' Agricultural Development Bank of Pakistan (A.D.B.P.) by letter dated 16-11-1987 sanctioned a loan to Pak. Green Fertilizer Company Limited (Defendant) No,1) in the sum of Rs,58.180 Million in foreign currency on interest basis and Rs,13.300 Million in local currency on Markup basis totaling Rs,71.480 Million for their project at Nooriabad District. To secure repayment of the loan A.D.B.P. Obtained, inter alia, a Promissory Note and Hypothecation Deed from Defendant No,1 and Letters of Guarantee from the first Directors of the Company (defendants Nos.2 to 8). Defendant No,1 committed default in payment of the loan and consequently on 21-11-1996 A.D.B.P. Filed the present suit for recovery of Rs,155,228,748,00 against defendant No,1 and its Directors and Guarantors (defendants Nos.2 to 8) in respect of the foreign currency loan while a separate suit has been filed for recovery of the loan given on markup basis. The defendants filed applications for unconditional leave to defend. On 28-11-1998 the application of defendant No,1 was rejected and the suit was decreed against it as prayed while the application of defendants Nos.2 to 8 for unconditional leave to defend was granted. Defendants Nos.2 to 8 filed their written statement taking various defenses.
On the basis of the pleadings, the Court framed the following issues:--
(1) Whether defendant Nos.2 to 8 are liable under the guarantee dated 16-12-1987 for the dues of defendant No,1?
(2) What should the decree be?
2. Plaintiff examined one witness who produced several documents in support of the claim. The witness was cross-examined by Mr. A.H. Mirza Advocate for the defendants. No witness was examined by the defendants.
' I have heard the arguments of learned counsel of both parties, gone through the relevant documents, considered the matter and my findings are as follows.
3. Issue No,1: On 9-9-1987, defendant No,1 applied to the plaintiff for financial assistance for setting up an Organic Fertilizer Manufacturing Unit at Nooriabad Industrial Site, District Dadu which was approved by the plaintiff by its sanction letter, dated 16-11-1987 and accepted by defendant No,1 by letter dated 21-11-1987. Under one of the provisions of the sanction letter, defendant No,1 was required to provide its existing and future assets as security for repayment of the dues of the Bank which included, among others, the following Assets: ' Sucurity A. Existing Assets
(i) Project land measuring 10 Acres located in Industrial Estate, Nooribad, District Dadu. You will submit the following title documents of project land duly transferred in the name of the company to the satisfaction of the Manager, A.D.B.P., Main Branch, Karachi.
(a) Lease Deed
(b) Permission to mortgage lease hold rights with A.D.B.P from Industrial Estate, Nooriabad.
' Clause 12 of the section letter stipulated that defendant No,1 shall abide by the Bank's terms and conditions for the grant of loans subject to variations which may be made from time to time pursuant to the A.D.B. Ordinance, 1961, the rules and regulations and administrative orders or instructions of the Chairman of the Bank. To secure repayment of the loan, defendant No,1 executed, inter alia, a promissory note signed by defendant Nos.2 and 3, Agreement. Of Hypothecation and Memorandum of Deposit of Title Deeds signed by defendant No,3 on behalf of the company, defendant Nos.2 to 8 who were Directors of defendant No,1 executed personal Letters of guarantee in favour of the plaintiff. It transpires that by letter dated 8-11-1988 defendant No,1 sought permission of the plaintiff to change the project site from Nooriabad to Hub Industrial Estate, inter alia, on account of the law and order situation and lack of basic infrastructure for development and running the project at Nooriabad. After consideration by the competent authority permission was granted and the project was accordingly established by defendant No,1 at Hub.
4. The defence taken by the defendants Nos.2 to 8 is that they are not liable under the guarantee because the terms of the loan agreement between the A.D.B.P. And defendant No,1 were varied without the consent of the guarantors in as much as the project site was shifted from Nooriabad to Lasbella Industrial Estate Development in Hub Baluchistan without the consent of the guarantors and such variation discharged the guarantors from their obligations under the guarantee as stipulated by section 133 of the Contract Act, 1872. The said section reads as follows:--
133. Any variance, made without the surety's consent, in the terms of contract between the principal debtor, the creditor, discharges the surety as to transaction subsequent to the variance.
' It has, therefore, to be seen whether the terms of the contract evidenced by the Sanction Letter dated 16-11-1987 have been varied without the consent of the guarantors. To do so , it would be pertinent to reproduce here the relevant provisions of one of the seven personal guarantees executed by the defendants which create the obligation. They read as follows: ' To ' A.D.B.P. Karachi ' Dear Sir: ' At the request of Messrs Pak Green Fertilizer Ltd, Karachi and in consideration of your having issued to the above said party your sanction letter bearing No,PLD-2(725)/87/3385, dated 16-11-1987 for a loan of Rs,71.480 Million (Rupees seventy-one Million four hundred eighty thousand only) to be utilized by the said party for the purpose of Organic Fertilizer, Processing Industry as stated therein, I, Mrs. Fauzia Bibi, Director, Messrs Pak. Green Fertilizer Ltd. Daughter of Asrar Hussain resident of Hamid Pur, Shujabad Road, Multan, hereby guarantee payment on demand by you of all the above mentioned sum of Rs,71.480 (Rupees seventy one million four hundred eighty thousand only) alongwith all other sums due on account of profit, dividend or other return, costs, charges and expenses due to the A.D.B.P., in accordance with the terms and conditions of the sanction letter or any existing and further terms and conditions, rules or administrative instructions and orders of the Chairman of the Bank issued from time to time.
' I also agree:
(i) that the said. Loan is subject to any variation in the terms and conditions mentioned in the sanction letter which may be made from time to time pursuant to the provisions of the Agricultural Development Bank Ordiance, 1961 the rules and regulations thereunder and the administrative orders or instructions of the chairman of the Bank.
(2) That this guarantee shall be irrevocable and shall be a continuing binding upon me till full payment has been made to you of all sums hereby guaranteed. (underlining added)
' From the reading of the above guarantee it is clear that the guarantor after referring to the sanction letter in the first part of the guarantee agreed that he would pay the amount specified in the guarantee in accordance with the terms and conditions of the sanction letter or any further terms and conditions, rules, or administrative instructions or orders of the Chairman of the Bank issued from time to time . The guarantor in the second part of the letter of guarantee again affirmed that I agree that the said loan is subject to any variation in the terms and conditions in the sanction letter which may be made from time to time pursuant to the provisions of A.D.B.P.
Ordinance, 1961, the rules and regulations thereunder and the administrative orders or instructions of the Chairman of the Bank defendant No,1 would have established the factory at Nooriabad.
However, due to the law and order situation prevailing in the said area, by letter, dated 18-11-1988 signed by their Director Khalid Hussain Chaudhry (defendant No,3 who is one of the guarantors), it requested the plaintiff for change of site from Nooriabad to Lasbella Industrial Estate Development Authority, Hub at Balochistan. The request was apparently made after the Board of Directors which consisted of defendant Nos.2 to 8 had passed a resolution to this effect. The competent authority considered the request and in accordance with their rules and regulations and the terms of the sanction advice accepted the same as it was in the interest of all parties including the guarantors who were shareholders and directors of defendant. No,1 that the project be set up at a place where it may function smoothly without any impediment or hindrance. It is common knowledge that in all new enterprises and projects which are undertaken changes are made during the implementation of the plans to meet the exigencies arising from time to time which naturally require changes in the terms and conditions of loan agreements with the lenders. Therefore, in all such agreements parties normally include a stipulation allowing them to change the terms and conditions of the loan at any time. If this is not done, the completion of the project is hampered, delayed and jeopardized. The sanction letter in the present case, therefore, expressly stated that the terms and conditions of the loan could be varid. Consequently, the personal guarantee while referring to the sanction letter explicitly expressed the consent, agreement and assurance of the guarantor without any reservation that the terms and conditions of the loan could be varied and that he would be bound by the same. It is obvious that the guarantor while giving his consent to variation in the guarantee had knowledge of the various kinds of changes that could be made in the agreement and their ramifications. When the intention of the guarantor is manifest from the document there is no reason why it should not be enforced. There is no cavil about the principle of law laid down in Seth Pratap Singh Moholalbahi v. Keshavlal Harilal AIR A 1935 PC 21. Cited by Mr. Mirza that a surety, cannot be held bound to I something for which he had not contracted unless he had assented to the new terms. In the present case defendant Nos.2 to 8, who, are admittedly businessm en, had expressly undertaken the obligations and given their advance consent in clear terms that they would be bound by any variation in the terms of the loan. Having unequivocally expressed their consent to variation with full knowledge of its implications and given their assurance that they would be bound by the same, they cannot now contend that the variation was without their consent and consequently they are discharged from the obligations. Section 133 of the Contract Act is not applicable to the facts and circumstances of this case as the variation in the contract was made with the clear consent of the guarantors which was given in the letter of guarantee as discussed above.
5. It may further be noted that in the seven independent letters of guarantee executed individually by defendant Nos.2 to 8 and addressed to the plaintiff all of them further agreed in clause 4 that:-- "Notwithstanding that as between me and the said Messrs Pak. Green Fertilizer Ltd., Karachi, I stand surety for the company yet as between me and you I shall be treated as principal debtor for the sum of Rs,71.480 Million (Rupees seventy-one million four hundred eighty thousand only) with return etc. Being given to the said Messrs Pak. Green Fertilizer Ltd., until the entire amount of principal alongwith return etc. Is repaid to you."
' By addition of the aforesaid clause. Defendant Nos.2 to 8 further assured the plaintiff that as between the Bank and the executants/guarantors, the executants shall be individually treated as principal debtors for the sum of Rs,71.480 Million with return etc. Which sum was being given by the plaintiff to defendant No,
1. Until the entire amount of the principal along with the return etc., was repaid to the plaintiff. Here also the guarantors unequivocally assured the plaintiff the payment of its dues. There is no ambiguity in the assurance. The undertaking in plain and simple words states that the executants shall be treated as principal debtors until the entire loan is repaid.
Notwithstanding the other provisions of the guarantee, clause 4 of the document independently of the other clauses of the guarantee binds the executants to pay back the loan and empowers the bank to recover the loan from them. The intention of the executants and the promise made by them is again very clear from its wordings and they are bound to fulfil their promise given to the plaintiff.
6. No other point was urged by Mr. Mirza. Learned councel for the defendants.
7. The case of Ananda Mohan v. Ananda Chandra AIR 1917 Cal. 811 cited by Mr Nomani, learned Counsel for ADBP in support of his arguments relates to correction of the contract by inserting the word per cent. After the rate of interest, which was missing in the document, to carry out the intention of the parties. It cannot be applied to the circumstances of this case.
8. In view of above discussion, I hold that defendants Nos.2 to 8 are severally liable under the guarantees dated 16-12-1987 for payment of the dues of defendant No,1 to the extent of the amount stated therein. The Issue is decided accordingly.
9. Issue No,2. The present Suit has been filed, inter alia, for recovery of Rs,155,228,748 with interest at the rate of 11 per cent. Per annum and further 3 per cent. As foreign exchange risk cover in respect of foreign exchange of US $ 3.295. Million which was provided by the plaintiff to defendant No,1 for purchase of plant and machinery. On 28-1-1998 the Court decreed the plaintiffs claim against defendant No,1 in the sum of Rs,155,228,748 together with interest at the rate of 18 per cent. Per annum. In their evidence the plaintiff neither produced any document nor any proof with regard to the claim of compensation for delay in payment. It may be mentioned that from the time of disbursement of the loan in 1987-88 till the filing of the suit, the Pakistani Rupee depreciated vis-a- vis the US Dollar. Such contingency was not taken into account in the sanction latter. No law has been shown to compensate the plaintiff for the loss it has suffered on this account and therefore no relief on its score can be granted. The Statement of account filed by the plaintiff shows that a sum of Rs,148,235,292.00 which includes profit, return, costs and chargtes etc, was due from defendant No,1 to the plaintiff upto 31-10-1996 while the suit was filed for recovery of Rs,155,228,748.00 by adding anticipated interest of Rs,6,993,456.00. In view of the established law relating to recovery of loan and interest, the claim of anticipated interest is not bona fide and cannot be allowed. Defendant Nos.2 to 8 guaranteed payment of the principal alongwith all other sums due on account of profit, dividend or other return, costs, charges and expenses due to A.D.B.P.
The argument of defendants counsel that the guarantee does not contemplate payment of interest but of profit and return only is misconceived. According to Black Law Dictionary, 6th Edition, page 1318 the word "return" means profit on sale of income from investment". The interest payable to the plaintiff is nothing but return on its investment which was given in the form of loan by the bank to defendant No,
1. The plaintiff is, therefore, entitled to recover from the defendants the principal loan together with all profit, return, costs and charges etc. Accordingly, the suit is decreed against defendant Nos.2 to 8 jointly and severally in the sum of Rs,148, 235,292 only together with interest at the rate of 18% per annum from the date of the suit till the date of payment. The plaintiff shall also be entitled to proportionate costs.