' NAIMUDDIN, J.-- This High Court appeal is from the order dated 17-2-1985, passed by a learned Single Judge on an application under section 39 of the Industrial Development Bank of Pakistan Ordinance, 1961, (hereinafter referred to as 'the Ordinance'), whereby the Nazir of this Court has been appointed as Commissioner for the purposes of determining the actual amount due and payable by the respondent to the appellant, with further direction that the Commissioner should calculate the balance amount and the contracted amount of interest in the concerned foreign currency and other items in Pak Rupees.
2. The relevant facts, briefly stated, are that respondent 1 at the request of respondent 2 granted a foreign currency loan equivalent to Pak Rs,4,34,000 for a term of 10 years to enable respondent 2 to import plant and machinery for setting up a textile unit at Kotri for production of Terry Towels and allied products. As a security for the repayment of the loan, respondent 2, hypothecated its entire plant and the machinery of the project and also agreed to create mortgage on its entire project in favour of respondent 1. Begum Abdul Karim, Mst. Sherood Hasan All Khan and Muhammad Saghir Khan (hereinafter referred to as 'the Guarantors') personally guaranteed repayment of the loan by respondent 2 to respondent 1 and pledged their respective share certificates as security with respondent 1.
3. The appellant at the request of respondent 2 and the guarantors furnished in favour of respondent 1 an interim Bank guarantee for payment of the amount to the extent of Rs,4,34,000 in equivalent foreign currency loan. According to the terms of the bank guarantee it was to remain in force till the conditions laid down in clause (4) thereof were fulfilled. Clause (4) of the Bank guarantee provided as follows: "4. The guarantee shall remain in force until the said Borrower has:-
(i) Installed, completed and commissioned to run the factory for which the loan has been granted and raised the required capital and as well as obtained interest free loan from directors in terms of Credit Agreement.
(ii) Created mortgage on the entire assets of the said Project in your favour in terms of the Credit Agreement referred to above between you and the Borrowers,"
4. It may also be convenient if clause (5) of the interim Bank guarantee is also reproduced herein below as the same is relevant to one of the contentions raised before us. It reads as follows: "5. You may without notice to us and without discharging or in any way affecting our liability hereunder grant time or other indulgence to or accept or make any composition or arrangement with the Borrower in respect of indebtedness and liability."
5. On default being made in payment of the loan amount respondent 1 filed against respondent 2 proceedings for recovery, as arrears of land revenue with the Deputy Collector, Karachi, which were withdrawn when certain payments were made by respondent 2 in terms of borrower's letter dated 25-5-1975. On default being committed again and on failure of respondent 2 to create effective mortgage the application (Judicial Miscellaneous No, 13 of 1978) was filed on the original side of this Court under section 39 of the Industrial Development Bank of Pakistan Ordinance, 1961. After recording evidence and hearing the Advocates, the learned Single Judge allowed the application by the order passed on 17-2-1985, which is impugned in this appeal.
6. We have heard Mr. Hyder Raza Hyderi learned counsel for the appellant. He has raised the following three contentions:-
(1) That the application under section 39 of the Ordinance was not maintainable.
(2) That the guarantee stood discharged.
(3) That the application was time-barred.
7. As regards the first contention it was submitted by the learned counsel that the appellant being surety no relief under section 39 of the Ordinance could be granted. In order to appreciate this submission it is necessary to refer to the provisions of section 39 of the Ordinance which read as follows:- "39(1).-- Where the Bank becomes entitled to require the immediate payment of any loan by reason of the breach of any condition of any agreement between the Bank and an industrial concern to which the loan has been granted or any person liable for repayment of that loan, or where an industrial concern to which any loan has been granted or any person liable for repayment of that loan fails to repay the loan in term thereof or in compliance with the notice under section 38, an officer of the Bank, generally or specially authorized by the Board in this behalf, may apply to the District Judge within the local limits of whose jurisdiction the concern carried on the whole or a part of its business, or the office or branch of the Bank from which the loan was disbursed is situated, for one or more of the following reliefs, namely:-
(a) an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Bank as security for the loan and any other properties, disclosed or undisclosed, of the industrial concern or the properties, disclosed or undisclosed, of persons liable for the repayment of the loan, including guarantors; (emphasis supplied) or
(b) an order for the transfer of the management of the industrial concern to the Bank or its nominee, provided that when such management is so transferred to the Bank, the Bank shall be deemed to be the agent of the industrial concern and shall manage the industrial concern on its behalf and all actions taken by the Bank on such transfer shall be deemed to be those of the industrial concern; or"
8. Under clause (a) of section 39 of the Ordinance an order for sale of property disclosed or undisclosed, of the persons liable for repayment of the loan, including guarantors could be made.
Since appellant was the guarantor an order under section 39 of the Ordinance could be made against it. Thus, this contention is without any substance.
9. As regards the second contention, it was submitted that under the terms of the guarantee the appellant was liable to respondent 2 till respondent 1 had created mortgage on the entire assets of their project in terms of the credit agreement between respondent 1 and respondent 2, and respondent 2 fulfilled this condition. Elaborating the submission it was stated that respondent 2 created equitable mortgage in favour of respondent 1 by depositing with it three documents. (Exhs.
7 to 9). We may give the details of these documents Exh. 7 is a letter of the Sind Industrial Trading Estate Limited, dated 28-10-1971, containing permission to mortgage. Exh. 8 is acknowledgement of receipt of possession of industrial plot of land executed by respondent 2 and Site. Exh. 9 is an agreement for lease dated 27-10-1971, between the Site and respondent 2. In our opinion, these documents do not create any mortgage on the 'entire assets of the project'. Thus, it is clear that the conditions laid in clause (4) reproduced above, were not fulfilled. In this regard the reasoning of the learned Single Judge is as follows:- "There is no evidence on record to indicate that the documents referred to in the above quoted paras. Were executed at all, what to say within 90 days. Even a lease deed of the plot was not executed. On the contrary Exhs. 4/13 and 41/4 indicate that no mortgage in terms of clause (4) of Exh. 4/4 was created. Exh. 4/13 is a letter dated 14-4-1976 sent by the petitioner to the borrower asking them to complete the formalities of the creation of the mortgage, a copy of which was endorsed to respondent No,9 bank with reference to the above Interim Bank Guarantee (Exh. 4/4) and whereas Exh. 4/14 is a letter dated 9-6-1977 addressed by respondent No,9 to the petitioner asking them to furnish inter alia inform as to the reasons why mortgage had not been created."
' We have no hesitation in agreeing with the above reasoning.
9-A. It was further submitted that the respondent 1 had allowed respondent 2 further time and, therefore, the appellant was discharged as a surety. In this regard we had already reproduced hereinbefore the contents of clause (5) of the Interim Bank Guarantee.
In the face of the express covenant made therein whereby liability of the appellant as a guarantor was expressly preserved even in the eventuality of grant of time or other indulgence to respondent 2, it can hardly be argued that the appellant was discharged as surety as contended on behalf of the appellant.
' Thus this objection raised by the learned counsel also fails.
10. Taking up the last submission that the application was barred by time, it may be stated that the interim guarantee was executed on 25-4-1970 and it had to remain in force until respondent 2 fulfilled the conditions mentioned in clause (4) which have been reproduced hereinbefore. It was, therefore, a continuing guarantee. Moreover, no such plea was raised either in the counter- affidavit or before the learned Single Judge. Therefore, the question of limitation neither arises nor can be allowed to be raised for the first time in this appeal, being a mixed question of fact and law.
11. We, therefore, find no substance in this appeal and accordingly dismiss it in limine.