' As common issues excepting one arise for decision in the two suits, this judgment will dispose of Suit No, 161 of 1965 and Suit No, 297 of 1967.
2. In Suit No, 161 of 1965, Muhammad Farooq Khan is the plaintiff and Sulaiman Panjwani, Pakistan Shipping Agencies Ltd., and Habib Bank Ltd., are the defendants. The brief facts of the case as disclosed in the Plaint are that Muhammad Farooq and Sulaiman Panjwani entered into partnership under the mire and style of Enterprisers Pan Islamic under a deed of partnership executed by them on 21-t-1964. The partnership firm had an account with the Habib Bank Foreign Exchange Branch at Karachi. It is averred in the plaint that differences having arisen between the parties the partnership was mutually dissolved and accounts were taken, settled and closed. A clearance certificate to this effect was executed by the parties on 29-7-1964 closing the accounts and the partnership business. It is contended in the plaint that plaintiff Muhammad Farooq sent intimation regarding the dissolution and settlement of accounts of the firm to Habib Bank. It was then contended that on 20-8-1964. Despite the dissolution of partnership, defendant Sulaiman Panjwani, behind the back of Muhammad Farooq and without his knowledge obtained a clean overdraft of Rs, 50,000 from Habib Bank in the name of the dissolved partnership firm and invested the same amount in his own company defendant Pakistan Shipping Agencies Ltd. It was further stated that defendant Sulaiman Panjwatu, once again obtained in the similar way two overdrafts of Rs, 100,000 each from the Habib Bank Ltd., in the name of the partnership firm and utilised the amounts for th" purposes of his company. The plaintiff Muhammad Farooq further alleged that Habib Bank Ltd., being aware of the dissolution of the firm was in collusion with defendant Sulaiman Panjawani, and attempted to create a liability against plaintiff Muhammad Farooq The latter averred that at the relevant time he was at Hong Kong and upon receiving information from his head office at Karachi, he immediately protested to Habib Bank Ltd., by cable personally addressed to the Deputy General Manager of the Bank, in which he reiterated the fact of the dissolution of the partnership. Plaintiff Muhammad Farooq finally complained that despite repeated correspondence Habib Bank Ltd., continued to forward to him intimation regarding accruing interest on the amount of loan and claimed the amounts from him jointly and severally with defendant Sulaiman Panjwani as partners of the firm. He challenged the authority of Sulaiman Panjawani to create liability by taking overdraft loans in the name of the dissolved firm. On the basis of these averments plaintiff Muhammad Farooq claimed the relief of declaration that he was not liable to the Habib Bank Ltd , for the overdrafts amounting to Rs, 2,50,000 and interest thereon and that the action of Habib Bank Ltd., was collusive and not binding upon him. He further claimed a declaration to the effect that defendant Sulaiman Panjawani had invested the overdraft amount in his own business carried on through Pakistan Shipping Agencies Ltd., purchasing properties and earning profits therefrom.
Lastly, he claimed a permanent injunction to restrain the Habib Bank Ltd., from filing any suit or taking any legal proceedings against him on the basis of the said overdraft amounts paid to defendant Sulaiman Panjawani.
3. Defendant Sulaiman Panjawani filed written statement on behalf of himself and Pakistan Shipping Agencies Ltd., resisting the suit. In substance he admitted that he was the Managing Director of the latter company and that he had entered into partnership with plaintiff Muhammad Farooq but claimed that he invested Rs, 2,50,000 in the business of the firm. He alleged misconduct against Muhammad Farooq including misapplication of funds. On account of this, he alleged, that he demanded settlement of account whereupon Muhammad Farooq proposed for conversion of the firm into a limited company and agreed to pay some amounts due to him and further that the remaining amount due to him would be invested in the proposed company by bringing the assets of the .Firm in the company and shares issued in his name. Defendant Sulannan Panjawani asserted that this agreement was reduced into writing in a memorandum dated 29-7-1964 which was termed as clearance certificate by plaintiff Muhammad Farooq. He further alleged that terms and conditions of the aforesaid agreement were not implemented and that it was subsequently discovered that the agreement was obtained by fraud. This defendant further categorically denied that any intimation was sent to Habib Bank Ltd., regarding the alleged dissolution of partnership and alleged that plaintiff Muhammad Farooq himself kept the account with the Bank open and operative. He further stated in detail facts and circumstances alleging that plaintiff Muhammad Farooq unauthorisedly received a sum of Rs, 2,00,000 from the trade representative of U. S. S. R. In Pakistan on behalf of Pakistan Shipping Agencies Ltd., to which he was not entitled. On receiving information about this, he alleged, he confronted the facts to plaintiff Muhammad Farooq, who admitted the same and requested him to arrange a further overdraft of Rs, 2,00,000 with the Habib Bank to procure the amount for payment to Pakistan Shipping Agencies Ltd. It was m consequence of this that he arranged the amount and paid the same to the latter company. This defendant, therefore, denied the allegation of fraud and collusion between himself and Habib Bank alleged in the plaint.
4. Defendant Habib Bank Ltd., also filed a written statement resisting the suit and stated that on or about 23-1-1964, the partnership firm of Enterprisers Pan Islamic whereof Sulaiman Panjawani and Muhammad Farooq represented themselves to be the partners opened an account with the Foreign Exchange Branch of the Bank. The said two persons represented themselves on behalf of their firm to be authorised to operate upon the said account jointly and severally and did in fact operate upon and deal with Habib Bank Ltd. In their said account jointly and severally. It was - further averred that the partnership firm is and the partners represented to be a trading firm.
Defendant Habib Bank Ltd., further contended that --the overdraft facilities in the aforesaid account of Enterprisers Pan Islamic were given by it against security and stock and goodwill of said trading firm and against lien of payment due under letters of credit. The overdraft facilities were also secured by equitable mortgage of the properties consisting of buildings and constructions on Plot No, 80/81 in Karachi Memon Cooperative Housing Society at Karachi belonging to defendant Sulaiman Panjawani. It was further disclosed that the account of firm as on 2-12-1964 showed a debit balance in the sum of Rs, 3,04,019.6 and that for the first time, on that date Habib Bank Ltd., received from plaintiff Muhammad Farooq a letter dated 24-11-1964 alleging dissolution of the firm Enterprisers Pan Islamic. The allegation of fraud and collusion were also denied by this defendant. It was categorically denied that any intimation regarding the alleged dissolution was received by the Bank prior to 2-12-1964 or that the alleged letter dated 31-7-1964 intimating dissolution of partnership by Muhammad Frooq was ever received. Further, it was contended that no public notice of the alleged dissolution was notified or publicized in newspaper as required by section 45 read with section 72 of the Partnership Act. Thus it was finally contended that the loans or overdraft facilities were obtained in the name of the partnership firm in this account and therefore Habib Bank Ltd., was entitled to call upon plaintiff Muhammad Farooq and defendant Sulaiman Panjawani to discharge their liabilities.
5. On the pleadings of the parties the Court framed as many as 18 issues. But it is not necessary to set out these issues here as subsequently the parties consented to drop them except one issue and adopt issues framed in suit No, 297 of 1967 filed by Habib Bank Ltd.
6. Coming now to the last mentioned suit (Suit No, 297 of 1967), this suit has been filed, as mentioned above, by Habib Bank Ltd., against the partnership firm Enterprisers Pan Islamic, Muhammad Farooq Khan, and Sulaiman Panjawani, in respect of transactions of loan obtained by the latter in the partnership account from Habib Bank Ltd., in controversy in the previous suit. The case of Habib Bank Ltd., in this suit is substantially the same as disclosed in their written statement substance of which has seen reproduced above. It was alleged that defendant Sulaiman Panjawani authorized and representing himself to be authorised obtained cash credit or loan and overdraft facilities. The latter on behalf of the firm and on his own behalf between 22-4-1964 and 21-11-1974 executed and signed promissory notes, papers and documents in respect of the aforesaid loan and other facilities. The Habib Bank Ltd., claimed a sum of Rs, 3,87,33-.43 as on 15-11- 67 the date of the suit. It was further alleged that defendant Suleiman Panjawani, to secure the said cash credit and loan and overdraft facilities deposited with Habib Bank Ltd., documents of title of the property details of which are mentioned above, as and by way of equitable mortgage besides securing the debts by hypothecation of goods under an agreement of hypothecation. The plaintiff in the suit further challenged the allegation 'that intimation of the alleged dissolution of the firm was given on 29-7-1964 to Habib Bank and denied having received any such intimation. The Bank claimed a decree for Rs, 3,87,337.43 with interest at 6% per annum from the date of suit until payment and preliminary mortgage decree declaring the amount due and directing defendants in suit to pay the amount in Court with usual reliefs as are claimed in mortgage suits of this nature.
7. In this suit Muhammad Farooq Khan filed written statement on behalf of the firm Enterprisers Pan Islamic and on his own behalf. He reiterated his stand viz-a-viz the liability claimed against the fires as disclosed in the previous suit filed by himself. He further challenged the authority of defendant Sulaiman Panjawani to represent the firm individually and severally for taking loans from the bank and maintained that the partnership firm stood dissolved on 29-7-1964 of which intimation was given to Habib Bank Ltd., on 31-7-1964 which was duly acknowledged. Consequently, it was contended that loans or advances obtained by defendant Sulaiman Panjawani after the date of dissolution of the firm was solely and individually the liability of the said defendant.
8. Defendant Sulaiman Panjawani also filed the written-statement resisting this suit and substantially raising the pleas as pleaded in his written statement in the previous suit. He maintained that he was fully authorised during the currency of the partnership as its partner to act in the course of business for or on behalf of firm. He disclosed that he had filed Suit No, 152 of 1965 in this Court inter alia for dissolution of the firm and rendition of account. It was his case that the overdraft facilities were availed of by the firm upon the joint representation of the partners comprising the firm, and therefore denied the allegation that he had solely executed and signed the promissory notes, papers and other documents in support of the said transactions. He also denied that he had deposited with the plaintiff's bank documents of title of the property as alleged, with the intention or object to create an equitable mortgage thereof. He alleged that documents of title had been wrongly retained by the plaintiff bank upon misrepresentation made to him. He also denied that the overdraft was secured by hipshot reaction of goods. Further, this defendant denied the allegation that the firm of which he and Muhammad Farooq were partners was dissolved on 29-7-1964 or that the accounts were rendered by the latter. He, however, admitted that no intimation regarding the alleged dissolution was communicated to the plaintiff-Bank. According to this defendant, the partnership subsisted, on account of which he had filed Suit ; No, 152 of 1965 in this Court for rendition of account.
9. On 19-5-1969, upon the pleadings of parties in Suit No, 297 of 1967 the Court framed the following issues:-
(1) Whether the firm was dissolved, if so did the plaintiffs have notice of dissolution ?
Whether the Defendant No, 3 was authorized by defendants Nos. 1, 2 or under the partnership deed or in law to obtain cash, loan and overdraft facilities from the plaintiff, if not, what are its effects ?
(3) Are the plaintiffs entitled to the reliefs claimed ?
(4) What should be the decree if any ?
(5) Whether plaintiffs are secured by mortgage and hypothecation. ; After the evidence of the parties was closed and both suits were fined for final arguments, on 26- 3-1976 on behalf of the parties it was consented that the issues framed in Suit No, 297 of 1967 be adopted as issues in Suit No, 161 of 1965 with one additional issue as under:- 'Whether the suit is maintainable ?"
10. In view of the fact that except for one issue common issues arise for decision of both suits, I would take up the consideration of each issue separately for the purpose of both suits:- ; Issue No, 1.-The question for consideration under this issue is whether upon evidence on record it is established that the firm was dissolved and it so whether notice of dissolution was served on the defendants. The question whether the firm was dissolved or not arises on account of the plea raised by Muhammad Farooq Khan whereby he disowned the liability for overdraft advances made by Habib Bank and drawn by Sulaiman Panjawani after 29-7-1964, the alleged date of dissolution, There is no doubt that the two partners entered into an agreement terms whereof were reduced into writing in a memorandum of agreement dated 7-9-1964 which is on record as (Exh.
8/1). According to the learned counsel for the plaintiff this document constitutes the deed of dissolution of the partnership as a result of which Muhammad Farooq Khan ceased to have any relationship with Sulaiman Panjawani as a partner and therefore the latter could not by his act bind the former. Mr. A.
0. Siddiqui, learned counsel appearing for Sulaiman Panjawani on the other hand contended that the document does not expressly speak of and was not intended to operate as dissolution of partnership. He referred to various facts and circumstances appearing in the evidence which according to the counsel clearly indicated that the partners continued to do business as usual, He further submitted that this conduct at least proves that the dissolution was never acted upon.
Whether the partnership was dissolved or not is a question only inter se the two partners and therefore learned counsel for the plaintiff did not at length deal with it, as according to him in these two suits the material question was whether the alleged intimation regarding dissolution was received by the Habib Bank. If the answer to this is in the affirmative, the counsel submitted, Muhammad Farooq Khan would cease to be liable for further transactions made by Sulaiman Panjawani, irrespective of whether the firm was actually dissolved or not. If on the other hand, Habib Bank Ltd., had no notice of the dissolution through the alleged intimation or otherwise Muhammad Farooq Khan would continue to be liable to the bank for the acts of the other partner.
Mr. Rahmatullah, learned counsel for ilabib Bank conceded to this and Mr. A. G. Siddiqui learned counsel for Sulaiman Panjawani did not dispute this position. On this basis Mr. Muhammad Arif frankly -conceded that Muhammad Farooq was liable for Rs, 50,000 which amount was taken by way of advance before 29-7-1964 but denied the liability for the rest of the amount which was drawn after this date by the other partner. I was told that the question whether the partnership was dissolved in fact or not is a material issue between two partners in Suit No, 152 of 1965. In this view of the matter, in my opinion, it is not necessary to decide in this suit whether the partnership was in fact dissolved or not. The only question that arises for decision is whether the Habib Bank had notice or knowledge of the alleged dissolution of partnership. Section 45 of the Partnership Act provides as under:- "(1) Notwithstanding the dissolution of a firm the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution in which public notice is given of the dissolution ; Provided that ...............................................................................
(2) Notice under subsection (1) may be given by any partner." ; The manner of giving public notice is provided for in section 72 which is in the following termst- "A Public notice under this Act is given:-
(a) Where it relates to the retirement or expulsion of a partner from a registered firm, or to the dissolution of a registered firm, or to the election to become, or not to become a partner in a registered firm by a person attaining majority who was admitted as a minor to the benefits of partnership, by notice to the Registrar of firms under section 63, and by publication in the official Gazette and in at least one vernacular newspaper circulating in the district where the firm to, which it relates has its place or principal place of business ; and rob in any other case, by publication in the local official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business." ; Mr. Muhammad Arif raised two-fold contention as regards notice of dissolution to the Habib Bank Ltd. He submitted that the bank was given actual notice by Muhammad Farooq through letter dated 31-7-1964 Exh. 8/4 and in the alternative the submission was that the bank had implied notice of the fact of dissolution. Mr. Rahmatullah on the other hand contended tr at the bank had no notice actual or implied and further contended that the notice contemplated in the section 45 must necessarily be actual in view of section 72 of the Partnership Act.
11. Relying on section 72 Mr. Rehmatullah contended that even if it is assumed that actual notice was served on Habib Bank Ltd., it will not be sufficient to relieve Muhammad Farooq Khan of the liability for the dues of the Bank as that section contemplates a public notice and not a personal notice. The disputed notice is admittedly not a public notice and therefore first question for consideration is whether this constitutes a valid notice under section 45 of the Partnership Act. Now the principle underlying section 45 quite obviously is that when a firm is dissolved and no notice is given of such dissolution, people who continue to trade with it should not be affected by the dissolution. But persons who had in fact notice of such dissolution are not adversely affected by reason of absence of publi notice. Having regard to this object behind the provision it is reasonable to hold that individual notice affords higher protection than public notice as spelled out by section '22 of the Partnership Act. In a recent case reported as Tariq Mohsin v. Province of Sind (1) a Division Bench of this Court had occasion to construe section 45 (1) of the Partnership Act and it was observed as under; "Although no public notice of the dissolution of the firm has been given in this case, counsel's submission is that actual and individual notice is on a better footing and affords higher protection to the petitioner. I am inclined to agree." ; Two decisions from Indian jurisdiction reported as Thurnuther Rama Rao v. 7 hoda Gan Venkateswa ra Rao and (2) and Central United Bank Ltd. And another v. b. A. Venkata Rama Naida
(3) were referred to in this decision. Counsel contended that the Indian decisions were based on the principle of estoppel rather than on the interpretation of sections 45 and 72. 1 have gone through these judgments and find that in both cases question of sufficiency of individual notice regarding dissolution of partnership or retirement of a partner from the partnership was considered and it was held that individual notice was sufficient even though public notice in the manner prescribed by section 72 was not served, to relieve a partner dissociating;
(1) PLD 1976 Kar. 728 (2) A T R 1963 Andh. Pra. 153
(3) AIR 1963 Mad. 302 ' himself with the partnership of further liability for the debts of the partnership, Therefore, both on principle and on authority, I would hold that if it is established that if individual notice was served upon the Bank by Muhammad Farooq Khan, he would no longer be liable for debts incurred in the name of the partnership after that date.
12. This brings me to the next question whether the notice was actually served on or received by the Bank. In this connection Mr. Arid argued that letter dated 31-7-1964 was delivered in the office of Habib Bank Ltd., and copy thereof was signed on behalf of the latter which has been produced as (Exh. 8/4). This document expressly speaks of the dissolution of the firm having taken place on 29- 7-1904 and intimates the Bank that the current account in the name of the firm shall be closed and no operation of same by any one would be allowed. Upon this document there appears a rubber seal of the Habib Bank as well as initials of some one consisting of a straight line curving in a loop without further modulation. It was argued that this letter was delivered by one Hamiduz Zafar, the Accountant of the Enterprisers Pan Islamic and was delivered to Habib Bank Ltd Foreign Exchange Branch, Blinder Road, Karachi. Muhammad Farooq Khan in his deposition has testified that the intimation regarding dissolution of the firm was sent to Habib Bank Ltd., and has produced the letter (Exh. 8/41. He further states that this letter was delivered to the Bank by their accountant named Zaffar, who is dead now but had filed an affidavit in this very suit in support of this fact. The affidavit has also been produced in evidence as (Exh. 8/5). On the basis of this evidence Mr. Arif submitted that the factum of notice has been established. With regard to the initials appearing on the document, learned counsel submitted that the initials of the Bank's employee on this document are the same as the initials on the admitted documents, namely (Exh. 8/42) and (Exh. 6/23). In the cross-examination, Muhammad Usman Joint Executive Vice-President of Habib Bank Ltd., on the other hand has made the following statement :- "I see (Exh. 8/4) in Suit No, 161 of 1965. This is by the Bank to defendant No, 1, dated 7-11-1964. The initials appearing at the bottom of the letter are mine but cannot say whose initials appear in the circle. (Mr. Arif undertakes to file photo copy of this letter which will be (Exh. 6/23). This document has come from the possession of the Bank. It is not correct that the seal and the initials in (Exh. 8/4) in Suit No, 161/65 are of the Bank or any officer of the Bank respectively. I have seen the initials of Mr. Basharat, He was Officer In charge in Letter of Guarantee Department. The initials in the red circle in (Exh. 8/4) in Suit No, 161/65 appears to be similar to his."
' On the basis of the aforesaid statement counsel contended that the initials on Exh. 8/4 stands proved. He further submitted that the alleged agreement of dissolution between the partners dated 29-11.1964 Exh. 8/1 provided for the establishment of a company with the two partners as directors. It was submitted that the fact that a new account was opened in the name of the newly formed company on 18-11-1964 further corroborates the fact of notice,
13. Now it is apparent that the onus of proof regarding this issue lay upon plaintiff Muhammad Farooq Khan. The controversy would have been greatly resolved if the alleged signatory of the initials Mr. Basharat had appeared as a witness in the case. But at the time of evidence he was already dead. Mr. Arif has urged that even so the Bank ought to have filed its counter-affidavit rebutting the allegations made by the Accountant of the plaintiff. But I do not find much force in this contention for the simple reason that the affidavit of Hameeduz Zaffar was filed in connection with interlocutory relief and nowhere in the affidavit the deponent had asserted that he had delivered the letter and obtained the initials of Mr. Basharat. All that he stated was that he delivered the letter "to the Bank" and obtained the signature "of the Bank" on the duplicate copy. It is inconcievable therefore that at this stage the Bank was called upon to file the counter-affidavit of any particular person to say that the initials were not his. No attempt has been made to prove the initials on the disputed document by expert evidence although it is admitted that the admitted signatures of Basharat were available. Besides being a very inconclusiye and unsafe mode of proof, the visual comparison of the two initials does not yield any positive result as the initials lack modulations and in my opinion are not capable of comparison without the aid of a handwriting expert.
14. Be that as it may, there are other circumstances in the evidence which militate against the veracity and genuineness of this document. Mr. Rahmatullah has pointed out to me that in the printed column meant for reference number in the line opposite to the printed words "Our Reference" only the words "EPI" are mentioned without any number. My attention was drawn to the other letters sent by Muhammad Farooq or his firm which invariably mention the reference by stating the number. Reference in this connection may be made to Exhs. 8/14, 8/15, 8/16, 8/17, 8/18, 8/19, 8/20, 8/21, 8/22 and 8/25. Some of these documents are of dates prior to the disputed document and some of later dates. This, therefore, being the established practice, the absence of reference number throws doubt upot the genuineness of this document. Learned counsel for the bank invited my attention to letter dated 24-11-1964 and pointed out that the rubber stamp on this letter affixed in token of receipt by the Bank, is totally different as compared to the rubber stamp on the disputed letter which is circular in shape whereas on this letter the stamp consist of letters written in straight lines. Learned counsel for the Bank stated that letter written by Muhammad Farooq dated 24-114964 (Exh. 8/17) which was received by the Bank on 2-12-1964 brought to their notice for the first time that the partnership was dissolved. Tnis was immediately acknowledged by the Bank by their letter dated 3-12-1964 (Exh. 8/43) pointing out that the Bank has been informed for the first time through the former letter about the dissolution of the firm. Additionally in letter dated 24-11-1964 (Exh. 8/17) referred to above, it was stated that the Bank was already informed that the firm was dissolved but no reference was made to the letter in question I specifically. If the letter in question had been actually written the normal course of human conduct would be to refer to that letter in reiterating the position that the intimation had already been communicated on a particular date. It was pointed out that letter dated 6-10-1964 (Exh. 8/16) was written by Muhammad Farocq after the alleged date of dissolution even then it was written on the letter head of the firm and was signed by Muhammad Farooq on behalf of the firm of Enterprisers Pan Islamic.
In this letter it was stated that letter of credit mentioned therein was lying with the Bank and since the validity thereof had already expired the Bank was requested for getting it revalidated. This is obviously an admission on the part of Muhammad Farooq that the firm continued to do business as such even after 29-7-1964, the alleged date of dissolution or at any rate it was BO to the knowledge of the bank authorities. This would also exclude the possibility of a prior intimation to the effect that the firm had been dissolved. Besides this letter, learned counsel for the Bank has invited my attention to letters dated 4-8-1964 (Exh. 8/39), and dated 11-11-1964 (Exh. 8/27) written on behalf of the firm of Enterprisers Pan Islamic which indicate that their firm continued to do business after 29-7-1964. In the light of all the circumstances appearing in the evidence as discussed above I have an doubt in my mind that the disputed letter, dated 31-7-1964 (Exh. 8/4) is not a genuine document and was not received by the Habib Bank Ltd.
15. Mr. Rahmatullah in the alternative contended that even if it is assumed that the notice was delivered to Mr. Basharat an employee of the Habib Bank Ltd., it will not be sufficient to constitute a notice to the Bank. The submission was that in case of corporate bodies the notice must be received in the course of business to which it relates, that is to say to the proper officer of the corporation. In view of my finding that the disputed notice was not served on or delivered to the Bank it is not necessary to consider this contention.
16. The alternate submission by Mr. Arif, as stated above was that failing the actual notice the evidence shows that the Bank had implied notice of the fact that the partnership was dissolved. For this submission, learned counsel relied upon the following circumstances in the evidence:-
(1) Cheques issued in the name of Sulaiman Panjawani were dishonored by the Bank after the date of dissolution of the firm, namely 29-7-1964.
(2) On 18-11-1964, the newly formed company opened account with the bank with incorporation documents.
(3) Before the so-called dissolution of the firm whenever advances by overdraft were granted, application in writing was obtained but the advances in question after the date of the alleged dissolution were given without obtaining such application.
(4) The amounts withdrawn in pursuance of the overdraft facilities by Sulaiman Panjawani were deposited in the account of his company Pak. Shipping Agencies Ltd.
On the legal question whether the implied notice is sufficient in law Mr. Ari relied upon two cases reported in AIR 1929 P C 132 and AIR 1938 All.
619. So far as the Privy Council case is concerned the decisio in that case is not material for the purpose of this question as it related t section 264 of the Contract Act before its amendment by the Partnershi Act 1932 whereby Chapter XI containing the section was omitted. Even otherwise the decision does not in any manner materially help in construing sections 45 and 72 of the Partnership Act, 1932 which are applicable in this case. Other Indian decision is also not directly relevant. Learned counsel stated at the Bar that be was relying on the principles enunciated in these decisions and conceded that otherwise they were not relevant. However, I have been unable to discover any principles of law postulated therein which have a bearing on the present question.
No other decision from either side was placed before me touching the question of law under consideration.
17. In any case I propose to consider the submissions of the counsel on this questions. Mr. Rahmatullah, as regards the first point invited my attention to the various letters written to the Bank by Muhammad Farooq himself after 29-7.1964 which have been mentioned above in which he acted on behalf of the firm. Mr. Arif has not pointed out anything in evidence to -show that cheques issued by Sulaiman Panjawani were dishonoured. Unless therefore it is shown that the cheques were dishonoured for the reason that the account was 'closed or the partner had no authority to operate the same, it is not possible to attach any value to this fact. As regards the second point Mr. Rahmatullah stated at the Bar that no account in the name of the newly formed firm was opened by the Bank. The witness of the Bank, Muhammad Usman in his cross-examination has not specifically admitted that any such account was opened and has shown ignorance about it. He has further stated that bank had no knowledge before 2-12-1964 that the firm had been converted into a private limited company. When he was shown a statement of account issued by the Bank the witness admitted that an account in the name of the limited company was opened on 18-11- 1964 as appeared from the statement of account. On an adjourned hearing he produced the account opening form of the limited company which is (Exh. 6/29). The witness explained that at the time the account was opened he had not seen these documents but when a cheque for Rs, 10,000 drawn by the partnership firm was deposited by the firm he called for papers and did not pass the cheque because the deed of dissolution of partnership firm was not available. He again said that the cheque was not passed because no arrangement was made in the partnership account and the overdraft limit on this date was already exhausted. In view of this evidence it has been established that the new account in the name of the limited company formed by the two partners was opened by the Bank although it appears not to have been effectively operated upon.
However, as rightly contended by Mr. Rahmatullah, this fact atone is not sufficient to prove notice of dissolution of the partnership firm as a partnership firm and a limited company promoted by the partners could exist side by side. Mr. Arif has not pointed out any law barring a partnership firm from simultaneously floating a company in the same name. As regards the third point it was submitted by Mr. Rahmatullah that there is no obligation upon the Bank to obtain a written request for grant of 0. D. Facilities and contended that the partnership being a trading firm, every partner had ample authority to borrow money for the firm for which the other partner would be liable. In this connection he relied upon Saremal Punamchand v. Kapurchand (1), where in case of a firm consisting of two partners constituted for carrying on the business of buying and selling copper and brass utensils, the defendant No, 1 borrowed some money from the plaintiff on promissory notes passed by him in the name of the firm, Mulla, J., held that the partnership in question having been one of the commercial nature, defendant No, 1 had an implied authority to borrow for the firm, and that therefore, defendant No, 2 was also liable for the loan. Nothing was contended against this proposition and therefore Sulaiman Panjawani obviously had authority to raise loans for the purpose of the firm binding the other partner also with liability. As regards the last point, Mr. Rahmatullah submitted that prior to the alleged date of dissolution, amounts were deposited in the account of Pak Shipping Agencies Ltd. And therefore this point has also no significance. In this connection learned counsel invited my attention to various entries in the statement of account of the firm (Exh. 6/19). At page 3 of this document vide entry dated 15-5-1964, an amount of Rs, 1,00,001 was transferred through cheque to Pakistan Shipping Agencies. Similar entry exists for an amount of Rs, 60000 on 18-5-1964. I, therefore, agree with the learned counsel that this fact has no bearing on the issue.
(1) I L R 1948 Born. 176 ' In the circumstances, the contention that Habib Bank Ltd., had implied notice of the alleged dissolution of partnership also fails.
18. My finding on the issue therefore is that no notice was given to or received by Habib Bank Ltd., regarding dissolution of partnership on 31-7-1964 and that the Bank received such notice on 2-12- 1964. Issue No, 2.-This issue was not pressed by Mr. Arif who frankly conceded that if issue No, 1 is decided against Muhammad Farooq, the suit would stand decreed against him. In any case I have discussed the legal position as regards the authority of Sulaiman Panjawani to borrow on behalf of the firm. Further the admitted facts are that the account could be operated singly by each partner.
On behalf of Mohammad Farooq the liability up to 29-7-1964 is admitted even in the written statement in suit No, 297 of 1967 wherein he has denied his liability created by Sulaiman Panjawani after 29-7-1964 only. Additionally, the so-called dissolution deed dated 29-7-1964 (Exh. 8/1) in para. 3-B also confirms that overdraft was drawn by the partnership firm.
19. In view of the above and the finding given on issue No, 1, I would answer this issue in affirmative.
Issue No, 3.-The next material issue to consider is whether Sulaiman Panjawani secured the loan with mortgage and hypothecation. On this issue, Mr. A. G. Siddiqui, learned Advocate for Sulaiman Panjawani, first contended that no equitable mortgage as alleged was created. The bank has produced two receipts, one dated 7-11-1964 (Exh. 6/9) and the other undated (Exh. 6/10) in support of their claim that equitable mortgage was created in favour of the Bank by the aforesaid partner, to secure the loan. The wording of both these receipts are identical and they mention title deeds having been received by the Bank from Sulaiman Panjawani "by way of equitable mortgage to secure overdraft etc.". There is no controversy that this document was signed by Mr. Sulaiman Panjawani. But the submission of Mr. A. G. Siddiqui was that the words "to secure" clearly indicate that the documents were delivered in pursuance of an executory transaction of mortgage and cannot be construed as memoranda of a past transaction so as to constitute an equitable mortgage by deposit of title deeds. It was further submitted that the amount of loan was paid after the date of execution of these receipts which showed that the security was to come into effect in the future. On these premises counsel submitted that the documents are not admissible in evidence and could not operate to create mortgage without registration. Mr. Rahmatullah in reply submitted that the construction placed by Mr. Siddiqui is not reflected by context of the language employed in the operative part of the document. It is now well settled that if the document evidencing the transaction is merely a record of a past transaction and does not contain the terms of the contract or bargain operating in praesenti, the document would qualify as a mere memorandum and would not require registration. In United Bank of India Ltd. v. A.Irannessa Bewa
(1) on which both learned counsel have placed reliance, the material words In the letters delivered by mortgagor by way of memorandum of transaction of mortgage by deposit of title deeds read as under :- "This is put on record that this day I deposited with your head office in Calcutta the documents specified in the Schedule hereto with
(1) PLD 1965 SC 274 ' intent to create an equitable mortgage upon all my right, title, interest, and estate in the properties to which such documents relate for the purpose of securing due repayment to the Bank on demand of all moneys now owing or which may hereafter be owed from me."
' Their Lordships of the Supreme Gourt held that letters did not require registration. On page 186 of the report Cornelius, C. J. (as he then was) who delivered the judgment for the Court, observed :- "There are no words in these letters which purport to create any relationship in present. The mention of the deposit is in the past tense, i,e,, "I deposited". There are no words used to show that in present the security was being created, but it is said "I deposited documents. . . . . . . With intent to create equitible mortgage "and in the light of the observations in the judgment of the Privy Council last cited, the position of such an intent at the time of deposit, being in the past, is capable cf being proved by production of document in evidence."
' Applying the test laid down by their Lordships, I find no words showing in evidence on part of the mortgagor of creating any rights in praesenti. The word "received" clearly refers to the act of delivery of title deeds in the past and therefore 1 am unable to construe the words 'to secure" as meaning or expressing an intent to create security in the future. Read in their proper context with the opening word "received", the words clearly mean that the documents were received by the Bank by way of equitable mortgage and the words "to secure" qualify the expression "document by way of equitable mortgage". The entire import of the text clearly spells out the intention underlying the execution of the documents that it was intended to be the record of the historical fact of delivery of title deeds by way of security in the past. This conclusion is very significantly fortified by the fact that the executing patty in the two documents is the Bank itself and not the mortgagor who has met Ely signed on the document in token of having received the original. Clearly therefore the two documents were passed on by way of receipt by the Bank to the mortgagor for the latter's use. But since the document also contains the memorandum of the oral transaction pertaining to the creation of mortgage by deposit of title deeds, the documents were utilized by the Bank in order to prove the transaction. Mr. Siddiqui cited the case of Eagle Star Insurance Co. v. Usman Sons Ltd. (1) to support his contention. However the facts of that case are clearly distinguishable inasmuch as the memorandi in that case were clearly worded so as to create rights in present, words like "herewith" and "hereby" were repeatedly used in the operative part of the memoranda which were construed as importing the intention to create the mortgage by the execution of document. In addition, the writings contained undertakings that the properties with regard to which documents of title were deposited shall not be alienated or encumbered until the loan advanced by the plaintiff has been repaid. These were obviously terms of the contract incorporated in the writings which were therefore construed to operate as creating the relationship of moitagor and mortgagee between the parties in present. In this case, however, no such circumstances exist and there is nothing to indicate that these documents were intended to operate as contract for mortgage. The fact that the payment under the advance was made after the execution of two documents has no bearing on the nature of the transaction. The Privy Council in the case of Sundara Charier v Nariyyana (2) held that even if it
(1) PLD 1969 Kar. 123 (2) 131 I C 328 ' was a condition of the advance that the memorandum was to be given, the fact that the memorandum was prepared, signed, and handed over to the mortgagee before the advance of the balance of the money to be secured by the deposit could not alter the nature and meaning of the document.
20. In the light of the above discussion I hold that the Bank has established that Sulaiman Panjawani had created equitable mortgage upon his properties in favour of the Bank.
21. The last issue that remains to be considered is the additional issue regarding maintainability of Suit No, 161 of 1965. The plaintiff in this suit has claimed several declarations to the effect that he is not liable to the Habib Bank Ltd. For the advances to the tune of Rs, 2,50,000 and interest thereon made to Sulaiman Panjawani in the name of the partnership firm and that this was done collusively. A declaration was also claimed that the amounts so secured by Suleiman Panjawani were invested in his own business carried through Pakistan Shipping Agencies Ltd. A consequential relief of permanent injunction was also sought to restrain the Bank from filing any suit or other proceedings against the plaintiff on the basis of the disputed advances. Mr. Rahmatullah rightly contended that the declarations sought do not fall within the purview of section 42 of the Specific Relief Act in so far as no question of legal character or right to property was involved. In Alvi Sons Ltd. v. Government of East Pakistan (1) where the plaintiff had claimed a declaration that he had not committed breach of any of the terms and conditions of the contract between the parties and therefore the security furnished by him in the ford of Bank guarantee was not liable to be cashed, it was held that the declaration sought cannot be granted under section 42, Specific Relief Act as the suit was primarily with respect to pecuniary relationship between the parties. Further, it was observed that the declaration sought was neither with respect to plaintiff's legal character in the sense of "status" nor with regard to any right to property. Respectfully agreeing with this view, I hold that the declarations sought in this suit are not available by way of relief under section 42 of Specific Relief Act. Similarly, the relief of permanent injunction has already become infructuous inasmuch as the Bank has filed a Suit No, 297 of 1967 against the plaintiff for recovery of dues arising out of the advances. No argument was advanced as against this contention by the Advocate for the plaintiff in this suit. I have therefore come to the conclusion that Suit No, 161 of 1965 is not maintainable.
22. In view of the above findings and conclusions, I decree Suit No, 297 of 1967 as prayed with costs and order that a preliminary decree be passed under Form 5-A of Appendix D to the First Schedule of the Civil Procedure Code. The defendants in this suit are given six months' time to pay the decretal amount. Suit No, 161 of 1965 is, in the result, dismissed with costs.
(1) PLD 1968 Kar. 333