1. SHABBIR AHMED, J.---The appellants have impugned the order dated 19-4-2002 passed by the learned Single Judge in Suit No,804 of 1996, whereby leave to defend the Suit No,804 of 1996 filed by the respondent against the appellants, was granted to them subject to the security in the sum of US $ 510,000,00 with Nazir of this Court within a period of one month from the date of order.
2. The present appeal emanates in the following circumstances.
3. The respondent filed suit against Abdul Malik K. Lakha who died during the pendency of the suit and his legal heirs, the appellants were brought on record. The case of the respondent in short was that Abdul Malik K. Lakha acknowledged his liability and executed promissory notes detailed in para. 1 of the order. The amount under promissory note were payable at Karachi. The defendant failed to pay the amount in spite of legal notice. Hence the suit was filed.
4. On service of summons Abdul Malik K. Lakha (now deceased) filed application for leave to defend raising inter alia, following grounds:
(1) That the claim of the respondent is barred by time.
(2) That the promissory notes are sufficiently stamped.
(3) That the promissory notes were obtained under duress. The learned Single Judge after hearing the learned counsel for the parties, granted leave to defend the suit as stated hereinabove subject to the condition. Hence the present appeal. We have heard Mr. Arshad Tayabally, learned counsel for the appellants and Mr. Ali Mumtaz Shaikh, learned counsel for the Respondent. Learned counsel for the appellants has taken almost the same grounds in support of the appeal taken by them in leave to defend application. His first contention was that the claim of the respondent was barred by time. As such, the promissory notes cannot be enforced which were executed after the expiry of period of limitation and cannot be treated as acknowledgement of debt in terms of the section 19 of the Limitation Act. The contention of the learned counsel for the appellants is devoid of any substance. Section 25(3) of the Contract Act is complete reply to the submission made by the learned counsel. Section 25 thereof makes the agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law. An agreement made without consideration is void unless--- (1)
5. (2)_______________________
(3) It is promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. Such an agreement is a contract. Next contention of the learned counsel for the appellants was that the instruments sued upon have been executed outside Pakistan and are payable otherwise than on demand and that they should be properly stamped as promissory notes as defined in section 2(22) of the Stamp Act and cannot be admitted in evidence without being properly stamped under Article 49(b) of the Stamp Act.
6. On the other hand, learned counsel for the respondent submitted that the instruments were executed outside Pakistan and the promise himself has instituted the suit for recovery of the amount due under the instruments, there is no need for stamping the instruments in accordance with the Stamp Act in view of section 18 of the Stamp Act.
7. There is no dispute that the instruments sued upon were executed outside Pakistan and are un- stamped. Thee instruments are the foreign bills, under the terms of the instruments sued upon, the amounts were payable on or before the dates specified therein. This, according to the learned counsel for the appellants, would make the instrument, payable otherwise than on demand requiring stamping under Article 49(b) of the Stamp Act. In order to examine the contentions, reference to sections 13, 18 and 19 of the Stamp Act are necessary, which are contained in Chapter II, A and C thereof, these sections read as follows:-- "3. Subject to the previsions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefore respectively, that is to say--
(a) _______________________________
(b) every bill of exchange payable otherwise than on demand, or promissory note drawn or made out of Pakistan on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in Pakistan; and (c)__________________________________
18. (1) Every instrument chargeable with duty executed only out of Pakistan, and not being a bill of exchange or promissory note, may be stamped within three months after it has been first received in Pakistan.
(2) Where any such instrument cannot, with reference to the description of stamp prescribed therefore, be duly stamped by a private person, it may be taken within the said period of three months to the Collector, who shall stamp the same, in such manner as the State Government may by rule prescribe, with a stamp of such value as the person so taking such instrument may require and pay for.
19. The first holder in Pakistan of any bill of exchange payable otherwise than on demand, or promissory note drawn or made out of Pakistan shall, before he presents the same for acceptance or payment or endorses, transfers or otherwise negotiates the same in Pakistan, and affix thereto the proper stamp and cancel the same; Provided that,--
(a) If, at the time any such bill of exchange, or note comes into the hands of any holder thereof in Pakistan, the proper adhesive stamp is affixed thereto and cancelled in manner prescribed by section 12 and such holder has no reason to believe that such stamp was affixed or cancelled otherwise than by the person and at the time required by this Act, such stamp shall, so far as relates to such holder, be deemed to have been duly affixed and cancelled;
(b) nothing contained in this proviso shall relieve any person from any penalty incurred by him for omitting to affix or cancel a stamp." The perusal of the aforesaid provisions would show that every bill of exchange payable otherwise than on demand, or promissory note drawn or made out of Pakistan on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated in Pakistan shall be charged with duty of the amount indicated in the Schedule.
8. Therefore, the foreign bill is subject to duty before its acceptance, payment or presented for acceptance or payment or endorsed, transferred or otherwise negotiated in Pakistan. Likewise, section 18 refers the every instrument chargeable with duty executed out of Pakistan, to be stamped within three months of its receipt in Pakistan, excluding bill of exchange, promissory notes, payable on demand or otherwise. Likewise section 19 requires that the first holder in Pakistan of any bill of exchange payable otherwise than on demand or promissory note drawn or made out of Pakistan subject to the duty before the holder presents the bill for acceptance or payment or endorses, transfers or otherwise negotiates the same in Pakistan and affix thereto the proper stamp and cancel the same.
9. The reading of section 3 would show that a foreign bill requires stamp duty before it is accepted or presented for acceptance or payment or endorses, transfers or otherwise negotiates in Pakistan.
10. Whereas section 19 requires that the first holder in Pakistan of any bill of exchange payable otherwise than on demand, or promissory note (foreign bills) to be stamped by duty, before the same is presented for acceptance, payment or endorses, transfers or otherwise negotiates the same in Pakistan. Both are charging sections, in first event, the promisee before the promissory note is presented for acceptance, payment, endorses, transfers or otherwise negotiates and in later case by first holder in Pakistan. Similar question came for consideration before the Division Bench of Erstwhile Judicial Commissioner Court of Sindh in Ramsing alias Ramlal v. Parumal and another IX SLR 150. The facts of the case were that the plaintiff sued the defendants for recovery of the lent value to defendant in Russian territory alleging that at the time of transaction the defendant No,1 had given him a writing in his books to the following effect.
11. An account opened by Paman Khialdasani Makhija with Bhai Ramlal Bagsingani Makhija at Kashgar Khatai Territory in Sambat 1964.
12. Credit Debit 4000 Miti Akhtar sud Sambat 1964 Russian Gold Sumbhs agreed to be paid with interest at the rate of 0-8-0 as per cent at Shikarpur-- Handwriting of Paman Makhija.
13. The defendants pleaded inter alia that the Lekho was a promissory note and as such inadmissible in evidence. The District Judge held that the Lekho was a promissory note and as such inadmissible in evidence, and further, that the Plaintiffs had failed to prove the loan and dismissed the suit. The Division Bench ruled as follows:-- "I have come to the eonclusion that the entry in plaintiff's book is a pro note and that the suit is and must be based on it I do not think the lower Court was right in thinking that it was chargeable with duty and excluding it from evidence for want of stamp. The pro note was made out of India and duty is only chargeable under sections 3 and 19 only when the note is presented, paid or negotiated in British India. As none of these events have happened no duty is chargeable on the note and it is therefore not excluded by section 35. This was so decided in the similar case of Mahomed Rowthan v. Mahomed Husin Rothan (I); Mr. Dipchand appears to argue that it was the duty of the plaintiff to present the note for payment. But section 64 of the Negotiable Instruments Act makes presentment a necessary condition only when it is sought to make liable parties other than the maker. The maker is the principlal debtor and he is liable to the holder irrespective of presentment Ardeshir Sorabshah v. Khusaldas (2)."
14. Similar question came for consideration before the learned Single Judge of the Madras High Court in R. Kannusamy v. V.V.K. Samy & Co. Singapore and others AIR. 1988 Madras 336. The observations are as follows:-- It is not disputed that in this case the promisee himself had instituted the suit and that there is no endorsement, transfer or negotiation by the respondent and the occasion for affixing proper stamps and their cancellation did not arise and therefore, the objection regarding the inadmissibility of the promissory note in evidence was rightly overruled by the Court below."
15. In the instant case, there is no dispute that the instruments sued upon were executed outside Pakistan. Sections 3 and 19 would be attracted when it is presented for payment, endorsed or transferred or otherwise negotiated. The respondent has not endorsed, transferred or otherwise negotiated the promissory notes sued upon before presenting the instruments in Court, the obligation to affix stamp had not arisen. Therefore, this contention is also not tenable.
16. The last contention raised was that the appellants have shown a triable issue in their favour and the learned Judge erred in granting the conditional leave. His further submission was that the appellant is entitled for unconditional leave to defend in suit.
17. Learned counsel for the respondent vehemently contended that the execution of promissory notes were not denied. In such circumstances, the learned Judge has shown indulgence by granting leave otherwise it was not a case for grant of leave and rightly conditioned with security.
18. In the instant case, the signing of promissory notes in the circumstances narrated in the supporting affidavit is admitted but simultaneously it has been pleaded that the promissory notes were obtained under duress raises a triable issue indicating that it is fair, bona fide, and reasonable defence, in such circumstances, the respondent is not entitled to leave to sign the judgment and the appellant is entitled to unconditional leave to defend.
19. In Messrs Mechalee Engineers and Manufacturers v. Messrs Basis Equipment Corporation AIR 1977 Supreme Court 577, the principle for the grant of leave in cases covered by Order XXXVII, C.P.C.
20. Illustrated in Smt. Kiranmoyee bassi v. Dr. J. Chatterjee (1945) 49 Cal. WN 246 at page 253, authored by Das, J., was approved and the following principles were laid down for grant of leave to defend the suit:-- "(a) if the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.
(c) if the defendant discloses such facts as may be deemed sufficient to entitle' him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiffs claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition and thereby show mercy to the defendant by enabling him to try to prove a defence. Similar view was taken in Fine Textile Mills Ltd. v. Haji Umar PLD 1963 SC 163, the leave was granted with the observations that in a case of this nature where the defendant discloses upon his affidavit facts which may constitute a plausible defence or even show that there is some substantial question of fact or law which needs to be tried or investigated into, then he is entitled to leave to defend. What is more is that even if the defence set up be vague or unsatisfactory or there be a doubt as to its genuineness, leave should not be refused altogether but the defendant should be put on terms either to furnish security or to deposit the amount claimed in Court.
21. In the instant case, the plea of undue influence has been raised, which is triable issue, secondly, a suit already pending adjudication, filed by the appellants against the respondent covering tile same cause.
22. In these circumstances, we are of the view that the appellants are entitled for leave to defend the suit unconditionally. Their case is covered under clause 3 of judgment. Messrs Mechalee Engineers and Manufacturers (supra) where the defendant discloses such fact as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiffs claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time of mode of trial but not as to payment into Court or furnishing security. Therefore, the appeal is allowed and the appellants are allowed to defend the suit unconditionally. Since it is short cause, it is expected that the learned Single Judge will decide the case as expeditiously as possible and the parties are directed not to seek unnecessary adjournments.
23. With the above observations, the appeal stands disposed of.