1. ' The brief facts of the case are that under Credit Agreement, dated 31-12-1984. Defendant No,1 obtained from the Plaintiff Bank long term credit facility in the sum of Rs,11.175 Million which was repayable in sixteen half yearly instalments starting from 1-10-1987 and ending on 1-4-1995. To secure payment of the credit facility, defendant No,1 executed, inter alia, Demand Promissory Note, Letter of Hypothecation, Pledge Agreement. Agreement to Mortgage and Memorandum of Deposit of Title Deeds of the factory premises and defendants Nos.2 to 8 executed personal guarantees.
2. Defendant No,1 paid back a small amount to liquidate its liabilities; consequently, after giving due notice, plaintiff filed the present Suit for recovery of Rs,31,841,866 against the defendants and for sale of the mortgaged/ pledged/hypothecated property. On 30-3-1998, leave to defend the suit was granted to the defendants and on 27-4-1998 on the basis of the pleadings of the parties the following issues were settled by the Court: "(1) Whether the letter of guarantee allegedly signed by the defendants Nos.3 to 8 has been manipulated? Its effect.
(2) Whether all or any of the charge document were signed in blank and have unauthorizedly been filled in by the plaintiff? Its effect.
(3) Whether the plaintiff has charged interest and other charges beyond the agreement between the parties?
(4) Whether the Suit is time-barred.
(5) What should the decree be?
3. ' The plaintiff examined Mr. Talat Behzad in support of the claim while the Defendant examined Mr. Tanveer Jaffer only in Support of their defence. I have heard the arguments of both learned counsels, perused the record and my findings on the issues are as follows: ' Issue No,1.
4. ' In para.7 of the plaint the Plaintiff alleged that defendants Nos.2 to 5 executed personal guarantee in the sum of Rs,11,175,000. In their written statement the defendants denied the execution of personal guarantees except by defendant No,2 and pleaded that the signatures on the guarantee had been manipulated in order to expand the liabilities. The said guarantee, dated 6-5-1985 was produced by plaintiff's witness as Exh.5/15 which contained the signatures of defendants Nos.2 to 8.
5. In his cross-examination the said witness admitted that the date mentioned on the guarantee had first been written with pencil and was, subsequently, put in ink and that the document had not been signed in his presence. He, however, denied the suggestion that the signatures of defendants Nos.2 to 8 on the guarantee had been manipulated. As far as the signatures of defendants Nos.2 to 8 are concerned there are other documents on the record which were executed by them on 6-5- 1985, namely, the Pledge Agreements of shares Exhs.5/8 to 5/15. The Memorandum of Deposit of Title Deeds Exh.5/18 and 5/19, bear the signature of defendants Nos.2 and 3. It is also interesting to note that an Irrevocable General Power of Attorney (Exh.5/16) was signed by defendants Nos.2 and 3 on 6-5-1985 which was later registered on 16-5-1985. A bank has the authority to fill in or complete inchoate documents, which include a guarantee, in accordance with the agreement between the parties (PLD 1986 Karachi 464). The defendants have not shown how the endorsement of the date on the guarantee is contrary to their agreement between the parties.
6. Therefore, it can be safely said that the date on the guarantee has been correctly endorsed..
7. Further, under Article 84 of Qanoon-e-Shahadat the Court is empowered to compare the impugned signature with the admitted signature of a person to ascertain whether the impugned signature is of the person by whom it purports to have been written. The signatures of defendants Nos.3 to 8 on the Guarantee (Exh.5/15) with those of the admitted signatures on Exh.5/8 to Exh.5/15, on comparison appear to be similar. Moreover, the signature of defendant No,3 on Exh.5/15 when compared with her admitted signature on Exhs.5/16, 5/18 and 5/19 also appear to be similar. Mr. Tanveer Jafer, defendant No,2 whose signature on the guarantee has been admitted in the written statement stated in his examination-in-chief that in several documents including the Guarantee (Exh.5/15) the amounts have been subsequently filed up. However, perusal of the Guarantee Exh.5/15 shows that the amount of the guarantee could not have been filled in subsequently as it is a typed document and there is no indication whatsoever on the document that the amount of the guarantee could have been typed subsequently. In his cross-examination defendant No,2 stated that "The defendants Nos.2 to 8 had not executed any personal guarantee for repayment of subject finance" and immediately thereafter, he admitted that the Guarantee "Exh.5/15 was signed by me".
8. Later in his cross-examination he admitted that the copy of Board Resolution passed by defendant No,1 (Exh.5/1) was signed by him but with regard to the other signature appearing thereon of Mrs. Parveen Jafer (his wife and defendant No,3) he stated that it appears to have been forged. He used the words "appears to have been forged" but did not categorically say that the signature was forged or that it was not the signature of his wife. If defendant No,2 was honest his wife Mrs. Parveen Jafer, (defendant No,3) should have appeared in the witness-box to deny her signature and also produce other documents containing her signature to prove that her signature on the Resolution Exh.5/1 and the Guarantee Exh.5/15 were not genuine. This was not done for reasons which are obvious. Further, defendants Nos.4 to 8 also did not appear in the witness-box to deny their signatures on the Guarantee Exh.5115. The evidence given by defendant No,2 does not inspire confidence. The abstinence of defendants Nos.3 to 8 to appear in the witness box points to only one conclusion which is that the denial of their signature on the Guarantee is not bona fide. The defendants have failed to prove that the Guarantee Exh.5/15 had been manipulated by the plaintiff.
9. The Issue is accordingly decided in the negative.
10. ' Issue No,2. Plaintiff's witness produced several charge documents which, the defendants allege, were signed in blank and were, unauthorizedly filled in subsequently by the plaintiff with the amounts stated therein. It is established law that the Bank has the right to complete and or fill in the blanks of inchoate documents in accordance with the agreement with the customer (1981 CLC 880, PLD 1986 Kar. 464). The burden was upon the defendants to show that the amounts in the charge documents had been filled unauthorizedly. The defendants did not produce any evidence to show how the amounts stated therein were incorrect or were unauthorizedly filled in by the plaintiff by referring to any document or by reference to any item in the Statement of Account. The burden to prove the Issue was upon the defendants which they failed to discharge. The Issue is accordingly decided in the negative.
11. ' Issue No,3. Plaintiff's witness in his evidence produced a Summary of Account (Exh.5/21) giving the breakup of the various amounts charged by the Bank in respect of the loan as follows: ' Principal: Rs,10,576,000 ' Interest @ 9% per annum: Rs,8,795,060 ' Loan Administration Fee: Rs,154,233 ' Additional Interest: Rs,10,918,051 ' Central Excise Duty: Rs, 683,860.57 ' Total: Rs,31,127,204.57 ' At the time of oral arguments, Mr. A.S. Pinger, learned counsel for the plaintiff conceded that the plaintiff is not entitled to charge Central Excise Duty of Rs,683,560.57 as the same was not paid by the Bank and Mr. Sajjad Ali Shah, learned counsel for defendants conceded that the plaintiff is entitled to recover the Principal, the Interest and the Loan Administration Fee as stated in the Summary of Account reproduced above but challenged the claim of Additional Interest of Rs,10,918,051 charged by the Bank. He also submitted that the Bank had not given credit of the amounts paid by defendant No,1. When this fact was brought to the attention of Mr. Pinger, both learned counsel sat down together to calculate the amount deposited by defendant No,1 and filed a Statement signed by them to the effect that defendant No,1 had paid a sum. Of Rs,1,658,775 towards repayment of the loan and accordingly it is entitled to adjustment of the same. Mr. Pinger, however, vehemently contended that the Bank is entitled to claim Additional Interest @ 18 per cent.
12. Per annum under clause 2.03(a) and 2.03(b) which read as follows: "2.03 The Borrower shall make the following payments to the Corporation at the times mentioned hereunder:
(a) Interest on the amount of the Credit drawn and remaining unpaid by the Borrower at the rates specified below:
(i) The rate of interest applicable on the Credit or such part thereof as has been disbursed by the Corporation to the Borrower from the Corporation's own resources without obtaining refinance in respect thereof from the State Bank of Pakistan shall be 4% per annum above the State Bank of Pakistan rate of interest ("the Bank Rate") with a minimum of 14% (Fourteen) per annum.
(ii) The rate of interest applicable on the Credit, or such part thereof in respect of which the Corporation has obtained the refinance from the State Bank of Pakistan shall be two per cent. (2%) per annum above the rate associated with the refinance facility of the State Bank of Pakistan as from the date such refinance has been obtained by the Corporation.
(b) Additional interest at the rate of 2% per annum over and above the rate of interest stipulated in section 2.03(a)(i) above or as the case may be 7% per annum over and above the rate of interest stipulated in clause 2.03(a)(ii) above computed on daily basis using a 360 days factor for the period of default on all amounts due to the Corporation by way of principal interest or costs, charges and expenses which remain unpaid beyond the due date which shall be paid at the same time as interest."
13. ' He was asked to cite any authority to show in light of the evidence how the Bank could claim Additional Interest 16 per cent. Per annum which apparently was punitive in nature. He did not refer to any statement in the evidence or cite any law or authority but insisted that the provisions relating to "payment of Additional Interest are a part of the Credit Agreement between the parties which must be strictly enforced and the plaintiff awarded the same as claimed. To decide the issue of Additional Interest it would be appropriate to refer to section 74 of the Contract Act which reads as follows: "74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
14. ' Explanation. ---A stipulation for increased interest from the date of default may be a stipulation by way of penalty."
15. ' From a bare reading of the section, it is apparent that if a contract contains any stipulation by virtue of which any specified amount or a penalty becomes payable when a breach of contract is committed, then the party complaining of the breach is entitled to receive from the party who has committed the breach of contract not the amount or penalty specified therein but reasonable compensation not exceeding the amount mentioned in the contract. What is reasonable compensation is a question of fact and the party who claims compensation must prove the fact.
16. This can only be done by producing evidence or by placing on record documents to prove reasonable compensation in the circumstances of the case if the law permits or requesting the Court for permission to adduce evidence.
17. ' Under clause 2.03(b) of Credit Agreement, dated 31-12-1984 (Exh.5/2) defendant No,1 is liable to pay interest @ 7% per annum over and above the rate of interest stipulated in clause 2.03(a)(ii) for the period of default. In the present case, according to the Statement of Account filed by the plaintiff they have charged interest @ 9 per cent. Per annum, apparently on the refinance obtained from the State Bank of Pakistan. Therefore, as far as the interest of 9 per cent. Is concerned it appears to be in accordance with the provisions of the Agreement between the parties (Exh.5/2).
18. However, in the Statement of Account the Bank has also claimed Additional Interest on the basis of clause 2.03(b) which allows the Corporation to charge the customer in case of default Additional Interest @ 7 per cent. Per annum over and above the rate of interest stipulated in clause 2.03(a) referred to above. According to the Explanation given in section 74 of the Contract Act, a stipulation for increased interest in case of default which is called additional interest in the Credit Agreement in question is apparently a stipulation in the nature of penalty and cannot be enforced under section 74 of the Contract Act unless the requirements laid down in the section are fulfilled. The Bank has not produced any oral evidence to justify the additional interest or the loss suffered by it on account of the breach of contract committed by defendant No, 1 . Further the Bank has neither attached any document with the Affidavit nor sought permission to place any document on the Court file to show as to what would be reasonable compensation for breach of the obligation by defendant No,1. In fact, in their evidence they have not asked for any compensation on this account and Mr. Pinger has still insisted that the plaintiff be awarded Additional Interest simply on the basis of the use of the term "Additional Interest in the Credit Agreement. Under section 74 of the Contract Act the party complaining the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, reasonable compensation not exceeding the amount so named or as the case may be, the penalty stipulated in the contract. The penalty stipulated in the Credit Agreement in case of default in additional interest at the rate of 7 per cent. Per annum over the above the normal rate. In the absence of any evidence adduced by the plaintiff, it is not possible to award reasonable compensation. But according to the terms of the section reasonable compensation has to be awarded whether or not loss is proved. Therefore, in compliance of the terms of section 74 of the Contract Act, 1872, I award to the Plaintiff token compensation of Rs,1,000 as Additional Interest instead of Rs,10,918,051 as claimed by it.
19. ' Issue No,4. The Suit was filed on 23-11-1996 in the Banking Tribunal under section 7 of the Banking Companies (Recovery of Loans) Ordinance, 1979 and Order 34, C.P.C., for recovery of money and for final mortgage decree. During the pendency of the suit, the Banking- Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 was promulgated and the suit was transferred to the Banking Jurisdiction of this Court. Section 22(1) of the Banking Companies Act, 1997 clearly provides that the provisions of the Limitation Act, 1908 shall not apply to any suit, application or other proceedings filed or transferred to a Banking Court under this Act. On 23-11-1996, when the suit was filed it was within time and was not barred by the law of limitations and, consequently would continue to be so after its transfer from the Banking Court to the Banking Jurisdiction of the High Court. This Issue is accordingly decided in the negative and in favour of the plaintiff.
20. Issue No,5. In view of the above findings, after adjustment of Rs,1,658,775 agreed to by both counsel, plaintiff's claim is decreed as follows:
(i) Judgment and Decree against the defendants jointly and severally in the sum of Rs,17,867,518 with interest at the rate of 16 per cent. Per annum from the date of institution of the Suit till the date of payment. (Mr. Pinger has filed a statement to the effect that the plaintiff is presently charging 16 per cent. Per annum of LMM Facility);
(ii) Final Mortgage Decree for sale of the mortgaged immovable property and pledged hypothecated movable property;
(iii) Costs of the Suit less Advocate's Fee; and
(iv) The question of Additional Interest in clearly covered by section 74 of the Contract Act, 1872. Mr. Pinger, after being forewarned, still insisted and vehemently argued and claimed Additional Interest without having placed on record any evidence or document in support thereof. He also did not cite any judgment of the Superior Courts in spite of their availability (See 1993 MLD 1571 and PLD 1971 SC 743 etc.). He wasted the precious time of this Court. Therefore, in exercise of the inherent powers of the Court, plaintiff is directed to deposit a sum of Rs,5,000 with the Nazir of this Court within 15 days of the judgment. In case the amount is not deposited within the aforesaid period, the Nazir is hereby authorised to recover the same by attachment of the property of the plaintiff.