MIAN ALLAH NAWAZ, J.--- This judgment will govern two Regular First Appeals namely 44 of 1969 and 4 of 1970. Both these have arisen out of judgment and decree passed by the learned Civil Judge, 1st Class, Multan, dated 8-2-1969. The appellant, in Appeal No.44 of 1969 is the Central Bank of India Ltd., Bombay through Assistant Custodian Enemy Property, Lahore (hereinafter described as Creditor/Bank/Plaintiff). The second appeal is by New Bank of India Ltd., through same functionary (hereinafter known as "Mortgagee"), Syed Abdul Jalil Shah/predecessor-in-interest of respondents Nos. l to 10, was the sole owner of registered partnership known as Messrs Jalil Cotton Factory (hereinafter described as Borrower/Defendant). Respondent No.2 shall be referred to as "Guarantor".
'2. Factually speaking, on 2-12-1946 the Borrower opened a cash credit account in Multan Branch of the Creditor with maximum limit of Rs. Six lacs. The Borrower started availing the facility, executed a deed of hypothecation on 12-12-1946. On the same date, he executed a deed of pledge as well as pronote. The aforesaid instruments were executed, as securities for repayment of loan alongwith interest at the rate of one per cent. Above the rate of Reserve Bank of .India with monthly rest. The Borrower deposited with the Bank Trust Deed dated 9-8-1946/pertaining to agricultural land measuring 22 Bighas of land known as "Bagh Chela Ramwala, situated in Tarf Sadhu Hassan and Tarf Ismail within the urabn limits of Municipal Committee, Multan. Respondent No. l agreed to maintain a margin of 25 to 30% of pledged goods in the constructive custody of land. As the Borrower was not able to make repayment as well as to keep the requisite pledge stock, he executed a mortgage-deed, dated 15-2=1947 (Exh.P.10). This showed that the stock value of borrower was Rs.4,11,700 while bank dues were Rs.4,87,505-10-9. Unfortunately the position of the pledged stocks further deteriorated and so on 12-4-1947 the Borrower further executed a mortgage-deed (Exh.P.Ll) admitting the entries of statement of accounts furnished to him by the Bank and also admitting the position of his pledged stock qua his liability in following terms: 1.Details of pledged stock: Cylinder Oil 300 Maunds CBS Rs.25Rs.7,500 Kappas 4 F 600 Maunds -- Rs.18Rs.10,800 Kappas 289 F 2000 Maunds @ Rs.20Rs.40,000 Cotton Loose 4F 375 Maunds -- Rs.20Rs.15,000 Cotton Seeds 4F 900 Maunds -- Rs.10Rs. 9,000 Cotton Seeds 289E 2400 Maunds @ Rs.8/8Rs.24,000 Fully pressed cotton bales 289E @ 149-7-10 Maunds @ Rs.50.Rs.35,500 Cotton loose 4F, 300 Maunds @ Rs.40Rs.12,000 2.Value of pledged stockRs.1,54,200 3.Outstanding liability of Borrower towards BankRs.4,26,903-14-3 At this juncture the guarantor executed a letter, dated 5-2-1947 under which he undertook to repay the liability of the Creditor.
3. Since the Borrower was not able to repay his liability, the Central Bank of India brought a suit on 27-8-1952 against respondent No. l in the Court of Senior Civil Judge, Multan with following prayers:-- "(a) That a decree for payment of the amount of Rs.3,74,836-8-0 referred to above may be passed in favour of the plaintiff against the defendants and both the defendants be held jointly and severally liable for the payment of the whole decretal amount.
(b) That in case of default the mortgaged properties described in paras.5,.7 and 10 of the plaint be sold except that property described in para. 10 be sold subject to the charge of the New Bank of India Ltd., Multan City, as mentioned in para. 11 of the plaint and the sale proceeds be appropriated towards the repayment of the decretal amount.
(c) That in case the sale proceeds are found insufficient to pay the amount due to the plaintiff- Bank then liberty be reserved to the plaintiff-Bank for obtaining a decree for realising the balance from other properties of the defendants and the person of defendant No. 1.
(d) That the plaintiff may be allowed interest from the date of institution of the suit till the date of the payment of the whole amount due to the plaintiff.
(e) That the plaintiff may be awarded the costs of suit; and
(f) That the plaintiff may be granted any other relief which may be appropriate in view of the facts of the case and provisions of law."
Despite efforts, service could not be effected upon the Guarantor who was so proceeded against ex parte. The mortgagee lodged an application for being impleaded as party which was allowed and mortgagee was so arrayed as defendant No. 3.
4. That suit was contested. It was pleaded therein that the Creditor, at the time of the filing of the suit, was in possession of the pledged goods worth Rs.Ten lacs; that the Bank, with the dawn of independence had migrated to India without accounting for the pledged goods; that the suit on that ground was incompetent. It was further objected that the suit was filed on the basis of deed of hypothecation, deed of pledge dated 12-12-1946 and deed of mortgage dated 15-2-1947 and so it was barred by time under Article 57 in Schedule to Limitation Act. On facts, it was pleaded that Messrs Jalil Cotton Factory was owned and run by the guarantor who had migrated to India; that the deeds, mentioned above though executed by him, yet were signed by under undue influence and coercion of Guarantor.
5. On the above pleadings, the learned trial Court framed as many as 35 issues on 1-12-1962. Two additional issues were also framed namely I-A and I-B on 6-2-1963. Thereafter, the borrower lodged a suit (No.299 of 1968) for rendition of accounts on 12-10-1962 against the creditor bank. In this suit four additional issues were framed. The evidence was recorded by the learned first Court in Bank's suit. Upon the consideration of the material on record, the learned trial Court decided issue No.33 against plaintiff/holding that the statement of account furnished by the plaintiff was insufficient to prove the liability of the borrower. Issue No.27 was decided against the bank with a conclusion that the plaintiff had neither 'returned nor tendered accounts with regard to pledged stock and so the suit was incompetent. Issues Nos.2 and 17 were decided jointly. On these issues, it was found that the bank was in possession of the pledged goods. On the basis of the above conclusions, the learned first Court held that the suit was not competent. Issues Nos.3, 4, 13 and 14 were dealt with jointly and it was held that the suit was beyond time under Article 57 in Schedule to Limitation Act. Issue No. 16 was adjudicated against the borrower. Issue No. l was not decided as impressed. Issue No.5 was decided against the plaintiff and it was held that the suit was not competent. Issues Nos. 8, 9, 10 and 11 were decided against the Bank. Issues Nos. 14, 22, 23, 24, 25 and 26 were also answered against plaintiff. Issues Nos. 18, 19, 21, 28, 30, 31 and 32 were found against the plaintiff. On these findings the suit was dismissed on 8-2-1969.
6. Feeling aggrieved the Central Bank of India as well as the New Bank of India preferred appeals bearing R.F.A. Na. 44 of 1969 and 4 of 1970. These appeals came up for hearing on 5th, 6th, 7th, 8th and 12th of October, 1991 and reserved for its decision. The decision was announced on 6-6-1992 allowing appeals. Feeling dissatisfied, Syed Iftikhar-ud-Din Haider Gardezi and 9 others successors-in-interest of Syed Muhammad Abdul Jalil Shah Gardezi/defendant No. 1, filed Civil Appeal No. 461 of 1992 in the Supreme Court. The same was allowed by apex Court on 24-10-1995 in following terms:------- "Result of the above discussion is that this appeal is remanded to the High Court to be heard and decided within three months without fail. The impugned judgment and decree of the High Court is set aside. Learned counsel for the parties may raise and argue as many questions of law and facts as they may like during the hearing. With these observations, this appeal succeeds and is allowed with no order as to costs. "
The record of this case was received by this Court on 6-5-1996. This is how these appeals have been reheard.
7. The learned counsel for the appellant/Central Bank of India, in support of Appeal No. 44 of 1969, reiterated whatever was argued by him on 5th, 6th, 8th and 12th of October, 1991. He simply stated that he had no other points in his armoury. Contrarily, Ch. Khurshid Ahmed, Senior Advocate/learned counsel for the Borrower reiterated earlier contentions alongwith following points: (i ) Relied upon Exh.P.17 and statement of Saeed Ahmad (D.W.11) to contend that the report of the said witness demonstrated that the statement of account of Bank suffered from manifest discrepancies and was not worth to determine borrower's liability. According to the learned counsel, the lender was required to prove the statement of account by strong and cogent evidence. Reliance was placed on the Australasia Bank Ltd. v. H.S. Mahmood Hassan Akbar PLD 1983 Kar. 431 and Ashraf Ali v. Bank of India Ltd. 1981 CLC 1582. It was pointed out that the testimony of D.W.11 was expert opinion and could not be lightly ignored.
(ii) That Issues Nos. 19, 22, 23, 24, 25 and 26 were decided by the first Court correctly. The borrower had taken up the plea that the guarantor was legal advisor to Non-Muslim Bank; that he had appeared in the witness-box and proved that he was merely a figure head while actually the guarantor was the real borrower; that Exh.D.8 was a trust-deed and so it could not serve the purpose of equitable mortgage. So Issues Nos.28, 31 and 32 had been correctly decided by the Court below.
(i.e) On the question of interest it was submitted that the same had been declared in violation of the injunctions of Islam and so this Court cannot decree the interest against Syed Abdul Jalil.
Strength was sought from Mahmood-ur-Rehman's Faisal v. Secretary, Ministry of Law PLD 1992 FSC 1.
8. From the above resume of facts, the contentions of the parties following points fall for determination:
(1) Whether the instant suit was competently instituted?
(2) Whether the instant suit was barred by time?
(3) Whether the plaintiff had rendered accounts to respondent No. 1, with respect to stock pledged by respondent No. 1, as required by section 172 of the Contract Act, if not, whether the plaintiff had right to file the instant suit? .
(4) Whether Issues Nos. 19, 22, 23, 24, 25 and 26 were correctly adjudicated upon by the Court below?
(5) Whether finding of first Court on Issues Nos.28, 31 and 32 were not open to any exception?
9. As regards the first point, suffice it to note that the suit was filed by the plaintiff/public limited Company inqorporated under the Indian Companies Act, 1913. The plaint was signed, verified and filed by Mr. S.R. Jariwala as recognised agent of the Company under Rule 1 of Order XXIX, C.P.C. The deed of general attorney, in favour of the said attorney, was executed on 2-5-1951 by two Directors namely Mr. B.D. Lan and Mr, Premchand. The statement of Mr. S.R. Jariwala was recorded on Commission wherein he deposed that he was the Principal agent of the plaintiff in Pakistan and was also bank attorney. As against this evidence, Syed Abdul Jalil appeared as D.W. 12 and did not utter a single word to controvert the above assertion. The point for determination is whether the plaintiff had proved that the suit was competently instituted. Similar point cropped up for consideration in Messrs Muhammad Sadiq v. The Australasia Bank Ltd. PLD 1966 SC 684. In this case, Australasia Bank Ltd. Brought a claim for recovery of loan against Kh. Muhammad Sadiq through attorney. The suit was contested and a plea was taken that it was filed by a person who did not have the legal authority to file it. The learned Original Court upheld this objection and dismissed the suit. On appeal before the Division Bench, the two Judges differed on this question and so the matter was referred to a third Judge who felt necessity of recording evidence, In this exercise, the memo. Of Association, Articles of Association of the Bank and Resolution authorising the Director to appoint attorney were brought on record. On this material, the learned third Judge held that the suit was validly Instituted and decreed the suit. On further appeal, the Supreme Court answered the question in following terms:----- "This brings us to the next question as to whether the suit had been competently filed. As already stated, one of the learned Judges of the High Court had taken the view that since the power of attorney had affixed to it the common seal of the company there was a presumption that the power of attorney was lawfully executed, and then the onus was on the other side which challenged the validity of the power of attorney to show that it was ultra vires the powers of the company. The third learned Judge evidently did not agree with this view, for, if he had done so he would not have called for the additional evidence.
We are unable to uphold the view that the production of the power of attorney bearing the common seal of the company was by itself sufficient. In saying this the learned Judge has evidently overlooked that as a rule the Articles of Association of a company contain special provisions prescribing for the manner in which the seal of the company may be affixed and that those who deal with a company are bound to see that the document on the face of it, accords with those provisions of the Articles. It is only when it does so and the instruments is on the face of it regular, persons dealing with a company have a right to presume that the seal so affixed has been duly affixed, that the Directors were duly appointed and their signature duly made. The burden only then shifts to prove the contrary on those who allege it. Again, the law requires that, prima facie, those who deal with a person acting under or purporting to act under a power of attorney are put upon enquiry and are bound to satisfy themselves as to the authenticity of that power. It is only when such a person acts or purports to act under a properly executed power that the principal cannot repudiate his action.
This rule, has been accepted as settled over since the decision of the Court of Exchequer Chamber in England in the case of Royal British Bank v. Turquand 1856 EL and BI 327). According to this rule persons dealing with a company are bound to read the public documents of a company i.e. Its Memorandum and Articles of Association and to satisfy themselves that the transaction entered into or proposed to be entered into is not inconsistent therewith, but they are not bound to do more, nor are they required to enquire into the regularity of the internal proceedings or what has been called "the indoor management of the company", for, they are entitled to assume that all other things have been done regularly. There are, of course, exceptions to this rule, but we are not concerned with those exceptions here.
We have referred to these provisions in order to Indicate that once the authority of Muhammad Khan to present the plaint was challenged, a reference not only to the power of attorney was called for but also to the Articles of Association of the company. It will be observed that in the preamble to the Articles of Association it is clearly stated that the regulations contained in Table ' A' of the First Schedule to the Companies Act shall not apply this company but only the Articles adopted shall apply. Under Article 125 thereof Khawaja Bashir Bakhsh was appointed the permanent Chairman of the Board of Directors for as long as he was qualified and willing to act as such. Under Article 123 two Directors were sufficient to form a quorum and at a meeting at which this quorum was present the meeting could under Article 126 exercise all or any of the authorities and powers and directions given by or under the Articles of the Company. Article 131 vested the general control of the company in the Directors and Article 132 inter alia, gave them power to institute conduct, defend, compound or abandon legal proceedings and to authorise or empower "the managers or other officers for the time being of the company to exercise and perform all or any of the powers, authorities and duties conferred or imposed upon the Directors". Article 135 provided that the custody of the common seal of the company shall be with the Chairman of the company and that the seal shall not be used except by the authority of the Directors or a Committee of the Directors in the presence of one Director at lease who shall sign every instrument to which the seal is affixed and every such instrument shall be countersigned by the permanent Chairman or some other person appointed by the Directors.
Now a reference to the power of attorney itself shows that it was signed by two Directors and the permanent Chairman and it was also sealed with the Common seal of the company. The said three Directors also appeared before the Registrar for presenting this document and there admitted its execution. We have also now the resolution of the Board of Directors passed on the 20th of December, 1942, which approved the terms of the power of attorney to be given to Muhammad Khan as also itself registration. Clause 6 thereof gave him the power to commence, prosecute, or proceedings and clause 8 thereof expressly authorised him to make, sign, execute, present and file all applications, plaints, petitions or written statements, etc. It is clear, therefore, that Muhammad Khan was properly and lawfully empowered by the Directors who themselves had express power given to them under the Articles of Association to delegate their authority and the delegation so made empowered Mr. Muhammad Khan to sign, execute and present plaints, on behalf of the company. The suit was, therefore, in our view, rightly held to have been competently filed".
10. Applying these principles to the facts of the case in hand, we are in no doubt that the findings of the learned first Court on this issue was/is not correct.
From the evidence, it is crystal clear that the plaint was filed by S. R. Jariwala who was appointed attorney vide deed dated 2-5-1951. The said instrument was executed by the two Directors of the Company and the Manager who had necessary powers under Article 116(11) of the Article of Association. Under Clause (7) of Deed of Attorney, S.R. Jariwala was empowered to initiate any action on behalf of Bank and take to its final conclusion. In our view, the aforesaid evidence was sufficient to prove that S.R. Jariwala had authority to file the suit. On this finding we set aside the finding of Court below on Issues Nos.7, 8, 9 and 10 and hold that the suit was competently brought by the plaintiff.
11. Now we come to the point of Limitation. Before we proceed further, it needs to be restated that the Pakistan Limitation Act, 1908 (hereinafter shortly stated as 'Act') is comprehensive code dealing with all matters relating to Limitation of actions, appeals, applications and so on and so forth. The Courts are obliged under section 3 to give effect to it regardless of calls of expediency or convenience of the parties. The Trial Court held that the instant suit was under Article 57 of the Act.
This reads as under: "Article 57 For money payable for money lent Three years, When the loan is made ............
A simple reading of this provision will show that it covers the suits for recovery of loan advanced by lender without effecting any writing and without fixing any date for its repayment. From this, it clearly follows that this Article was inapplicable to facts of the case in hapd which was filed to recover the outstanding amount due to the plaintiff firstly against the person of respondents Nos. 1 and 2 severely and jointly and then by sale of properties mortgaged under mortgage deed dated 5-12-1947 and 12-4-1947. It was further prayed therein that if the outstanding amount was not realised through the aforesaid remedies, then the liabilities of respondent No. 1 be satisfied from personal properties of respondents Nos. l and 2. Obviously the suit embodied multiple reliefs noted above. The question is as to which Article in Schedule to Act is applicable to this suit. This question has never been free form difficulty. Articles 116 and 132 of Schedule to Act are relevant. These came up for consideration before the Full Bench in Sahib Dayal v. Maherban AIR 1923 All.
1. After the survey of the case-law, the Full Bench concluded that Article 132 ibid applies to actions to enforce charge on mortgage-deeds by sale of mortgaged immovable property while Article 116 ibid covers the suits for recovery of deficiency arising out of such sale. This view was approved in Thiruvendipuram Chengalmma Garu and others v. Vemasani Veerarghava Naidu (1928) 114 IC 340 and Sheo Das Pande v. Munj Behari and another (1928) 114 IC 813, R. Ratnasabapathy Chettiar and others v.
Davasigamony Pillai AIR 1929 Mad. 53 and Kishan Sahai and others v. Renumath Singh and others AIR 1929 All.
139. The above point came up for examination before the Full Bench of Lahore High Court in Ch. Kidar Nath and others v. Mian Saraj-ud-Din AIR (33) 1946 Lah.
97. In this case, the question referred to Full Bench was "Whether the mortgage, who lost his right to recover the mortgage-debt as ordinary debt, after the lapse of time, retains right to recover the debt out of sale-proceeds of mortgage-property and has brought such property to sale, through recovering the full amount, can be permitted to recover interest for six years prior to the institution of suit by a personal decree". Before answering the question noted above, the Full Bench dealt with the scope of Articles 116 and 132 in Schedule I to the Act and approved the view noted above in following words:------ "It is beyond dispute that a suit for the enforcement of a personal covenant express or implied in a registered mortgage deed is governed by Article 116, Limitation Act. There was at one time some doubt as to the implication of certain observation made by their lordships of the Judicial Committee in Ganesh Lal v. Khetramohan (5 Pat. 585) but by now it is well settled that those observations were not intended to alter the law as applicable to actions for the enforcement of personal covenants whether express or implied against a mortgagor in respect of the mortgage debt. The Full Benches of the Madras and the Allahabad High Courts in 52 Mad. '105 and 52 All. 369, a Division Bench of this Court in 16 Lah. 137, a Division Bench of Pat. High Court in 13 Pat. 228 and a Division Bench of Calcutta High Court in 35 CWN 1030, have dealt with this question at considerable length and had laid it down that in spite of the observation in 5 Pat 585, Article 116 Limitation Act, is the Article applicable to actions for the enforcement of personal covenants in registered mortgage-deeds. Article 116 gives the parties six years for a suit for compensation for the breach of a contract in writing registered, the terminus qua being the date when the contract is broken, or, where there are successive breaches, when the breach in respect of which the suit is Instituted occurred. According to the language of the article, therefore, a suit for the enforcement of the personal covenant express or implied, in a registered mortgage-deed, can be brought within six years from the date of breach of that covenant. The question that we have to consider in the present case, is, whether the breach of the personal covenant for the payment of the principal mortgage money occurred more than six years prior to the institution of the suit, there can be a separate and independent breach of the covenant to pay interest subsequent to the lapse of time for the enforcement of personal covenant in respect of the principal, so as to entitle the mortgagee to maintain an action within six years from the date of such breach."
12 The ratio deducible froth the foregoing examination is that Article 132 ibid covers the suit for recovery of money/charge on immovable property mentioned in the mortgage deeds by their sale while Article 116 ibid applies to suits for recovery of outstanding debt on the basis of personal covenant' incorporated in the mortgage deeds. Guided by this rule, it is clear to us that relief with respect to recovery of money lent on the basis of personal covenant in the mortgage deed was covered by Article 116 in Schedule to the Act while the prayer regarding realisation of outstanding amount of debt by sale of property in mortgage deed was covered by Article 132 in Schedule to the Act. Clearly respondent No. 1 had opened cash credit account on 12-12-1946; had executed mortgage deed on 15-2-1947 and 12-4-1947; that the suit had been filed on 4-7-1952. All these reliefs were claimed in the plaint and so we find the suit was covered by Articles 116 and 132 in Schedule to the Act. Article 116 prescribes period of six years commencing from breach of registered contract while the latter Article provides period of 12 years. Applying these periods we find that the suit was filed clearly within the above prescribed periods and so we find no difficulty in saying that the finding of the Court below on Issues Nos.3, 4, 13 and 14 were bad in law and so cannot be sustained. We accordingly set aside the findings of the Court below on these issues and find that the suit filed by the appellant was well within time.
13. Having determined the first two points, now we turn to third one. 'Before we proceed to deal with the contentions of the parties on this point, we find it useful to note the findings of the learned first Court on this point. Relevant finding is as under: "He has in support of his argument, cited PLD 1966 Lahore page I at page 7 wherein it was held by my Lords Mr. Justice Yaqub Ali and Mr. Justice Sardar Muhammad Iqbal that the principle of equity is that the creditor is not entitled to recover the amount of a secured debt when he cannot return the security. In that authority, there is a reference by their Lordships to an authority of the House of Lords wherein it was held by Lords Cave that where a creditor holding security sues for his debt he is under an obligation, on payment of the debt to hand over the security and if having improperly made away with the security, he is unable to return it to his debtor, he cannot have judgment for the debt. The facts of the authority cited by the learned counsel for the defendant quite fit in the facts of this case with the exception that in that authority the answering defendant had claimed a set-of and had not requested the Court to dismiss the suit, It was clearly held by their Lordships of the High Court that since the creditor had not been able to account for 29 reams of paper and therefore on this principle of equity, the whole suit was liable to be dismissed. Learned counsel for the plaintiff on the contrary has not been able to quote a single authority in rebuttal holding a different view. In the present case also since the plaintiff had not been able to account for the security and return it, the suit was liable to be dismissed. Learned counsel for the plaintiff has however argued that as indicated by S.R. Jariwala, the stocks were taken over by the Government and therefore, it was beyond their power to return the security. In the first place it is not the case of the plaintiff that the security was taken over by the Government. The plaintiff's case is that the pledged stocks were with the defendant who has done away with it. The evidence on the other hand was established beyond doubt that the pledged goods were in the control of the plaintiff. No receipt for taking over by the Government of the stocks has been produced. The statement of S.R.
Jariwala is not supported by any evidence. The plaintiff was responsible to account for the security in his possession. Since he has failed to do so, the suit as liable to be dismissed on the strength of authority quoted above. "
14. The most curtail provision in this case is section 176 of the Contract Act. It is as under:------ If the pawner makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged on giving the pawner reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawner is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawner.
A careful analysis of this section makes it clear that when a pawner defaults to make the payment of loan the pawnee has three rights; firstly, he brings a suit against pawner upon debt or promise; secondly, he may retain pawn as collateral security till the realisation of debt; and thirdly, pawnee may sell the pawn after reasonable notice to pawner and to sue the pawner for recovery of the debt. It thus clearly follows that right to retain pawns, right to. Sell the same and right to bring an action for realisation of debt, are not` alternative remedies but concurrent. This question was corisictered by a Division Bench of erstwhile High Court of West Pakistan in A.M. Burq v. Central Exchange Bank Ltd. PLD 1966 Lah.
1. In this authority, Mr. A.M. Burq had pledged his share as security of the payment of debt. In another account, he pledged papers as security and in the third account he pledged 29 reams of papers. The pawnee filed a suit against the pawner for recovery of Rs.35,807-8-10 alongwith agreed interest. The claim with regard to his account for Rs.12,517-2-1 was found barred by time. The suit was decreed with regard to remaining claims. M.A. Burq filed an appeal in the High Court. In the appeal, the question raised was whether the appellant should have been allowed set-of of price of 29 reams of papers which were in possession of the Bank as pledged goods". Upon the assessm ent of evidence and relevant law the learned Division Bench accepted the appeal, reduced the decretal amount by Rs.2,320 with interest by holding that neither pawnee had accounted for 29 reams nor had returned the same to pawner. It is useful to reproduce the relevant passage from the opinion of his Lordship Mr. Justice Sardar Muhammad Iqbal (as he then was). It reads as follows:----- "It is a right of the pawnee-pledge either to bring a suit upon the debt or to sell the things pledged upon giving a reasonable notice of sale. Both these rights are concurrent and they are provided in section 176 of the Contract Act. Under this section, as interpreted in Percy F. Fisher v. Ardeshir Hormasji Gazdar AIR 1935 Bom. 213 the pawnee has a right of action for the debt notwithstanding the possession of the goods, subject to the pawner's right to redeem the goods upon tender of the amount due before the sale. "
"There can be no doubt that when movable property is pledged to a person for money lent, he acquires, a special property therein; he has a charge upon it for the satisfaction of the loan advanced, and he is entitled under section 176 of the Contract Act, either to bring a suit against the owner upon the debt of promise, retaining the goods pledged as collateral security, or he may sell the things pledged upon giving reasonable notice of the sale.
It is, therefore, clear that the right to proceed against the property, is not merely accessory to the right to proceed against the debtor personally. Thus, a pledger cannot compel the pledgee to exercise the power of sale or its adjustment as a means of discharging or satisfying the amount due to him. The pledger, therefore, is competent in law to sue for his debt without selling the pledged property and adjusting its price towards the payment of the debt. He has, however, to keep the property pledged intact so that he may be able to hand over the security to the pledger on payment of the debt by him. The respondent is, admittedly, not in possession of 29 reams of paper pledged to it as a security for the payment of the loan. He has also not proved that it had been damaged or destroyed at the risk of the appellant. It may be a case of an unauthorised conversion. Question, however, arises whether the appellant can be granted a relief in respect of this property in the suit filed by the respondent. "
17. Section 176 of the Contract Act was noticed in Haridas Mundra v. National Grindlays Bank Ltd. AIR 1963 Cal. 132, wherein it was held:----- "In construing this section too much importance should not be given to the semi-colon in the first paragraph. In a case where the pawner makes default the pawnee has three rights; (1) he may bring a suit against the pawner upon the debt or promise, and (ii) he tray retain the pawn as a collateral security or (i.e) he may sell it on giving the pawner reasonable notice of the sale. The right to retain the pawn and the right to sell it are alternative and not concurrent rights. While the pawnee retains, he does not sell; and when he sells he does not retain. But the pawnee has the right to sue on the debt or the promise concurrently with his right to retain the pawn or to sell it. The retention of the pawn does not exclude this right of suit, since the pawn is a collateral security only.
Nor does the sale of the pawn destroy this right, the pawner is still liable on the original promise to pay the balance due. The sale does not give a fresh starting point of limitation for a suit to recover the balance. See ILR 24 All. 251 and Yellappa v. Desayappa ILR 30 Bom. 218. Similarly the institution of a suit upon the debt or promise does not reduce the pledge to a passive lien and destroy the pawnee's right to sell the pawn. The right of sale is necessary to make the security effectual for the discharge of the pawner's obligation and the right continues in spite of the institution of the suit.
The point in issue arose directly for decision in Suit No.860 of 1945 Gorkahram Sahduram v.
Agarchand Chunilal decided by Sarkar, J. On August 5, 1952. In that case Sarkar, J. Observed:----- 'I have already said that some of the sales took place after the suit had been filed. I did not understand learned counsel for the defendant to make any special point or this. Nor do I myself find that this makes-any difference. The pledgee has admittedly the right to sell. I do not see that he loses this right by filing a suit'.
It is to be observed that this opinion was not challenged on appeal though some of the other findings of Sarkar, J. Were set aside in A.F.O. D. No.12 of 1953, Agarchand Chunilal v. Gorakhram Sadhuram, decided on January 17, 1957. "
21. From the foregoing it is quite clear that the findings of the learned First Court on this point cannot be sustained. We are, therefore, of considered opinion that the appellant was competent to institute the suit without returning/rendering the amount of pledged goods to respondent No. 1.
However, respondent No. l was entitled to claim set of with regard to his pledged stock with the bank. This aspect of the matter will come up for examination later. The conclusion of the Courts below on Issues Nos.2, 5, 17 and 34 are thus, contrary to law and are hereby reversed. We are constrained to note that issues framed by the learned trial Court are overlapping and covers the same point again and again. For this reason we have framed questions which arose out of the arguments addressed by the learned counsel for the parties.
22. Coming to merits of the cases, the point arising for decision is whether evidence of the appellant/plaintiff was/is sufficient to prove that the amount claimed from the respondent No.1 was/is, if so to that extent. Besides oral evidence the documentary evidence adduced by the appellant/plaintiff is as follows:-- Deed of hypothecation, dated 12-12-1946Exh.P.I Deed of Pledge of goodsExh.P.2.
Promissory note, dated 12-12-1946Exh.P.3.
Declaration, dated 12-12-1946Exh.P.4 Letter, dated 12-12-1946Exh.P.5 Letter of interest, dated 12-12-1946Exh.P.6.
Declaration, dated 12-12-1946Exh.P.7 Trust-deed, dated 9-8-1946Exh.P.8 LetterExh. P. 9.
Mortgage deed dated 15-2-1947Exh.P.10 Mortgage Deed dated 12-4-1947Exh.P.l1.
Letter dated 15-2-1947Exh.P.12.
Letter of guarantee dated 5-2-1947Exh.P.13.
Letter dated 13-4-1947Exh.P.14.
Letter of authority dated 17-2-1947Exh.P.15.
A letterExh.P.16.
Statement of Accounts. 'Exh.P.17 Except Exh. P.17, all the above documents were proved by Digjee Shah Patel (P.W. 1) while former document was tendered by him into evidence. Amazingly enough the execution of aforementioned documents were admitted by respondent No. 1, who, however, took up the plea that his signatures on these documents were obtained by respondent No. 2. As against this evidence respondent No. 1 relied upon eleven witnesses, namely, Iftikhtar Ahmed, General Manager of Central Cooperative Bank, Multan (D.W.1), Syed Sahib Ali Shah (D.W.2), Khadim Hussain (D.W.3), Sher Muhammad (D.W.4)
Malik Ranjho (D.W.5) Muhammad Hussain (D.W.6), Ghulam Mohy-ud-Din (D.W.7), Khadim Hussain (D.W.8), Mahmood Bakhsh (D.W.9), Ch. Ashiq Hussain (D.W.10), Mr. Saeed Ahmad (D.W.11) and himself appeared as D.W.12.
17. Before we proceed to analyse the above material, we feel expedient to reiterate three well known rules of appreciation of evidence which are as follows: ---- Firstly: where a document, such as bond, receipt of entry in the book of accounts, the execution of which is admitted embodies an admission of receipt of a debt admission shifts the onus of proof upon the person who executes such document. Reference be made to Nihal Chand v. Design AIR 1932 Lah. 135, Mrs. N. Johnstone v. Gopal Singh AIR 1931 Lah. 419, VCAR Annamalai Chehttiar v.
M.N.M.N. Ramanathan Chettiar PLD 1947 PC 82, Shah Magammal and another v. Darbarilal Chowdhry AIR 1928 PC 38 and Comtibal v. Kanchhedilal PLD 1949 PC 156.
Secondly: in law there is a presumption of good faith in human transactions similar to the presumption of innocence in criminal cases as expressed in the maxim praesumuntur rite esse acta. The burden of proving that a particular transaction suffers from bad faith, fraud, collusion, misrepresentation, coercion and undue influence, essentially lies upon the party who alleges these circumstances; Thirdly: that the copies of accounts taken from the Books of Accounts maintained by the banks are per se admissible as prima facie evidence of existence of such entry in the Books of Accounts and are admitted in evidence of transaction and accounts recorded therein to same extent as original entry under section 4 of the Bankers' Books Evidence Act, 1891. However, these entries are not solely sufficient to charge the borrower with liability and needs to be proved by supportive evidence.
Reference be made to Messrs Muhammad Sadiq Muhammad Umar and another v. The Australasia Bank Ltd. PLD 1966 SC 684. The relevant passage from this classic judgment on this point is being reproduced in extenso with advantage---- 'The appellants have supported the view taken in dissenting judgment. It is necessary, therefore, to examine first the scope of section 4 of the Bankers' Books Evidence Act, which provides as follows--
(4) Subject to the provisions of this Act, certified copy of any entry in a bankers' book shall in all legal proceedings, be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.'
It will be observed that all that this section says is that the certified copy shall be prima facie, evidence of the existence of such an entry in the books of the bank and shall be admitted as evidence of the matters, transactions and accounts therein recorded to the same extent, as the original entry itself is now by law admissible, but no further or otherwise. It does not purport, therefore, to give the certified copy any greater efficacy than the original itself. It merely provides a simplified mode of proof of the original entry, provided the original entry itself, is relevant to the enquiry or was admissible under the law prevailing in 1891. The Evidence Act, which was enacted in 1872, was a law applicable on the date of enactment of the Bankers' Books Evidence Act, and it clearly governed the proof of the original entry. If under that Act the original entry was not by itself sufficient to charge a person with liability the certification of entry under the latter Act could not make it so. We must not also confuse between admissibility in evidence and sufficiency to charge with liability. 1t is with the latter that we are concerned here and this is not dealt with by the Bankers'
Books Evidence Act.
Even with regard to section 3 of the English Bankers' Books Evidence Act, 1879, which stops at the word ' recorded' and does not contain the rest of the words to be found in section 4 of our own Act, Pagest in his law of Banking has observed that the 'object of the above Act is to avoid the inconvenience and dislocation of business, formerly entailed on bankers by their being compellable to produce their books in legal proceedings, 'but even so it seems that in England where the Bank is itself a party to the litigation it can still be compelled to produce its,. Original books under a supoena duces tecum. Thus in the case of Douglass v. Lloyds Bank Limited (1929) 34 Commercial Cases 263) the bank was made to produce its old deposit ledgers to trace the deposit alleged to have been made in 1866 and not repaid. The bank could produce its old ledgers only upto 1873. Hence the Court held that since the bank had no record of the subsistence of this deposit it confirmed its view that the deposit had been repaid.
The same is the view of the learned Editor of Halsbury's Statutes, 2nd Edition (vide Vol.9, p.599).
We are unable, therefore, to agree that the mere production of certified copy of the account was by itself sufficient to charge the defendants with liability. The copy produced was tantamount, however, to production of entries from the original books of account. Those entries could have been admissible in evidence only for the purposes mentioned under the Evidence Act and to the extent therein provided. Sect-ion 34 of the Evidence Act provides that ' Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability'. It is clear from this section that corroboration is necessary of the entry to charge a person with liability, but as to what should be the nature or the extent of the corroboration no hard and fast rule can be laid down, for that must depend on the circumstances surrounding each transaction and the reliability of the manner in which the account has been kept.
There can be no doubt in the present case that the entries were relevant in evidence. The question, therefore, now is as to whether there were such corroborative circumstances as to make them also sufficiently reliable for charging the defendant with liability. Two of the learned Judges of the High Court have taken the view that the admissions of the defendants were alone sufficient to furnish such corroboration. We have already referred to the oral evidence of the witnesses which shows that the statement of account had been properly prepared from the relevant books of account and that the defendants did have an overdraft account with this bank. This was now been further confirmed by the Additional evidence of the Ex-Managing Director of the Bank. The defendant Muhammad Siddique had himself in his evidence also admitted the execution of the pronotes and the cash credit agreements and the fact that he had executed these for 'fixing the limit of the loan' which he had taken or could take from the bank. But in his evidence he set up the case that these advances were made against the security of goods which had not been returned to him. The Ex- Managing Director admitted the pledge of goods but stated that a delivery order for these goods was issued in favour of this defendant but the goods could not be taken delivery of as he had in the meantime been declared an evacuee by the Government of India."
Also see Abdul Haq v. The Firm Shivji Ram-Khan Chand AIR 1922 Lah. 338. Australasia Bank Ltd. v. H.S. Mahmood Hassan Akbar PLD 1983 Kar. 431, Gul Habib v. Habib Bank Ltd. PLD 1983 Pesh. 31 and Muhammad Yaqoob Khan v. Hussain Khan 1981 PCr.LJ 431.
18. Stage is now set to assess the claiming of the parties on merits. As regards objection to admissibility of Exh. P.17. Suffice it to say that it was tendered in evidence by P. W. 1; that it related to accounts prepared by the Bank and so was per se admissible. This document demonstrates not only withdrawal of amount by respondent No. 1 but also deposits made by him. These entries are against the interest of the appellant and were so admissible in evidence under Article 34 of the Qanun-e-Shahadat Order, 1984. This statement was made in the course of business and shows mutuality of account between the parties. Add to it, the execution of these documents was admitted by respondent No.1. In view of this we safely conclude that this was correctly tendered in evidence so rightly admitted into evidence as Exh.P.17. Ganji Shah/Accountant of Central Bank of India, Multan Branch, appeared is the witness-box and stated he had been working as Accountant in the said Branch from 1945 to 1949; that Syed Abdul Jalil Shah was personally known to him; that he had opened a cash credit account in 1947. He proved the execution of documents Exhs.P.L. To P.17. He deposed that he was liable to pay, at the time of institution of suit, Rs.3,76,000 alongwith interest of Rs.2,34.000; that this liability was up to 31-1-1963. This witness was subjected to lengthy cross-examination but nothing was extracted to demolish his evidential value. It is interesting to note that the respondents did not dare to put question to this witness that the aforesaid documents were executed by Syed Abdul Jalil Shah under undue influence/coercion and that the factory belonged to guarantor. It is well known that if a fact is asserted in examination-in-chief and is not impeached by way of cross-examination, that assertion is deemed to have been admitted by defaulting party. On this principle, we have no difficulty in inferring that the assertions made by P.W. 1 with regard to execution of EXhS.P.I to P.17 were admitted by Syed Abdul Jalil Shah and so stand proved. As against this, respondent No.1 relied upon the testimony of Iftikhar Ahmad (D.W.1), Syed Sahib Ali Shah (D.W.2), Khadim Hussain (D, W.3), Malik Ranjhu (D.W.5), Muhammad Hussain (D.W.6), Khadim Hussain (D.W.8), Muhammad Bakhsh (D.W.9), Ch. Ashiq Hussain (D.W.10), Mr. Saeed Ahmad Accountant Area and Workshop M.P.O., Lyallpur (Faisalabad) and Syed Muhammad Abdul Jalil Shah himself appeared as D.W.12. Sufficient to note that the testimony of D.W.1 to D.W.10 are valueless. These witnesses, in one way or the other, had deposed that pledged goods were in the custody of the Central Bank of India and had not been returned to Syed Abdul Jalil Shah. This is not in dispute. Interestingly, the Bank had not taken the stance that these were returned to respondent No. 1. Mr. S. R. Jariwala stated that the Bank was neither in possession of these goods nor was in a position to return the same to borrower at the time of the institution of the suit as these were taken by the Government of Punjab at the time of Partition of Sub--continent. It is true that the appellant as pawnee was bound to retain these goods till the realisation of the debt and was required to return the same to borrower after receipt of Bank's dues. On this conclusion we find that respondent No. 1 was entitled to claim set-of to the extent of Rs.1,54,200 as value of the pledged stock as given in Exh.P.11 D.W.11 entered into the witness-box to prove his Report Exh.D.3. He posed himself as an expert in Accounts and tended to show that the statement of Accounts embodied in Exh.P.17 was eratic and incredible. This report comprises of 33 pages and is dated 1-11-1968. The conclusions of this expert are as follows:------ "Therefore, the conclusion I arrive at from the above is that the Bank Statement Exh.P.17 as furnished by the plaintiff-Bank hardly depicts a reliable record. (Page 7 of Report):
(i) The stock values in Exh.P.11 were merely estimated both as regards quantity and the value on 12- 4-1947. They were under-estimated.
(ii) The bank dues on 12-4-1947 in Exh.P.11 and Exh.P.17 were not correct and hardly reflect a true picture of the Bank dues.
(i.e) The 2nd mortgage deed executed on 12-4-1947 was not necessary in view of the revised position of the factory's stocks and the bank dues were already well protected through instrument of Demand Promissory Note dated 12-12-1946 (Exh.P.3) from the account-holder for Rs.6,00,000 as security before the cash credits were allowed which never exceeded the cash credit limit and value of Demand Promissory Note as per conditions agreed upon between the both parties in .Exhs.P.1 and P.2" (See pages 12 and 13 of Report).
19. In so far the interest, we are not inclined to award it in consonance with the stipulations embodied in the deed of hypothecation, promissory note as well as mortgage-deeds on account of special features of this case. No'. Doubt the suit was filed on 4-7-1952 and remained pending adjudication for over more than 16 years. Preliminary objections were framed on 8-6-1954 and the matter was referred to Custodian for its determination. The learned Custodian rendered his decision on 18-8-1989 by holding that the appellant was not an evacuee concern. The record was received by the learned Administrative Civil Judge on 5-12-1960. Meanwhile, the guarantor had migrated to India due to the advent of Partition and the property left by him had been allotted to displaced persons coming from India. The first appeal remained pending in this Court and was decided on 6-6-1992. Pursuant to order of remand by the Supreme Court, this appeal was heard on 20-10-1997 and the decision is being announced today on 30-10-1997. Taking all these circumstances into consideration, we find improper to award interest at the rate of 6% to the appellant/plaintiff as compensation for retention of goods by' respondent No. 1. The power to grant interest under Rule 14 of Order XXXIV, C.P.C. Is discretionary in nature and the Court may, decline to grant it at the rate stipulated in the contract if the circumstances so warrant. See Jaigobind Singh v. Lachmi Narain Ram AIR 1940 FC 30 and Sukhraj Rai v. Ratinath Panjara AIR (29) Pat.
102. As regards the contention that the interest is Rib'a and opposed to Injunctions of Islam, suffice it to say that this aspect of the ease is beyond the jurisdiction of this Court and lies within the domain of Federal Shariat Court. See Massu etc. v. United Bank Limited etc. 1990 MLD 2304.
Now we come to R.F.A. No.4 of 1970 filed by New Bank of India Ltd. Through Assistant Custodian of Enemy Property. The learned counsel appearing on behalf of the appellant had not addressed any argument in support of this appeal on 5th, 6th, 7th, 8th and 12th of October, 1991. The aforesaid Bank even did not file any leave to appeal against our decision dated 6-6-1992. Mr. M.A. Farani, Advocate, has entered appearance and argued his case. However, we are not inclined to deal with this appeal on merits separately for the circumstances noted above.
21. In result we hereby set aside the judgment and decree passed by the trial Court and pass a preliminary decree in terms of Rule 4 of Order XXXIV of C.P.C. In favour of the appellant/plaintiff and against respondents Nos.1 and-2 with no order as to costs. The file of the case shall be sent to the learned Senior Civil Judge, Multan who shall appoint a Local Commissioner in order to take account as required under Rules 2 and 4 of Order XXXIV, C.P.C. And proceed in the case thereafter according to law, with expedition so as to bring the instant litigation to its final conclusion.