1. G.H. MALIK, J.-~ This is an application by the plaintiff under Order 39, Rule 1 and 2, C.P.C, seeking temporary injunction to restrain defendant No. 1 from remitting any further amount to the defendant No. 3 under an agreement between defendants Nos. 2 and 3.
2. It appears to be an admitted position that the plaintiffs were indebted to Bank of Commerce and Credit International (Overseas) Ltd. In its branch at Karachi, the B.C.C.1. Karachi, went into liquidation and a Liquidator thereof was appointed; that an agreement was entered into between the said Liquidator and defendant No. 2 whereby the Karachi Branches of B.C.C.1. Overseas were merged with Habib Bank Ltd. which, consequently, took over its rights and liabilities; that the agreement took the form of a scheme which was sanctioned under section 47 of the Banking Companies Ordinance, 1962; that the scheme did not provide for adjustment of the plaintiffs' deposit with Bank of Commerce and Credit S.A. In London against their liability to B.C.C.1., Karachi; that subsequently, defendant No. 1 succeeded to the rights and liabilities of Karachi Branch of B.C.C.I. Overseas and that defendant No. 1 is demanding payment of the moneys due to it by the plaintiffs.
3. Mr. Samiuddin Sami, the learned counsel for the plaintiffs, submits that defendant No. 1 is a wholly owned subsidiary of defendant No. 2 and is not, therefore, in view of the provisions * of section 23 of the Banking Companies Ordinance, 1962, a Banking Company; that the scheme of merger between defendant No. 2 and the Karachi Branches of B.C.C.L Overseas is not, in view of the provisions of section 47(7) of the Bank Companies Ordinance, 1962.
4. Mr. Mandviwal, the learned counsel for the defendants Nos. 1 and 2, submits that defendant No. 1 is a Banking Company in view of the provisions of section 23 (i) (dd) read with section 7 of the Banking Companies Ordinance; that the scheme framed under section 47 of the Ordinance is binding on the plaintiff; and that no guarantee was given by B.C.C.I. S.A. as security for payment, of the loan given to the plaintiffs by B.C.C.I. Overseas; and that at any rate, the defendants were not aware of such a guarantee. He submits further that in any event there is no linkage between the claim of defendant No. 1 against the plaintiffs and the moneys said to have been deposited by the plaintiffs with B.C.C.I. S.A.; and that the plaintiffs have filed the suit only because defendant No. 1 has demanded the payment of large sum of money which is due to it.
5. Mr.S.A. Sarwana, the learned counsel for the Liquidator of B.C.C.1. Overseas, submits that the Liquidator has no knowledge of any guarantee; that the scheme under section 47 of the Banking Companies Ordinance is binding on the plaintiffs; that the plaintiffs have, in fact, filed a claim with the Liquidator of B.C.C.I. S.A. on account of moneys deposited by them with that bank; and that the plaintiffs are not entitled to set off their claim against B.C.C.I.S.A. against the moneys claimed from them on account of the debt due to BCCI Overseas.
6. Mr. Samiuddin Sami states in reply, that the injunction is being sought primarily against defendants Nos. 1 and 2 that the plaintiffs would be satisfied with a temporary injunction against the defendant No. 1.
7. Section 23 (1) of the Banking Companies Ordinance, 1962, provides that a Banking Company shall not form any subsidiary company except a subsidiary formed for one or more of the purposes specified therein; and one of such purposes is, as specified in clause (dd) of subsection (1): " the conduct of any form of business permitted by section 7"; and section 7 of the Ordinance provides that, in addition to the business of banking, a Banking Company may engage in any one or more forms of business enumerated therein. Assuming therefore, that anything turns on this argument, it appears to be clear that the defendant No. 1 is a Banking Company.
8. The arguments that the scheme of merger framed by State Bank of Pakistan whereby the Karachi Branches of B.C.C.I. Overseas were merged with Habib Bank and subsequently with defendant No. 1 and whereby the rights and liabilities of those branches devolved on Habib Bank Ltd., and subsequently on defendant No. 1, is not binding on the plaintiffs is sought to be supported by the provision of section 47(7) of the Ordinance on the ground that no suggestions or objections were invited by State Bank of Pakistan from the plaintiff as contemplated by that provision. The argument is entirely devoid of merit. By subsection (6) of section 47, State Bank is required to send a draft of a scheme to the banking company which is to be amalgamated, the transferee bank and any other banking company concerned in amalgamation for suggestions and objections; and, by subsection (7), it is empowered to make such modifications in the draft scheme as it may consider necessary in the light of the suggestions and objections received*from the banking company, the transferee bank or any other banking company, concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank, It is however, not the case of the plaintiffs that the draft of the scheme was modified or that they are or were members, depositors or creditors of either B.C.C.I. Overseas or Habib Bank Ltd. or of any other bank that may have been concerned in the amalgamation for which the scheme was made. The provisions of section 47 therefore do not apply.
9. The contention on behalf of the plaintiffs that B.C.C.I. S.A. had executed a guarantee as security for repayment of the moneys advanced by B.C.C.I. Overseas to the plaintiffs and had retained US $ 2,50,000 of the plaintiffs by way of security for such guarantee is based on the letter, dated 24th November, 1988 (Annexure A to the plaint) from B.C.C.I. S. A..to the plaintiffs whereby B.C.C.I. S.A. agreed to grant credit facilities to the plaintiffs by way of inter alia, letter of guarantee for US $ 2,50.000 and whereby it was stipulated that "payment under the guarantee to be made by us upon first writing or telex demand by B.C.C.I. (Overseas) Ltd. Karachi, which is to be paid to the debit of your account maintained with over selves." That letter, of course, cannot and does not show that a guarantee was, in fact, issued. Mr. Sami, therefore, relies on the letter, dated 29th April, 1993 (Annexure J to the plaint) from defendant No. 3 to the plaintiffs and on the Memo, dated* 4th November, 1993 (Annexure B) to the written statement of defendant No. 3) from B.C.C.1. S.A. to defendant No. 3. The letter, dated 29th April, 1993, states that "the block of US $ 2,50,000 on the plaintiffs account with BCCI SA to support a guarantee given to BCCI Karachi had been released".
10. That statement has been explained in the Memo, dated 4th November, 1993, by saying that the block on the account was released because of the lack of documentary support. The Memo, also refers to a letter of 23rd March, 1992, stating that there was no evidence that a guarantee had ever been issued and, further, that a letter from Habib Bank to defendant No. 3 implies that the letter of Lien (Guarantee) had already gone a stray and that no replacement had been issued and further that the fact that Habib Bank had not sent a copy of guarantee implied that they did not have it. It was further stated in the Memo, of 4th November, 1993, that the plaintiffs appeared to have confused the release of the block or their account with B.C.C.L S.A. with the release of funds under the block; and that there would be no transfer of funds or claim remitted in the absence of a letter of guarantee. Mr. Mandviwala refers to a letter, dated May 26, 1993 (Annexure K-2 to the plaint) from defendant No. 1 to the plaintiffs reiterating that there was no linkage between the deposit of the plaintiffs with B.C.C.I. S.A. and the claim of defendant No. 1.
11. The material on the record is not sufficient to decide whether or not a guarantee was, in fact, issued by B.C.C.I. S.A. In favour of B.C.C.I. (Overseas), Karachi, and*in the view that I propose to take of the matter it is not necessary to decide that question.
12. Assuming that a guarantee was, in fact, issued by B.C.C.I. S.A. In favour of B.C.C.I. (Overseas) as security for payment of the moneys due by the plaintiffs to B.C.C.I. (Overseas) and that B.C.C.I. S.A. had a lien or a charge over any moneys which may have been deposited by the plaintiffs with it, it is clear that B.C.C.I. Overseas, being the beneficiary of such a guarantee, was not bound to invoke it and was within its rights to demand payment of money due to it from the plaintiffs without invoking guarantee. If B.C.C.1. Overseas had chosen to invoke the guarantee and B.C.C.I. S.A. had failed to make payment thereunder, it would have been open to B.C.C.I. Overseas or its successors to enforce their claim under the guarantee but even so, it would not have been open to the plaintiffs to claim that the defendant No. 1 was bound to adjust the amount of their deposit lying with B.C.C.I. S.A. against their liability to defendant No. 1. On the other hand if B.C.C.I. Overseas or their successors chose not to invoke the guarantee, the moneys of the plaintiffs deposited with B.C.C.I. S.A. would remain with B.C.C.I. S.A. or their Liquidator so that the relationship between the plaintiffs, on one hand, and B.C.C.I. S.A. or its Liquidator, on the other hand, would be that of creditor and debtor and it would be open to the plaintiffs to claim those moneys; and it appears that, in fact, the plaintiffs have lodged their claim with the liquidator of B.C.C.I. S.A. The plaintiffs are, therefore, not entitled to have their moneys lying with the liquidator of B.C.C.I. S.A. adjusted against their liability to defendant No. 1. The case of M/s. Fashions Ltd., and others v. Bank of Credit and Commerce international S.A. (In Liq) and others, cited by Mr. Sami is of no assistance to him. There the problem was stated by Court of appeal to be this. "If a bank lends money to a company and takes a guarantee of the company's indebtedness from a director of the company, and also takes from the director a deposit of money with the bank which is charged in favour of the bank with the payment to the bank of the company's indebtedness to the bank or the Director's liability to the bank as guarantor of the company's indebtedness, and if the bank later becomes insolvent and it put into liquidation, can the company or the director compel the Dank to apply the director's deposit in reduction of the company's indebtedness, and also of the director's liability as juarantor, or can the bank require the company to pay the full amount of its indebtedness to the bank without regard to the director's deposit and, if so, does that leave the director to prove is an unsecured creditor in the liquidation of the bank for the amount of this deposit." It was held that where there had been mutual credits, mutual debts or other mutual dealings between n insolvent company any creditor of the company Rule 490 of ie Insolvency Rules, 1986 required that an account be taken of 'hat was due from each party to the other in respect of the mutual dealings and the sums due from one party had to be set off against the sums due from the other before a claim was made in the liquidation or a payment made to the liquidator, as the case might be. Moreover, the set off was mandatory, it could not be excluded by any Contract between the parties and it applied notwithstanding the fact that one or other of the debts or credits might be secured, It followed that if a bank lent money to a company secured by a guarantee provided by a person who had a deposit account with the bank, the guarantee being on terms that the guarantor was the principal debtor, and the bank subsequently became insolvent, the guarantor could set off his claim for the return of his deposit against his liability to pay the company's debt, so that the debt was wholly or protarrto extinguished. Accordingly, the plaintiffs having accepted liability as principal debtors and being under immediately liability to pay the companies' debts without demand being made the companies' liability was extinguished or reduced, as a result of a set off between the bank and the plaintiffs pursuant to Rule 4.90 of the 1986 Rules, by the amount standing to the credit of the plaintiffs deposit accounts so that the plaintiffs were only liable to pay the defence, if any between the companies' debts and the amount of the deposits.
13. In the present case the facts are entirely different because here the liability of the plaintiffs is to the successor of B.C.C.I. Overseas whereas their claim on account of deposit made by them is against the liquidator of B.C.C.I. S.A. The question of set-off, therefore, does not arise in this case.
14. Mr. Sami finally submits that in the circumstances of the case, it is just equitable that defendant No. 1 be restrained from remitting any money to defendant No. 3 at least to the extent of US $ 2,50,000 which is equal to the amount of deposit of the plaintiffs stated to be lying with the liquidator of B.C.C.I. S.A. It appears to me, however, that the object of the present suit is obviously to forestall the demand being made by defendant No. 1 for payment of money which is said to be due to it by the plaintiffs and that the object is sought to be achieved by an injunction sought in the suit. Obviously, it cannot be equitable to enable the plaintiffs to forestall the demand of defendant No. 1 on a ground which is quite clearly without any basis. Further, the defendant No. 3, admittedly, is not liquidator of B.C.C.I. Overseas; and payment under the scheme is to be made to that liquidator who is not party to the present proceedings; and since any injunction against defendant No. 1 would necessarily affect;hat liquidator, it would not be fair or proper to restrain defendant Mo. 1 as sought by the plaintiffs, Mr. Sami says that he has moved an application to implead the liquidator of B.C.C.I. Overseas as a party in the present proceedings. If such an application has been made, it will be decided on its impleaded as a party, to apply for such relief as they consider themselves o be entitled to. In the circumstances, this application is dismissed.