1. This is a joint application, filed on behalf of the defendants under Order XXXVII, Rule 3, C.P.C., praying that unconditional leave to appear and defend the suit be granted to them, for the reasons discussed hereinafter.
2. The plaintiff's case is that it is a private limited company, which was initially incorporated under the Companies Act, 1913 (now Companies Ordinance, 1984)--- that on 21-7-1984 the Punjab Industrial Development Board decided to sell its entire interest in Messrs Pasroor Sugar Mills Limited, on the terms and conditions disclosed in the advertisement published on 21-7-1984 in "Pakistan Times", Lahore, that the plaintiff responded with its offer to purchase Pasroor Sugar Mills as well as Rahwali Sugar Mills. It is the further case of the plaintiff that Punjab Industrial Development Board (hereinafter referred to as "PIDB") accepted the offer of the plaintiff in respect of Pasroor Sugar Mills, on the condition, inter alia, that the P.I.D.B. Will arrange with the defendants a moratorium for five years for repayment of loans outstanding against Pasroor Sugar Mills, waiver of all interest and penal interest upto the date of transfer, rescheduling/restructuring the debts and for grant of additional financing for modernisation, development, expansion, change of process and replacement etc. Etc., that after exchange of several communication and deliberation, on 9-2-1986 an agreement was executed between the plaintiff and P.I.D.B. Relating to disinvestment of Pasroor Sugar Mills.. Thereafter, various loan agreements were executed between the plaintiff, Pasroor Sugar Mills and the defendants restructuring the loans, that the defendants renegated on their commitment to provide financing for B.M.R. Causing heavy losses to the investment made by the plaintiff in Pasroor Sugar Mills.
3. The grievance of the plaintiff is that at the time of transfer of Pasroor Sugar Mills to the plaintiff by the P.I.D.B. The defendants had represented and made commitments that B.M.R. Facility will be allowed to Pasroor Sugar Mills in order to improve its production capacity so that the outstandings of the defendants could be released and that it was solely on such understanding and promises of the defendants that the plaintiffs had purchased Pasroor Sugar Mills at high cost and have invested from its resources a huge amount. It is averred in the plaint that the defendants have received from the plaintiff/Pasroor Sugar Mills a sum of Rs.205 million as token for providing B.M.R.
And refused/avoided to fulfil their obligations to provide B.M.R. Finances to the Pasroor Sugar Mills and thus committed breach of their promise. According to the plaintiffs this breach of promise committed by the defendants had resulted it discharge of the plaintiff from its guarantee towards the defendants as the same have become without consideration. In view of the facts narrated in the plaint, the plaintiff has prayed for a decree of Rs.521,835 million with interest/mark-up at the rate of 18% per annum against the defendants, jointly and severally. In this suit, the plaintiff has also prayed for declaration to the effect that the guarantee executed by plaintiff and furnished to the defendants be declared as without consideration and for further declaration that the plaintiff stands discharged from its guarantee executed in favour of the defendants. The plaintiff has also praye4 for permanent injunction against the defendants from seeking enforcement of the guarantee of the plaintiffs, besides claiming damages for breach of promise.
4. I have heard, Mr. Muhammad A.I Sayeed, for the plaintiff and Mr. Munir A. Malik, for the defendants, who at the very outset, has raised objection on the maintainability of the suit.
According to Mr. Munir A. Malik, the present suit is for damages as well as for the declaration and for the relief in reference to bank guarantees, executed by the plaintiff in favour of defendants, and that the claim for damages takes this suit out of the purview of Banking Companies (Recovery of Loans) Ordinance; 1979. It is further argued by Mr. Munir A. Malik, that the plaintiff has filed this suit to block/impede anticipated legal action to be initiated in future by the defendants. It is further contended that the so-called understanding as alleged in the plaint has no legal effect as it did not amount to a concluded and legal contract; that the defendants are not bound to provide B.M.R.
Finances, on the contrary the plaintiff never paid a single loan instalment despite having become due, thereby entitling the defendants to recall the entire loan. In reply, it was argued by Mr. Muhammad A.I Sayeed that the defendants are not entitled to unconditional leave to appear and defend the above suit as they have not approached the Court with clean hands. He has further argued that this suit is maintainable under the Banking Companies (Recovery of Loans) Ordinance, 1979 and that the commitments made by the defendants to provide B.M.R. Finances are legally binding on them, In support of this plea he has referred to several documents/letters dated 10-3- 1985, 21-3-1982, 4-7-1992 and 16-3-1992. Both the learned counsel have referred to the following reported cases:
(i) Fine Textile Mills Ltd., Karachi v. Haji Umar (PLD 1963 SC 163);
(ii) Abdul Karim Jafarani v. United Bank Ltd. And 2 others (1984 SCM R 568); and
(iii) Azmat Wali v. Hassan Al-Adawi and 2 others (1983 CLC 546).
5. The present suit is in the nature of recovery of damages and declaration with consequential relief. It is neither based on negotiable instrument nor on the basis of mortgage. At this interlocutory stage, it would not be proper to hold that through several communications, as referred by Mr, Muhammad A.I Sayeed, a concluded and binding agreement was reached. In view of denial by the defendants; such plea has become a matter of evidence. The plaintiff has also prayed for damages which again would involve recording of evidence as the initial burden is always upon the plaintiff to prove such damages. Whether there was a legal commitment on the part of the defendants to provide additional financing for B.M.R. Is also a question of fact requiring the recording of evidence. The intention of the parties in executing the various documents relied upon for the purpose of agreement to provide further finances is yet to be drawn from the evidence which may be produced during trial by the parties. Keeping in view all the above circumstances, I am of the considered view that the defendants have made out a good arguable case and have also disclosed several triable issues. The defence proposed, prima facie, appear neither to be sham nor vexatious. Therefore, the defendants are entitled for unconditional leave to appear and defend the above suit. Order accordingly.