6 is admitted to the extent that the defendants delivered goods i,e, cotton seeds and oil cakes of high value to the plaintiffs which they treated as security."
14. ' And in reply to para. 10 of the plaint in the original written statement, the defendants stated :- "Para. 10 is admitted as substantially correct. It is however denied that the defendant directly sold the goods except a small portion of 1,250 Maunds of cotton seed. The bulk of the goods were sold by the plaintiff without the due notice to the defendants, These were collusive sales for below the market price. Sale proceeds of cotton seeds have not even been credited."
15. ' Thus, from the pleadings of the parties it is evident that the parties were not at issue as to the quantities of the cotton seeds and oil cakes pledged with the plaintiffs by the defendants. On the contrary while admitting the facts pleaded in para. 10 of the plaint, the defendants only plea in para. 9 of the written statement was that they did not sell the goods except a small I portion of 1,250 Maunds of cotton seed and that the bulk of the goods were sold by the plaintiffs without due notice to the defendants and that the sale proceeds of cotton seeds have not been credited.
16. Thus, the Issue No, 1 is disposed of with the observation that no amount of evidence can be led on questions of facts which have not been pleaded I the written statement and that the Issue No, 1 as framed, therefore, does not arise out of the pleadings. The Issue is answered accordingly.
4. Re-Issue No, 2.-While considering this Issue it would be appropriate first to refer some of the facts which have bearing on the subject-matter of the suit.
17. ' Admittedly the defendants were granted a cash credit limit to the extent of Rs, 5 lacs by the plaintiffs, on 27-12-1966 and as a security for its repayment and/or any balance that may be found due the defendants Nos. 2 to 5 the Partners, executed the promissory note dated 3-1-1967 and as an additional security pledged their stock in trade consisting of cotton seeds and oil cakes for which the deed was executed on 3-1-1967 (Exh. 27) and the letter of arrangement (Exh. 28) was also delivered. It is an admitted fact that the defendants after the lapse of one year for which the facility was granted acknowledged their liability to repay the amount due to them in writing on 23-7-1968 (Exh. 29) and gave three post dated cheques (Exhs. 30, 31, 32) for Rs, 30,000 for deposit in their account at a month's interval but on presentation these cheques were dishonoured.
18. ' The defendants on 31-12-1967 acknowledged vide Exh. 32-A and confirmed in writing that as on that date the balance in their O/D (Over-Draft) account was Rs, 1.97,975.98. Subsequently they again in writing confirmed that as on 31-12-1968, the balance due by them to the plaintiffs amounted to Rs, 91,201.27.
19. ' As regards the position of the stock pledged with the plaintiff and its sale the facts which emerge from the evidence of Mr. Andul Ghafoor, the plaintiffs-Manager (Exh. 35), are that as per defendants declaration 4,500 Maunds of cotton seeds were supposed to have been pledged with the plaintiff-Bank, and that the said quantity was stated to be lying in the godowns in the defendants own factory promises at Sargodha.
20. ' Besides, 2,100 bags of oil cakes belonging to the defendants were received from Karachi by the said Manager at Sargodha but these bags were stored in another godown rented by the Bank. Out of these 2100 bags of oil cakes, the plaintiffs sold 100 bags at the rate of Rs, 17 per bag and the remaining bags were sold to the defendants themselves who submitted tender for its purchase @ Rs, 14 per bag. The sale proceeds thus received were remitted to Karachi office of the plaintiffs and credited in the account of the defendants. There is no dispute between the parties as to the quantity of oil cakes. I would now like to resolve here the dispute as to the quantity of stock of cotton seeds which was ultimately found lying with the defendants in their godowns situated in their own factory premises at Sargodha which was disposed of by the plaintiffs to recover their dues.
(1) Mr. Abdul Ghafoor, Manager Sargodha Branch (Exh. 35), proved that 1,100 Maunds of cotton seeds were delivered to the defendants in September 1967 against execution of a trust receipt but the defendants did not make any payment for the same.
(ii) As regards the remaining stock also lying in the defendants godown in their own factory premises Mr. Abdul Ghafoor (Exh. 35) stated that he personally contacted Mr. Amir Bux the defendants partner at Sargodha, but he neither showed any interest in its disposal nor did he allow the bank to shift the stock from the godowns situated in the defendants factory premises for the purposes of disposal on the pretext that the issue would be settled by their senior partner Mian Muhammad Bux, who was stationed in Karachi. The attempt made by the above-named Manager personally in February 1968, to shift the stock of Cottonseeds from the factory for disposal was also frustrated by Mr. Amir Bux (defendant's partner) and his staff. Letter dated 18-2-1969 (Exh. 35/1) written by the above-named witness to the plaintiffs Office at Karachi is on record which corroborates the above statement.
(iii) From the evidence of this witness it is also evident that he contacted Mr. Ahmed Bux, the senior partner of the defendants as well when he went to Sargodha, and requested him to allow the shifting of the stock for disposal and that if they were not inclined to shift the same they should themselves dispose of the same. According to the witness Mr. Ahmed Bux found a customer (Muhammad Ibrahim) to purchase the stock at Rs, 35 per Maund, but after departure of Mr. Ahmed Bux, he backed out from that deal. Another customer, (Mr. Abdul Hameed), was then found by the Manager with the consent of Mr. Amir Bux, the defendants partner. This new customer offered to purchase the stock at the rate of Rs, 35 per Maund vide Exh. 35/2. Accordingly the plaintiffs informed the party that the stock would be weighed and disposed of on 10-7-1970. The defendants were also requested to be present at the time of weighment. The plaintiffs letter, dated 9-7-1970 addressed to the defendant No, 1 has been produced and marked as Exh. 35/3 and the same reads as follows :- "Messrs Mehbo ob Oil Mills, Factory Area, Sargodha ' Dear Sir, ' Your Cotton Seed Stock Pledged With Us ' As agreed upon by you verbally, we are disposing off the above stock @ Rs, 35 per bag. The delivery of the stock will be given to the purchaser on 10-7-1970 at 7 a. m. You are requested to please (be) present at the time of weighment of the stock. In case you cannot make yourself available at the time of weighment you may depute your representative for this purpose.
21. Yours faithfully, (Sd.)
22. (A Ghafoor Khan), Manager."
23. ' The total stock of cotton seeds weighed 365 Maunds only and it fetched ' Rs, 12,477 which amount was remitted to the plaintiff's Denso Hall Branch at Karachi. The witness deposed :- "The weighment and disposal of the stock was done in the presence of few leading marchants of the marked in Sargodha. The names of the persons who were present were Choudhry Muhammad Aslam Bhatti, Muhammad lqbal, Ch. Muhammad Yaqoob, Abdul Hameed and Manzoor-ur- Rehman. I produce the statement to the above effect made by the aforesaid persons which they signed in my persence, marked as Exh. 35/4. After the sale I had informed the defendant of the transaction by a telegram, dated 11th July, 1970 that goods have been sold and the proceeds remitted to their account at Karachi. I produce a copy of the telegram marked 'X'. I produce the copy of my letter, dated 11th July, 1970 sent by registered cover whereby the party was informed about the sale of the stock, I produce the copy together its postal receipt, marked as Exhs. 35/5 and 35/6."
24. ' Reference may here be also made to be plaintiffs letter, dated 17-7-1970 (Exh. 36/1) wherein the sale of 365 Maunds @ Rs, 35 per bag as verbally agreed by Mian Amir Bux was confirmed. It would be relevant to produce the contents of this letter which reads as follows :- "As verbally agreed upon by you and your partner Mian Amir Bukhsh, our Sargodha Branch has disposed of your stocks of cottonseed pledged with them in lose form in a barrack of your Sargodha Factory. The stock has been weighed at 355, bags (1 Mds. In a bag) and has been sold Rs, 35 per bag, at price settled @ by you. The sale proceeds of the stocks i. e. Rs, 12,477 have been received and credited to your above-noted account. The account at present shows a debit balance of Rs, 96,362.89 against which as you are aware no security is held by us.
25. ' You are requested in your own interest to please arrange to adjust your account in full by 25th July, 1970, failing which we shall have no alternative but to refer the case to our Legal Adviser for filing of suit against you at your risk as to cost and consequences.
26. ' This is our last and final notice."
27. ' The above letter and facts stated therein, were never challenged by the defendants.
28. ' The statement of account prepared by the plaintiffs Foreign Exchange Branch Karachi has been produced as Exh. 35/24 and is duly certified in accordance with the Bankers Books Evidence Act.
29. Neither any of the entries made in the said statement has been shown to be incorrect nor was challenged in the cross-examination. This statement of account shows that at the time of filing of the suit the defendants owned a sum of Rs, 99,812.50 to the plaintiffs.
30. ' A significant fact to be noted here is that in spite of the fact that copy of statement of account (Exh. 35/24) was filed with the plaint and copies thereof had been supplied to the defendants, showing expressly credit of Rs, 12,477 on 15-7-1970 as sale proceeds of cotton seeds, the defendants did not take any plea in the written statement that the stock of cotton seeds in their godown situated in their factory premises was in excess of 365 Maunds or that any quantity was left undisposed of. On the contrary the defendants in para. 9 of their written statement admitted that para. 10 of the plaint was Substantially correct but added that bulk of the goods were sold by the defendants without due notice and by collusive sales far below market price.
31. ' The objection raised by the learned counsel for the defendants that neither the peon who delivered the letter, dated 9-7-1970 (Exh. 35/3) was examined nor the peon book was produced, cannot advance the case of the defendants as I find that this letter (Copy) (Exh. 35/3) was produced without any objection in the evidence. This objection was pressed by the learned counsel in support of his argument that the sale of the pledged goods was made by the plaintiffs without giving any notice as required by section 176 of the Contract Act and as such the sale was not binding upon the defendants. I, however, find that the plaintiffs were served with notices which sufficiently complied with the requirements of section 176 of the Contract Act. In the notice dated 14-9-1977 (Exh. 9) served upon the defendants after pointing out that overdraft account (Rs, 1,81,297.75) had not been cleared, they were warned by the plaintiffs that :- "We shall dispose of the stocks in case you fail to adjust the outstanding within seven days from the date hereof."
32. ' Thereafter by notice dated 18-1-1968 (Exh. 11) the plaintiffs again notified the defendants as follows :- "Please refer to your letter No, Nil, dated 12-1-1968 whereby you had undertaken to get the stock released against the payment within this week.
33. ' In this context, we have to finally inform you that in case you do not honour your commitment till 20-1-1968, we shall dispose of the stock of cotton seed under pledge with the Bank without any further notice."
34. ' We have also letter dated 20-44968 (Exh. 13), letter dated 23-5-1968 (Exh. 14) and letter dated 5- 11-1968 (Exh. 17) on record in which also the plaintiffs in 'express terms warned the defendants that in case the outstanding amount was not paid, the Bank would proceed to take legal action and the security held by the Bank would be disposed of and shortfall, if any, would be recovered from the defendants.
35. ' The plaintiffs in support of their case also produced Mr. Muhammad Gul Qureshi (Exh. 36) an employee who was working in their Exchange Branch M. A. Jinnah Road, Karachi. This witness stated that as security for the over draft facility defendant No, 1 had pledged stock of cotton seed, cotton seed oil cakes and groundnut oil cakes, and that on 30-9-1967, 4400 bags of oil cakes and 1,813 bags of groundnut cakes were pledged at Karachi. He further stated that out of 4,400 bags of oil cakes, 2,100 bags were transferred to Sargodha at the request of the defendants and the remaining stock of oil cakes were delivered to the defendant No, 1 at Karachi against three delivery orders Exhs. 21, 22 and 23. This witness also referred to Exh. 35/24 which is the statement of account of the defendants and referred to the credit entries about the sale proceeds of oil cakes made in favour of the defendants in the said account. He also produced notices Exhs. 36/1 to 36/7 sent to the defendants by the plaintiffs. I have already reproduced the contents of letter Exh. 36/1, wherein the sale of 355 bags cotton seeds at Sargodha @ Rs, 35 for a total consideration of Rs, 12,477 was confirmed and the defendants were also notified that a sum of Rs, 96,362.80 then remained outstanding.
36. ' The defendants on their own behalf examined Mr. Muhammad Bux (Exh. 37) a partner in the defendant No, 1 firm. This witness made reference to Stock Report, dated 30-9-1967 (Exh. 20) wherein position of stock was shown to be as follows:- {{TABLE TEXT}} Descrip- Balance Recei- Delive- Bal- Weight Rate Appro- Re- tion. Per last ved. Red ance or per ximate marks.
37. Stock on Measure- unit value report hand ment (Dated) per unit Cotton- seeds Oil- 4,400 4,400 6,600 Rs, 15 Rs, 66,000 cakes. Bags Bags mds.
38. (Subject to counting)
39. Groundnut 1,813 - 1,813 3,172 Rs, 15 47,580 Cakes Bags - Bags mds Subject to counting)
40. Seeds at 4,500 4,500 Rs, 18 81,000 Sargodha Bags Bags 4,500 P. M. mds (Subject to counting)
41. 1,94,580 {{TABLE}} ' Placing reliance upon the above Stock report Mr. Ibadat Yar Khan, the learned counsel for the defendants argued that the said report was issued by the plaintiffs and, therefore, the plaintiffs cannot be allowed to resile from the statement made therein as to the position of the Stock and accordingly it was contended that the stock of cotton seeds shown to have been disposed of by the plaintiff bank was lesser than what was stated in the above-mentioned Stock Report (Exh. 20) and that the plaintiff though credited sale proceeds of 355 20 bags in the defendants account but failed to credit Rs, 1,05,000 being the value of 3,400 bags of cotton seeds at Rs, 25 per md. Which was the market rate prevailing in Karachi in 1968 as shown in market bulletin marked M-1.
42. ' The claim of the defendants that the stock pledged was as per Exh. 20 and thus 3,400 bags of cotton seeds remained unaccounted for the Pawnee (the plaintiff), however is not supported by any material on the record. It would be observed from the Stock Report (Exh. 20), the relevant portion of which has been reproduced above, that under the quantity of each of the item shown in it, remarks are made that the same were "Subject to Counting". Thus, no finality can be attached to the quantities shown in the said Stock Report. It is also important to note here that the defendants in the evidence did not challenge the said remarks. Further more, it would be observed that this document (Exh. 20) is signed by the defendants only and that the Manager of the plaintiffs has not signed. The certificate appended to the said Stock Report which fact justifies the argument of the learned counsel for the plaintiffs, that the Stock Report (Exh. 20) is nothing more than a statement of the defendants who made the entries in Exh. 20 in their own favour for serving their own ends to obtain credit facility from the plaintiffs for a higher amount than what they otherwise would have been entitled. The defendants cannot, therefore, take advantage of self-serving statement as to description, quantities etc. Made by them in their own favour in Exh.
43. 20.
44. ' Reference may also be made to the document (Pledge of goods to secure a Demand Crash Credit) dated 3-1-1967 which is an admitted document and has been marked by consent as Exh.
27. In this document the defendants inter alia, as to quantities and value of pledged stocks expressly covenanted as follows :- "That the borrowers shall be responsible for the quantity and quality of the goods pledged with the Bank and also for the correctness of statements and returns furnished by them to the Bank from time to time as mentioned in clause (6) above. The Borrowers have assured the Bank that all information regarding the quantity, quality, value etc., and other description of the goods pledged with the Bank as given in the said statement and Returns is or would be correct and the Bank has advanced and agreed to advance moneys under the above account on such representations. The Borrowers further declare and agree that the goods pledged with the Bank have not been actually weighed, value or numbered and in order to verify the quantity or quality of the goods pledged or the statement and Returns furnished by the Borrowers, the Bank shall be at liberty at any time in its discretion, to get the goods weighed, surveyed and valued at the expense of the Borrowers and the Borrowers agree to accept as conclusive proof the result of such weighment as certificate by an authorised officer of the Bank or by any other surveyors of values. If no such weighment, the goods pledged are found to be short or less than the weight as shown by the Borrowers, the Borrowers undertake to make up the deficit on demand and to reimburse the Bank for all loss, damage or expense incurred by the Bank on that account.
45. ' The Borrowers agree to accept as conclusive proof of the correctness of any sum claimed to be due from them to the Bank under this agreement all statement of account made out from Books of the Bank and signed by the Accountant or other duly authorised officer of the Bank without the production of any other voucher, document of paper."
46. ' Thus, in the absence of certificate by the plaintiff as to the quantity and quality etc. Of the pledged goods, even otherwise, the statement made in the Stock Report (Exh. 20) is not binding upon the plaintiffs in view of the express covenant made in the Agreement of pledge (Exh. 27).
47. ' I may also again refer here to the fact that the stock pledged belonged to the defendants and was lying in the defendants own godown in their own factory premises. The plaintiffs witness Mr. Adbul Ghafoor (Exh. 35) in his evidence stated that in February, 1968 he wanted to shift the stock of cotton seeds from factory premises for disposal but Mian Amir Bux and his staff did not allow the plaintiffs to shift the said stock from their premises. The witness, therefore, informed Head Office by his letter Exh. 35/1. This statement of the witness was neither challenged in the cross-examination nor denied in his own evidence by the defendant. Significant to note here is that the defendants did not even choose to produce Mr. Amir Bux their partner who used to remain at Sargodha where the pledged stock was lying and who had dealings with the plaintiffs at Sargodha.
48. ' The defendant also did not care to produce the stock-register, though their witness admitted that the quantity of the pledged goods would have been mentioned in their records. It may be mentioned here that while making the above statement the said witness added that the said record is not available now with them but their explanation is not convincing.
49. ' As to plea that the sales made were either collusive or were at lower price than market rates, it may be mentioned that the learned counsel for the defendants did not press the question as to sales made at an allegedly lower. Rate. No evidence has been produced to prove that the alleged sales were collusive. These contentions, therefore, cannot succeed.
5. From the reasons discussed above it is established that the stock of cotton seeds in the godowns of the defendants, situated in their own factory premises was 365 bags (1 Maunds in each bag) and that the same was sold by the pawnee/the plaintiffs after giving reasonable notice to the defendants and that the sales were neither collusive nor at a lower rate. It is also proved that at the time of filing of the suit a sum of Rs, 99,812.50 was payable by the defendants to the plaintiffs.
6. The suit is accordingly decreed against the defendants for Rs, 99,812.5 with costs and interest as prayed.