1. ' Placed at serial No,1, is the application under section 16 of the Banking Companies (Recovery of Loans, Advances Credits and Finances) Act, 1997 (Act XV of 1997); the application placed at serial No,2 is for grant of leave to defend the proceedings and is moved on behalf of defendants Nos.1 to 5 and 7 to 10; the application at serial No,3 is again filed by the plaintiff for attachment of the factory of defendant No,1 under Order XXXVIII, Rule 5, C.P.C.; and C.M.A. No,8252 of 1997, filed on behalf of defendant No,6 has wrongly been listed for hearing since it was granted on 22-4-1998 and application under section 10 of Act of 1997 filed on behalf of defendant No,6 for grant of leave (C.M.A. No,7777 of 1997) was restored and arguments heard thereon.
2. ' The present proceedings are filed by the plaintiff a banking company, for recovery of Rs,92,649,174.74. The defendant No,1 is sued as the principal borrower whereas the remaining defendants are sued as guarantors/mortgagors. The plaintiff's case is that in the normal course of its business, the defendant No,1 was granted facilities for import of RBD Palm Oil and Soyabean Oil by opending Letters of Credit from time to time. The present proceedings have been filed in relation to five Letters of Credit, of the value of $ 2,070, 422.60. In relation to the five Letters of Credit, in question, six Bills of Exchange were received by the plaintiff alongwith shipping documents. All the Bills of Exchange were duly accepted by the defendant No,1 for payment on maturity. It is an admitted position between the parties that payment against bills of exchange had to be made by 180 days from the date of the respective Bill of Lading. The defendant No,1 under the above five Letters of Credit, had imported 3498.638 metric tons of RBD palm oil and 235 M.T. Of Soyabean Oil.
3. ' Out of the said quantity of RBD Palm Oil, 602.36 metric tons was stored in the tanks of Pakistan Tankage Company Limited which, according to the plaintiff, is still available there. The entire imported merchandise, referred above, was under the pledge of the plaintiff. According to the plaint, out of the said consignment of RBD Palm Oil, the plaintiff had released to the defendant No,1 2896.273 metric tons against six Trust Receipts, three dated 23-1-1996, one dated 27-6-1996 and two dated 31-7-1996. Out of the RBD Palm Oil released against the Trust Receipts, the defendant No,1 has not obtained clearance from Customs in respect of 45.770 metric tons of RBD Palm Oil.
4. According to the defendant No,1, however, it has not received 47.5 metric tons of RBD Palm Oil besides another 300 metric tons of RBD Palm Oil imported against Letter of Credit No,PRUD/LCU/0106/95, dated 20-12-1995. The plaintiff's case is that the defendant No,1 has not made any payment despite taking delivery under Trust Receipts nor has made payment against the Bills of Exchange on the dates of maturity with the result that the amount of $ 20,068,152.28 had to be remitted to the Exporters of the plaintiff. The plaintiff's further case is that part of the amount due on account of payment against the Bills of Exchange has been placed under the Trust Receipt Account to the extent or Rs,32,737,116.51 and the balance amount of Rs,45,635,948.94 has been placed under the facility known as Past Due Acceptances. It is claimed that the amount placed in the two accounts (facilities) has remained outstanding and payable with the result that various other charges such as excise duty, security services charges etc., had to be paid in relation thereto.
5. For payment of such charges Running Finance Facility was created and the amount of above- referred miscellaneous charges was debited to such account. A sum of Rs,460,387.29 is claimed under the Running Finance Account. By way of security for repayment of the dues, outstanding against defendant No,1, Promissory Note dated 21-8-1995 in the sum of Rs,100 million was delivered besides execution of personal guarantee by the defendants Nos.2 to 8 and creation of equitable mortgages by the defendants Nos.2, 3, 9 and 10. The plaintiff has further claimed mark-up on the amount outstanding under the three accounts in the sum of Rs,13,816,262.
6. ' On behalf of defendant No,1, Mr. Mohsin Tayabaly, Advocate has urged as follows:--
(i) The claim in respect of Trust Receipt Account includes a sum of Rs,3,049,127 towards mark up which could not be charged in the absence of agreement between the parties;
(ii) The Letters of Credit having been issued on Usance basis, the goods imported thereagainst ought to have been handed over against Trust Receipts but such understanding was not honoured fully;
(iii) The claim for money could not be maintained if the plaintiff as pledgee was unable to return the pledged goods.
7. ' Mr. S. Mazharul Haq representing the defendants Nos.2 to 5 and 8 to 10 has adopted the above submissions of the learned counsel for the defendant No,1 Mr. S.A. Majid representing the defendant No,6 and Mr. A. Aziz Khan, representing defendant No,7 have adopted the arguments of Mr. Mohsin Tayabally and have additionally contended that the guarantee dated 21-8-1995 was executed by the two defendants on behalf of defendant No,1 and, in any event, the guarantee had become void for unauthorised insertion of the dates of Financing Agreements executed between the defendant No,1 and the plaintiff subsequent to the guarantee itself.
8. ' The first contention of Mr. Mohsin Tayabally has two aspects. The inclusion of a sum of Rs,3,049,127 in the Trust Receipt Account by way of mark-up is not disputed by Mr. Mansoorul Arfeen, Advocate who concedes that the principle amount due under the said account is Rs,29,687,989 and of decree for Rs,3,049,127 charged as mark-up, may be considered alongwith the plaintiff's claim for mark-up in respect of the other accounts. According to the learned counsel for the defendants, the parties had never agreed for payment of any mark-up upon the value of Bills of Exchange, and under the Islamic System of Banking, mark-up cannot be charged unless the parties have mutually agreed for such payments at a reasonable rate. The plaintiff's case, as reflected from the plaint and the various affidavits, is that the defendant No,1 was obliged to make payment against the Bills of Exchange within 180 days from the date of respective Bills of Lading. Pertinently, it is not the case of plaintiff that the parties had agreed for payment of mark-up on the amount remaining unpaid in respect of the Bill of Exchange. The mere inability to pay or even non-payment of dues at the agreed time does not, ipso facto, create liability to pay mark-up on the amount remaining due and payable. Mr. Mansoorul Arfeen, in support of the plaintiff's claim for mark-up, has relied upon the Sanction Advice wherein against the column mark-up the words commissioner as per bank schedule of charges' are mentioned. In the schedule of charges maintained by the plaintiff-bank, mark-up on Past Dues Acceptance is stated as 62 paisa per thousand per day and mark-up on Import Bills is mentioned as 54 paisa and 56 paisa per Rs,1,000 on daily product basis. However, commission is separately mentioned under the times pertaining to mark-up on Import Bill.
9. Evidently, commission is distinct from mark-up and even if the Sanction Letter is treated as an agreement, the plaintiff does not acquire any right to claim mark-up. The above stated finding does not lead to any factual controversy and the mark-up claimed by the plaintiff can conveniently be segregated from the claim amount. The defendants, therefore, are not entitled to grant of leave on this ground.
10. ' The next contention urged on behalf of the defendants hardly makes out a ground for grant of leave. The plaintiff's case is that Delivery Orders against Trust Receipts were issued to the extent desired by the defendants. The issuance of Delivery Orders by the plaintiff in respect of 2896.273 metric tons of RBD Palm Oil is manifest from the record. The parties, however, are at variance about actual quantity of the RBD Palm Oil taken by the Defendant No,
1. While I have separately discussed the effect of alleged short delivery of RBD Palm Oil to the defendant No,1, suffice to observe that goods could not be handed over against Trust Receipts without demand by the consignee and the question agitated by the learned counsel for the defendants does not remain of much importance for absence of assertion that the plaintiff did not issue Delivery Orders of the balance consignment despite demand.
11. ' Mr. Mohsin Tayabally has next urged that the plaintiff-Bank, as pledgee of the imported merchandise, was obliged to take care of the pledged goods and in view of its inability to return the pledged goods could not maintain proceedings for recovery of the debt. It is contended that the plaint contains the averment that the remaining consignment of pledged RBD Palm Oil was stored in the tanks belonging to Karachi Tank Terminal and Pakistan Tankage Company (Pvt.)
12. Limited. The tanks which are declared bonded warehouse under the Customs Act have been sealed under the order passed by Banking Court or by the Customs Authorities. In either case it is urged the plaintiff was not in a position to return or release the remaining quantity of pledged RBD Palm Oil to the defendants. The learned counsel has referred to the common Law Principle that a pawn or a pledge is a bailment of personal property as security for some debt or engagement; that pawnee has only a special property in the pledge and the general property therein remains in the pawnors which reverts completely to him on discharge of the debt. In other words, the right to the pledged property vests in the pledgee only to the extent as is necessary to secure the debt. The bailee or pawnee is under an obligation to return the pledged property if the pawnor elects to redeem the goods on payment of debt. The above stated principle of Common Law is incorporated in section 176 of the Contract Act which entitles that pawnee to bring a suit against the pawnor upon the debt or promise and retain the goods pledged as a collateral security. Section 117 of the Contract Act recognises the right of a pawner to redeem the goods pledged even after default is committed in payment of the debt or performance of the compromise at the stipulated time, before the actual sale of the goods. Nevertheless, the right of a pwnor to return the pledged goods only upon discharge of debt is clearly recognised by the above-referred provisions of the Contract Act. The learned counsel for the defendant No,1 has referred to judgment in A.M. Burq and another v. Central Exchange Bank Limited and others (PLD 1966 Lahore Page 1) wherein after finding that the subject merchandise was put under pledge but was no more available with the pawnee who had pleaded damage and destruction thereof and upon consideration of the evidence it was established that the pawnee was not in a position to return the pledged goods. In such circumstances, the learned Judges proceeded to hold as follows: ' "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 in-tact 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 pleged to it as a security for the payment of the loan.The principle in equity is that the creditor is not entitled to recover the amount of this secured debt when he cannot return the security. In Ellis & Company's Trustees v. Dixon-Johnson (1925 AC 489 P.493), it was held by the House of Lords that the stock-brokers could not have maintained an action for their debt if they were not in a position to restore the shares which he had pledged as a security, since payment of the defendant would entitle him to the return of the security which he furnished."
13. ' The above principle ,also finds support in the case of Lallan Prasad v. Rahmat Ali and another (AIR 1967 SC Page 1322) wherein the following dictum was laid down reference to the opinion expressed by Viscount Cave LC in the above-referred House of Lord's case: ' "He has a right of action for his debt notwithstanding possession by him of the goods pledged. But if the pawner tenderes payment of the debt the pawnee has to return the property pledged. If by his default the pawnee is unable to return the security against payment of the debt, the pawnor has a good defence to the action."
14. To the same effect is the view expressed in United Bank of India v. Debendra Nath Roy Chaudhry (AIR 1992 Gauhati 88). In all the above cited cases, it was found as a matter of fact, that the pledged goods had been misplaced or misappropriated making it impossible for the pledger to return them and secondly, the payment of debt in its entirety was offered by the pledger. In the Lahore case, however, the right of pledgor to set off was upheld to the extent of value of the goods not returned by the pledgee. In the present case, the defendant No,1 has not been able to show that the remaining quantity of pledged goods is not available and has been lost by the pledgee.
15. Indeed, the loss of the remaining quantity of pledged goods has not even been pleaded by the defendants. The mere fact that on account of the restraint put by the Banking Court or by the Customs, the ability of the pledgee has gone under an eclipse to effect immediate release or return of the pledged good which cannot result in imputing upon the plaintiff, inability to return the goods. The attachment/sealing of tanks under orders of the Court can always be withdrawn at the behest of the plaintiff on whose application attachment was ordered. The seal put by the Customs Authorities, likewise, can always be removed upon payment of the customs dues. The underlying fact, however, remains that the pledged goods are available and can be returned unless proved otherwise. I must record here that except for oral assertion, nothing is shown to presume pilferage of loss of the subject Palm Oil. Thing brings me to the issue if the plaintiff is to be called upon in the circumstances of the case to prove that it had acted diligently and had taken as much care of the goods entrusted to it as a man of ordinary prudence would take of his own goods of similar quality and volume. The law regulating the subject is contained in sections 151 and 152 of the Contract Act which are as follows:-- "151 In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed."
16. "152 The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151."
17. ' The above-referred provisions require the bailee to show that reasonable care was taken by it in handling the goods. In the given case the imported merchandise was stored at a bonded place since the defendant No,1 had failed to have it released. The defendant No,1 had multiple responsibilities including payment against the Bills of Exchange to the plaintiff with option to obtain delivery orders against Trust receipts; then, the defendant No,1 had to make payment of the Customs duties, demurrage, octroi, wharfage etc., for receiving actual delivery of the subject goods. The plaintiff despite having constructive position of the pledged goods did not have exclusive physical control thereof for being burdened with the presumption of negligence and/or the alleged loss of the pledged goods. The burden to prove affirmatively if the plaintiff has acted negligently in taking reasonable care of the subject goods is upon the defendant No,1 who has failed to offer any material whatsoever to discharge the burden warranting presumption of negligence or to call upon the plaintiff to prove existence of the subject goods. Indeed, the defendant No,1 at this stage, is not expected to prove negligence through positive evidence.
18. Nevertheless, the defendant No,1 is atleast required to assert in unequivocal terms that the balance quantity of RBD Palm Oil is not available for delivery to it. In the minimum, the defendant No,1 could have asked for delivery orders and in the event of refusal, adverse presumption could possibly be urged against the plaintiff. The plaintiff, rather, has clearly come up with the assertion that it was not approached for release of the pledged goods. I am tempted at this stage to refer to a Division Bench judgment of the High Court of West Pakistan in the Federation of Pakistan v. Munshi Mohammad Ismail (PLD 1956 Lah. 222) wherein upon reference to the rule in the case of Dawarka Nath Pai, Mohan Chaudhury v. Rivers Steam Navigation Co. Limited (AIR 1917 PC 173) the following observation was made: ' "Therefore, in a suit against a railway company or administration the plaintiff has to prove that the defendant failed to take the care which, under section 151 of the Contract Act, it is the duty of a bailee to take. That section, be it noted, does not lay the onus on the bailee in a suit against him to prove that he took the care which it was his duty to take. It only defines the measure of his duty; and a plaintiff can succeed only by proving its absence. Therefore, it would be entirely erroneous on the part of a Court to cast any burden on the defendant by framing an issue whether he took due care or any care,"
19. ' Applying the above rule to the present case, I find that the necessary pleading from the defendants' side is missing. The contention of Mr. Mohsin Tayabally to the effect that evidence of negligence and want of due care by the plaintiff would be produced if evidence is allowed to be led, I am afraid, is not of any substance. It is axiomatic that evidence can be led only to support the pleadings. In the present case, as already observed, necessary pleading to assert failure on the part of the plaintiff to perform its duty of care is absent. In the circumstances, I find that the grant of leave for producing evidence of plaintiff's negligence, as above, shall amount to abuse of the process of Court hence cannot be allowed. The learned counsel for defendant No,1 has also taken me through a host of documents to show that the parties were at variance with regard to quantity of RBD Palm Oil delivered to the defendant No,l. Suffice to observe that the short delivery of RBD Palm Oil, if proved can entitle the defendant No,1 to decree for damages and proceedings for such relief have, admittedly, been initiated by the defendant No,1 through Suit No,1252 of 1997 which is pending before this Court. In view of such position I do not consider it appropriate to dilate upon the quantity of RBD Palm Oil received by the defendant No,1 or allegedly short delivered to it. It is pertinent to note that during arguments, Mr. Mohsin Tayabally made statement at bar that the defendant No,1 was willing to deposit the amount equivalent to value of the goods still held under pledge of the plaintiff. Such offer, I am constrained to observe, cannot oblige the plaintiff to issue delivery orders in respect thereof. The plaintiff has, therefore, lawfully exercised its option under section 176 of the Contract Act and has filed present proceedings for recovery of the entire debt retaining its lien over the pledged goods. The distinction between payment of entire debt and the money equivalent to value of the pledged goods has to be kept in view particularly for the reason that the market value of the pledged goods is far below the amount of debt. The defendant No,1, as pledgee, has the right to redeem the pledged goods upon payment of entire debt and not by merely offering payment of money equivalent to value of the pledged goods. As to right of adjustment of the value of pledged goods from the outstanding debts, in my view, claim can be preferred only if the pledged goods are sold by the plaintiff. I find support for my said view from the following observations contained in M/s Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Limited (PLD 1966 SC 684): ' Even assuming that some goods were pledged with the bank as security for the advance this does not, in our opinion, absolve the defendant from his liability to clear his dues. The banker only acquires a lien over such pledged goods for the recovery of his dues and has a right, after notice to the debtor, to sell those goods not reimburse himself. But it is only where such a sale is actually held that the debtor can claim an adjustment of the sale proceeds of the goods against the amount claimed by the bank. There is no evidence in the present case that any goods were, in fact, sold by the bank or that the bank still retains any goods as such security."
20. ' Reverting to the contention raised by Mr. S,A. Majid and Mr. A. Aziz Khan to the effect that the guarantee dated 21-8-1995 was nullified on account of unauthorised entry of the subsequent facilities in its opening part, I may state that the defendants Nos.6 and 7, alongwith others had executed personal guarantee dated 21-8-1995. According to the said defendants, the date of Financing Agreement which was required to be mentioned in the first line of the guarantee was left blank. However, the guarantee was given for repayment of dues payable by the defendant No,1 to the plaintiff within two days of demand to the extent of Rs,100 million. The plaintiff had unauthorisedly entered the dates of three Financing Agreements, subsequently executed with the defendant No,1, for preferring the claim which is subject-matter of present proceedings. It is contended on behalf of defendants Nos.6 and 7 that responsibility could not be undertaken for an unknown liability which did not exist at the time of execution of the guarantee itself. The Guarantee, it is pertinent to note, is not a negotiable instrument and is in the nature of bond. The blanks, if left therein, cannot vitiate the document. What is to be considered, in such circumstances, is if the dates unauthorisedly filled by the plaintiff are material to the terms of the deed. In the present case, even if the dates subsequently filed in the guarantee in question, are ignored altogether, the liability undertaken thereby cannot be avoided. At the time of execution of the guarantee, the defendants Nos.6 and 7 were, admittedly, the Directors of defendant No,1 having enjoyed such position from 14-3-1995 to 5-12-1996. What is important in the present case is that the personal guarantee was, admittedly, executed by the defendants Nos.6 and 7 who cannot evade their liability by resort to technicalities. The following passage from Goddard's Case 76 English Reports 396, decided in the year 1584 by the Kings Bench Division is quite interesting to be read: ' And when a deed is delivered, it takes effect by the delivery, and not from the day of the date. And, therefore, be the deed without date, or of a false or impossible date, yet the deed is good."
21. ' The underlying principle for the above said dictum is that the date is not material when execution is acknowledged. The ground urged on behalf of defendants Nos.6 and 7 also does not raise a bonafide and serious dispute requiring evidence.
22. ' In the circumstances, the two applications for grant of leave being C.M.A. No,7630 and C.M.A.
23. No,7777 both of 1997 are dismissed. As a result of dismissal of the applications filed by the defendants, the interest of plaintiff in the mortgaged properties and other assets of defendant No,1 is to be protected. The plaintiff has clearly expressed the apprehension that the defendants are attempting to dispose of the factory belonging to defendant No,1 with a view to defeat the decree as may be passed against them. In the circumstances, the ad- ( interim order passed on 13-10- 1997 is confirmed and the defendants restrained from alienating or encumbering the Property No,P/5, SITE Hyderabad and the fittings and fixtures thereon or attached thereto, during the pendency of the proceedings. The applications, C.M.As. Nos.6013 of 1997 and 7840 of 1997 are disposed of in the above terms. Let the, matter be put up for further ordes on a date in office.