1. Plaintiff has filed this suit for recovery of Rs,26,05,46,345.69 and for sale of mortgaged property.
2. Case of the plaintiff is that defendant No,1 executed and delivered to the plaintiff various promissory notes in respect of various credit facilities granted to them viz. Promissory note seven in numbers marked Annexures A-1 to A-7. Defendant No,1 had earlier deposited title deeds in respect of its immovable property bearing Plot No,A-15, measuring 9.80 acres situated in S.I.T.E., Lyari Quarters, Karachi together with building, sheds, structures, plants, spare-parts and appurtenances, fixed, constructed or attached therein and also executed registered mortgage-deed dated 31-5- 1995, a further registered mortgage-deed dated 21-5-1978 and memorandum of deposit of title deeds dated 11-5-1981 and after execution of recited 7 D.P. Notes defendants 2(i) to 2(iv), 3, 4 and 7 also executed letter of guarantee dated 4-3-1982 and guaranteed the repayment of plaintiff's dues to the tune of Rs,60,00,000 exclusive of interest, charges and costs. Letter of guarantee dated 4-3- 1982 is Annexure 'D'. Similarly defendant Nos. 2(i) 2(ii), 2(iv), 3 and 4 executed and delivered to the plaintiff a letter of guarantee dated 26-4-1982 guaranteeing the repayment of a sum of Rs,75,15,000 exclusive of interest, charges and costs which is marked as Annexure 'E' same defendants guaranteed the repayment of Rs,33,00,000 as above vide guarantee dated 25-11-1982 marked as 'F' so also defendants 2(i) to 2(iv), 3 and 4 guaranteed the repayment of Rs,197,53,323 exclusive of interest charges and costs, executed letter of guarantee dated 28-12-1982 marked as Annexure 'G'. Likewise defendants executed guarantees for repayment of Rs,17,00,000 as Annexure 'H', Rs,6,31,00,000 Annexure 'I' and Rs,16,700,000 marked as 'J.. For an amount of Rs,75,15,000 created a registered collateral mortgage of their factory property situated at Tehsil and District Faisalabad marked as 'K'. Defendant Nos.2(i) to 2(iv) as partnership of defendant No,2 guaranteed the repayment of Rs,75,15,000 inclusive of interest, charges and costs and executed guarantee as marked 'L-1 to L-4' dated 11-1-1982. Defendants 5 and 6 created mortgage of their 2 properties bearing No,23-A/II, Khyaban-e-Tanzeem, Defence Housing Authority, Karachi, and Property No,A- 299, Block I, Gulshan-e-Iqbal, Karachi. The mortgage was created through a registered mortgage deed registered by the Sub-Registrar, 'T' Division IV, Karachi on 6-4-1982 which is marked 'M and N'.
3. That for further security for the repayment of plaintiff's dues defendant No,2(iv) by way of registered Collateral Mortgage Deed dated 26-8-1982 created mortgage of the property bearing No,11/1 Khyaban-e-Hafiz, Defence Housing Authority, Karachi for an amount of Rs,15,00,000 which is marked '0'. That defendants failed/neglected/refused to pay the outstanding balance of plaintiff's dues in respect of the said facilities in spite of repeated requests and demands made, final notices dated 10-11-1991, 11-11-1991, 12-11-1991 and 13-11-1991 were sent to the defendants demanding payment of plaintiff's dues which are marked 'Q-1 to Q-11'. According to the plaintiff defendant No,1 is a pro forma defendant and plaintiff has already filed petition bearing No,Judicial Miscellaneous No,39 of 1991 as such company in the suit has been described as defendant No,1 in the title of the suit. After registration of the suit process through three modes viz. Through registered post A/D, by bailiff and also by way of publication in daily Dawn were effected. According to the report defendants stood served through the three modes of service as required under the law.
4. Applications under Order 37, Rule 3, C.P.C. Have been filed with a prayer to grant unconditional leave to defend the suit on merits.
5. Mr.Tasawar Ali Hashmi, the learned counsel has contended that defendants were served through bailiff on 31-7-1993, that the suit is time-barred and plaintiff has suppressed material facts disentitling them to claim any relief. That plaintiff has already chosen to file proceedings for the recovery of the loan and has filed winding up petition against defendant No,1 being Judicial Miscellaneous No,39 of 1991 as such any subsequent proceedings on the identical issue against the defendants is barred under Order 2, Rules 2(2) and (3), C.P.C. The subject-matter in issue in the instant proceeding is directly and substantially in issue before the Company Judge. That various promissory notes shown as Annexures A-1 to A-7 in para. 4 of the plaint are patently time-barred and promissory note dated 26-4-1982 is without consideration. The defendant No,1 was never advanced Rs,75,15,000. The statement of current account does not show any credit entry of alleged loan of Rs,75,15,000. That in regard to promissory note dated 25-11-1982 although the loan account has been shown for sum of Rs,33,00,000 but in the statement of Current Account filed by the plaintiff the alleged loan has not been credited. There is no entry of the alleged loan amount of Rs,33,00,000 on 25-11-1982 in the Current Account which is sufficient to belie the claim of the plaintiff. Likewise for the alleged amount of Rs,1,05,00,000 and Rs,7,00,000 no loan was given to defendant No,
1. That in regard to promissory note dated 10-8-1983 of Rs,60,00,000 it was pledge limit and loan of Rs,60,00,000 was not given by the plaintiff to defendant No,1 and promissory note dated 12-3-1984 for Rs,6,31,00,000 was also without consideration. The promissory note dated 30-8- 1984 for the sum of Rs,1,67,00,000 is also without consideration. The alleged loan has not been given to the defendant. That blank promissory notes were obtained by the bank for already settled accounts, have been attempted to be used by the plaintiff in the suit in order to give credence to the unjustified claim, such unauthorised use, filling up the blanks without authority, renders the promissory notes of no legal value. That on 31-5-1975 the present management was not incharge of the respondent No,1 Company. That Annexures 'D' to 'J' and 'L-1' to 1-4' the subject letters of guarantees have lived their lives and in view of new arrangement whereby present management of defendant No,1 took over the charge of the Mill, all the earlier guarantees stood discharged and guarantors stood absolved of their liabilities sought to be enforced on the basis of outlived guarantees, even otherwise, subsequent to the signing of the said guarantees, bilateral arrangements between the plaintiff and the present management has absolved the guarantors of the alleged liabilities and that claims of the plaintiff are denied. That charging of interest compound interest or any usuary has been prohibited and any claim on that account after 2-3- 1985 is illegal, unconstitutional and against the Injunction of Islam. That defendant No,2(ii) has expired in the year 1991, the necessary parties for just and proper adjudication of the points in issue are not before the Court as such no effective dicision could be given in the suit.
6. Mr. Musheer Alam learned counsel has contended that defendant No,4 received the summons on 5-8-1993 from defendant No,2(i) who was served through bailiff of the Court on 31-7-1993, that plaintiff has suppressed material facts and claim in the suit is time-barred. That promissory notes as Annexures A-1 to A-7 are time-barred as the same have neither been signed nor delivered by the defendants. The Annexure 'B' to the plaint is mortgage which is invalid and unenforceable under the law, likewise Annexures 'C' and 'N' to the plaint and 'B', 'K', 'M' and '0' to the plaint on the basis of which alleged charges have been created are themselves invalid and time-barred, the same is the case of Annexures 'D' to 'J' and L-1 to L-4. That Annexures 'K', 'M', '0' the mortgage deeds are without consideration, the amounts guaranteed under the mortgage deeds were never disbursed. The statement of the Current Account annexed with the place does not show any credit entry corresponding to the amount shown in the mortgage deeds. That Annexures P-1 to P-3 of the plaint, the statement contained therein would not bind the guarantors, more particularly when the documents on the basis of which claim in suit is rested are time-barred.
7. Mr. A. Rauf learned counsel has contended that defendant No,7 had signed the guarantees not in personal capacity but in official capacity which plea can be proved by referring to the rules of the Bank, documents filed and can further be substantiated by oral evidence. That the plaintiffs have signed a notice Annexure Q-7, Sohail Nasim, Director M/s. Dost Muhammad Cotton Mills A-15 Fakhurddin Valika Road, Karachi when the bank has received defendant's letter dated 29-1-1984 informing about his resignation and requesting that all guarantees signed by him in connection with the liabilities of the company may be treated as cancelled because he has resigned as member of the Board of Directors of the Company which is Annexure 'D' to the application. In support of the application affidavit of Farooq Sheikh son of late Sharif Ahmed, Sohail Naseem son of Naseem Firoz and Rafiq Ahmed son of Bashir Ahmed has been filed.
8. Mr. A.I. Chundrigar learned counsel for the plaintiff has contended that publication took place in daily 'Dawn' on 15-7-1993 as such application for leave to defend the suit filed on 7-8-1993 is time- barred. That service in any one of three modes provided in Banking Companies (Recovery of Loans) Rules, 1980 is sufficient. Defendants were already served through publication dated 15-7- 1993 while applications under Order 37, Rule 3, C.P.C. Were submitted in Court on 7-8-1993. That defendants have not described any instance of suppression of material facts, that actually defendants executed the promissory notes dated 26-4-1982, 25-11-1982, 28-12-1982, 26-3-1983, 10- 8-1983, 12-3-1984 and 30-8-1984 and the certificate of registration of charge was issued on 22-1- 1985, deposits were made on 28-1-1985 and on 30-6-1987, various mortgages were created by different defendants in the years 1975, 1978 and 1981 and defendants sought information from the plaintiff vide their letter dated 15-10-1991 for issuance of statements of accounts which were promptly supplied to them which are filed with the plaint as R-3 to R-7. That besides above letters defendants also got issued annual reports containing balance sheets for the years 1987, 1988, 1991 on 30-9-1983, 30-9-1988 and 30-9-1991 respectively which constitute acknowledgement of loan, as such suit is not time-barred and is well within time. That Judicial Miscellanous 39 of 1991 was filed against defendant No,1 only who has been cited as pro forma defendant in the suit. That the gamut is different in this suit when compared with Judicial Miscellaneous 39 of 1991 as such provisions of Order II, Rule 2(2) & (3) and section 10, C.P.C. Are not attracted. The matters of Judicial Miscellaneous 39 of 1991 and this suit are different, Judicial Miscellaneous 39 of 1991 is not suit although these two proceedings are not between the same parties. That reliefs claimed in the two proceedings are different inasmuch as in Judicial Miscellaneous 39 of 1991 only winding up of the limited company has been sought. The promissory notes in question are within time. The defendants have been acknowledging loan from time to time as such promissory note cannot be termed as time-barred. That in promissory note dated 26-4-1982, it is clearly mentioned in the promissory note 'value received with interest'. The execution of the promissory note is not denied.
9. The statement of account marked R-3 justified the amount of demand promissory note dated 26- 4-1982. That the D.P. Notes and the connected statements of accounts of the Annexures with the plaint are as follows: D.P. Notes Statements of Account A - 6 R - 1 A - 5 R - 2 A - 1 R - 3 A - 2 R - 4 A - 3 R - 5 A - 4 R - 6 A - 7 R - 7 That the amount of Rs,33,00,000 was obtained by the defendant in general loan Account No,192249.75 entry whereof is shown in the statement of account which is R-4.That the defendants have been receiving amounts by way of disbursements from the plaintiff on various dates which is evident from the statement of account filed as Annexures R-1 to R-7 with the plaint for which the defendants have executed 7 promissory notes for various amounts. The statements of account do not show only one transaction but they show all the transactions denoting withdrawals and deposits by the customers on various dates. Similarly the contention that amount of Rs,1,05,00,000 is not mentioned in the statement of account is irrelevant as the value of the said promissory notes has already been received by the defendants on various dates. That as regards the entry of Rs,1,95,57,891.38 is concerned it has been clearly mentioned against that entry, that it is the loan transferred from Central Branch, Karachi. That first page of statement of account marked R-6 to the plaint shows defendant No,1 did avail Rs,17,00,000 on two dates i,e, 2-3-1983 and 26-3-1983 and defendant deposited Rs,5,00,000 on 7-11-1983, Rs,2,00,000 on 1-12-1983, Rs,1,00,000 on 15-1-1984 and Rs,1,00,000 on 3-3-1984. Thin the defendants received the amounts mentioned in the promissory notes on various dates which is evident from the statement of account already filed. That defendants received this amount and utilized it fully. That plaintiff had not obtained blank promissory notes from the defendants. That the change of management never absolved a limited company regarding its liabilities and all D.P. Notes and charge documents including mortgages created by defendant No,1 continued to be valid and binding. That in the annual balance sheets (for various years) including 1987 to 1990 prepared in respect of defendant No,1 the liabilities regarding the first mortgage/charge in favour of the consortium have been acknowledged. That the mortgages mentioned in the plaint are absolutely valid documents and claims based on the same have not become time-barred on account of acknowledgement of loan by defendant No,1 and others from time to time as mentioned in Annexures 'P-1' to 'P-3', that mortgages are not barred till 12 years and any acknowledgement of liability gives a further period of 12 years as section 19, Limitation Act speaks of a fresh period of limitation. The mortgages Annexures (sic), M and 0 were created on 11-1-1982, 30-3-1982 and on 26-8-1982 and the suit was filed on 4-5-1993 which is within 12 years. Under clause 12 of the guarantees, acknowledgements of liability by principal debtor (defendant No,1) are binding on the guarantors. That Annexures D to J and L-1 to L- 4 are the guarantees executed by the Directors of the defendants in their personal capacity as such they are binding on them. The letters of the guarantees are still effective and binding on the persons who have executed these guarantees irrespective of change in management. These guarantees have not been discharged and the guarantors do not stand absolved of the liability even if management of defendant No,1 had changed the legal entity of defendant No,1 is intact. The amounts were advanced by the plaintiff and guarantees are for the consideration and that plaintiffs had fully disbursed the amounts shown in the mortgage documents to the defendant No, 1 . The annual reports Annexures P-1 to P-3 for the years 1987, 1988 and 1991 also contained the balance sheets which were certified by the Chartered Accountant and the guarantors who were also Directors of defendant No,1 are bound by the statements of account as shown in the balance sheet for these years. That acknowledgement of liability even if not addressed directly to the creditor is binding as between the creditor and the debtor. That the amounts mentioned in the seven statements of accounts marked as R-1 to R-7 to the plaint are correct. That the defendants had agreed to pay the interest and they are bound to pay the same. That the death of defendant No,2(ii) in the year 1991 does not affect the proceedings and there is no need to bring legal representatives of the deceased defendants on record. That even if defendant No,7 has resigned as Director on 21-12-1983 or any other date the personal liability undertaken by him and letter of guarantee copies of which are marked 'D', 'F' and 'H'. That it is immaterial that even if defendant No,7 obtained the certificate from the Registrar Joint Stock Companies, that after resignation he was not reappointed as Director of defendant No,1 the Company. That publication of news of resignation of defendant No,7 as Director in daily 'Business Recorder' does not change the legal position and he remained liable under the personal guarantees executed by him. That by sending letter to all major banks including the plaintiff by defendant No,7 that does not result in getting release from personal liability under the three guarantees. That the balance sheet of defendant No,1 for period ending 30-8-1983, stating that he resigned from Directorship of defendant No,1 on 12-12-1983 is not relevant and the guarantee letters are still binding on defendant No,7. That defendant No,7 had signed the guarantee in his capacity as Director and that guarantee is still valid. That the resignation of defendant No,7 as Director of defendant No, 1 and his sending intimation to the Registrar, Joint Stock Companies regarding the resignation do not have the effect of revoking the three guarantees.
10. I would like to discuss the case-law referred by the learned counsel for the parties. Mr. Tasawar Ali Hashmi, learned counsel has referred (1) Ram Narain v. Lt.-Col. Hari Singh and another AIR 1964 Rajasthan 76. In this case a joint Hindu family of Asaram Kedarmal instituted a suit in the Court of the Civil Judge, Suratgarh for the recovery of a sum of Rs,6,400-8-6 as principal and Rs,2,657-7-6 as interest against Harisingh Sikh and Lt.-Col. Harsingh. The plaintiff started money dealings with Harisingh who was a tenant of the Lt.-Col. Harisingh. The latter undertook the responsibility of paying if any of the dues of Harisingh remained unpaid. The transactions between the plaintiff and Harisingh were settled and cleared off and Harisingh executed an entry in the account book of the plaintiff for having received a sum of Rs,7,500 in cash on 18-12-1953. The Lt.-Col. Signed this entry stating that he was responsible for the repayment of this amount of money. Other items consisting of the sum of Rs,175 and Rs,21 which remained due on the basis of the previous accounts together with another sum of Rs,3 were also claimed, A credit was given in this Khata for Rs,1298-7-6 from some separate account of the Lt.-Col. And thus the total claim made by the plaintiff came to Rs,9.058 inclusive of interest at the rate of Rs,1-4-0 per cent. Per mensem. The case in hand is a different one because matter does not pertain to the Joint Hundu Family firm in any case.
(2) Fine Textile Mills Ltd., Karachi v. Haji Umar PLD 1963 SC 163. In this case the Hon'ble Supreme Court has observed that: "In a suit of this nature where the defendant discloses upon his affidavit facts which may constitute a plausible defence or even show that here is some substantial question of fact or law which needs to be tried or investigated into, then he is entitled to leave to defend. What is more is that even if the defence set up be vague or unsatisfactory or there be a doubt as to its genuineness, leave should not be refused altogether but the defendant should be put on terms either to furnish security or to deposit the amount claimed in Court."
(3) The Punjab Pulp and Paper Mills Limited AIR 1932 Lahore 475: In this case petition under section 171, Companies Act, was presented by (1) the Lloyds Bank Limited (2) Alfredh Ernest Mitchell, and (3)
11. George Callender G. Gooding for leave to bring a suit against the Punjab Pulp and Paper Mills Limited in liquidation which was being wound up by order of the Court dated 8th July, 1930. A learned D.B. Of Lahore High Court observed that "it has been laid down in a series of cases, both in England and India, that a person claiming to be secured creditor cannot be endorsed to prove his debt in liquidation, but he can stand outside the winding up proceedings and rely upon his security for whatever it is worth. In my humble view this citation is not favourable to the case of the defendants because liquidation proceedings against defendant No,1 has, already been filed by the plaintiffs whereas this suit has been filed against the defendants who in their capacity as directors and guarantors have obtained loans from the plaintiffs.
(4) National Construction Ltd. v. Standard Insurance Co. Ltd. 1984 CLC 286: Ibadatyar Khan Judge (as his Lordship then was) has held if there is an admitted default either in performance or in payment, a right would accrue to the plaintiff to sue the principal debtor/defaulter, But if he so chooses, he may bypass the principal debtor and right away pursue his remedy against the surety.
12. Here in this case also the defendants as Directors and guarantors have obtained loans from the plaintiffs. In my humble opinion this authority on the face of it is not supporting the case of the defendants.
(5) Capt. Muhammad Aqeel Siddiqui and 2 others PLD 1988 Kar. 72: An application under section 316 of the Companies Ordinance, 1984, praying for leave to proceed with the suit filed by Pakistan- Kuwait Investment Company Limited against the Company in liquidation and its guarantors for recovery of loan amount of Rs,27,93,984 and sale of security given by the applicants to the company. His Lordship Naimuddin, C.J. Was pleased to allow the application. Admittedly winding up petition against defendant No,1 has been filed and this suit under Chapter proceedings have been filed against the defendants as Directors and guarantors as such in my humble view this authority is not helpful to the case of the defendants.
(6) Baghpatee (Pvt.) Ltd. And others v. M/s. Pak-Libya Holding Company (Pvt.) Ltd. 1991 SCMR 33: In this case leave to appeal was sought from an order passed by a Single Judge of this Court while acting as a Special Court under the Banking Companies (Recovery of Loans) Ordinance, 1979 filed by the respondent against the petitioners for the recovery of Rs,88,01,033, under the Ordinance granting conditional leave to the petitioners to defend the suit on furnishing security of Rs,88,00,000 by petitioner No,1 and security of Rs,20,00,000 each by petitioners Nos. 2 and 3. The Hon'ble Supreme Court converted the above petition into an appeal with the order that learned Single Judge acting as a Special Court, after determining the approximate value of the mortgaged property and after hearing the parties, would give adjustment of the value so determined against the security amount fixed for petitioner No,l. With the above modification, the impugned order was maintained. In my humble view conditional leave was granted to the party for contesting the suit and some modification was allowed by the Hon'ble Supreme Court for determining the approximate value of the mortgaged property. In my humble opinion this authority in any case is not applicable to the facts of the present case.
(7) In the matter of Shaafi Woollen Industries Limited PLD 1993 Lahore 452: In this case three identical applications were filed under section 316 of the Companies Ordinance, 1984 seeking leave of the Court to proceed with the money suits brought by the applicants against M/s. Shaafi Woollen Industries Ltd., the company under liquidation which suits were pending before the Banking Tribunals at Lahore and Peshawar and the learned Lahore High Court was pleased to allow the applications with three conditions. The facts of this case are different and distinguishable from the facts of the case in hand because winding up petition has already been filed by the plaintiff against defendant No,1 and the defendants he in this suit have been impleaded in their capacity as Directors and guarantors who have furnished guarantees for repayment of the loan.
13. Mr. Abdul Rauf, learned counsel has cited:
(1) Messrs Badruddin H. Mavani v. Government of Pakistan, Ministry of Food and another 1981 CLC 339: Learned D.B. Of this Court held that award cannot be set aside unless arbitrator shown to have misconducted himself or award improperly procured or otherwise invalid and findings of arbitrator wrongly accepted. Here in this case proceedings under the Arbitration Act have not been held and neither an award of arbitrator is agitated. This authority in my humble opinion is not relevant.
(2) Mirza Munawar Ahmad and another v. Official Liquidator and 3 others PLD 1980 Lahore 86. In this case two appeals were filed against the order of learned Company Judge which arose out of Civil Miscellaneous 101/L of 1971 and Civil Miscellaneous 102/L of 1971 in C.O. 14 of 1970, in which all the parties consented to winding up of the company. In pursuance thereof order dated 22-9-1971 passed in Civil Miscellaneous 101/L of 1971 filed by the Industrial Development Bank of Pakistan, it was prayed that property sought to be auctioned by the Official Liquidator through Pakistan Times dated 22nd September, 1971 be released. Whereas prayer made in the case Civil Miscellaneous 102/L of 1971 was that property mentioned in Schedule 'A' attached to their petition did not belong to the company and may be released so that loan taken by the partnership from the bank may be paid off. The learned Company Judge held that as the property in question stood validly transferred to the company, there was no merit in the two applications, in this background of the matter parties approached the learned D.B. In my humble opinion this authority is different and distinguishable from the facts of the present case and is not helpful to the case of the defendants.
(3) Industrial Development Bank of Pakistan v. Al-Mansoor Ltd. And others PLD 1989 Peshawar 191: In this case the plaintiff/appellant in the Court of Special Judge (Banking Companies), N.-W.F.P. Did not produce any evidence except the solitary statement of Muhammad Tariq their Law Officer (P.W.1) who too showed ignorance about the relevant facts connected with the suit in hand and the learned D.B. Of the Peshawar High Court in view of the above facts finding the case of no evidence, declined to interfere with the order of the Special Judge and appeal was dismissed. The case in hand has not been proceeded as yet and evidence is still to be recorded by the parties as such in my humble view this authority is not applicable to the facts of the present case.
(4) The Australasia Bank Ltd. v. Messrs H.S. Mahmood Hassan Akbar and others PLD 1983 Kar. 431: In this case the plaintiffs had filed the suit for recovery of Rs,1,54,593.69. The defendant No,1 is a firm of which defendants Nos. 2 and 3 are. The partners. The defendant No,1 opened a current account with the plaintiffs on or about 30th November, 1960 and at the request of the defendants the plaintiffs granted a cash credit limit of Rs,15,000 which was fully utilised in the said account from time to time. The defendants a!So deposited various amounts in the said account from time to time towards repayment of the plaintiff's dues. In this background of the matter, suit was filed on the original side of this Court by the parties, issues were framed, evidence was adduced by the parties and Saleem Akhtar, J. (as his Lordship then was) awarded the relief to the plaintiffs in the following terms: "In view of the discussion on the aforestated issues it has been held that the suit is within time. The defendants are jointly and severally liable to the plaintiffs for such amount which may be found due and payable after a true and correct account is rendered by the plaintiffs. The plaintiffs were holding the account and all the documents necessary for rendering the account. Considering' the facts of the case and the relationship between the parties the plaintiffs are the accounting party. In order to ascertain the money due to the plaintiffs from the defendants jointly and severally an account should be taken from the plaintiffs. I therefore, pass a preliminary decree for accounts directing the plaintiffs to render true and correct account before the Commissioner. Mr. Afzal Munif if appointed as a Commissioner for taking accounts. The Commissioner shall submit his report within four months. The plaintiff shall deposit Rs,5,000 towards the tentative fee of the commission which should be deposited in Court within two weeks. The cost will following the result of the preliminary decree."
14. In my humble view this case is also not helpful to the contentions of the defendants.
(5) Abdul Karim. Jaffarani v. United Bank Ltd. And 2 others 1984 SCMR 568: In this case this Court granted leave to the petitioners to defend the suit but attached conditions requiring him to furnish a security equivalent to the sum of the claim in suit within two months. The same order was agitated before a learned D.B. Of this Court which also dismissed his appeal except for modifying the nature of the security and special leave to appeal was filed and the Supreme Court was pleased to observe as follows: "We would accordingly modify the aforesaid conditions. On our inquiry the payments received by the petitioner in terms of the statement of account within a period of three years prior to the execution of the promissory note each side has filed a separate statement. According to the petitioner an amount of Rs,2,77,155.08 is the amount shown as debit during this period but it is contended that this amount is mostly interest charged on time-barred debts. On the other hand, the figure shown by the first respondent in his statement is Rs,2,79,800.15. We are not inclined to go into the question whether this amount constitutes actual withdrawals or was debited as interest. If relevant these matters can be gone into at the trial. We would,, however, direct that the petitioner shall be entitled to appear and defend the suit on furnishing security in the sum of Rs,2,80,000 to the satisfaction of the Nazir of the High Court within a period of two months."
(6) Habib Bank Limited v. Messrs Pazhong Traders and 12 others 1986 CLC 1086: In this matter 19 applications filed in the Suit No,352 of 1983 and 11 applications in Suit No,369 of 1983 were disposed of by this single order. Suits were filed in 1981 in the Special Court of Banking for Sindh at Karachi by the Habib Bank Ltd. Under the Banking Companies (Recovery of Loans) Ordinance, 1979, in view of the amendment both the suits were transferred to this Court in 1983. The defendants denied the partnership. The partnership deed was not filed by the plaintiff-bank, Counter-affidavit to controvert the averments made in the affidavit in support of the leave application was not filed, denial of partnership, non-filing of partnership deed by the plaintiff was held to be a good ground for grant of unconditional leave to defend the suit. In this case counter-affidavits and rejoinders have been filed and defendants have obtained the loans as Directors and guarantors for defendant No,1 . In my humble view this authority is quite different and distinguishable and is not applicable to the facts of the present case.
(7) Emirates Bank International Ltd. v. Super Drive-In Ltd. And 8 others 1990 MLD 538: In this authority learned Judges has observed that period of limitation, in case of guarantor of bank loan would start running from the day when guarantor had for the first time denied to honour his guarantee.
15. The notices and the documents produced by the plaintiff clearly show that suit is not barred and is within time, therefore, this authority is not favourable to the case of the defendants.
16. Mr. A.I. Chundrigar, learned counsel for the plaintiff cited the following case-law:
(1) Inayat Ali v. Agricultural Development Bank of Pakistan 1992 CLC 3: In this authority, learned Judge has observed that after having taken advantage of loan on explicit undertaking to pay the interest as such, could not be heard now to say that liability for the same did not fall on him on account of its being contrary to religious convictions. The defendants have taken loan and agreed to pay the interest/mark-up with,their free will after utilizing the same they cannot be allowed to raise the plea that interest is un-Islamic.
(2) Allied Bank of Pakistan Ltd. v.Messrs Kohinoor Cotton Mills Ltd. And 3 others PLD 1985 Lah. 89: In this case receipt of loan amount was admitted and execution of documents also not denied.
17. Consequently suit was decreed. In the case in hand also the defendants have simply stated that they have obtained the loans as Directors and guarantors but they have only filled in the blank forms at the instance of the bank officers without verifying the contentions of the same, this contention of the defendants can hardly be a ground to be considered.
(3) The Muslim Commercial Bank Ltd. v. Junejo Ziauddin Ahmad and another 1996 MLD 176: In this case Nasir Aslam Zahid, J. (as his Lordship then was) has observed that fresh loan was given to borrower by bank on request and guarantee of guarantor who agreed to give guarantee not only for fresh loan but also for earlier loan taken by borrower. Although earlier loan was not given to borrower at request of guarantor yet guarantor was held liable to pay amount of earlier loan as he gave guarantee for both fresh and earlier loans. In the case in hand the defendants as Directors and guarantors have obtained the loans and executed necessary documents as such they are liable for repayment of the amount as guarantors and Directors.
(4) Habib Bank Ltd. v. Cargo Despatch Co. Ltd. And 4 others 1987 CLC 1002: In this authority His Lordship Mamoon Kazi, J. Has observed as follows: "Lastly, it was argued by Mr. J.H. Rahimtoola that the loan stands fully secured by the two mortgages, therefore, leave should be granted to the defendant to defend the suit. This argument also appears to be without force as the securing of loan by a mortgage, by itself cannot be a ground for granting of such leave to the defendant."
(5) United Bank Ltd. v. Messrs Sartaj Industries PLD 1990 Lahore 99: In this case observation was that mortgage deed in question has not been executed as such in favour of the Dijkot Road Branch but in fact it had been executed in favour of the United Bank Ltd. With its registered office at Karachi and therefore will be enforceable against the defendants notwithstanding the transfer, of the cash credit advance in question from one branch of the plaintiff-bank to the other, further that mortgage deed was executed and registered by the defendants in favour of the plaintiff on 29-12- 1976 and, therefore, the limitation will be governed by Article 132 of the First Schedule to the Limitation Act and that suit having been filed, was well within 12 years and, therefore, not barred by limitation. Here in this case also suit has been filed within a period of 12 years which is within time and is not barred by Law of Limitation. Moreover the mortgage deeds were executed by the defendants at Karachi for the properties which are even outside of Karachi, therefore, the registered mortgage deeds are valid and binding on the defendants.
(6) Siraj-ud-Din and 2 others v. Habib Bank Ltd. PLD 1994 Peshawar 233: The judgment of learned Federal Shariat Court on the question of Riba has been appealed against in the Supreme Court under Article 203-F of the Constitution of Pakistan by the Federation and is pending decision. The operation of the judgment of the Federal Shariat Court has since been suspended, therefore, the ground of Riba agitated by the appellant was not considered by the learned D.B. Of Pehsawar High Court. Under the circumstances most respectfully I follow this judgment and say that since operation of the Federal Shariat Court has been suspended by the Hon'ble Supreme Court, the question of Riba cannot be considered as un-Islamic at present.
(7) Messrs Ahmad Autos and another v. Allied Bank of Pakistan Limited PLD 1990 SC 497: In this authority the Supreme Court has held that: "......... ..... ... ... ...However, we may point out that there was no need to amend the above Rule 8 as the correct legal position was that the service was to be held to be good service if it was effected by any one or more modes of service provided for in the above-quoted Rule 8. If we were to take a contrary view, it would be in conflict with the object of the Ordinance and the Rules framed thereunder, as it would make the service more difficult. It would instead of suppressing the mischief which promoted the framing of above Rule 8, would encourage the mischief as a defendant may successfully avoid service by one of the above three modes of service for considerable period by manoeuvring."
18. ' In this case also the summons were issued through all the three modes viz. Through bailiff of the Court, by registered post A/D and by publication.
(8) United Bank Limited, Karachi v. Messrs Union Agencies Limited, Lahore PLD 1994 Kar. 303: In this case the defendant was served by publication and applied for leave to appear and defend the suit beyond prescribed period of 10 days. Defendant in his application for condonation of delay took the plea that he did not subscribe to daily newspaper 'Morning News' and was not aware of the publication. Defendant's plea was not accepted and suit of the plaintiff was decreed. Here in this case also defendants were served through the three modes prescribed by the law and publication was affected in daily 'Dawn' a widely circulated newspaper of the country.
(9) Bazm-e-Salat and others v. Messrs United Bank. Ltd. PLD 1989 Kar. 150: The facts of the case are that Bazm-e-Salat, a religious social organization operated Current Account No,152 in U.B.L. And was allowed over draft from time to time. Ultimately there was a debit balance amounting to Rs A3,610.79. Bazm-e-Salat applied for loan of Rs,50,000 in April, 1971 which was granted without interest on the ground that functions performed by loanee were of religious and social nature.
19. Bazm-e-Salat executed promissory note for Rs,50,000 at the rate of 4% interest over and above rate published by the State Bank of Pakistan with a minimum of 10% with quarterly rests. Bezm-e- Salat in spite of repeated advice for the liquidation of liability did not respond but, however, admitted their liability in writing and promised to have the matter sorted out by the managing committee and subsequently executed promissory note for a sum of Rs,99,855.79 with interest at the rate of 5% over and above the State Bank of Pakistan published rate of interest with a minimum of 10% per annum with quarterly rests. In this background of the matter suit was filed and matter was agitated in appeal and the learned D.B. Dismissed the appeal with the observation that plaint can also be treated as notice.
(10) United Bank Ltd. v. Shahyar Textile Mills Ltd. And 3 others 1996 CLC 106: In this case G.H. Malik, J.
20. (as he then was) has held that defences set up by defendant were far from plausible and defendant was, thus, not entitled to leave to defend the suit. Consequently suit was decreed in terms of averments made in the plaint.
21. The authorities cited by the learned counsel for the plaintiff are relevant and applicable to the facts of plaintiff's case, whereas authorities cited by the learned counsel for the defendants referred and discussed herein earlier part of this order are different and distinguishable from the facts of the present case.
22. I have gone through the material placed with the case. The defendants as guarantors and Directors have obtained the loan and executed necessary documents and also executed registered mortgage deeds in favour of the plaintiff of their properties in Karachi as well as outside the Karachi and the defendants also executed promissory notes in favour of the plaintiff which are duly signed by them on proper stamps which are Annexure 'A-1' to Annexure 'A-7' filed with the plaint and referred hereinabove. Plaintiff has also filed memorandum and letter of guarantee signed by the defendants, the relevant portion of letter of guarantee reads as follows: "(1) My/our liability under this guarantee shall be that of a principal debtor and you may at your option hold me/us primarily responsible for the liabilities of the principal.
(2) This guarantee shall be continuing security binding on me/us and my/our personal representative until receipt by you of written notice of discontinuance thereof and notwithstanding such discontinuance or any release or granting of time or other indulgence by you to any one or more of us, this guarantee shall remain a continuing security as regards the other or others. In case of discontinuance by notice, this guarantee shall nevertheless as to the parties giving notice, continue to be binding on them and their personal representatives in respect of all liabilities of the Principal up to the limit abovementioned at the date of receipt of such notice, whether certain or contingent and also for any credit established for the Principal and for all instruments drawn on you or accepted by you, for the benefit of the Principal and purporting to be dated on or before the date of receipt of the notice, though actually paid or honoured alter that date."
23. Plaintiff has also filed letter of guarantees as 'F', 'G, 'H', 'I' and 'J'. He has also produced Collateral Mortgage Deed which is Annexure 'K' alongwith schedule of the mortgaged property, letter of guarantees 'L-1', 'L-2, 'L-3', 'L-4' and registered mortgage deed for Rs,75,15,000 presented in the Office of the District Registrar, Karachi dated 30-3-1982. The relevant paragraph 13 of the same reads as under: This mortgage shall be a continuing security and shall not be discharged except by a duly registered deed of redemption. This mortgage shall secure repayment of any amount ultimately due from the mortgagors/borrowers to the Bank in any account whatsoever inclusive of any potential liability and futute advances up to the maximum amount of Rs,7.515 million (rupees seven million and five hundred fifteen thousand only) hereby secured and interest, costs, charges and expenses notwithstanding that at any time, hereafter there may not be any amount due and owing by the mortgagors/borrower to the Bank or the account of the mortgagors/borrower the bank may be in credit."
24. Plaintiff has filed Collateral Mortgage Deed fof Rs,15,00,000 registered with Sub-Registrar T. Division), Karachi dated 26-8-1982, and relevant paragraph of the same reads as follows: "The Mortgagor/Borrower further undertake and agree to pay interest on the amount outstanding at the rate of 4% (four per cent.) above the Bank rate subject to a minimum of 14% (fourteen per cent.) per annum with quarterly rests plus costs and charges thereon to be paid quarterly on or before the fifth day of every quarter or as directed by the Bank according to the rules prevailing in the Bank from time to time."
25. Plaintiff also filed 33rd Annual Report of the defendant No,1 showing therein details of the accounts duly audited by the auditors as Annexure 'P-1' from page 131 to page 197, 'P-3' from page 199 to 299, 37th Annual Report for the year ended 30th September, 1991 and notices issued by the plaintiffs through registered post A/D to Mr. Tahir Ejaz Shaikh, Director, Mrs. Shireen Farooq, Tahir Ejaz, Farooq Ahmed Zafar Saleem, Mumtaz Saleem and Basharat Ahmed through registered post A/D marked as 'Q-1', 'Q-2', 'Q-3' and 'Q-4' and also to Zafar Shaikh, Tahir A. Shaikh and Rafiq Ahmad marked as `Q-5', 'Q-6 and 'Q-7 and also letters of the plaintiff to Zafar Shaikh, Tahir Ejaz and Sohail Naseem, Directors marked as 'Q-8', 'Q-9' and to Basharat A. Shaikh marked as 'Q-10' Tahir Ejaz and Ch. Abdul Aziz marked 'Q-11' and statement of accounts from 'R-1' to 'R-7'. In view 'of this overwhelming evidence so produced by the plaintiff the mere denial of the defendants is that they were not issued notices and that statement of account was not supplied to them is prima facie a mere excuse on the part of the defendants.
26. The contention of Mr. A. Rauf that defendant No,7 had signed the guarantee not in personal capacity but in official capacity and that plaintiff has sent a notice 'Q-7' to Sohail Nasim, Director of M/s. Dost Muhammad Cotton Mills Ltd. When the bank has already received letter informing them about his resignation and requesting that all the guarantees signed by him in connection with the liabilities of the company may be treated as cancelled because he has resigned from the Board of Directors of the Company is hardly a ground to be considered even. Defendant No,7 has signed the guarantee referred hereinabove his mere resignation from the Board of Directors will not absolve him from his liability as a guarantor to the plaintiff. During the course of arguments it was pointed out that defendant No,2 Zafar Shaikh has expired and Mr. A.I. Chundrigar, stated that he wants to delete the name of defendant from the array of the defendants and that joining of legal representatives in his place in any case is not necessary and he was accordingly granted permission.
27. No doubt defendants have denied the contents of the promissory notes as well as collateral mortgage deeds and letter of guarantees referred herein earlier part of this order and defendants have been duly served and they have not applied in time to get leave of the Court to appear and defend the suit. However, in view of the authority of the Supreme Court i,e, PLD 1963 SC 163 (Fine Textile Mills Ltd., Karachi v. Haji Umar) their Lordships of the Supreme Court consisting of A.R.
28. Cornelius, C.J., S.A. Rahman, Fazle-Akbar, B.Z. Kaikaus and Hamoodur Rahman, JJ. This judgment was authored by Hamoodur Rahman, J. And consented by the other Hon'ble Judges. The relevant observations of the Supreme Court has been reproduced in the earlier part of the order (at page 17, case-law No,2).
29. Without touching merits/demerits of the defence set up by the defendants, in the interest of equity, fairplay and justice I am of the considered opinion that I shall be following the authority of the Supreme Court in letter and spirit by allowing the defendants, conditional leave to appear and defend the suit provided they deposit the amount of Rs,26,05,46,345.69, severally and jointly, claimed by the plaintiff in cash as security with the Nazir of the Court within 60 days from the date of this order.