1. ' The plaintiff's claim in this suit is based on agreement for establishment of irrevocable documentary credit for Japanese Yen 875.869 million, dated 26-6-1990 executed between the plaintiff and defendant No,1. The remaining defendants have been sued as guarantors.
2. ' The plaintiff claims to have established irrevocable letter of credit-cum-letter of guarantee favouring the foreign supplier namely Toyota Tsusho (Hong Kong) Company Ltd. For the agreed amount in Japanese yen. Out of the said amount of L.C.-cum-L.G., 15% was payable on sight whereas the remaining 85% was payable against 12 successive Bills of Exchange. The defendant No,1, in pursuance of the agreement, had accepted the Bills of Exchange and executed various securities documents including Demand Promissory Note, Deed of Floating Charge and Memorandum of Deposit of Tile Deeds besides personal guarantee executed by the remaining defendants. It may be noted that the balance amount of the L.C-cum-L.G. Was converted into Pak Rupees at the rate then prevailing which came to Rs,124.447 million. Although the application/agreement for establishment of irrevocable documentary credit contains provision for re-purchase of the documents by adding mark-up thereto, the rate of mark-up is left blank. The purchase price, however, is clearly mentioned in the various securities documents and more particularly in the letter of Hypothecation and the Deed of Floating Charge as Rs,149.400 million. It may be noted that the defendant No,1 had executed Memorandum of Deposit of Title Deeds, also with a view to create mortgage for securing re-payment of amount due under the agreement. The security documents, it may further be noted, were duly registered with the Corporate Law Authority.
3. It is the case of plaintiff that notwithstanding printed term No,8 contained in the agreement dated 26-6-1990, the defendants had undertaken to obtain forward foreign exchange booking for the amount of L.C-cum-L.G. To cover the risk of foreign exchange rate fluctuation for remittance of instalments according, to the dates of maturity of the Bills of Exchange. The defendant No,1 had separately executed undertaking to pay the Rupee equivalent of the 12 Bills on their respective dates of maturity. The defendant No,1 since failed to pay the bills of exchange, the plaintiff claims to have remitted the payments to the beneficiary of L.C.-cum-L.G. And created forced demand finance (N.I.D.F.). After payment of 7 bills, it chose to file the present proceedings on 18-9-1996. The plaintiff has claimed mark-up on the amount of forced N.I.D.F. At the rates contained in Schedule of Bank Charges issued by it besides Excise Duty of Rs,1,172,352 paid in relation to the first three (3) bills.
4. ' Mr. Kamal Azfar, appearing for the defendant No,1 has urged that the defendant No,1 is liable to the extent of the purchase price settled under the agreement, dated 26-6-1990 which continues to subsist and cannot be treated to have undergone novafion on account of the alleged undertakings subsequently signed by some directors of defendant No,1. According to the learned counsel, the term contained in the agreement, dated 26-6-1990, obliging the plaintiff-bank to fix the rate of exchange, having been acted upon could not be varied nor has actually been modified at any stage. It is urged that the three (3) undertakings to book the foreign exchange were not executed by the defendant No,1 who in turn cannot be burdened with the liability to take payment at an enhanced conversion rate. According to Mr Azfar the above-referred undertakings, in any case, do not bring about substitution of the agreement, dated 26-6-1990 or novation thereof. It is contended that novation takes place only when a new substantial term is introduced in a contract which has the effect of rescinding the previous contract or any material term thereof. The learned counsel in support of his submission has referred to the cases of The Central Bank of India, Ltd. v. Muhammad Islam Khan PLD 1962 SC 251, Messrs Jugotekstil Impex, 61001, Lubijana Yugosalavia v. Messrs Shams Textile Mills Ltd. 1990 M LD 857 and Mrs. Mussarat Shaukat Ali v. Mrs. Safia Khatoon 1994 SCM R 2189.
5. The principle about novation or substitution of contract is quite well-established and where only one of the parties to the contract alleges novation or alteration in the original contract but fails to establish the same, the parties to the contract are not absolved of the liability and obligation under only original contract. Substitution or novation of a contract takes place only by mutual consent of the parties. In the present case, however, the modification of condition No,8, contained in the agreement, dated 26-6-1990, is claimed to have been brought about through undertaking reflected from the three documents copies whereof are filed as Annexures "K", "L" and "M" with the plaint. The three documents are admittedly signed by defendant No,2 and/or defendant No,3 and the validity of such documents is questioned, in the reply statement of defendant No,1, for want of attestation in terms of Article 17 of Qanun-e-Shahadat. It is pertinent to note that execution of the three documents is not denied or disputed otherwise in the reply statement. Mr. Kamal Azfar, Advocate during his submissions, however, has contended that the undertaking filed as Annexure "K" with the plaint is not signed by defendant No,3 on behalf of defendant No, 1 . Such plea is negatived by the contents of the undertaking itself which starts with the words "We Messrs Golden Textile Mills (Pvt.) Ltd. Hereby undertake to pay the rupee equivalent of the following drafts at their respective maturity. These drafts accepted by us, " The defendant No,3 was admittedly a director of defendant No,1 and has signed the undertaking, as above. The failure to put rubber stamp of the company does not invalidate the document nor can dilute the effect thereof. The three undertakings, referred by the plaintiff, do create an obligation upon the defendant No,1 to obtain forward foreign exchange booking and to pay rupee equivalent of the Bills of Exchange on their respective dates of maturity., In case clause (8) of the agreement, dated 26-6-1990 postulates a term contrary to what is provided under the three documents filed as Annexures "K", "L" and "M", the effect thereof, evidently, is substitution of such term. The position is quite free from any ambiguity and does not present a serious and bona fide dispute for trial.
6. ' The defendant No,1 had availed the facility obliging the plaintiff-bank to make payment of the Bills of Exchange in terms of the L.C.-cum-L.G. Established under the agreement, dated 26-6-1990. As regards the liability for payment of mark-up, the learned counsel for defendant No,1 has referred to the views expressed by me in the case of United Bank Limited v. Central Cotton Mills Ltd. 1999 CLC 1374 which are as follows:-- "As regards the claim for mark-up on PADs for the period from 12-2-1987 to 25-7-1987, it is contended by the learned counsel for the defendants Nos.1 and 2 that there is no agreement between the parties for levy of mark-up and, therefore, the same cannot be charged. Mr. Muhammad Sadiq Khan has pointed out that the mark-up in relation to PADs has been charged on the basis of the Financing Agreements, dated 24-7-1986, which had substituted the earlier agreement, dated 4-9-1985. It- is further explained that the principal amount under the PADs was repaid by the defendant No,1 and the amount of mark-up is covered by the above-referred agreement, dated 24-7-1986 which relates to the facilities of FABP, Import L/C and Local L/C. It is, however, conceded that there is not specific agreement between the plaintiff and defendant No,1 for charging mark-up in relation to PADs. In view of such position, the plaintiff is not entitled to charge mark-up on the PADs and the claim is disallowed."
7. ' The learned counsel for the plaintiff, in reply, has referred to the Schedule of Bank charges notified by the bank on the basis of B.C.D. Circular No,31, dated 24-12-1980 issued by the State Bank of Pakistan and the judgment in Muslim Commercial Bank Ltd. v. M/s. Over Impex 1994 CLC 1. The judgment cited by Mr. Ijaz Ahmed is primarily based on the ground that the customer had not disputed the claim of the bank for mark-up and had rather requested for grant of time to make payment. In the present case, however, the plaintiff's claim for mark-up has been disputed. The plaintiff can claim mark-up only on the basis of mutual agreement which is lacking in the present case. The plaintiff could have instituted proceedings for recovery immediately upon maturity and discharge of the first Bill. The plaintiff cannot take premium out of its own in-action. The cited judgment in the case of Muslim Commercial Bank (supra) is distinguishable from the present case.
8. The observations, as above, do not entitle the defendants to grant of leave for the reason that the amount of mark-up claimed by the plaintiff can conveniently be segregated from the suit amount.
9. ' No other arguments having been urged on behalf of defendant No,1, the prayer for grant of leave is declined.
10. ' On behalf of the remaining defendants, it is contended by Mr. Thepdawal that the personal guarantees executed by them stipulate payment of a sum to the extent of Rs,124.447 million besides service charge and other sums due under the agreement, dated 26-6-1990. It is conceded by the learned counsel that upon addition of mark-up, the purchase price undertaken to be paid under the said agreement was determined at Rs,149.4 million. According to the learned counsel, the defendants Nos.2 to 8 as guarantors, cannot be burdened with liability in excess of the above- referred purchase price. The undertakings executed by the defendant No,1, according to Mr. Thepdawala, cannot create any personal liability against the guarantors being in variance of the terms contained in the agreement, dated .26-6-1990. The learned counsel for he plaintiff has urged that the defendants Nos.2 and/or 3 had signed the three undertakings and cannot claim ignorance of the enhanced liability undertaken thereby. Reliance is placed on section 128 of the Contract Act to contend that liability of a guarantor is coextensive with that of the principal debtor and the guarantors in the present case did authorise variation and renewal of the liability under clause (4) of the Letter of Guarantee. It may be noted that the provision contained in section 133 of the Contract Act gives discharge to the surety from any added liability subsequent to or caused as a result of change or alteration in the original terms settled between the parties. The consent, postulated by the provisions of section 133 of the Contract Act must be conscious and inferable from an overt act. The effect of a statutory provision cannot be whittled down by vague and general term as is contained in the Letter of Guarantee. The defendants Nos.2 to 8, therefore, cannot be burdened with any personal liability in excess of Rs,149.400 million as guarantors. The learned counsel for defendants Nos.2 to 7, too, has not pressed any other arguments in support of prayer for leave which is, accordingly, declined.
11. 'Taking up the pliantiff's claim for scrutiny on account of rejection of reply statements, it is found that the plaintiff had paid a sum of Rs,182,741,984 in relation to the 7 Bills of Exchange till filing of present suit. The plaintiff cannot claim any mark-up on the amount of bills which have rightly been converted into Pak currency on the respective dates of maturity. The subsequent payments made by the plaintiff in relation to the remaining Bills of Exchange cannot be taken into consideration in the present case since the amount of said Bills had not become due on the date of filing the present proceedings. The plaintiff, if it so chooses, may file separate proceedings for recovery of the amount as may have become due during the pendency of this case. Such factor becomes important, additionally, in view of section 15 of Act XV of 1997 which provides for award of mark-up on the decretal amount from the date of institution of suit. The plaintiff is further entitled to recovery of Excise Duty in the sum of Rs,1,172,352 paid in relation to the first three Bills. The plaintiff's suit, in the circumstances, is decreed against the defendants jointly as well as severally in the sum of Rs,183,915,336 with mark-up at the rate of 54 paisa per thousand per day from the date of institution of suit till payment. The plaintiff shall also be entitled to mortgage decree and decree for sale of hypothecated stocks to the above extent. The liability of defendants Nos.2 to 8, jointly as well as severally, shall, however, be confined to Rs,149.400 million. The plaintiff shall also be entitled to costs of the proceedings.