G. H. MALIK, J.- -The suit has been filed by the plaintiff against the defendants for recovery of Rs.l,14,803.02 with interest thereon. The suit was originally filed against six defendants including Aslam Ali, the defendant No.4. Subsequently, the legal representatives of the defendant No.4 were substituted as defendants Nos.4(i),(ii),(iii) and (iv). The claim of the plaintiff in the suit is that on or about the 6th February, 1968, overdraft of Rs.15,000/-was granted to the defendant No.1.
Subsequently, on or about lst August, 1968, the overdraft limit was enhanced to Rs.l,75,000/- and was utilized by the defendant No.1 in full. As security for repayment of the plaintiffs dues, the defandant No.1 executed a promissory note dated the 15th August, 1968, in favour of late K.B. Alam Ali and the defendants Nos.2,3,5 and 6, who, in turn, endorsed it to the plaintiff. On the same date, late K.B.Alam Ali and the defendants Nos.2,3,5 and 6 and the late Aslam Ali executed a guarantee.
The defendants Nos.2 and 6 mortgaged their property by deposit of title deeds as security for repayment of the plaintiffs dues. On the 30th June, 1971, a sum of Rs.82,328.17 was due and payable by the defendants to 1h? Plaintiff and on the same date, various documents were executed by the defendants. Those documents are (1) a balance confirmation slip signed by defendant No.1, (2) promissory note for Rs.82,330/- executed by defendant No.1 in favour of the defendants Nos.2,3,5 and the late Aslam Ali who, in turn, endorsed it to the plaintiff and (3) guarantee by the defendants Nos.2,3,5 and the late Aslam Ali. The defendant No.1, by its letter dated the 31st March, 1974, acknowledged its liability and promised to pay the plaintiffs dues. Finally, the plaintiff sent a notice of demand dated the 25th January, 1972, to the defendants but the defendants failed to pay the plaintiffs dues. The defendants filed their respective written statements in reply to the plaint and, upon the pleadings of the parties, following issues were settled:-
1. Whether the property in suit is mortgaged with the plaintiff?
2. Whether the guarantees and pronote are void consideration? And without
3. Whether any documents is forged?
4. To what relief is the plaintiff entitled?
2. The plaintiff examined Ziauddin and Raza Imam as its witnesses whereas the defendants did not lead any evidence at all.
3. I have perused the pleadings of the parties and the evidence led on behalf of the plaintiff and heard the arguments of the learned counsel for the parlies. My findings on the issues are as follows:-
4. ISSUE No.1. In paragraph 5 of the plaint, the plaintiff has alleged that the defendant No.2 and the defendant No.6, as security for repayment of the plaintiffs dues, mortgaged their property by depositing the title deeds relating thereto with the plaintiff. Ziauddin (PW1)-has deposed that the defendants Nos.2 and 6 mortgaged their property; and has produced a Search certificate (Ex.13), a letter dated the 19th July, 1965, from the Military Estates Officer (Ex.14) and Income Tax Clearance Certificate (Ex.15). Raza Imam (PW2) has deposed that the defendants Nos.2 & 6 mortgaged their property by deposit of title deeds and produced a sub lease in Form 'A' (Ex.20) and a lease deed dated the 26th April, 1965(Ex.21). The witness Ziauddin (PW.1) has not been cross examined in relation to the mortgage whereas the witness Raza Imam stated in his cross examination that a register of mortgages is maintained in the main branch of the plaintiff and that the entry about the present mortgage was not made in the register in his presence. Bakhtaran, the learned counsel for the defendants, invited my attention to paragraph 5 in the written statement of the defendant No.2 and to paragraph 5 in the written statement of the defendant No.6. Both the paragraphs are identical and text thereof is reproduced below:- "The allegations made in para 5 are denied. The plaintiffs plea in this para is false, dishonest and an attempt to commit fraud. It is denied that any equitable mortgage had been raised to secure the alleged loan. It is denied that any mortgage was raised. The date of the alleged mortgage has been purposely with held nor the alleged title deeds are filed, alongwith the plaint. The plaint suffers from faulty pleadings. It is denied that any title deeds had been deposited."
Mr. Mansoorul Arfin, the learned counsel for the plaintiff, objected to the written statement being referred to on the ground that it cannot be treated as substantive evidence as the defendants did not appear as witnesses at the trial. He relied on the decision of MALIK MUHAMMAD ISHAQUE V.
MESSRS EROSE THEATRE AND OTHERS (PLD 1977 S.C. 109). The contention of the learned counsel for the plaintiff is correct. Bakhtaran then contends that, as required by Section 135 of the Companies Ordinance, 1984, the plaintiff has to maintain a register of mortgages and entries of all mortgages have to be made therein. Sub- Section^) of Section 135 of the Companies Ordinance, 1984, provides as follows:- "Every company shall keep a register of mortgages and enter therein all mortgages and charges specifically affecting property of the company and all floating charges on the undertaking or on any property of the company, giving in each case a short description of. The property mortgaged or charged, the amount of the mortgage or charge and, except in the case of securities to bearer, the names of the mortgages or persons entitled thereto.
Perusal of the provision of Sub Section (1) shows that the entries to be made in the register of mortgages to be kept by every company are entries affecting the property of that company and not entries relating to properties of other persons mortgaged to the company. In this case, no property of the plaintiff was affected by the mortgage created by the defendants in favour of the plaintiff. Section 135 of the Companies Ordinance, 1984, is, therefore, clearly not applicable. Further the present mortgage was created before the Companies Ordinance, 1984, was promulgated and at the relevant time the provision applicable was Section 123 of the Companies Act, 1913, which is in relative part reproduced below: - "123. Company's register of mortgages.- (1) Every company shall keep a register of mortgages and enter therein all mortgages and charges specifically affecting property of the company (and all floating charges on the undertaking or on any property of the company), giving in each case a short description of the property mortgaged on charged, the amount of the mortgage or charge and (except in the case of securities to bearer) the names of the mortgagees, or persons entitled thereto."
Section 123 of the Companies Act, 1913, it will be seen, is in the similar terms as Section 135 of the Companies Ordinance, 1984. The provision, therefore, is also not applicable. Finally, Bakhtaran contends that there was no proof that the documents of title were deposited by the defendants Nos.2 & 6 for the purpose of creating a mortgage. He submitted that the documents are deposited with banks for several purposes and that it was for the plaintiff in this case to prove positively that the documents in question in this suit were deposited with intention to create a mortgage the argument has no merit. Admittedly, the plaintiff is in possession of the documents of title; and it has alleged that they were deposited with intent to mortgage the relative property. The plaintiffs witnesses have supported its case and no question was put to then in cross examination to suggest that the documents might have been deposited for a purpose other than to mortgage the property. Mr. Arfin invites my attention to the Clearance Certificate(Ex.15) which shows on the face of it that it was obtained by the defendants for the purpose of mortgaging the property to the plaintiff. The Income Tax Clearance Certificate is stated, on the face of it, to be valid upto a particular date and to relate only to the property mentioned therein "whein is intended to be mortgaged for consideration of Rs.75,000/- to National Bank of Pakistan". I am, therefore, of the opinion that the defendants Nos.2 and 6 have mortgaged their property mentioned in the suit to the plaintiff.
5. Issue No.2 Bakhtaran contends that no advances, except to the extent of Rs.286/-, were granted by the plaintiff to defendant No.1 after the execution of guarantees and that the guarantees having been executed in consideration of the plaintiff "having agreed.... To grant" cash credit facilities to the defendant No.1, could not be applied to the advances which had already been granted before the guarantees were executed. He submits, therefore, that the guarantees are without consideration except to the extent of Rs.286/-; and that the promissory notes are, for the same reason, also without consideration. It is, therefore, necessary to examine the guarantees and to ascertain the intention of the parties. The guarantees provide, in relevant pans, as follows:- In consideration of the National Bank of Pakistan (hereinafter called "the Bank") having agreed at my/our request to grant to M/s. Alam Industries Ltd. (hereinafter referred to as "the borrower") accommodation by way of cash credit.~..On condition that such cash credit shall., be secured by the promissory Note hereinafter mentioned I/we the undersigned., have delivered to the Bank a Promissory Note ....Made by the Borrower in favour of me/us and for sufficient consideration to me/us endorsed by me/us to the Bank or order the said Promissory Note being, intended a guarantee to the extent of Rs..... On the understanding that the Bank shall be at liberty to take steps to enforce payment of the said Promissory Note at any time after notice in writing demanding payment thereof..."
They further provided that- "I/we further agree that any Promissory Note or Notes that may hereafter be given by us in renewal of or substitution for the said Promissory Notencephalus be held by the Bank upon and subject to the same terms and conditions as are herein expressed and contained with reference to the said Promissory Note."
It would appear that although in the opening clause of the guarantee, the consideration for the guarantee is expressed as the bank "having agreed" to grant cash credit yet the second part of the guarantee reproduced above obviously contemplates that a promissory note or promissory notes may be executed by the guarantors in substitution for the promissory note mentioned in the guarantee and such promissory note, executed in substitution, would be held subject to the same terms and conditions. Such subsequent promissory note would evidently be for an advance which has already after the execution thereof. The true intention of the parties may be gathered not only from the language of the document but that, language may be construed in the light of the surrounding circumstances in which the guarantees were executed in order to arrive at to the true intention of the parties. See Jhada Singh v. Wahid-and-Din (1916) ILR 38 All. 570 (P.C.) at 574) and Hilalsing-Govinda Patil v. Udesiitg Vithal (AIR 1938 Bombay 125). The first guarantee (Ex.7) was executed on the 15th August, 1968, when according to Bakhtaran, a substantial part of the advance had already been granted to the defendant No.1; and on the same date, several documents including a promissory note (Ex.6) were executed. The parties were obviously aware that on that date i.e. The 15th August, 1968, that the bank had already advanced, but of the amount of Rs.1,75,000/- fairly substantial amount to the defendant No.1. With regard to the second guarantee (Ex.10), the case of the plaintiff, as set out in paragraph 6 of the plaint, is that on 30th June, 1971, a sum of Rs. 82,328.17 was due and payable by the defendants and that, on the same date, they executed various documents including the guarantee (Ex.10) and the promissory note (Ex.9). This allegation has not been controverted and it clearly shows that the defendants were aware on the 30th June, 1971, that the amount mentioned in the guarantee had already been advanced to the defendant No.1 and was due from it to the plaintiff. In the circumstances of the case, therefore, the guarantees in question were intended to secure not only the money which the bank may advance after the respective dates thereof but also for any moneys which may already have been advanced. The consideration for the guarantee, as stated above, was good consideration as under Section 2(d) of the contract Act, any act done by the promise at the requestion of the promisor is sufficient consideration. I, therefore, hold that the guarantees were executed for consideration. The other point to be noted in connection with the guarantees is that the sureities have not thereby agreed to repay the plaintiff the amount due by the defendant No.1 but have only agreed that the amounts mentioned in the guarantees shall be secured by the promissory note executed by the defendant No.1 in favour of the other defendants and endorsed by them to the Plaintiff; and it is the promissory notes so endoresed which were intended to be a guarantee in favour of the plaintiff and which the bank was at liberty to enforce at any time after notice in writing demanding payment thereof. That the promissory notes were endorsed by the defendants in favour of the plaintiff for consideration is expressly admitted in the guarantees and was not challenged by Mr. A.R. Akhtar in any way. Since it is those promissory notes which the plaintiff is n6w seeking enforce, the question of any consideration as between the plaintiff and the defendant No.1 becomes irrelevant.
6. With regard to the promissory notes, Mr. Mansoorul Arfin, the learned counsel for the plaintiff, invited attention to Section 37 of- the Negotiable Instruments Act, 1881, which provides , inter alia, that the maker of a promissory note is a principal debtor and the parties thereto are liable thereon as sureties for the maker. It is, therefore, clear that, independently of the guaranties, the defendants Nos. 2, to 6 are sureties for the maker of the promissory notes, who is the defendant No.1 herein and the alleged absence -of consideration as between the plaintiff and the defendant No.1, in relation to the promissory notes, is of no consequence as provided by Section 43 of the Negotiable Instruments Act, 1881, which provides as follows:- "43. Negotiable Instrument made, etc., without consideration: A negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration, which fails, creats no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him may recovery the amount due on such instrument from the transferor for consideration or any prior party thereto, (under-lining is mine).
In this case, the plaintiff to whom the promissory notes were transferred by way of endorsement are holder for consideration and are, therefore, entitled to enforce the said promissory notes notwithstanding any absence of consideration from the defendant No.1 to the plaintiff. Further, the plaintiff having admittedly obtained the promissory notes for consideration is a holder in due course thereof as provided by Section 9 of the Negotiable Instrument Act and the defendant No.1 is liable on those promissory notes to the plaintiff as provided by Section 36 of the Act. I, therefore, hold that, in any event, the defendants are liable thereon.
7. Issue No.3 to the effect, whether any of the documents are forged, was not pressed by Mr. A.R.
Akhtar.
8. Issue No.4. In the light of the above findings, the plaintiff is entitled to the reliefs claimed in the suit. It is, therefore, hereby declared that the amount due to the plaintiff on the basis of the mortgage set out in the plaint is Rs.1,14, 803.02, as on the date of the suit, with interest thereon at the rate of 11% per annum with quarterly rests from the date of the suit till payment and costs and direct that a preliminary decree, against the defendants Nos.2 & 6, in Form 5-A, Appendix 'D', 1st Schedule, C.P.C., be prepared. I further decree the suit of the plaintiff against the defendants jointly and severally for Rs.1,14,803.02 with interest as aforesaid and costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.