' Pursuant to this Execution Application the Decree-Holders seek to recover the decretal amount of Rs,20,32,557 from purported garnishees, Haryana Abestos Cement Industries Limited and the United Bank Limited, through attachment of moneys payable to the Judgment-Debtors, Farben Industrial Development S.P.A. "by the garnishees through garnishee No,2 in instalments as price of machinery etc. Purchased by garnishee No,1". Such Execution Application is based on Order 21, Rules 46-A and 46-B (Sindh Amendments) of the Code of Civil Procedure.
' Alongwith the Execution Application was submitted Civil Miscellaneous Application No, 1493/88 under Order 21, Rule 46, C.P.C. Wherein it is stated that garnishee Haryana Asbestos Cement Limited (hereinafter also referred to as garnishee-Haryana or the first garnishee) was liable to pay U.S.$ 3,000,000 (reported approximate equivalent Rs,40 Million) to the defendant-Judgment Debtors (shortly mentioned hereunder also as Messrs Farben or Judgment-Debtors Farben) against the purchase of an Asbestos Cement plant machinery, in 16 six monthly instalments, through United Bank Limited, SITE Branch, Karachi (hereinafter also called the garnishee-bank or the second garnishee). It is recited that, while the suit was pending, this Court, per order dated 13-1-1986, prohibited garnishee-Haryana from making payment to the extent of Rs,23,40,300 to the defendants-Farben. Such restraint was continued till further orders vide an order dated 10-2-1986 and was confirmed on 13-4-1986, the Court directing garnishee-Haryana to deposit the referred amount with the Nazir of the Court but the garnishee failed. The suit was decreed on 4-11-1987.
Prayer, in execution, was made that the decretal amount of Rs,20,32,557 may be ordered to be deposited by the two garnishees in Court pursuant to the referred C.M.A. No, 1493/1988. In the supporting affidavit Waqar Hussain, Sole Proprietor of the plaintiffs decree-holders, averred that 10 half-yearly instalments, equivalent to Rs,2,12,50,000 in Pakistan Currency, still remained in balance to be remitted by garnishee-Haryana through the garnishee-bank and that such money, belonging to the judgment-debtors, was liable to be appropriated towards the decretal debt.
2. In response to the execution proceedings the garnishee-bank submitted an application under Order 21, Rule 46-C (C.MA. 713 of 1989) on 3-4-1989. In such application, it was pleaded that a sum of Rs,73,16,920 was placed to the credit of the first garnishee, having been received from Bankers Equity Limited for the specific purpose of financing the project of that garnishee in the Lasbela Industrial Trading Estate at Hub, which project had not yet reached completion. It was further stated that the garnishee bank had given a letter of guarantee bearing No, 552 of 1984, dated 27- 2-1984, on behalf of garnishee-Haryana to the judgment-debtors-Farben, guaranteeing, to the said exporter in Italy, 85% of the deferred payment for machinery imported under a contract dated 17-4-1983 in sixteen, six monthly instalments. Copy of the letter of guarantee was filed. Garnishee- Haryana, it was said, developed certain disputes and were not able to pay for even a single instalment due, out of which the garnishee-bank had already paid eight instalments as per its irrevocable and unconditional letter of guarantee, being in the nature of an international commitment. A sum of Rs,4,88,75,990 was due with mark-up and the bank had to incur further pecuniary liability in paying the balance of eight instalments under the referred letter of guarantee.
Besides, the garnishee-bank had also provided Rs,39,09,600 to garnishee-Haryana, towards which dues also not a single penny had been paid. Statement of account in that context was also submitted. It was next said that the garnishee bank could not even lay hands on the aforesaid funds provided by Bankers' Equity limited since such adjustment was precluded under the conditions of that grant. It was prayed that garnishee notice order dated 29-1-1989 served on the second garnishee on 12-3-1989 be discharged. Reference to the case file, however, shows that only a notice was issued to the garnishee-bank, as per Court order dated 18-12-1988.
3. Objections were filed on 31-8-1989 by the decree-holders in answer to the application of the garnishee-bank under Order 21, Rule 46-C referred above. In such Objectons, in substance, it was maintained that the garnishee bank had admitted that it was liable in the sum of Rs,2,44,37,995 to the judgment-debtors and, besides, it had a sum of Rs,73,16,920 received from Bakers' Equity in the account of garnishee No,1, which garnishee was liable to the judgment-debtors for a much larger amount. On these pleas, it was claimed that the garnishee bank be directed to deposit the decretal amount in Court from out of such moneys. During the course of hearing, however, Mr. Iqbal Kazi, in the presence and upon the instructions of Mr. Waqar Hussain, sole proprietor of the decree-holders, gave up claim as regards the funds of Rs,73,16,920. Provided to the garnishee-bank for the benefit of garnishee-Haryana, by the Bankers' Equity Ltd. This relinquishment had nexus with the specific purpose of such funds, as reflected in para 2 of C.M.A. No,713 of 1989 filed by the garnishee-bank.
4. Somewhat curiously, in place of an Affidavit in Rejoinder, a Counter-Affidavit in reply to the objections was filed by the garnishee-bank on 1-11-1989 in which, inter alia, it was stated that the judgment-debtors-Farben had at the very outset, discounted the bank guarantee and that 15 bills of exchange had been issued in favour of Trans-Arabian Investment Bank, Bahrain and The London Forfaiting Company Limited, the bank guarantee in question being in respect of bills of exchange, amounts and details whereof were indicated in the letter of guarantee itself. Letter dated 10-11-1985 by the garnishee-bank to Trans-Arabian Investment Bank confirming the genuineness of 9 such drafts was attached. In response to various Telexes of the London Forfaiting Co., telex of garnishee- bank dated 1-9-1985, confirming that appropriate measures had been taken to effect remittances, on due dates, was next attached. A copy of Telex dated 3-9-1986 from The London Forfaiting Company Limited regarding 16 bills of exchange seeking specific confirmation whether the garnishee bank had completed all formalities with the State Bank of Pakistan for payment of such bills, in due course, was also annexed by the garnishee bank. Letter dated 15-4-1986 from the London Forfaiting Company saying that out of the 6 bills of exchange they had sold 3 bills to the National Bank of Pakistan was submitted too. It was thus claimed that such amounts under the guarantee were being paid to the above endorsees and not to the Judgment-Debtors Farben, which had already received full consideration by discounting the bills and were no longer beneficiaries thereof.
5. I have heard Mr. Inamul Haq for the Garnishee Bank and Mr. Iqbal Qazi for the Decree-Holders at quite some length. Mr. Inamul Haq, referring to section 60 of the Code of Civil Procedure and Order 21, Rule 46 in the same Code, has maintained that it is, inter alia, only a debt which can be attached under the referred provisions and that a debt denotes and existing and absolute obligation to pay a liquidated sum of money. Correspondingly, a sum of money, which might or might not become due or the payment of which depends upon contingencies, which may or may not happen, is not a debt. In support of his contention learned counsel has relied on Brij Kumar v. Naurangi Lal (AIR 1938 Lah. 336), Gajraj Sheo Karandas v. Sir Hukamchand Sarupchand and another (AIR 1939 Bom.90) and Meta Ram v. Firm Ram Das Joshi & Sons (AIR 1942 Lah. 275). In the first of these cases, an amount of money, due to the judgment-debtor in respect of a building contract, executed and performed by him, was attached. Objection was raised by the garnishee that the balance of money due had been appropriated against defects discovered in the building works, which appropriation was acceded to by the judgment-debtor. It was opined that the amount attached did not constitute a debt. Similarly, in the Bombay case attachment was sought in respect of money deposited by a member in an association, the deposit being subject to forfeiture and liens within the absolute control of the association. Such deposit was found not liable to attachment and the attachment was raised in appeal, on a finding that, at that moment, there was no debt to be attached. The case of Mela Ram ibid is a Full Bench decision of the Lahore High Court and deals with moneys outstanding, on a contract of sale, with the vendee, the latter undertaking to make payment of the balance in his hands to the creditors of the vendor. On attachment being made in respect of such moneys, pursuant to a decree against the vendor, the view expressed was that since the vendor could always revoke the condition of payment to his creditors, there neither being any charge of nor privity of contract between the vendee and such creditors, the sums in the hands of the vendee duly constituted a debt capable of being attached. Relevent here is also the opinion of Zaffar Hussain Mirza, J., then in the High Court, in the case of Sadiqeen Traders v. S.M.
Alam 1980 CLC 1851, to which attention has been invited by Mr. Iqbal Kazi. In such case this Court, while holding that a debt represented money, which has become due, though payable in future, on facts, declined to equate the amount held by the Collector of Customs, as security deposit, with a debt.
It is, even otherwise, now well-established that the concept of debt in section 60 and Order 21, rule 46, C.P.C. Signifies a specified sum of money, which is payable, in present or in future, on the basis of a subsisting obligation, which was become fixed. To put it differently, the sum involved may either be payable on demand or in future but, in each case, it should have become due for payment. Thus a debt is the equivalent of an existing obligation to pay, whether immediately or in future. The liability, however, must be an existing, a perfected and an absolute one. Applying these principles to the case in hand, it cannot be said, as Mr. Inamul Haq would want it to be said, that the obligation of the garnishee-bank to pay specified sums of money, under the bank guarantee, to Messrs Farben, in the simplest of terms, was not a debt. However, it still remains to be seen whether the bills of exchange drawn by Messrs Farben upon the garnishee-bank on endorsements/negotiations, if any, to third parties have or have not made any difference to the original obligation by way of debt, as it came to emerge from the transaction under consideration.
6. It is next urged on behalf of the garnishee-bank that such garnishee had extended the bank guarantee on the basis of a loan due and an obligation owing to itself by Messrs Haryana and that the latter having defaulted, the garnishee- bank has been constrained to file a suit of its own against garnishee-Haryana, which suit also is currently pending in this Court and has been numbered as Suit No, 378/89. The sum and substance of this contention is that, in reality, there is no debt owing by the garnishee-bank to Messrs Farben and that for such money or monetary dues, as have been guaranteed to Messrs Farben, the garnishee bank is itself a creditor against Messrs Haryana, the two debts thus mutually cancelling each other. In that the assets and properties of Messrs Haryana stand mortgaged with the garnishee-bank a parallel is drawn between such rights and those of an unpaid vendor under section 55 (4) (b) of the Transfer of Property Act, reliance being placed on Muhammad Iqbal v. Additional Settlement Commissioner (PLD 1971 S.C. 318), where such a charge (of an unpaid vendor) has been equated with rights under section 100 of the Transfer of Property Act. This proposition, even if it was applicable to the case, on which subject I would prefer not to express any opinion, is of no help whatever to the garnishee- bank. The reason is simple. It is the debt owing by the garnishee-bank to Messrs Farben, the judgment-debtors, that is being sought to be brought into execution and in so far as such debt is concerned it is enforcible and binds the garnishee-bank irrespective of such rights, if any, that the bank may be having of its own against another party, which party may have actually been the cause or instrumental to the creation of the indebtedness of the garnishee-bank. Such matters are different and altogether distinct and cannot, in these proceedings, be confused or made to act upon each other. The debt, due to the judgment-debtors from the bank, being actual, existing, perfected and absolute was duly amenable to attachment,
7. It is then pointed out that there had been a violation of the statutory provision of notice under Order 21, Rule 46-A of the Code as well as of the principles of natural justice, when no adequate notice of the execution application was issued to the garnishee-bank and only a notice, without copy of such application, had gone to them. Besides, no notice of C.M.A. No,1493 of 1988, the application under Order 21, Rule 46, C.P.C. Is alleged to have been served on the garnishee-bank. In answer to these objections, Mr. Iqbal Kazi urges that Order 21, Rule 22 itelf provides for notice only in some cases and not in all. Thus, as would be relevant in the instant case, no notice of execution is required where an execution application is filed within one year of the date of decree. Further, as regards notice of the execution alone going, such he says is based on a rule of practice, and that is what the procedure in execution is. Besides, according to learned counsel, while notices were ordered to be issued on the Execution and Civil Miscellaneous Applications both, due to ministerial intercession, the actual notice issued had only been one, cumulatively covering both. It is said that the Execution and the Misc. Applications are to be read together and in either, United Bank Ltd., is mentioned as the garnishee. Mr. Kazi, also, points out that pursuant to notice, served for 16-3-1989, Mr. Inamul Haq stated that he would submit objections after receipt of copies but did not urge total want of notice of the application. As to the first objection and the cognate explanation, since the decree is sought to be executed merely against the two garnishees and not against the judgment- debtors directly, notice of execution to the garnishees was essential as, on the language of Order 21, Rule 22, C.P.C. It is only in respect of parties to a decree that notice of execution may not go, where execution is filed within one year of the date of decree. It needs also to be clarified that Order 21, Rule 22, C.P.C. Conceives of mandatory notices in the three distinct situations contemplated in that provisions and does foreclose other situations where, on principle or discretion, notice ought to be addressed. Apropos the second explanation namely, that of a practice of not sending a copy of the execution application with notice of execution, the prevailing position does not appear to be very much different from that here urged. However, such a course of procedure does not seem to have any sanction of law. Notice of any application, as a rule, must always be accompanied by a copy of such application, except possibly in cases where such copy is demonstrably supplied in advance to the party noticed. Cognisant of this situation and with a view to set at rest the allegation that no notice of the application under Order 21, Rule 46 was actually served, an objection which, if sustained could have unsettled these proceedings, I had occasion to pass an order, dated 31-12-1989, whereby, upon a directed supply of due copies, such procedural lacunas as there may have been, were duly counterbalanced. The matter was heard only then.
8. Yet another objection is that the debt, if any, for which the garnishee-bank was accountable to the judgment-debtors, was based on an irrevocable bank guarantee, which debt, under all norms of municipal and international law, it was bound to pay to the judgment-debtors and, that being so, the garnishee-bank could not dishonour the irrevocable guarantee it had given to the judgment-debtors. Reliance has been placed by the learned counsel for the bank on Tarapore and Company, Madras v. Tractoro-Export Moscow (AIR 1970 SC 891), Howe Richardson Scale v. Polmex- Cekop and another (1978) 1 L.L.R. 161, Damodar Paints (Private) Ltd. v. Indian Oil Corporation Ltd. (AIR 1982 Delhi 57) and Sirafi Trading Establishment v. Trading Corporation of Pakistan (1984 CLC 381).
In order that the correct rule is deduced reference may also be made to Province of West Pakistan v. Mistree Patel & Co. PLD 1966 SC 80), Elian and another v. Mastas and others (1966) 2 LLR 495 and Jamia Industries Ltd. v. Pakistan National Refinery Ltd, PLD 1976 Karachi 644, as was done by K.A. Ghani, J., in Sirafi Trading Establishment v. Trading Corporation of Pakistan 1984 CLC 381).
9. Inter alia, on the foregoing dicta, it may be stated that by and large, bank guarantees and letters of credit are to be treated at par and that, except in the rarest of cases, such as where fraud to the knowledge of the bank is involved or the terms of the assurance itself are manifestly dishonoured or retracted, a banker is obliged to honour its commitments and Courts of law would be extremely slow in countenancing situations whereby a banker may be precluded or forced to dishonour or disregard its solemn commitments in the nature of a bank guarantee or a letter of credit of an irrevocable nature. Question, therefore, in such cases always is whether it is the rule or the exception within which a given case would fall. I am afraid, however, if a bank guarantee simpliciter was involved in these proceedings, enforcement or observance of a garnishee order against the bank would not tantamount to dishonouring the bank guarantee at all because, in such a case, pursuant to an order of the Court, the bank would be doing no more than to honour a debt, lawfully due, from the holder beneficiary of the bank guarantee in the same way as a manager, trustee or other person incharge or having custody of the assets or properties of such holder or beneficiary would have acted, on the latter's behalf, pursuant to lawful and enforceable orders of the Court.
Such would be situations where the persons liable on the guarantee or the letter of credit would be required to act upon and discharge his commitment and not to disregard or dishonour the same, the only difference being that compliance would be not to the holder or beneficiary directly but, by operation of law, his behalf. No violation of Municipal law or of international law or of any solemn obligations of the garnishee-bank would thus, on principle, be invocable by compliance of a garnishee order simpliciter in respect of the bank guarantee or even letter of credit because such a bank guarantee, as here, also has a reference to the letter of credit, which was the source for the issuance of the bank guarantee.
10. Mr. Inamul Haq then urged that, where a debt due is payable outside Pakistan and was also assigned outside Pakistan, Courts in this country have no jurisdiction to attach the debt solely on the ground that the debt is payable by somebody, which is functioning in Pakistan. Reliance in such context is placed on Michelin Tyre India Limited v. Jeewandas & Sons (AIR 1934 Sind 135 (1)). On the other hand in Bissesserdas Daga and others v. Gabdumal Brahmina and another (AIR 1934 Nagpur 167), the rule laid down is that an executing Court has no jurisdiction to pass any prohibitory order unless either the debt to be attached is within the territorial jurisdiction of that Court or the person against whom it is claimed resides within its jurisdiction. I would prefer to bypass the question of locus of the debt, as that can be a complicated and even a tricky question in these situations. The second alternative, as pointed out In re: Bissesserdas can be equally efficacious. It will, therefore, for our purposes, suffice if only the person against whom the debt be enforceable is located within the jurisdiction of the Court. In matters of this genus, inter alia, a Court is to see whether, all things being equal, effectiveness of its orders can be assured and maintained.
This precondition seems to have been met in these proceedings. The debt sought to be resorted to in this execution is clearly payable by the second garnishee (a local bank) to the judgment debtors and, that being so, the question of jurisdiction has to be decided in the affirmative.
11. It was lastly pointed out by Mr. Inamul Haq that the bank guarantee of the garnishee bank based as it was on the letter of credit favouring the judgment-debtors in itself did not mean much but, in turn, provided for issuance of some 16 bills of exchange drawn by Judgment-debtors-Farben upon the garnishee-bank, such bills of exchange being payable in succession, six months apart from each other. It was also pointed out that these bills of exchange, with different and successive dates of payment were not only actually drawn but even negotiated by judgment-debtors-Farben in favour of third parties, thereby extinguishing the rights of the judgment-debtors altogether and creating independent rights on such bills in favour of the present endorsees and, ultimately, the holders in due course. On this contention, there being no current entitlement of judgment- debtorsFarben against the garnishee-bank there is nothing which could be attached by way of debt owning from or in the hands of the garnishee-bank to or favouring the judgment-debtors- Farben, which on such pleas are said to have washed off their hands completely of the matter.
Reliance has been placed on Lagdir Nauji v. Surendra Mohun Nag and another (AIR 1939 Cal. 606: 42 C.W.N 971). There can be no question that only an existing debt due by the garnishee to the judgment debtor can be realized following upon an attachment of such debt in a decree but where such debt stands extinguished, discharged or lawfully assigned creating third party interest in relation thereto, prior to an effectual order of attachment, there would either be left nothing to be attached or only such interest, right or entitlement in the debt, as may still be vesting in the judgment-debtor and no more. It will, however, always be a question of fact whether there has actually been any such satisfaction, discharge, extinction, assignment or other creation of charge in respect of the specific debt owing by a garnishee to the judgment-debtor. A further question, in the context of negotiable instruments, may well be whether consideration, good faith and want of notice etc., prerequisites for a holder in due course, are or are not to be found in the context of negotiation or endorsement, if any.
12. As regards the objection pertaining to the discounting of some 16 bills of exchange by judgment-debtors-Farben, originally, said to have been, in favour of Trans Arabian Investment Bank, Bahrain, and the London Forfaiting Company Limited, it is urged by Mr. Iqbal Qazi that such plea firstly, does not arise on facts and law and secondly, has been taken belatedly, for the first time, in the counter-affidavit affirmed on 1-11-1989. As to the competence of the objection citation is made of K.B. Cooperative Credit Bank Limited v. H.S. Verma (AIR 1962 Born. 121) and M.E. School Committee v. Noble Raj (AIR 1975 Mad. 19). In the case from Bombay jurisdiction attachment was ordered by the Court of Compensation due to the judgment-debtor from the Displaced Persons Compensation and Rehabilitation Department whereas in the Madras case Government grant of money for a specific purpose was found to be absolute, purpose thereof being disregarded, and attachment was ordered. Without going into the niceties of these judgments the principle governing such attachments of moneys in the hands of third parties is that the same are effective fully if moneys involved undoubtedly belong to the judgment-debtor, effective partially if limited rights of the judgment-debtor are found to subsist therein and such are ineffective totally if the judgment-debtor had never had any right or interest therein or if, having had such right or interest, has in due course of law but not collusively or fraudulently, lost it. The last is exactly what is pleaded by the garnishee-bank, purportedly, to protect itself against third party action(s). This question, manifestly, would be required to be examined appropriately.
13. As to the second contention of Mr. Qazi, it is said that, on 10-12-1989, when the two applications came up for consideration and orders were passed, the position taken was that the garnishee- bank was still to pay some rupees three crores to the judgment-debtors. The order, therefore, was virtually an order on admission and, therefore, subsequent documents, such as they may be, are not even to be seen since the new stand taken tantamounts to approbation and reprobation at the same time. Reference is made to Nanak Chank v. Chbeda Lal (AIR 1927 All. 41 and Toola Goolal v.
John Antone (I L R 11 Bom,448) in support of the proposition that where debt is not denied or not denied in Coto such can be reached in garnishee proceedings. There can be no cavil with the proposition that an admitted debt cannot be withheld by a garnishee following upon due orders of attachment. It is also correct that due details of third party interest in such debt were not initially amplified by the garnishee and such have emerged in the counter-affidavit verified on 1-11-1989. It is also not unlikely that the judgment-debtors-Farben may have manipulated in making or effecting negotiations but, at the same time, genuine third party interest, for due consideration, in good faither and without notice, cannot be ruled out. If the bills of exchange have been endorsed on consideration, in good faith and without notice property in the debt owing by the garnishee to the judgment-debtors can lawfully have passed to the holders in due course, if any. On these pleas Mr. Inamul Haq suggested that evidence may be recorded as to the effect of the referred negotiations and the current liability of the garnishee. Bank. Mr. Iqbal Kazi opposed such a move saying that it was too late in the day to enter into such an exercise. It is further urged that the garnishee-bank took a chance and protracted the proceedings and thus rendered itself disentitled to any judicial discretion. On merits, House of Lords case of Rogers v. Whitley (1892 A.C. 118), has also been cited where a banker was held not to be liable in damages or otherwise for dis-honouring cheques drawn by the judgment-debtors on their account, whilst an order of attachment as regards such account remained in force. Prospective dishonour of the bills of exchange in this case is said to be similar to that of the cheques in the cited case. I regret I cannot agree. There is an obvious difference between the holder of an account drawing cheques on such account, without there being any third party interest, and bills of exchange issued and negotiated, possibly genuinely, in favour of verifiable parties, who on the basis of an irrevocable bank guarantee come to have, probably, an honest and valuable interest without notice of defect or clog on the title of the drawer. Such interests, if any, are projected here and it is only just and in consonance with time honoured judicial principles to consider all such rights as there be or are relevant. The element of delay hightlighted by Mr. Iqbal Kazi would remain an open question and may have such repurcussions on the objections as be warranted. Besides, it is, not with the effect of an order of attachment alone that we are concerned here. Such effect is obvious. The second garnishee is precluded from paying upon the bills. It cannot be so except at its own NASIR ASLAM ZAHID, J.--The petitioner had been allotted an peril. The primary question, however, is as to whom is the debt owe.
If it is to the judgment-debtors there is not much to be done. If third parties have come to have genuine rights, we shall have to see what such rights are.
Subject to the above, I would, therefore, direct the office to fix this matter for evidence to be initially led by the second garnishee on making such parties to these proceedings, as be called for. The decree-holders and the judgment-debtors, if they so choose, can also lead such evidence in the matter as they deem appropriate. The case shall be laid before an Original Side Judge of the Court, according to Roster. Till further orders, however, the undertaking given by the garnishee on 3-1-1990 shall hold the field.