1. ' The defendants have filed this application under Order XXXVII, rule 2, C. P. C. Seeking unconditional leave to appear and defend the suit. The plaintiff has filed this suit for recovery of Rs, 57,50,751.72 and sale of mortgaged property. According to the plaintiff the defendant No, 1 opened an account on 21st March, 1972, with the plaintiff who allowed an overdraft limit to the defendant No, 1 in the sum of Rs, 18 lacs which was subsequently reduced to Rs, 18 lacs. As a security for repayment of the dues a promissory note, dated 2nd May, 1972 for Rs, 20 lacs payable on demand was executed by the defendant No, 1 in favour of the defendants No, 2, 3 and 5 and one Riaz Malik. These defendants and Riaz Malik endorsed the said promissory note in favour of the plaintiff. The defendant Nos. 1 to 3 and 5 and Riaz Malik executed agreement of hypothecation on 2nd May, 1972. Again on 23rd April, 1974 defendant executed a promissory note for Rs, 18 lacs payable to the defendants Nos. 2 to 5 who endorsed it in favour of the plaintiff. The defendants Nos. 2 to 5 also executed various letters of guarantee in favour of the plaintiff. The last letter of guarantee was executed by the defendants Nos. 2, 3 and 4 on 21st February, 1979. The defendant No, 1 also created an equitable mortgare over its factory including the leasehold right of plot of land situated at SITE, Karachi by depositing title deed with the plaintiff under a memo. Of deposit of title deed executed on 2nd May, 1972. The plaintiff has filed several documents including balance confirmation letter and promissory note, dated 4th February, 1979 and 21st February, 1979 respectively. The last promissory note, dated 21st February, 1979 was executed by the defendant No, 1 in favour of the defendants Nos. 2 to 5 for Rs, 36.78,662.14 which was endorsed in favour of the plaintiff by the defendants Nos. 2 to 4. An agreement of cash credit and hypothecation, dated 21st February, 1979 was also executed by the defendants. According to the plaintiff upto the date of filing the suit Rs, 57,50,751.72 was due for which the suit has been instituted.
2. ' The defendants have filed this application pleading that the defendant No, I has filed a suit bearing No, 58181 contending that no amount is payable to the plaintiff, and the plaintiff is liable to pay the defendant No, 1 Rs, 4 crores by way of damages. Copy of the plaint has not been filed by the defendant, but Mr. Namazi has stated that such a suit for recovery of damages of Rs, 4 crores has been filed, and if the suit is decreed, the plaintiff's claim can be adjusted from it. This contention impliedly admits that the plaintiff has some claim against the defendant No,
1. This plea does not make out a ground for granting leave as this can be no defence to the plaintiff's action.
3. The other plea mentioned in the application and the affidavit is that blank signed guarantees were taken from the defendant No, 5 between 1972 to 1974 and have unauthorisedly been completed, by the plaintiff and they are not enforceable. It has been pleaded that the claim is barred by limitation. It is also stated that the guarantors are liable to pay only that amount which the Principal debtor i. e. The defendant No, 1 is liable to pay and since its contention is that no amount is due, the guarantors are not liable to pay.
4. ' The second ground regarding unauthorised completion of guarantee documents clearly demonstrates that the documents were signed by the guarantors but according to the defendant No, 5 they were blank and were unauthorisedly completed by the plaintiff. No particular of such unauthorised action of the Bank has been mentioned. The burden therefore, is entirely on the defendants to show that the guarantees were executed in blank and the plaintiff has unauthorisedly completed them. So far the point of limitation is concerned, prima facie the same does not seem to be correct. However, proper finding on this issue can be given after examining the evidence.
5. ' Mr. Namazi the learned counsel for the defendant has contended that the plaintiff has filed a suit on the basis of the mortgage, and therefore, procedure provided by Order XXXIV, C. P. C. Will be it is not necessary that leave may be obtained under Order XXXVII, r. 2 applicable and C. P. C. In this regard the learned counsel has referred to Industrial Development Bank of Pakistan v. Nadeem Flour Mill (1). The contention raised by the learned counsel attracts the provision of Banking Companies Recovery of Loans Ordinance XIX of 1979, as amended by Ordinance II of 1983. The main argument rests on the definition of the word "Special Court" as provided by section 2 (i) (ii) which reads as follows : "(f) "Special Court" means-
(1) in respect of a case in which the outstanding amount of the loan does not exceed one million rupees, or the trial of offence punishable under this Ordinance, a person who is or has been a District Judge or an Additional District Judge and is appointed by the Federal Government by notification in the official Gazette, to be a Special Court to exercise jurisdiction within such territorial limits as may be specified in the notification, and, in the absence of such appointment, the District Court ; and
(ii) in respect of any other case the High Court in exercise of original civil jurisdiction."
6. ' According to the learned counsel as High Court in exercise of its Original Civil Jurisdiction acts as Special Court. It has to follow procedure provided by C. P. C. And the Rules of the Original Side.
7. Therefore,
(1) 1981 SCM R 143 ' mortgage suit should be tried as provided by Order XXXIV, C. P. C. Section 7 of the Ordinance provides procedure for Special Court. Subsection (2) of section 7 provides that "in exercise of its Civil Jurisdiction, the Special Court shall. In all suits before it including suits based on mortgages of all kinds on statement of accounts for recovery of money paid to or to the order of the defendant, follow the summary procedure provided for in Order XXXVII, in the First Schedule to the Code of Civil Procedure". A scrutiny of these provisions makes it clear that under the Ordinance Special Courts have been established to decide cases which fall under this Ordinance. The cases of civil nature which do not exceed Rupees one million are to be tried by a person who has been appointed by the Federal Government by Notification in the official Gazette to be a Special Court, and in the absence of such appointment the District Court will act as Special Court. But for the cases in which claim exceeds Rupees one million, the High Court in exercise of its Original Civil Jurisdiction shall be the Special Court. The cases in which claim exceeds rupees one million and are covered by the Ordinance are to be tried by the High Court in exercise of its original civil jurisdiction, but while dealing with such cases the High Court will be deemed to be a Special Court within the meaning of the Ordinance.
8. A special procedure for trial of cases under the Ordinance has been provided, and therefor e, the general provision regulating the procedure of the Court will be excluded. As section 7 provides that cases will be tried in accordance with Order XXXVII of C. P. C. No other procedure can be followed by the High Court in exercise of its jurisdiction as a Special Court.
9. ' Mr. Namazi has relied on the Supreme Court Judgment quoted above but Mr. Mansoorul Arfin has referred to a recent order of this Court in Suit No, 283/83 where similar question arose for consideration and my learned brother Mr. Saeed-uz-Zanian Siddiqui, J. After considering the Supreme Court judgment and various provisions of law passed an exhaustive order and held that :- "In my humble opinion these observations (of the Supreme Court) cannot be construed as meaning that no leave to defend is required in cases before the Special Court which is based on mortgage of immovable property or statement of account. In my most humble view the above observation of Supreme Court was intended to point out to the law-makers the practical difficulties and anomalies existing in the legislation. This fact is well evident from the ultimate direction of the Court in the order for sending a copy thereof to the Law Secretary."
10. I respectfully agree with the view expressed by my learned brother and hold that in a suit filed before a Special Court based on mortgage C procedure provided by Order XXXVII, C. P. C. Is applicable, and leave to appear and defend should be obtained by the defendant.
11. ' Mr. Namazi's next contention is that the plaintiff has filed an application for winding up of the defendant No, 1, and therefore, this suit should not proceed till such time the petition has been disposed of. The object of winding up petition is not to realise the dues which company may be liable to pay and has not paid. The effect of the winding up petition will be considered if the liquidator has been appointed or the petition has been granted. Even in that event the liquidator may choose to proceed with the case and defend it.
12. ' Mr. Namazi then contended that the leave may be granted unconditionally as the defendants have furnished security, value of which exceeds the amount of claim in the suit. In that regard reference has been made to the equitable mortgage created in favour of the plaintiff. This mortgage was in respect of plot of land at SITE and Mr. Mansoorul Arlin has referred to the Nazir's report, dated 21st February, 1983 submitted by him in J. M. 28/82 (Winding Up Petition) where under orders of the Court, the Nazir had inspected and reported that all the machinery have been dismantled. According to Mr. Namazi the value of machinery would be about Rupees ten lacs.
13. According to the learned counsel for the defendant at the time of mortgage, the value of land and machinery would have been about Rupees twenty-eight lacs. He further contended that the value of the plot, building and superstructure would be more than the plaintiff's claim. He has, however, been unable to show from the record the present value of the land and superstructure. Considering the appreciation in price of land during the past ten years, it would be fair to assess its market value at Rs, 25 lacs excluding the machinery which are lying in a state of dismantle. In these circumstances considering that the defendant has challenged the validity of guarantee documents, filed suit for damages for breach of agreement and further that it holds security about Rs, 25 lacs, I will grant conditional leave to the defendants on furnishing security in the sum of Rs, 22 lacs within a period of one month.