' NAZIM HUSSAIN SIDDIQUI, J.---The petitioners have impugned the judgment, dated 14-2-2001 of a learned Division Bench, High Court of Sindh, whereby first appeal preferred against judgment and decree, dated 5-8-2000 of Banking Court No,1, Karachi, decreeing the suit for Rs,1,03,39,110 jointly and severally against the petitioners, was dismissed.
2. The facts relevant for decision of this petition are that in May, 2000, the respondent, Messrs Security Leasing Corporation Ltd, hereinafter referred to as "the Corporation", which is a Banking Company within the meaning of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act (XV of 1997), hereinafter referred to as "the Act of 1997", had filed the Suit No,270 of 2000 against the petitioners for recovery of Rs,10,339,110 before Banking Court No,1, Karachi. The petitioner No,1, Messrs Huffaz Seamlen Pipe Industries Ltd. Was sued as the debtor and the petitioners Nos.2 and 3 as guarantors.
1 It was averred in the plaint that the Corporation had provided finance to the petitioner No,1, under the Sale and Lease Back Agreement, dated 10-3-1998 in the sum of Rs,12 million. Under the terms of said Agreement, 200 tons Cold Draw Bench with accessories was imported for sale and with Buy Lease Price of Rs,17,212,320 payable in 48 instalments of Rs,3,58,590 per month. It was also averred in the plaint that on said date the lease amount of Rs,12 million was disbursed after deducting a sum of Rs,1,134,820 thus, making payment of Rs,10,865,180 to the petitioner No,
1. According to the Corporation the petitioner No,1 in order to secure repayment, had executed Demand Promissory Note, Revival Letter and Personal Guarantees of petitioners Nos.2 and 3. Out of the 48 post-dated cheques issued by the petitioner No,1, 19 cheques. Up to month of September, 1999 were encashed, while the cheques for the months of October, 1999 to April, 2000 were dishonoured. Thereafter, the suit was filed for recovery of said amount.
4. All the petitioners were served and they filed applications for leave to defend the suit. The application of petitioner No,3 for leave to defend was dismissed on the ground that no serious/bona fide issue was raised, while the other petitioners were declared ex parte and the suit was decreed.
5. It was contended before trial Court that though sanctioned amount was Rs,12 million, but the actual disbursement was of Rs,10,865,180, that first instalment included mark-up when mark-up was not due, that rate of mark-up was not given.
6. Having taking into consideration all the pleas raised on behalf of the parties, learned trial Court held as follows:-- ' "The defendants had not denied to have executed the Annexure 'A' This document says that cost of the Lease Machinery was 12 million repayable in 48 instalments at the rate of Rs,3,58,590 and which included the mark-up Rs,3,58,590 x 48 = Rs,1,72,22,320, which was the back purchase price and the defendant was bound to repay the same. Admittedly the defendants had only given 19 instalments and, therefore, had defaulted. The lease agreement signed by both parties is Annexure 'B' which has the schedule and reflects to terms of proposed Annexure "A". Therefore, now the defendants are estopped from objecting that the mark-up was high and that mark-up has been charged on the amount deducted before actual disbursement. The instalment was payable in advance as per Annexures 'A' & `B'."
7. Referring to Article IX of the Lease Agreement, learned trial Court observed as follows:- ' "Under Article IX of the Lease Agreement, if the defendant had defaulted in payment of any one instalment, the plaintiff was at liberty to claim the whole amount, therefore, the contention of learned Advocate for the defendant that plaintiff can only claim 7 instalments which were due at the time of filing of suit has no force."
8. Learned High Court agreeing with the findings recorded by trial Court dismissed the appeal.
9. Mr. Musthaq Ahmad Memon, learned Advocate Supreme Court for the petitioners contended that both trial Court and High Court have failed to appreciate the facts in their true perspective and reached wrong conclusion. He argued that learned Judges of Division Bench, while hearing the appeal were obliged under law to examine all the points raised before them before deciding the matter. It is also urged that various pleas raised on behalf of the petitioners were not adverted by High Court. According to him, the lease agreement was not valid, firstly for the reason that rental was charged before the Cold Draw Bench with accessories (leased assets) was delivered to the petitioner No,1; secondly, in built mark-up was charged from the date of sanction of finance on the entire amount to the date of final repayment. It is also urged that mark-up could not be charged on mark-up.
10. On the other hand learned counsel for the respondent supported the judgment of trial Court and of High Court on the basis of reasons recorded therein.
11. We have perused the record in the light of the contentions raised before us.
12. Although it is contended that both trial Court and High Court failed to appreciate the facts in their true perspective, it is, however, noted that before High .Court there was no grievance regarding non-reading or misreading of evidence. The record reveals that suit was not contested by the petitioners Nos.1 and 2 and only petitioner No,3 had filed an application for leave to defend alongwith an affidavit, but no serious issue was raised, as such, leave to appeal was declined. It is also evident from record that though the petitioners had applied for leave to defend, but the petitioners Nos.1 and 2 had not filed any affidavit and it was only the petitioner No,3, who had filed affidavit, therefore, only his application was considered and rightly so, for the purpose of granting leave to defend or otherwise. The petitioners Nos.1 and 2 had never been serious in contesting the proceedings before trial Court. It being so, they were non-suited. Only petitioner No,3 had contested the matter as a guarantor.
13. The execution of agreement in question is not denied nor it is disputed that the terms of the agreement were the same, which were suggested by the petitioner No,1 in its letter, dated 1-12-1997 and in pursuance thereof the agreement was executed. Thereafter, the amount' was disbursed to the petitioner No,1 on 10-3-1998. The schedule of the agreement clearly mentioned that amount as per terms of the agreement was to be paid back in 48 instalments and monthly instalment was of Rs,3,58,590, which was to be paid in advance. The petitioner No,1 committed default in discharging its liabilities.
14. It is noted that while disbursing the amount of Rs,1,08,65,180, the amount of Rs,11,34,820 was deducted being Rs,6,00,000, Rs,3,58,590, Rs,2,000, Rs,90,000 and Rs,84,230 total Rs,11,34,820, as security deposit/first monthly rental, documentation charges, processing fee and insurance premium respectively. It was the responsibility of the petitioner No,1 to have paid aforesaid amounts and since it was not in a position to pay the same, therefore, at its request, the aforesaid amounts were deducted from the sanctioned amount of Rs,12,000,000 (12 million). In fact, aforesaid amounts were paid by the Corporation on behalf of the petitioner No, 1.
15. Learned counsel for the petitioners criticized the agreement and questioned its validity on the ground that first monthly rental was charged before Cold Draw Bench with accessories was delivered to the petitioner No,
1. The agreement in question is a conscious "buyback" agreement, which was executed by the petitioner No,1 at its own terms and by doing so it had agreed to pay voluntarily "buyback" price mentioned earlier. The agreement in question is a valid and legal agreement. It is not based upon mark-up nor it tantamounts to Riba nor it could be termed as lending out agreement. It was accepted and acted upon by the petitioner No, 1.
16. There are two agreements in this matter. The first one was executed by petitioner No,1 as principal debtor and the second by petitioners Nos.2 and 3 as guarantors. Principal agreement between the petitioner No,1 and the Corporation (respondent No,1) and the guarantee agreements between the Corporation and the petitioners Nos.2 and 3 are separate agreements between the parties each containing its own terms and conditions to be performed by the concerned parties.
The terms of agreement between the principal debtor and the Corporation are to be looked into as were agreed upon between them. The petitioner No,3 has no right to seek modification or revocation of said agreement/contract.
17. As regards contract of guarantee, rights and liabilities of the parties are to be determined with reference to terms and conditions of the guarantees. The guarantors cannot take advantage of any condition incorporated in the principal agreement, unless the same is reflected in a contract of guarantee executed by the guarantors, as liabilities of the principal and of guarantors though arising from the same transaction, are distinct. In an action by a creditor against a guarantor the former is only required to establish the liability of the principal debtor and occurrence of default or breach of the terms leading to the liability. The guarantor cannot resort to technicalities to defeat the claim of the creditor. Even where the contract becomes unenforceable against the principal debtor, yet, the guarantor would still be liable for the surety he had executed, unless there was any covenant to the contrary.
18. In the instant case, the amount taken by the petitioner No,1 was not paid back to the Corporation in terms of the agreement. Out of 48 post-dated cheques, only 19 were encashed. Thus, the contract only in part was performed. The responsibility for performance of the contract was upon the petitioner No,1, which it failed to do so without any justification. The petitioner No,3, as a guarantor, is not entitled to plead the case of petitioner No,1 nor can deny the petitioner No, l's liabilities nor can challenge validity and propriety of the terms and conditions agreed upon between the petitioner No,1 and the Corporation, specially when the petitioner No,1 had not taken any interest to contest the matter and had partly performed the contract. He is a guarantor and is to confine to the terms and conditions of the guarantee, which he had executed.
19. An appeal under section 21 of the Act of 1997 against the order of Banking Court is to be preferred before High Court, which is to be heard by a Bench of not less than two Judges. This section also provides that no appeal, review or revision shall lie against any interlocutory order of the Banking Court. The object of the Legislature is to see that such disputes are resolved as early as possible. In the instant case, there are concurrent findings and. Article 185(3) of the Constitution could not be invoked for discretionary/equitable relief particularly when the petitioners have not come to the Court with clean hands. The petitioner No,1 had not contested the matter, probably for the reason that it had no ground to urge. The .Only object was to prolong the proceedings and to avoid the payment. It is significant to note that the petitioner No,1 had received the amount from the Corporation and also lease assets, yet, it is not paying the dues of the Corporation on the basis of misconceived pleas and technicalities, which is against law and equity as well.
20. In consequence, leave to appeal is refused and the petition is dismissed.