1. ' These are applications, C.M.A. 3942/88, 3943/88, 3944/88, 3945/88, 3946/88 and 3947/88, filed by the defendants under Order 37, Rule 3, C.P.C. For leave to appear and defend the suit.
2. ' The suit was originally filed by Union Bank of the Middle East Ltd. (UBME) on the 17th March, 1988, for recovery of Rs,1,393,767.51 on account of financial accommodation granted by the former Dubai Bank Ltd. To the defendants No,1. UBME claimed to be successor-in-interest to the former Dubai Bank Ltd. By virtue of merger of the two banks with effect from the Ist January, 1986. Subsequently, the name of UBME was changed to Emirate Bank International Ltd. And, by order dated the 12th March, 1989, the plaint was allowed to be amended by substituting the name of the Emirate Bank International Ltd. For that of UBME. C.M.A. 3947/88 has been filed by the defendant No,1. The grounds upon which leave is sought, as set out in the affidavit in support of the application, are (1) that the plaintiff (i,e. UBME) is not a banking company, (2) that the alleged merger of Dubai Bank Ltd. With UBME is denied, (3) that the suit is barred by limitation as the alleged agreement dated 10-7-1985 "was not executed on that day" but was manipulated by the plaintiff by putting date 10-7-1985 therein when the date was blank, (4) that Dubai Bank Ltd. Had refused to amend the letter of credit No,KLC 85/00113 and also refused to transfer the Exchange Control copy of import licence to American Express and thereby caused loss to the defendant No,1, and (5) that the plaint has not been signed by the authorised person.
3. ' Mr. Mansoorul Arfin, the learned counsel for the defendants, contended that section 48 of the Banking Companies Ordinance, 1962, applies only to the banks incorporated in Pakistan and that, therefore, there was no legal or valid merger between Dubai Bank Ltd. And UBME. Mr. Iqbal Bawani, learned counsel for the plaintiff, submits, in reply, that merger between the two banks was in accordance with the law of Dubai and had been confirmed by the State Bank of Pakistan under Section 48 of the Banking Companies Ordinance, 1962. He further submits that the question of merger between the two banks stands concluded by a decision of a Division Bench of this Court in the case of Rayasat Rasool Qadri v. Dubai Bank Ltd., reported in PLD 1986 Karachi 297. In answer to Mr. Iqbal Bawani's submission, Mr. Mansoorul Arfin contends that the law of Dubai is a question of fact to be proved accordingly and that this point was not considered in the judgment cited by Mr. Iqbal Bawani. In the case of Dubai Bank Ltd. Cited above, it was held (at page 300) that "the merger of Bubai Bank Ltd. Into the Union Bank of Middle East Limited, was to be done only in accordance with the provisions of Section 48 of the Banking Companies Ordinance, 1962, and it is not disputed that the merger had taken place in accordance therewith. Thus the Union Bank of Middle East Limited acquired all the rights of Dubai Bank Limited. " It may be observed that Mr. Mansoorul-Arfin has not disputed that the merger had taken place in accordance with Section 48 of the Banking Companies Ordinance, 1962. The contention that Section 48 of the Ordinance is applicable only to the banks incorporated in Pakistan is, therfore, not tenable. As for the submission that the merger in accordance with the law of Dubai has to be proved as a fact, the plaintiff has, with its counter affidavit, filed several documents to show that merger has taken place in accordance with the law of Dubai. Annexures C/2 and C/4 are resolutions dated the 16th September, 1985, by Dubai Bank, Limited and UBME, respectively, providing that the two banks be merged and that rights, interests, contracts, deeds, bonds, agreements and other instruments of Dubai Bank he transferred to UBME, Annexure C/6 is a letter from Government of Dubai approving the merger and Annexure C/8 is the letter from State Bank of Pakistan sanctioning the merger. In reply to this, the defendant No,1, in its affidavit-in-rejoinder merely denied the contents of the counter-affidavit without in any manner contesting the validity or genuineness of the documents produced. The plea, therefore, does not appear to be genuine or bona fide.
4. ' It was next urged by Mr. Mansoorul Arlin that the defendant No,1 is entitled to unconditional leave to appear and defend the suit because the defendant No,1 had opened a letter of credit No,KLC 85/00113 through Dubai Bank Ltd. And that it had suffered damages on account of refusal by Dubai Bank, Ltd. To amend the said letter of credit and to transfer the import licence to American Express.
5. The letter of credit in respect of which the grievance is made is not the one in question in this suit. If the defendant No,1 has any claim on the ground outlined above, it may file a separate suit for recovery of damages. Such claim is not an answer to the plaintiffs claim in the suit. The ground taken is, thus, without merit. No other grounds were urged by Mr. Mansoorul Arfin during the hearing of the application. However, I propose to deal with the remaining grounds set out in the affidavit on behalf of defendant No,1. The defendant No,1 denied that the plaintiff (i,e UBME) is a bank or that it is incorporated in U.A.E. The plaintiff, with its counter-affidavit, produced Memorandum of Association of UBME and the licence issued by State Bank of Pakistan in favour of that bank. In the affidavit-in- rejoinder, the defendant has merely denied the assertion in the counter-affidavit and the documents produced without, in any manner, contesting or challenging the validity or authenticity of those documents. The plea that the suit is barred by limitation is taken in para 6 of the affidavit in these words, the suit is barred by time and agreement alleged to have been executed on 10-7- 1985 was not executed on that day but in fact the plaintiff has manipulated the document by putting 10-7-1985 therein when the date was blank." This allegation has been denied by the plaintiff.
6. It is significant that the defendant has not shown when the agreement was signed. In the plaint, two agreements, both dated the 10th July, 1985, have been relied upon. One of them is an agreement of hypothecation of goods (Annexure H') and the charge created thereby has been registered under the Companies Ordinance, 1984, as shown by certificate of charge (Annexure H/1'). The registration and the certificate of the charge or indeed that date and contents of the agreement of hypothecation of goods has not been questioned. In any event, the date of agreements of hypothecation would not seem to affect the question of limitation. The cause of action for filing the suit is stated, in the plaint, to have arisen, inter alia, on 21st March, 1985, when the defendant's account was overdrawn and on 9th April, 1985, when the defendant No,1 failed to pay the import bill. This averment in the plaint has not been denied by the defendant No,1. It is, therefore, clear that the suit which was filed on the 17th March, 1988, is within time. With regard to the allegation that the plaint has not been signed by authorised person, the plaintiff has produced powers of attorney (Annexures 'D/1' and 'D/2' to counter-affidavit) executed by UBME in favour of Reshad Ahmed Khan and Sikandar Iqbal, respectively, authorising them to file suits; and the plaint has been signed by them.
7. In the circumstances, I am of the view that the defence set up by the defendant No,1 is vague, unsatisfactory and lacking in bona fides. Further, the defendant has not denied the borrowing or the amount claimed in the suit. It is, therefore, not entitled to unconditional leave. The defendant No,1 is, therefore, granted leave to appear and defend the suit on the condition of its furnishing security to the extent of the amount claimed in the suit.
8. ' C.M.A. 3945/88 and C.M.A. 3944/88 have been filed by the defendants Nos.3 and 5 respectively.
9. The defendants Nos.2, 3, 4 and 5 have been sued on the basis of guarantees executed by them for payments of the amount due by defendant No,1 to the plaintiff. The suit has already been decreed against the defendants Nos.2 and 4. The defendants Nos.3 and 5 have adopted the affidavit filed on behalf of the defendant No,1 and have additionally taken the plea that the suit is time-barred as the guarantees were executed on the 5th January, 1985, and the suit was filed on the 17th March, 1988, viz. More than three years from the date, of the guarantees. The grounds taken in the affidavit of the defendant No,1 have already been considered above. As for the plea of limitation, Mr. Mansoorul Arfin contends that since the defendants had, by their guarantees agreed to make the payment "on demand", the period of limitation commenced from the date of the guarantees. Mr. Bawany, in reply, submitted that the liability was to pay "on demand in writing" as provided by the guarantee; and that this provision, read 1 with the last clause of the guarantees, providing for the circumstances in which the demand in writing shall be deemed to be given, shows that the liability of the defendants under the guarantees was to arise only upon demand in writing being made by the plaintiff. He further argued that, as averred in para 18 of the plaint, the demand was made on the 29th March, 1987, and, therefore, the suit, filed on the 17th March, 1988, was within time.
10. ' Mr. Mansoorul Arfin relied on the case of National Commercial Bank, Ltd. v. Mohammad Tufail, reported in PLD 1975 Karachi 671 for the proposition that the period of limitation for filing a suit upon a guarantee will run from the date of execution of a guarantee irrespective of the date of subsequent demand for repayment. In that case, the learned Judge found that there was no principal debtor and that on that account the suit against the guarantors must fail. In view of this finding, he considered it unnecessary to elaborate the issue regarding limitation but observed, obitcr, that the period began to run from the date of the guarantee. The terms of the guarantee do not appear in the report. With due respect to the learned Judge, the observation is too wide and, in any case, was not necessary for the decision in the case. A guarantee is a contract and the rights and liabilities of the parties thereunder have to be determined with reference to the terms and conditions of the guarantee. Therefore, the question of when the liability of the defendants to pay arose has to be determined with reference to the terms and conditions of the guarantee. If any authority is needed for the proposition, reference may be made to the case of United Bank, Ltd. v.
11. Business Investment, Ltd. (1982 CLC 1101), wherein my learned brother Saleem Akhtar, J. Observed that "the liability of the surety has to be determined on the basis of the contract of guarantee" and held that as the guarantee provided for payment within two days of demand being made, the liability of the surety accrues after two days of demand. Again, in the case of MA. Qadir v. Bank of Bahawalpur (PLD 1984 Karachi 211), where the guarantee provided for payment "within two days after demand", it was held that the amount guaranteed was to be paid within two days after demand and the cause of action for filing the suit arose within two days after demand was made.
12. ' It is clear from the terms of the guarantees in question in this suit that the liability of the defendants was to arise only upon demand in writing being made. The allegation that such demand was made on the 29th March, 1987, has E not been denied nor has it been alleged by the defendants that any demand was made by the plaintiff prior to that date. The suit is, therefore, not barred by limitation.
13. ' C.MA. 3943/88, C.M.A. 3942/88 and C.M.A. 3946/88 have been filed by the defendants Nos.6, 7 and 8 respectively. They have sought leave to appear and defend the suit on the grounds stated in the affidavit filed on behalf of defendant No,1. Those grounds have already been considered above.
14. They have further pleaded that the guarantees are not valid because no resolution was passed by the defendant authorising the execution of the guarantees. The plaintiff has, with its counter- affidavits, produced copies of the resolutions passed by the defendants Nos.6 and 8 respectively authorising their directors to execute guarantees. These have not been denied by the defendants.
15. As regards the defendant No,7, the plaintiff, while denying that no resolution was passed by defendant No,7, has taken the stand that the defendant No,7 is a private limited company and the guarantee has been signed by its directors and, therefore, the doctrine of indoor management is attracted. Mr. Bawany relied on the case of Bank of Oman v. East Asia Trading Co., Ltd, (1987 CLC 288) wherein it was held that according to doctrine of indoor management, the plaintiff is not obliged to make inquiry whether the meeting was actually held and, if so, whether it was legal or not, after a certified copy of the resolution is filed with the plaintiff. However, it is not the plaintiff's case that a copy of any resolution passed by the defendant No,7 was filed with it. In Dehra Dun Mussorie Electric. Co., Ltd. v. Jagmandar Das (AIR 1932 A11.141), it was observed that "a company is liable for all acts done by its directors even though unauthorised by it, provided such acts are within the apparent authority of the directors and ultra vires of the company"; and that observation was cited with approval in Pakistan Employees Co-operative Housing Society, Ltd. v. Anwar Sultana (PLD 1969 Karachi 474). It is not the case of the defendants that the execution of the guarantees was ultra vires the defendant companies or any of them. The guarantees, therefore, appear to have been validly executed by the directors of the defendants Nos.6, 7 and 8.
16. It was also contended by Mr. Mansoorul Arfin that the guarantees by defendants Nos.6, 7 and 8 were executed on the 5th January, 1985 and, therefore, the suit filed on the 17th March, 1988, was barred by limitation. For the reasons stated above in relation to similar plea taken by the defendants Nos.3 and 5, this ground has no merit.
17. For the foregoing reasons, I am of the view that the defence set up by the defendants Nos.3, 5, 6, 7 and 8 is vague, unsatisfactory and lacking in bona fides. It may further be observed that neither the borrowing nor the amount claimed is I denied by any of the defendants. They are, therefore, not entitled to unconditional leave to appear and defend the suit. The defendants Nos. 3, 5, 6, 7 and 8 are, therefore, hereby granted leave to appear and defend the suit on the condition of furnishing security to the extent of the amount claimed in the suit.