1. The application put up for hearing is filed by defendant No,2 seeking leave to defend the suit.
2. The plaintiff's suit is for recovery of Rs,76,130,360 against the defendants and for sale of all the immovable and movable properties owned by them alongwith costs of the proceedings. In the plaint, it is averred that the plaintiff alongwith a syndicate of other banking companies had entered into a Term Finance Agreement, dated 20th July, 1995 referred herein as 'the agreement', with M/s. Pakland Cement Limited (hereinafter referred to as 'the principal company') undertaking grant of finance to the extent of Rs,250 million. Under the terms of the agreement, the above-referred amount of facility was termed as the purchase price and the marked-up price undertaken to be re-paid by the principal company was settled at Rs,437,804,414. The amount undertaken to be contributed by the various members of syndicate including the plaintiff was separately earmarked in the agreement as follows:-- "The purchase price shall be contributed by the members in the 'following amounts:
(1) CITIBANK PKR 50,000,000
(2) ACB PKR 50,000,000
(3) ABL PKR 50,000,000 (4)SCB PKR 50,000,000 (5)HBL PKR 30,000,000 (6)SBL PKR 20,000,000 Total: PKR 250,000,000 Likewise, the marked-up price receivable by the respective members of the Syndicate was also sepaately mentioned and was payable to the plaintiff and other members of the Syndicate in the following proportion:- "The marked-up price shall be paid by the customer to the members as under:--
(1) CITIBANK PKR 87,560,883
(2) ACB PKR 87,560,883
(3) ABL PKR 87,560,883 (4)SCB PKR 87,560,883 (5)HBL PKR 52,536,530 (6)SBL PKR 35,024,353 Total: PKR 437,804,415."
3. The parties to the agreement had agreed to appoint M/s. Citicorp Investment Bank (Pakistan)
4. Limited hereinafter referred as the agentto act as agent for and on behalf of the Syndicate. It was agreed that the amount of finance would be repaid in instalments in terms of Schedule-B attached to the agreement with the stipulation that in the event of payment of instalment(s) on or before its due date the principal company would be entitled to a prompt payment bonus set out in or calculated in accordance with Schedule D annexed with the agreement. It may be noted that the prompt payment bonus calculated on actuals, in accordance with Schedule D, finds mention in Schedule B to the agreement. Article 9 of the agreement contained the events of default and clauses (9.3) and (9.4) therein being relevant and having been cited by both the learned counsel for the plaintiff and defendant No, 2 are reproduced hereunder for the sake of convenience:-- "9.3. Consequences of an event of default.--The Agent shall, if so requested by the majority in value of the Members, without prejudice to any other rights of the Syndicate, at any time after the occurrence of an event of default, by notice in writing to the customer declare:
(a) That the several obligations of the members to disburse and contribute their portions of the Purchase Price shall be terminated, whereupon the facility granted by this Agreement shall be terminated forthwith;
(b) that the outstanding amount of the Marked-up Price and other amounts due by the customer under this Agreement (whether or not as yet due for payment) shall have become due and payable by the customer within ten (10) days of the receipt by the Customer of the said notice issued by the Agent. Such outstanding amount of the Marked-up Price and other amounts shall become due and payable by the Customer without the need to obtain a judgment or completion of any other formality. In such a case, in addition to paying all outstanding amounts due under this Agreement, the customer will pay to the Syndicate the amount corresponding to the costs (directly and reasonably) incurred by the members in connection with the early payment of the Marked-up Price and other amounts due under this agreement: Provided further that in no event, any delay on the part of the Syndicate, or the Agent, in the exercise of the said right to cancel the facility or to require immediate payment of the outstanding amount of the Marked-up Price and other amounts, may be interpreted as waiver of this right.
5. 9.4. Declaration by the Agent and rights of the Syndicate and the Members.--(a) The amount of the outstanding Marked-up Price declared by the agent to be due and payable with immediate effect in accordance with clause 9.3(b) above will be the aggregate amount stated in the notice given by the agent for the Syndicate as well as the proportionate amounts payable to each individual member as its entitlement out of the said aggregate amount due and shall be final and conclusive. The Customer shall pay each amount to the respective Members within ten (10) days after the receipt of such notice. If the customer fails to pay the outstanding amount within ten (10) days from the date of the receipt by the customer of such notice from the agent demanding payment, the Syndicate as well as each individual Member shall have the right to forthwith take the following remedies amongst other remedies available under the law:--
(i) to forthwith enforce and realise the securities provided in clause (3) hereof including, without limitation, to sell with or without the intervention of the Court, the Mortgaged Properties, the bypothecated and/or pledged properties;
(ii) to file suits for the recovery of the outstandings due to each Member and for the sale of the mortgaged properties, hypothecated and/or pledged properties including, without limitation, for the appointment of receivers and prompt attachment of all other movable and immovable properties of the Customer;
(iii) to apply for winding up of the customer in accordance with the provisions of the Companies Ordinance, 1984; and
(iv) to file suits for the recovery of the total outstandings and/or for any shortfall after the sale or realisation of all the securities, as the case may be.
(b) The net amount realised by sale of any security or securities after deduction of expenses on sale, disposal or realisation, including, without limitation, Commissioner's fees, legal fees, etc., shall be shared by all the Members in proportion to their entitlements mentioned in Schedule B and clause (2.3) hereof. If the net sale proceeds be insulfficient, the customer shall continue to be liable for the deficit.
(c) Each Member shall be free to initiate recovery proceedings for the amount due to it, but the proceeds of the securities shall always be realised for the benefit of all the Members and shared on pari passu basis in proportion to the Marked-up Price due to each Member."
6. Another salient term of the agreement, referred by the learned counsel, is contained in sub-clause
(a) of Article 14.2 which is to the following effect:- "(a). A statement, signed on behalf of the agent by any of its Authorised Representatives, as to any matter or any amount outstanding (including, without limitation, amounts owing by the customer) as at the date specified in the statement, would conclusive as against the Customer and all Members."
7. Under term 14.3 of the agreement, it was acknowledged by the principal company that the agent was not an agent, trustee or finduciary for the principal company. According to the averments contained in the plaint, amongst the various collaterals stipulated under the agreement, the defendants Nos.1 to 4 were required to execute personal guarantees to secure repayment of liabilities under the agreement to the plaintiff and other members of the syndicate. The defendant No,1 and the defendants Nos.2, 3 and 4 had accordingly executed personal guarantees in favour of the plaintiff on 22-12-1996. The guarantees are stated to be irrevocable and unconditional and have to be considered continuing security binding the guarantor(s) to make payment of and discharge all the liabilities of the principal company, upon receipt of its demand, jointly and severally, a sum up to the limit of Rs,67 million. The guarantees executed by the defendants had further authorised the plaintiff, at its option, to treat the guarantors primarily liable for the debt of the principal company. On account of the alleged failure of the principal company to make repayment in terms of the .Agreement, the plaintiff through letter dated 11-11-1997 had called upon the principal company to liquidate the claim outstanding against it amounting to Rs,74,624,660 followed by notice dated 17-11-1997 calling upon the defendants Nos.1 to 4 to discharge the liability in terms of the undertaking contained in the guarantee. The notice dated 17-11-1997 is stated to have been responded by the four defendants in identical terms through their Legal Advisor. The reply being evasive, the present proceedings have been filed.
8. It may be noted that the defendant No,2 is younger brother of defendant No,.1. The defendants Nos.
9. 1 and 3 had earlier filed a joint application for leave to defend the suit which was dismissed for non-prosecution on 8-9-1998. Applications were then separately filed for restoration of the leave application but the same came to be dismissed on 16-9-1998.
10. The defence urged by defendant No,2 in the affidavit, filed in support of the application for grant of leave, is that the principal company is a necessary party and the various documents were signed blank under undue influence and duress exercised by defendant No,1 . It is further averred in the affidavit that detailed statement of account has not been filed with the plaint and besides charging excessive mark-up adjustment of liabilities through sale of pledged shares had not been accounted for. During hearing, however, the learned counsel for the defendant No,2 has urged as follows:--
(i) The present proceedings having been initiated by the plaintiff alone are not maintainable due to non-joinder of other members of the syndicate and, in any event, the communication about the amount remaining due and outstanding had to be conveyed by the agent namely M/s. Citicorp.
11. Investment Bank (Pakistan) Limited;
(ii) Excessive mark-up amounting to penalty had been charged and the amount mentioned as prompt payment bonus in Schedule-B to the agreement had to be discounted from the marked- up price mentioned in the agreement for ascertaining the correct marked-up price;
(iii) Liability of defendants being co-extensive with that of the principal company, the claim against the latter ought to be shown to have matured and all other securities held by the plaintiff should be disclosed.
12. Mr. Salman Talibuddin, appearing for the plaintiff, has raised preliminary objection against entertainment of the pleas, urged on behalf of defendant No,2 as are not mentioned in the application for leave. The contention of Mr. Salman Talibuddin, Advocate is that the object of pleadings is to put the other side on notice about contentions/questions proposed to be raised and the requirement of a fair hearing stands defeated in case fresh pleas are permitted to be raised during arguments.
13. The objection agitated by the learned counsel for the plaintiff, I must confess, has a good logic; and, the requirement of fair and reasonable hearing, indeed, stands negatived if new and additional pleas are allowed to be raised during arguments. The requirement of reasonable hearing means a fair opportunity to meet the case set up by the other side and the desire to administer justice and equity cannot be enforced in a manner to ignore the technicalities altogether. On such principle even evidence which comes on record and is found contrary to or beyond the pleadings is required to be discarded out of consideration. The principle of fair hearing was even implemented in a case where default in payment of rent was alleged for a particular period but was found by the Court to have been committed for a slightly different period. Ajmal Mian, J, as he then was, in the case of Amir Ali v. Mrs. Aleema Ahmed PLD 1981 Kar. 150 had proceeded to set aside the order of eviction despite holding that law of pleadings was not strictly applicable to rent proceedings. The other possible approach could be of allowing time to the adversary for meeting the additional or new points raised subsequently. In relation to the cases under Act XV of 1997, however, the position is regulated by letter of the law. Section 10 of the Act provides: "Subject to section 11, the Banking Court, shall, upon an application made by a defendant within twenty-one days, give leave to defend the suit, if a serious and bona fide dispute is raised thereby". The word 'therebyhas its own significance and according to Chamber's Dictionary means "by that means". The above-referred provision of law, thus, requires that the questions or issues raised through the leave application, alone, can be considered and the desire to dispense equitable justice cannot defeat or override the letter of law which requires the law of pleadings to be enforced strictly.
14. Having held as above, the various contentions raised by the learned counsel for defendant No,2 cannot be considered at all whereas the questions raised through the application for leave to defend itself are to be deemed to have been given-up having not been pressed at the time of arguments. However, since I have heard arguments of the learned counsel in detail and the submissions made in reply, I propose to deal with the questions separately.
15. The first contention about maintainability of the proceedings by the plaintiff alone, without joining other Syndicate members, is based on certain terms of the agreement including the Schedule of re-payments contained in Schedule-B to the agreement. The said schedule indeed, refers to the cumulative amount of instalments payable to the plaintiff and other members of Syndicate through the agent. Even the terms contained in Article 9.3 and Article 9.4 of the Agreement tend to show that the Syndicate including the plaintiff is to act jointly in relation to ascertained matters through the agent. Under Article 9.4 the amount of outstanding marked-up price is required to be declared by the agent through notice to become due and payable with immediate effect in accordance with. Article 9.3(b) conveying therein the aggregate amount so due as well as the proportionate amount payable to each individual member of the Syndicate. The special mode for treating the outstanding amount of the marked-up price and other amounts due is contained in Article 9.3 of the Agreement which requires issuance of notice by the agent. Once notice calling upon the principal company to pay the outstanding amount is issued, the Syndicate acting jointly as well as each individual member becomes entitled to take the remedies specified under Article 9.4 of the Agreement. The use of word 'as well asis synonymous with 'includesand tends to enlarge or broaden the arena. Thus, not only the Syndicate acting jointly but every member thereof including the plaintiff have the right to follow the remedies specified under Article 9.4 of the Agreement and the other remedies available under the law. Besides the statutory remedies, the plaintiff, subject to fulfilment of declaration by agent rendering the outstanding amount due, can file suit for recovery of the outstanding due to it and for the sale of the mortgaged properties, hypothecated and/or pledged properties etc. Subject to the limitation contained in clauses (b) and (c) of Article 9.4 of the Agreement meaning thereby that the proceeds of the securities would be shared rateably, and, expenditure, incurred on sale, disposal of realization thereof and Commissioner's fees, legal fees etc. Would be shared by all the members proportionately. The agreement, thus, does not cast any disability upon the right of plaintiff to initiate proceedings individually for recovery of the outstanding due to it.
16. Another important factor which is to be borne in mind is that the principal company is not a party to the present proceedings. The plaintiff has opted to recover its dues from the defendants who had executed two guarantees dated 22-12-1996. The guarantees in question have been executed in favour of the plaintiff-bank; and, the Syndicate as a single unit or the agent are not privy thereto.
17. The cause of action against the defendants is primarily based on the two guarantees and while I have dealt with the question of liability of defendants vis-a-vis the liability of the principal company separately hereinafter, the joinder of other members of Syndicate to the present proceedings would have surely complicated the matter, rather, rendered it defective for misjoinder.
18. The guarantees in question enure to the benefit of plaintiff who alone can sue on the basis thereof.
19. The learned counsel for the plaintiff has aptly referred to Article 2.11 of the Agreement which provides that the rights and obligations of the members and the agent under the agreement are several and divided. The objection relating to maintainability of the proceedings is, thus, repelled.
20. Adverting to the second contention rerating to excessive mark-up having been charged in the nature of penalty, I have dealt with such matter in a number of cases including Suit No,1472 of 1997 (NDFC v. Anwarzaib White Cement Ltd.). It is quite normal in the matter of financing that dual rates of mark-up are prescribed under an agreement in order to keep the pressure for repayment of marked-up price within due date. The schedule of repayment annexed to the agreement discloses substantial amount under column 5 being deducted towards prompt payment bonus. The admissibility of prompt payment bonus and reduction of the marked-up price to such extent is not left at the will and desire of the plaintiff and other members of the Syndicate. The principal company was entitled to prompt payment bonus as per the agreement provided the amount of instalments was paid by the due date. Obviously, therefore, the marked-up price actually agreed between the parties was what was agreed to be paid upon deduction of the amount referred as prompt payment bonus. The amount of prompt payment bonus, in reality, is what had to be paid by way of penalty for non-payment of instalments by the scheduled dates. The Islamic System of Banking, in the event of grant of finance allows the parties to settle between themselves a reasonable amount of profit. However, imposition of penalty by any name or form is impermissible.
21. Likewise, the claim for liquidated damages, also, is in the nature of penalty. The Divine Command to the creditor is either to forgive or to grant time (2:280). Even otherwise, imposition of penalty or damages at a fixed rate is opposed to the provisions contained in section 73 of the Contract Act.
22. For claiming penalty or liquidated damages, a party is required to plead and prove actual loss or damages. Such view finds support in the Division Bench of this Court in the case of Habib Bank Limited v. M/s. Farooq Compost Fertilizer Corporation Ltd. 1993 M LD 1571. The claim of plaintiff in the present case, as per the statement of account includes liquidated damages and prompt payment bonus, which is denied to the principal company for its alleged failure to make repayment within due dates. The learned counsel for the defendant No,2 is justified in contending that the amount of prompt payment bonus and liquidated damages having been levied by way of penalty cannot be granted to the plaintiff. Such finding, however, does not justify grant of leave to defend since the claim based under the above-referred heads can be identified and segregated quite conveniently from the claim amount. Such process would not require and evidence from either side and cannot be classified as a serious and bona fide dispute warranting grant of leave to defend the case.
23. The last submission raised by Mr. Arfin is based on sections 127 and 128 of the Contract Act. It is urged by Mr. Arfin that the liability of defendants being co-extensive with that of the principal company, the plaintiff is required to establish that the claim herein could lawfully be preferred against the latter. It is urged that the liability of the principal company had to be ascertained through a particular mode prescribed under Article 9.3 of the Agreement and could then be enforced in the manner provided by Article 9.4 of the Agreement. In the context of such submission, it is contended that liability under the guarantee in question cannot be invoked. It is further the case of Mr. Arfin that the guarantee dated 22-12-1996 was not enforceable for being without consideration. I may reproduce here the provisions contained in section 127 with illustration (c) thereunder and section 128 of the Contract Act for reference purpose:-- "S.
127. Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.
24. Illustration (a)........................................
25. (b).......................................
(c) A sells and delivers goods to B.C. Afterward, without consideration, agrees to pay for them in default of B. The agreement is void.
26. S.128. The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract."
27. The case of defendant No,2, urged during hearing, is that the entire amount of finance undertaken by the plaintiff was disbursed to the principal company on or about 8-8-1995 and no further benefit or additional advantage was extended to the principal company thereafter. The defendant No,2 having executed guarantee jointly with defendants Nos.3 and 4 on 22-12-1996, it is urged that nothing was done nor was any promise made for the benefit of the principal company at the desire or behest of the defendants, hence, the contract of guarantee is void and unenforceable.
28. The learned counsel for defendant No,2 has relied in this behalf on judgments in National Construction Ltd. v. Standard Insurance Co. Ltd. 1984 CLC 286 and United Bank Limited v. Ch. Ghulam Hussain 1998 CLC 816. In the first case, it is affirmed that liability of surety and a principal- debtor is co-exensive and the claim against surety until and unless existence of liability and failure or breach on the part of principal-debtor is established, would be premature. In the second case, a Division Bench of Lahore High Court had found that the statement of account filed by the plaintiff therein did not show any disbursement and the financing agreement relied therein were not preceded by grant of sanction by the competent Authority. In the circumstances, the agreements were found lacking any consideration and were treated void.
29. In reply, Mr. Salman Talibuddin, has urged that the guarantee itself creates enforceable and independent contract of indemnity and the defendants including the defendant No,2 cannot bank on the procedural technicalities which could be urged by the principal company. It is further contended that in any event, the certification of the dues by the agent was agreed to be conclusive proof of the outstanding in terms of Article 14.2 of the Agreement with the, result that upon communication of demand through letter dated 17-11-1997 forwarding therewith certificate in terms of clause (8) of the guarantee, the defendants became liable for payment under the guarantee. It is further pointed out that the defendant No,2 in his reply dated 22-11-1997 sent through his counsel did not question the liability itself. Reference was instead made to some undisclosed undertaking of the Syndicate during meeting held on 20th October, 1997 between the representatives of principal company and members of the Syndicate. The learned counsel for plaintiff has referred to the notice of demand, dated 21st August, 1997 addressed by the agent to the principal company annexing therewith details of calculation of alleged over-dues showing therein the proportionate amount payable to every individual member of the Syndicate out of the aggregate amount mentioned in the notice. I may note here that both the learned counsel representing the plaintiff and the defendant No,2 have vehemently argued for and against in relation to the propriety of any reference to the said notice. Mr. Arfin has urged that the said documents had been filed alongwith counter-affidavit to C.M.A. No,498 of 1998 filed by defendants Nos.1 and 3 seeking leave to defend the proceedings. The said application having been dismissed for non-prosecution, the various documents filed in relation thereto could not be referred for the purpose of present application. From the plaintiff's side, reference has been made to Order XIII, Rules 10 and 11, C.P.C. And section 9(4) of Act XV of 1997 and it is contended that the Court is empowered to take into account and consider any material or documents as may be considered relevant and seem to advance cause of justice. The learned counsel for plaintiff further submits that two copies of the above-referred notice, dated 21st August, 1997 with its enclosures are available on the file and the same have not been re-filed in order to avoid burdening the Court record. Moreover, it is urged that the objection based on Articles 9.3 and 9.4 of the Agreement was raised for the first time during arguments and in order to do complete justice, the contents of the notice be considered. In support of his submission, reliance has been placed on the case of Mian Rahim Gul Syed Kaka Khel v. District Judge (South), Karachi 1994 CLC 94 wherein request of a party for allowing production of inspection report was upheld with the observation that procedural law was a handmaid of justice and even if there was infraction of the same, in a fit case relevant and material documents could be considered. In the present case, the defendant No,2 did not plead its non-liability for want of notice/declaration by the agent and, therefore, cannot now be allowed to urge hypertechnicalities. The notice dated 21-8-1997 is material and relevant for meeting the objection raised on behalf of defendant No,2 and its copy is already available on the record.
30. Pertinently, the defendant No,2 has not alleged manipulation of the said document and the same has, therefore, appropriately been referred by the learned counsel for plaintiff. The requirements of Articles 9.3 and 9.4 of the Agreement have sufficiently been shown to have been met by the plaintiff before filing the present proceedings. In relation to the question of liability of defendants, it is true that the same is co-extensive and the plaintiff, as held by Ibadat Yar Khan, J. As he then was, in the case of National Construction Ltd. (supra). The plaintiff, in a claim against guarantor, is required merely to assert that liability of principal company exists in the first instance and a default or breach on its part had occurred. The logic for such finding is the principle contained in sections 140 and 141 of the Contract Act which invests the surety with all the rights enjoyed by a creditor against the principal-debtor and further entitles it to the benefit of every security held by the creditor against the principal-debtor. Indeed, mere forbearance on the part of the plaintiff to sue the principal company has not even been pleaded as a ground of discharge in the present case.
31. Having held, as above, it is necessary to see if all the defences which could be urged by the principal company can be raised by the defendant No,2. A contract of guarantee creates an independent liability and the guarantor can defend action against it primarily on the terms of guarantee. The creditor in an action against a guarantor is merely required to show existence of liability of the principal-debtor and occurrence of default or breach of the terms leading to the liability. Beyond the above, the defences based on technicalities, laws of procedure or the covenants to which guarantor is not a party cannot be pressed into service by the guarantor. For instance a claim may have become barred by limitation against the principal-debtor but the creditor can still sue the guarantor if such relief can otherwise be maintained. However, if the guarantee itself stipulates and incorporates by reference, the terms contained in the agreement between the creditor and the principal-debtor, implementation to that extent becomes imminent.
32. The law in this behalf is succinctly stated in Sree Meenakshi Mills Ltd. v. Ratilal Tribhovandas Thakar AIR 1941 Bombay 108 in the following terms:- "It is well-established that a guarantor is prima facie entitled to have the debt proved as against him.... . . . ... ...The liability of a guarantor must depend on the true construction of the guarantee which he has given. If the guarantor merely guarantees payment of the debt of the principal- debtor, then he is entitled to require the debt to be proved as against him in accordance with the ordinary law, that is in this case under the Evidence Act. If, on the other hand, the principal-debtor has agreed that as against him the debt shall be proved in a particular way, and the guarantor has guaranteed the debt so to be proved, then I apprehend that there can be no doubt that the guarantor would be bound by the particular method of proof agreed to by the principal-debtor and accepted by himself."
33. In the present case, the defendant No,2 had undertaken to make payment and discharge all the liabilities of the principal company upon receipt of demand. Conspicuously enough, the guarantee does not postulate any proof of legality of the claim which would have made the guarantee subservient and subject to adjudication of claim against the principal-debtor. The very concept that a contract of guarantee creates independent liability, in such an event would have stood negatived. The defendant had expressly agreed that the plaintiff could, at its election, treat them primarily liable for the debt of the principal company.
34. Applying the above principle, in para. 5 of the plaint, the plaintiff has clearly stated the existence of liability and failure of the principal company to effect its discharge. Such assertion has remained unrebutted and the defendant No,2 cannot press into service any further defence as could be urged by the principal company. Needless to observe the defendant No,2, in any event, has not been able to show if the plaintiff's claim is inadmissible as against the principal company. However, 1 do not wish to dilate any further on this issue for the rights of the principal company are not subject-matter of adjudication in the present proceedings nor do I intend to undertake any such exercise.
35. Coming to the validity of the guarantee in question itself, the learned counsel for defendant No,2 has referred to the use of terms 'granting and/or agreeing to grant at our requestused in opening part of the guarantee. According to Mr. Arfin, the guarantee had contemplated simultaneous grant of finances and future grant of finances to the principal company and the undertaking to repay such liability. It is further contended that illustration (c) under section 127 of the Contract Act renders the guarantee in question void in relation to the advances already made by the plaintiff to the principal company which in any event, were not covered by the terms of guarantee.
36. Mr. Salman Talibuddin has urged that section 127 of the Contract Act admits of anything done, or any promise made, for the benefit of principal-debtor as sufficient consideration to the surety for giving the guarantee. The facilities advanced in past and continued to be enjoyed by the principal company, therefore, amount to valid consideration and the guarantee in question is valid and enforceable. According to the learned counsel, the reference to definition of 'consideration contained in section 2(d) of the Contract Act does not render it necessary to show that the facilities were granted to the principal company at the request or behest of the defendant No,2. For such contention reliance has been place on the judgment in M. Ghulam Hussain Khan v. M. Faiyaz All Khan AIR 1940 Oudh 364. The learned counsel in order to explain the scope and meaning of section 127 of the Contract Act has referred to a large number of Authorities in Kali Charm v. Abdul Rahman AIR 1918 PC 226, Mathra Das v. Shamboo Nath AIR 1929 Lah. 203, National Bank of Pakistan v. Alam Industries Limited, Karachi PLD 1992 Kar. 295, American Express Bank Limited v. Adamjee Industries Limited 1995 CLC 880 and United Bank Limited v. Shahyar Textile Mills Ltd. 1996 CLC 106. I do not consider it necessary to refer separately to the various judgments cited by the learned counsel for plaintiff. The principles which have come to be settled in the said judgments are that anything done or any promise made for the benefit of the principal may be a sufficient consideration to a surety for giving guarantee; that the word 'donein section 127 of Contract Act shows that past benefit to principal-debtor is good consideration; that the consideration is not necessary to be received by the surety; and, that something done or abstained from in relation to past transaction would be a good consideration. In all the cases, however, the language of the guarantee was examined and it is observed that the intention of the party is to be gathered from language of the instrument and the surrounding circumstances. In the present case, the relevant portion of the guarantee is as follows:-- "In consideration of your bank granting and/or agreeing to grant at our request finances of credit facilities up to the limit of Rs,67,000,000 (Rupees sixty-seven million only) to M/s. Pakland Cement Limited having offices at Trade Centre, A-14, Block 7/8, KCHS, Karachi (hereinafter called 'principals') under one or more modes of 'financesas defined in the Banking Tribunals Ordinance, 1984 and/or providing to the Principals any other banking accommodation or facility and in that connection your entering into one or several agreement or agreements with the Principles and your opening one or several account or accounts in your Books in the name of the Principals, I/we, the undersigned herein referred to as the 'Guarantor(s)', do hereby irrecoverably and unconditionally agree; undertake and guarantee jointly and/or severally the due payment and discharge of all the Principal's liabilities to you on receipt of your demand, whether incurred before or after the date hereof." (Emphasis supplied).
37. The guarantee in the above terms was executed on 22-12-1996 at a time when the Syndicate including the plaintiff had already disbursed the amount of finance. The facility, however, had to be returned in instalments and such instalments became due from 1st November, 1995 onwards. The use of word 'granting read with the words 'the due payment and discharge of all the pricipal's liabilities... ... ... Whether incurred before or after the date hereofsignifies desire of the guarantors about continuity of the facility notwithstanding default committed already, in re-payment thereof.
38. The statement of account filed by the plaintiff on 27-10-1998 shows that the instalments due on 1st August, 1996 and 1st November, 1996 had remained unpaid on the date of execution of guarantee.
39. Indeed, on account of the default, the entire amount of liability could be recalled and the principal company, therefore, needed waiver of the rights enforceable then, by the members of the syndicate. The grant of waiver or time was a continuing process and the same was apparently allowed upon execution of guarantee. Conversely, the guarantee was executed in consideration of the plaintiff-bank continuing with the facilities. The undertaking to pay the liabilities which had turned to arrears before execution of the guarantee signifies knowledge on the part of defendant No,2 and others or existence of past liabilities. The facilities were allowed to be continued in pursuance of the guarantee in question and the loan agreement itself, amounting to valid consideration in terms of section 127 of the Contract Act. It is not necessary that a surety himself must receive some benefit in return for the guarantee. The principal company having received benefit was sufficient consideration for the guarantee. In the circumstances, I do not find any merit in the submission that the guarantee dated 22-12-1996 was given without consideration or that no liability was undertaken for the past disbursement.
40. Reverting to the grounds urged in the leave application itself, nothing has been shown to infer that the guarantee in question was signed blank or under undue influence or duress exercised by defendant No,
1. In any event, the allegation of undue influence and duress is a matter to be sorted out between the defendants themselves and the contract of guarantee between the plaintiff and defendant No,2 appears to be valid and enforceable. As to the detailed statement of account, the plaintiff has filed the same on 27-10-1998 with due certificate appended thereto. The defendant no.2 has not given details of the liabilities which the plaintiff was obliged to adjust through sale of pledged shares. From the Plaintiff's side, it is urged that nothing has been sold nor has any amount remained unaccounted. Assuming that the pledged shares are in custody of the plaintiff, the plaintiff can lawfully retain the pledged shares as collateral securities and make claim for the outstanding debt. In any event, such defence cannot be raised by the defendants who are sued as guarantors in view of the observation recorded hereinbefore. In the circumstances, the application for leave to defend, filed by the defendant No,2, is dismissed.
41. As a result of dismissal of the leave applications and non-filing of application for leave on behalf of defendant No,4, I have examined the plaintiff's claim and found that the claim herein includes mark-up beyond the agreed rate inasmuch as penalty payable upon non-repayment by the due dates, referred as prompt payment bonus, has been included therein besides the amount of liquidated damages. While dealing with the leave application filed by defendant No,2, I have already held that the plaintiff is not entitled to claim the amount of prompt payment bonus and liquidated damages. Let the plaintiff file a revised statement of account within five (5) days from today with advance copy to the learned counsel for other side and the matter be put up for further orders on 19-11-1998.