1. Plaintiffs have filed this suit for recovery of Rs.5,92,037.32 with interest thereon at the rate of 11 % per annum on the averments that at the request of defendant No.1 they had allowed a limit to the extent of Rs.25,00,000. The said defendant withdrew various amounts from time to time from its Account bearing No.276 with the plaintiffs Corporate Branch, I.I. Chundrigar Road, Karachi.
2. Defendants Nos.2 to 4 being Directors of the Company guaranteed for repayment of the plaintiffs' dues which may be found, due and payable at any time. They executed a letter of guarantee in favour of the plaintiffs. According to the plaintiffs a sum of IZs.5,92,037.32 had fallen due and payable by the defendants jointly and severally which they failed to pay in spite of repeated requests and demands.
3. Case of the defendants as reflected in their written statement is that they did maintain Account No.276 with the plaintiffs $ranch but no loan or overdraft facility was allowed to them. They denied validity of the alleged guarantee document and claimed that the plaintiffs had obtained their signatures on a blank form in accordance with usual banking practice. They denied the correctness of various items of account as shown in the statement of accounts and particularly plaintiffs' right with regard to transfer debit entry of Rs.2,77,926 shown on 19-7-1972. In the counter- claim on behalf of defendant No.1 it was alleged that plaintiffs had advanced certain amounts to them against pledge of goods and the said advance used to be 50% of the value of the goods pledged. They described the goods pledged with the plaintiffs viz. 450 bales of cotton yarn worth Rs.6,10,000 for the sale whereof they neither received any notice for sale thereof nor did the plaintiffs return the said goods to them. On adjustment of accounts and subject to the amount found due defendants claimed that the plaintiffs were liable to pay to them a sum of Rs.1,47,000 and in the alternate they claimed their title to request for sale of the said goods and after settlement of accounts entitled to a sum of Rs.1,47,000.
4. After filing of the written statement by defendants, plaintiffs filed an application under Order VI, Rule 5, C.P.C. Seeking an order against the defendants to give further and better particulars in relation .To the facts mentioned in the counterclaim. In their reply to this application defendant No.1stated that the dates of pledges were not within their knowledge as the records were available with the plaintiffs. They further alleged that the goods were illegally sold by the plaintiffs and that the details were not available with them. It was further added that amount of Rs.1,47,000 had been calculated after adjusting the claim of the plaintiffs. '
5. In reply to the counterclaim, plaintiffs stated that "loan against packing credit" account was opened on 14-3-1972 from where two amounts, one of Rs.2,12,000 and the other of Rs.58,000 were transferred to the C.D. Account No.276 of defendant No.1 who was to pledge the cotton yarn in respect of out standings in the loan against packing credit account. Plaintiffs stated that defendant No.1 did not pledge any goods whatsoever with them, therefore, question of sale or notice of sale did not arise. It is the case of the plaintiffs that since defendant N.o. 1 was not pledging the goods and was not interested in continuing the "loan against packing credit" account, they had no alternative but to reverse the entry of Rs.2,77,000 by debiting C.D. Account No.276 of defendant No.1 against the credit of equivalent aniouru as well as Rs.926 on account of interest.
6. Pleadings of the parties were reflected in the following issues:--
(1) Whether plaintiff obtained signatures of the defendants on blank documents? If so, to what effect?
(2) Whether the plaintiff has wrongly debited Rs.2,77,926 to defendant's account on 19-7-1972?
7. (3)Whether the plaintiff is not entitled to any interest?
8. (4)To what decree, if any, is the plaintiff entitled?
9. Following additional issue was framed vide order, dated 14-5-1991:-- "Wether the defendant No.1 had pledged their stocks of cotton yarn with the plaintiffs and whether the plaintiffs afe, liable to defendant No.2 for a sum of Rs.1,47,000.
10. In support of their case defendants examined Farooq Umar, defendant No.2 whereas the plaintiff- Bank led the evidence of Badre Alain Zaidi, Assistant Vice-President of the Bank.
11. Upon hearing learned counsel for the parties and going through the relevant evidence on record, my findings on each issue with reasons are as under:-- Issue No.1: Onus of proof of this issue lay on the defendants. Defendants' witness Farooq. Umar who is one of the Directors' of defendant No.1 and joined as defendant No.2 to the suit has remained silent in his examination-in-chief spread over three pages. In his cross-examination he was confronted with a resolution passed in the meeting of Board of Directors of defendant No.1 on 10-3-1972 resolving to arrange a loan or advance of Rs.40,00,000 for the company with the plaintiff's Bank and authorising one of the Directors to make such arrangements and to sign, execute acid deliver such documents as may be required for the grant of loan from time to time. He produced the resolution duly .0igned by. Him Exh.5/8. He was also confronted with a demand promissory note, a letter of arrangement and a letter of continuity which he produced Exhs.5/9, 5/10 and 5/11. For the first time at this stage he stated that he had signed these documents in blank in which the date and amount were filled in subsequently by the plaintiff. Defendants cannot be allowed to take this stand at this stage particularly when the witness categorically admitted that he did not see anything wrong with the aforesaid documents Exhs.5/8 to 5/11 as well as a guarantee by Haji Moosa Umar and Iqbal Umar by way of security for the advances Exh.5/12 which was alright and valid according to the witness. It may be stated that Exhs.5/9 to 5/12 are, dated 17th July, 1972 and duly signed by this witness, the last document having- been signed by remaining two Directors, namely, defendants Nos.3 and 4 as well. In the absence of any evidence to the contrary, it would be just, proper and legitimate to answer the issue in negative and I hold accordingly.
12. Issue No-2: In .This connection P.W: Badre-Alam Zaidi stated on oath that in July, 1972 defendant No.1 was allowed facilities as. "loan against packing credit" and they opened - an account in the name of defendant No. 1 known as "loan against packing account". He has referred to credit entry, dated 14- 3-1972 and 18-3-1972 in the sum of Rs.2,12,000 and Rs.58,000 respectively making corresponding credit entries in Account No.276 maintained by defendant No. 1. He referred to two cheques Exhs.5/1 and 5/7 to show that defendant N0.1 had withdrawn these amounts under the signature of defendant No-2 which were also admitted by the defendants' witness. Both the amounts were debited to loan account in the name of defendant No.1 Witness explained that 'on 8th July, 1972 cash credit Account No.276 of defendant No.1 was debited with an amount of Rs.2,77,926 which included an amount of 85.7,926 as interest and equivalent credit was given to loan account of the defendants. He also produced statement of account Exh.6 duly certified under the Bankers Book of Evidence Act, 1891. Besides the above two cheques, plaintiffs produced credit vouchers Exh.5/3 indicating credit of Rs.2,12,000 to the credit of defendants Account No.276 on account of "loan against packing credit" for 250 bales of cotton yarn to be received by defendants from Ismail Textile Mills Ltd. Against the delivery order. Defendants' witness D.W. Farooq Umar also admitted this document as credit voucher which speaks for itself. In the light of withdrawal of a sum of Rs.2,70,000 by defendants through the cheques referred to above plaintiffs were legally entitled to debit this entry against current account of the defendants being C.D. Account No.276 on 8-7-1972 which of course included interest of Rs.7,926. Indeed there was nothing wrong with this entry and the plaintiffs were legally entitled to, transfer the credit from one account to another account of the defendants in the absence of any agreement. I am fortified in this view by the judgment in the case of Messrs Continental Syndicate of Trade v. Lloyd Bank Ltd. PLD 1966 Kar. 556 in which a Division Bench of this Court held that unless precluded .By agreement, the Banker is entitled to combine different accounts kept by the customer in his own right, whether deposit or current and to exercise his lien or set off for the resulting balance. Issue No.-2 is, therefore, answered in negative.
13. Additional Issue: Onus of proof of this issue rests on the defendants but they have miserably failed to discharge the same. As observed earlier they could not provide any information or details in respect of the alleged pledges of cotton yarn bales with the plaintiffs when called upon to do so by the plaintiffs vide their application under Order VI, Rule 5, C.P.C. They were further called upon under Order XI, Rule 12, C.P.C. To discover on oath all documents, accounts, receipts, vouchers, etc. In their possession relating to the matters in dispute but on their own showing they failed to produce even a single document. D.W. Farooq Umar was constrained to admit the notice received, by their counsel Exh.5/4. He did not remember from which Textile Mills the cotton yarn was purchased but he stated that this could be verified from the cheques on record. He produced cheques Exhs.5/1, 5/2, 5/6 and 5/7. He conceded that payees of those cheques are the Mills from which the, cotton yarn was purchased. While cheque Exh.5/2 bears an endorsement to the effect that this cheque is not valid for payment unless payees confirmed below to the effect that the delivery orders for 100 bales (40 thousand Lbs) 40S Hanks in favour of the drawers has been delivered and valid receipt obtained, remaining three cheques do not bear any endorsement and were received for collection on account of defendant No.1 and accordingly passed for payment. Even cheque Exh.5/2 bears endorsement payees' confirmation by Gulberg Textile Mills Ltd. In whose favour the cheque was drawn. All these cheques tend to show that defendants had issued cheques in favour of different Textile Mills and received delivery by themselves and no delivery was taken by the plaintiff's Bank.
14. D.W.'Farooq Umar was called upon to explain whether defendants' stock register and ledger indicated that the goods were pledged with the plaintiff to which he replied in affirmative. On being asked whether he had any document signed by the plaintiff to show that the delivery of cotton yarn was given to the Bank he replied in negative adding further that the defendant did not have such documents as the cotton yarn was delivered by Textile Mills direct to the Bank. Without producing any documentary, evidence the witness falsely alleged that Syed Shabihul Hassan, plaintiffs' Branch Manager at the relevant time used to obtain delivery orders from the Textile Mills before passing the defendants' cheques for payment knowing fully well that the said Manager had left the defendant-Bank in 1974 and his whereabouts were not known. However, he was constrained to admit that the Textile Mills never sent any intimation to the defendant regarding delivery of goods to the plaintiffs, who did not receive any intimation from the plaintiffs as well that any goods had been received from the Textile Mills. The witness was questioned that he had not produced any correspondence with the Bank to which he replied in affirmative explaining that due to lapse of time he had been unable to trace them. The explanation furnished by the witness on the face of it is neither true nor convincing because after filing of the written statement in January, 1976 raising a counterclaim they were called upon by the plaintiffs in February, 1976 to discover on oath all the documents, accounts, receipts, vouchers, etc. In their possession but they did not care to produce 'any. No doubt, the matter had become old in 1991 when the evidence was recorded it was sufficiently recent in 1976, when the defendants were called upon to produce relevant documents.
15. In the circumstances, there is no escape from the conclusion that the defendants failed to establish that they had pledged their stocks of cotton yarn with the plaintiffs as alleged. At any rate, the plaintiffs are not liable to defendant No.2 for a sum of Rs.1,47,000 because the defendants utterly failed to establish their counterclaim by way of pledging the stock of C cotton yarn with the plaintiff's Bank or sale thereof by the Bank.
16. Issues Nos.3 and 4 Plaintiffs produced letters Exhs.5/14 to 5/16 demanding adjustment of overdraft account. By way of letters Exhs.5/17 and 5/18 plaintiffs reminded them for an adjustment and failure of the defendants to give them export business and keep drawings against hypothecation -of stocks. All these letters were admittedly received by the defendants but they failed to furnish any reply rebutting the claim of the plaintiffs. Statement of accounts produced by D.W.1 if examined in juxtaposition with statement of account Exh.6/1 produced by plaintiff's witness would show that there are corresponding er tries in the two accounts in the name of defendant No.1 and it shows a balance of Rs.4,70,480.80 as on 8-7-1972. This account alongwith interest at the rate of 11 % per annum has been worked out at Rs.5,92,037.32 which is due and payable by the defendants. As regards liability of the defendants to pay interest on the amount due, section 34-B, C.P.C. Permits the award of interest at 2% p above the Bank rate or the rate of interest agreed upon whichever is higher. It is admitted that at present the Bank rate is 10% as such the plaintiff would be entitled to claim interest at the rate of 11% from, the date of suit and 12% from the date of decree.
17. In-view of my findings. On the aforesaid issues suit is decreed with costs and interest as stated above. Counterclaim made by defendant No.1 in the sum of Rs.1,47,000.00 is dismissed.