1. ' The application placed at Serial No,1 is moved on behalf of the defendants Nos.1 to 10, 12 and 13 seeking leave to defend the suit. The remaining two applications are filed on behalf of defendant No,11. C.M.A. No,4694 of 1998 is filed for striking off the defendant No,11 whereas C.M.A. No,4695 of 1998 is filed for grant of leave. Mr. Tasawar Ali Hashmi, appearing for defendants Nos.1 to 10, 12 and 13, has pointed out that the defendant No,1 had availed facilities under the Import Letter of Credit limit of Rs,100 million. The defendant No,1 had availed such facilities since the year 1991 and the limit which earlier was Rs,56.7 million, had subsequently been enhanced to Rs,100 million through Sanction Advice, dated 5th January, 1994 and further renewed on 2-2-1995. According to Mr. Hashmi, the facility, availed under various Letters of Credit, had fully been discharged except that had remained outstanding under three import Licences Nos. 405, 413 and 422 which were established on 8-8-1995, 9-9=1995 and 17-10-1995 respectively. The learned counsel representing the majority of the defendants accepts the principal amounts of dues in the sum of Rs,24,903,000 in respect or the three Letters of Credit mentioned in para.9 of the plaint as outstanding and payable but disputes the liability of defendants to pay mark-up amounting to Rs,17,269,408 and the commission amounting to Rs,196,626. It is contended by Mr. Hashmi that mark-up could not be charged by the plaintiff over the amount of dues for want of any agreement' between the parties. It is further pointed out that the two Sanction Advices, dated 5-1-1994 and 2-2-1995 do not refer to markup and the plaintiff can claim the agreed amount of commission, alone. As regards commission, the learned counsel points out by reference to the corresponding memos. That the amount of commission was included in the principal amount and could not be charged, again.
2. ' Mr. Haider Raza Naqvi, appearing for the plaintiff, submits that the parties had specifically agreed for payment of mark-up at the rate of 22% by virtue of Condition No,2 printed on reverse of the Application and Agreement for Establishment of Letters of Credit. The condition referred by Mr. Haider Raza Naqvi is as follows: "We shall be defined to have simultaneously bought back from you the said documents at the aforesaid price less the amount of margin, if any, deposited by me/us with you plus a mark-up on the net amount at the rate of Rs,22 for every Rs,100 or part thereof of the sale price (the total being referred to hereinafter as the buy back price) payable on demand or if this credit calls for usance
(sic) drafts the rate of mark up would be Rs,22 for every Rs, 100 or part thereof and the 'marked-up' amount will be payable on demand. No further act on our part will be necessary to complete abovementioned sale and buy back transactions.
3. ' The actual amount of sale and buy back price shall be such as may be advised to me/us by the Bank."
4. ' It is further the case of plaintiff that the amount of commission mentioned in the Application Form for Establishment of Licence had separately been agreed between the parties which finds mention in the table appearing at last page of such applications. Having considered the documents and the contentions of the learned counsel, I find that the plaintiff-Bank had continued to extend the facility of import Letters of Credit even beyond the period mentioned in the last renewal, dated 2-2- 1995. The facility had been granted on 90/180, D.A. Basis. The last mentioned Sanction Advice did not refer to chargeability of any mark-up on the amount of facilities for the obvious reason that payment of commission had been agreed between the parties. The last mentioned extension granted on 2-2-1995 had expired on 30th June of the same year but the parties continued to act thereunder even after expiry of the validity period. The plaintiff-Bank having charged commission for establishment of import licence could not levy any further charge by way of mark-up on the amount of the Bills of Exchange. The Sanction Advice, evidently, did not contain any term for charging mark-up. The reliance placed by the learned counsel for the plaintiff on the conditions printed on the reverse of the Application Form for Establishment of Letters of Credit, is not justified for the reason that the plank has charged substantial amount of commission on the L.C. Value. The plaintiff-Bank, firstly, we in a position of advantage and could not take; undue gain therefrom.
5. Secondly, the two charges, the mark-up and the commission, could not be levied simultaneously.
6. Under the Islamic System of Banking, a lender has to act reasonably and cannot take advantage of its position. For such reason, despite the above-referred condition contained in the Application for Establishment of Letters of Credit, I am not inclined to allow the plaintiff's claim for mark-up. The amount of mark-up claimed by the plaintiff is, however, identifiable and is separately calculated.
7. With the result that it can, conveniently, be segregated without taking the matter to evidence. The defendants, therefore, are not entitled to grant of leave on this ground.
8. ' As regards commission claimed by the plaintiff, the record shows that commission agreed between the parties had been charged by the plaintiff and was included in the principal amount shown in the statement of account. Having charged the commission, as above, no further commission can be claimed by the plaintiff. The plaintiff, therefore, is not entitled to claim any additional amount by way of commission. The defendants, however, are not entitled to grant of leave since no serious question requiring evidence arise thereby.
9. ' Mr. Tasawar Ali Hashmi has next urged that the various documents mentioned by the plaintiff to have been executed by way of security for repayment of facilities granted under the three Letters of Credit, in question, had been executed in relation to different transaction and the said Letters of Credit had not been established during the validity period of the two Sanction Advices, dated 5th January, 1994 and 2-2-1995 mentioned in the plaint. According to the contents of plaint, the seven documents referred in para.3 thereof were executed to secure repayment of the financing facility under the Letters of Credit mentioned in the statement of account (Annexure C-11) to the plaint. The two Sanction Advices, referred in the plaint, have been placed on record. The first Sanction Advice, dated 5th January, 1994 shows the validity date as 30th June, 1994 whereas the second Sanction Advice, dated 2-2-1995 shows the validity date as 30th June, 1995. The three Letters of Credit in question were established after the above-referred expiry date mentioned in the Sanction Advice, dated 2-2-1995. The defendant No,1, as already observed, had continued to avail finance under the agreed facility even beyond the validity period mentioned in the Sanction Advices and from the conduct of the parties it appears that execution of formal deed of renewal was never considered material. The defendant No,1 has, itself, relied on the terms of the Sanction Advice for evading the liability to pay mark-up. A customer cannot be allowed to approbate and reprobate by relying on one document in respect of a particular transaction and dispute its effectiveness in relation to the other aspects. The question of validity of the Sanction Advice beyond 2nd February, 1995, therefore, cannot be allowed to be agitated by the defendant Nb.1. The facility under the Letters of Credit in question was availed under the Sanction Advice, dated 2nd February, 1995 and the terms contained therein would regulate the liabilities incurred by the two parties. The matter, however, does not end there. Some of the security documents relied upon by the plaintiff-Bank appear to have been executed even prior to the Sanction Advice, dated 5th January, 1994. Such documents include the memorandum of Deposit of Title Deeds, dated 23-4-1991, Letter of Hypothecation, dated 23-4-1991, and Certificate of Registration of Mortgage Deed, dated 8-5-1991. Mr. Tasawar Ali Hashmi has urged that the mortgages executed prior to the Sanction Advice, dated 5th January, 1994 and 2nd February, 1995 cannot be treated valid and unenforceable for the purpose of recovery of dues out standing thereunder. Mr. Naqvi has submitted, in reply, that the defendants had executed mortgage deed and submitted title documents pertaining to the properties by way of security for repayment of the amount remaining unpaid in respect of the facility of Import Letters of Credit.
10. According to the learned counsel, the very fact that the title documents had continued to remain in the custody of plaintiff-Bank, clearly reflects the intention of the parties for continuation of the mortgages. The learned counsel has further referred to the terms of the two Sanction Advices wherein reference is specifically made to the equitable mortgage of the four properties. Mr. Hashmi has, however, referred to the case of M. Subramanian and another v. MLR M. Lutchman and others (AIR 1923 Privy Council 50) wherein it is held that although deposit of title documents raises presumption in favour of equitable mortgage as security for repayment of the amounts payable by the mortgagor to the mortgagee, in the event of written documents, its contents would prevail over the presumptive terms. It is an admitted position on record that the defendants or any of them had not executed any supplementary deed of mortgage nor had notified renewal of mortgage after the Sanction Advice, dated 2nd February, 1995. However, the fact remains that the documents of title pertaining to three out of four properties have all along remained in possession of the plaintiff. In respect of the fourth property, the defendant No,14 is a pari pasu charge holder and is in possession of the title documents. I have already observed that the parties through their conduct had continued the facilities granted under the Sanction Advice, dated 5th January, 1994 and 2nd February, 1995. The reference to the mortgaged properties in the Sanction Advice and the retention of title documents by the plaintiff-Bank supports the stand taken by the plaintiff that equitable mortgage of the properties was intended to be /continued as security for repayment of the outstanding liabilities. The last mentioned .Contention of Mr. Tasawar Ali Hashmi abort validity of mortgage is, therefore, repelled, ' It is next contended by Mr. Hashmi that the personal guarantees signed on 27-11-1994 by his clients were executed prior to the Sanction Advice; dated 2-2-1995 and, therefore, the same stood discharged. The learned counsel has referred to the Sanction Advice, dated 2-2-1995 whereby the earlier Sanction Advice, dated 5th January, 1994 was specifically cancelled. According to the learned counsel, the guarantees were given in the context of facilities granted under Sanction Advice, dated 7-1-1994 and even if the facility is taken to have been renewed through Sanction Advice, dated 2-2-1995, the guarantors cannot be held liable unless their assent is shown to have been obtained. The law with regard to discharge of surety is contained in section 133 of the Contract Act which postulates discharge of surety in event of any variance in the terms of contract between the principal debtor and the guarantor made without the surety's consent. Such consent need riot necessarily be given at the time of variance 'or after the variance. A surety can, evidently, waive his right conferred by section 133 of the Contract Act by agreeing to remain liable notwithstanding any variance in the terms of contract. In the present case, clauses (2), (3) and (13) contained in the guarantees in question are relevant: "2 This guarantee shall continue to remain binding on me/us until receipt by you of written notice of discontinuance thereof and notwithstanding such notice I/We shall continue to remain liable to you for all sums due and owing to you by the Customer whether certain or contingent at the time of receipt by you of such notice and also for any credits established for the Customer and or all instruments drawn on you or accepted by you, for the benefit of the Customer and purporting to be on a date on or before the date of receipt of such notice, even though actually paid or honoured after that date."
11. "3 This guarantee shall not be discharged or prejudiced by any partial payments or settlement of account of existence of a credit balance of the Customer at any time or by discharge of the Customer by operation of law for any other reason."
12. "13. In the event of this guarantee ceasing from any cause to be binding as a continuing guarantee on me/us, you may open a fresh account or continue any existing account with the Customer and no moneys paid into any such account by or on behalf of the Customer and subsequently withdrawn shall affect or diminish my/our liability under this guarantee."
13. ' The guarantee in the first place was not given with reference to a particular facility and the opening portion refers to sanction of Rs,100 million limit in favour of the defendant No,1 It is not the defendants' case that the guarantee was given without consideration. The contention of Mr. Hashmi is that the guarantee was not given pursuant to the Sanction Advice, dated 2-2-1995. The admitted position that the personal guarantees were executed by the defendants and at the relevant time the defendant No,1 was authorised to avail the L.C. Limit up to the guarantee amount, shows that the subsequent Sanction Advice was in the nature of renewal of extension of the earlier facility for repayment whereof guarantees had been given and consent was also expressed for continued liability notwithstanding settlement of account or discharge of the principal debtor and opening of fresh account or its continuance. The guarantors, therefore, cannot avail benefit of section 133 of the. Contract Act and would continue to be liable for the facilities availed under Sanction Advice, dated 2-2-1995. Mr. Tasawar Ali Hashmi, in relation to the personal guarantees, has further referred to the fact that the defendant No,9 was not a Direct on 27th November, 1994 and had resigned from such position on 6-8-1992. With reference to the Sanction Advice, it is contended that the defendant No,1 had agreed to provide personal guarantees of its Directors, alone. The defendant No,9, therefore, was not obliged to furnish guarantee at a time when he was not a Director. Mr. Hashmi has urged that the defendant No,9 had not executed any personal guarantee on 27-11-1994 but her signatures on blank document had, unauthorisedly, been utilised.
14. Although the law does not forbid a stranger to execute personal guarantee for repayment of any debt outstanding against third person, the consideration as had prompted the defendant No,9 to execute guarantee for repayment of debts outstanding against defendant No,1 at a time when she was not a Director have to be established through evidence. Similar is the contention raised by Mr. Amanullah on behalf of defendant No,11. Mr. Jumani's further contention is that the guarantee executed by his client is blank with regard to the amount for which it was allegedly given. Mr. Haider Raza Naqvi, at this stage, does not press the claim against defendants. Nos.9 and 11 on the basis of guarantees executed by them. Such issue, therefore, need not detain me any further.
15. ' In the circumstances., the application placed at serial No,1 is dismissed. The two applications filed on behalf of defendant No,11, have become infructuous in view of the statement made by Mr. Haider Raza Naqvi and are disposed of accordingly.
16. I have taken up the examination of the plaintiff's claim and find that claim has been made for a sum of Rs,24,903,000 being the principal amount outstanding under the facility of import Letters of Credit. Such amount includes the commission and the other expenses which could, lawfully, be claimed by the plaintiff. I have already made observations disallowing the grant of mark-up and further commission claimed by the plaintiff. In the circumstances, the plaintiff's suit is decreed against the defendants Nos.1 to 8, 10 and 12 to 13 jointly as well as severally in the sum of Rs,24,903,000 with mark-up at the rate of 16% per annum from the date of institution of suit till payment. The plaintiff's suit is also decreed for sale of the mortgaged properties in accordance with Order XXXIV, C.P.C. The plaintiff shall also be entitled to proportionate costs.