1. ' By this order all the three applications filed by the defendants under Order 37, Rule 3, C.P.C. Shall be disposed of. The plaintiff has filed a suit for recovery of Rs,44,67,490.35. The brief facts are that the plaintiff is a banking company and the defendant No,1 is a private limited company and defendants Nos.2 to 8 are the shareholders and at the material time were Directors of the defendant No,1. They are also guarantors for the financial accommodation granted by the defendant No,1 to the plaintiff. The defendants decided to set up a project of a modern hotel-cum- casino at Karachi and defendant No,1 was constituted with an authorised capital of Rs,50 million.
2. The defendant No,1 decided to set up prject from its own subscribed and paid-up capital and from the borrowings. The defendants therefore, entered into two agreements with the consortium of banks and financial institutions. The first agreement was an underwriting agreement dated 20-8- 1975 between the defendants No,1 and banks and final institutions one of them being the plaintiff.
3. By this agreement the defendants No,1 were to meet portion of the local currency cost of the project. The underwriting agreement provided that the underwriters will meet the unsubscribed capital in the public issue and the liability of the plaintiff was Rs,5,75,000 and the liability of each underwriter was specified. The investment agreement dated 7-5-1976 between the bank and financial institutions was to meet a portion of the Pakistani currency cost of the project and to raise Rs,1.60 crores from the Syndicate in which amount of loan to be given was Rs,12,00,000. This loan was to be converted into a debenture loan. The plaintiff advanced loan and made disbursement of Rs,5,75,000. The statements of account showing the loan and interest have been filed with the plaint and marked 'F'. In the statement of account relating to debenture loan the amount of loan is mentioned as Rs,12,00,000 interest Rs,16,64,508.35 and penal interest as Rs,1,74,457. The other statement of account relates to bridge loan. In this account loan amount is Rs,5,75,000 interest Rs,812,240 and Rs,41,285 as penal interest. The plaintiff has claimed the total amount as stated above as the same has not been paid by the defendants.
4. ' Mr. Mansoorul Arfin the learned counsel for the defendant No,1 has contended that the suit is barred by time. According to the learned counsel the agreement is dated 20-8-1975 and there is no acknowledgment of liability nor any such document has been filed, therefore, the suit filed on 28-1-1985 is barred by time. Mr. Anwar Mansoor Ahmed the learned counsel for the plaintiff has contended that mortgage was created by defendants No,1 and therefore, the period of limitation of 12 years is to be computed from 20-8-1975 and the suit is within time. The contention of the learned counsel for the defendants Nos.1, 2 to 7 has not impressed me.
5. ' The next contention of Mr. Arfin Advocate is that the property has been mortgaged in which there are more than one mortgagees but all of them have not been joined as party, therefore, the suit is bad for non-joinder of mortgagees. In this regard the learned counsel has referred to Order 34, Rule 1, C.P.C. And section 67 of the Transfer of Property Act. He has also relied on an unreported judgment in Suit No,337 of 1983 in which my learned brother Saeeduzzaman Siddiqui, J. Had granted leave on such a plea raised by the borrowers. It is an admitted position that there are 8 mortgagees including PICIC and each one has its specified share of loan. The plaintiff has not joined any one of them as a party. Mr. Anwar Mansoor Ahmed, Advocate has contended that merely because they have not been joined as party it does not lead to the conclusion that the suit should be dismissed, as it is merely non-joinder of proper parties. It is true that the law requires every person having an interest in the mortgage property to be joined as a party in a suit based on mortgage but their non-inclusion may not result in non-suiting the plantiff. Such party can be joined at an later stage. Subject to all just exceptions. But so long such mortgagees are not joined there is a defence requiring consideration. According to Mr. Arfin on this plea unconditional leave should be granted and reliance has been placed on the order passed in Suit No,337 of 1983. In that order grant of unconditional leave was not entirely based on the fact that the plaintiff had failed to join all the mortgagees in the suit. Further consideration was that there was a security by way of mortgage which seems to have been considered sufficient security for the plaintiffs claim. In the present case there are several mortgagees who have their claim against the defendants No,1. It has not been brought on record by the plaintiff that in view of these liabilities and burden on the mortgaged property the security can be treated as sufficient security for the plaintiffs claim. In such circumstances leave can be graned only conditionally and not unconditionally.
6. ' Mr. Arfin the learned counsel next contended that the plaintiff has charged penal interest which is not authorised. According to the learned counsel for the plaintiff it is provided under clause 2.05 of the agreement. Mr. Arfin the learned counsel then contended that the penal clause can be enforced in terms of section 74 of the Contract Act and unless the plaintiff establishes that it has suffered loss to the extent of the amount claimed by it amount of penal interest cannot be granted straightaway. Prima facie the plaintiff has agreed to pay penal interest. Without entering into the merit of this contention on this plea the defendants can challenge the validity of Rs,2,15,742 out of total amount of Rs,44,67,490.35.
7. Mr. J.H. Rahimatoola Advocate appears for defendants Nos. 3 and 6 who are the guarantors and have applied for leave to appear and defend the suit. These two guarantors namely Venu G.
8. Advani and Gurdasmal D. Advani have not denied their signatures on the deed of guarantee. They have disputed their liability on the ground that they could not have signed the deed of guarantee on 17-5-1976 when it is said to have been executed as they were not Directors of the defendants No,1 on that date. It was further contended that the guarantee was never signed on the date and for the amount shown. The amount of Rs,5,75,000 was never advanced. So far as first contention of the learned counsel is concerned it is not necessary for the guarantor to be Director of the company. Any person who is not a director can furnish surety and execute deed of guarantee.
9. Merely because the defendants Nos.3 and 6 were not Directors on 17-5-1976 does not lead to the conclusion that they have not signed the deed of guarantee and that it was without consideration.
10. The learned counsel contended that except that being Directors there was no other consideration which could have compelled defendants Nos.3 and 6 to have executed the deed of guarantee. This cannot be spelt out from the documents nor it can be a valid ground because the consideration for executing such deed is the loan granted or advanced by the creditor to the borrowers. There is no such evidence or even allegation made by the defendants No,1 that the loan has not been advanced to them. In these circumstances this contention does not make out a plausible or arguable defence.
11. ' The learned counsel then contended that the suit against the guarantor is barred by time.
12. According to him as no time was fixed for payment it should be treated as reasonable time which is three years from the date of loan and computing the period of limitation from that date the suit is barred by time. In this regard the learned counsel has referred to Halsbury's Laws of England, IV Edition, para. 497, PLD 1971 SC 78 and PLD 1966 SC 983. It is true that if in a document no date is fixed for performance of an obligation that depending on the circumstances, the obligation should be discharged within a reasonable time. Mr. Anwar Mansoor Ahmed the learned counsel has pointed out that under the deed of guarantee the guarantors have jointly and severally agreed to make payment and discharge all liabilities two days after demand has been made from them. A notice was issued to these defendants on 23-12-1984 receipt of which has not been denied.
13. Therefore, the question of limitation cannot be pleaded as a strong defence.
14. Mr. Rahimtoola then contended that the liability of guarantors' will be limited to Rs,5,75,000 which is said to have been advanced by the plaintiffs. The deed of guarantee was executed in favour of the Australasia Bank Ltd., the predecessor-in-interest of the plaintiff limited to the sum of Rs,17,75,000 with interest thereon @ 14% p.a. Therefore, the liability of the guarantors will be to the extent of the principal amount advanced by the plaintiff not exceeding Rs,17,75,000 plus interest. Mr. Shahenshah Hussain the learned counsel for the defendant No,5 has adopted the arguments of both the learned counsel. In view of the above discussion and the fact there exists a valid mortgage which has not been shown in these proceedings to be sufficient to satisfy the plaintiffs' claim, I grant leave to the defendants to appear and defend the suit on furnishing surety in the sum of Rs,1.5 M to the satisfaction of Nazir within four weeks.