1. MUSHIR ALAM, J.---Through this common judgment, we propose to decide Ist Appeal No,10 of 2001 (Mst. Talat Nasreen v. United Bank Ltd. And others) and I.A. No, 19 of 2001 (United Bank Ltd. And others v. Mst. Talat Nasreen).
2. Brief facts leading to the present appeals are that the appellant Mst. Talat Nasreen claims that out of her saving, pensionery and other benefit that had come in her hand after the demise of her husband she purchased 32 Defence Saving Certificates of different denomination worth Rs,3,00,000 on various dates since 1990 to 1993. It was her case that at the behest of one Javed Asghar she pledged said certificates as a security for the finance availed by respondents Nos,2(a) to 3(b) from U.B.L., the respondent No,
1. Consequently, under agreement dated 16-5-1994 she handed over said certificates to the respondent No,2(b) to be pledged, against a loan of Rs,3,00,000. As consideration she was entitled to Rs,1,500 per month. It was the case of the appellant that the security was limited for one time loan and the certificates were not offered as a continuing security for any subsequent finance. According to the appellant subject loan was satisfied as repayment was made on 19-10- 1994. It is the case of the plaintiff that U.B.L., the respondent/ defendant No,1 without due consideration and against the banking law and practice encashed the subject pledged certificates on 17-9-1996 and 15-12-1996 before date of maturity causing loss to the appellant/plaintiff.
3. Under this factual backdrop appellant/plaintiff prayed for the following relief:-
(a) to declare that the plaintiff's 32 DSCs (as described in Annexure 'Ahereto) are liable to be returned to the plaintiff free of any charge, encumbrance or obligation and that all the DSCs be returned to the plaintiff by the defendants, jointly and severally, with interest as stated herein;
(c) in the event the said DSCs have been encashed, to pass a decree against the defendants, jointly and severally, in the sum of Rs,28,00,000 (twenty-eight lacs) as under:- the maturity value of 32 DSCsRs.13.00 lacs general damages Rs.10.00 lacs special damages Rs. 5.00 lacs Total decretal amount Rs.28.00 lacs with interest thereon from 16-5-1994 until payment, at the rate of 20% p.a. With quarterly rest; to further direct all these persons including the defendants and bank officers of defendant No,1 directly connected with fraudulent ulterior, mala fide and malicious act causing distress, anxiety, lack of security to the widow to be dealt in accordance with the law;
(d) to award and also allow special/exemplary costs to the plaintiff; and
(e) any other relief which this Hon'ble Court may deem appropriate under the circumstances of her case.
4. Defendant/respondent NO,1 (UBL) was allowed leave to defend. In written statement respondent No,1 denied the allegations made in the plaint. It was stated that appellant/plaintiff herself had placed the certificates as a continuing security to secure the finance facility availed by the borrower i,e, defendant/respondent No,3(b). It was further pleaded that on failure of the borrower to discharge the liability, pledged certificates were encashed on 27-1-1997, proceeds whereof, amounting to Rs,5,16,213 were adjusted on 11-3-1993 towards principal liability and mark-up.
5. According to the defendant/respondent No,1, Suit No, 82 of 1990 for recovery of the balance due against the principal borrower i,e, respondents/defendants Nos,3(a) and 3(b) was filed and same was decreed. Out of the pleading of the parties following issues were framed;
(1) Whether the said 32 DSCs are continuing securities in the matter?
(2) Whether the plaintiff has no cause of action against the defendant No,1?
(3) Whether the said 32 DSCs were handed over by the plaintiff to the defendant No,1 or delivered in the manner and as was mentioned in the plaint, if so what is the effect?
(4) Whether the securities (32 DSCs) were given in the account of defendants Nos,2(a)/3(a) and whether, this was disclosed by the defendants Nos,2(a)/3(a) if not what is the position?
(5) Whether any notice as alleged or otherwise was given by the defendant No,1 for encashment of the securities and if so was the notice at all competent or valid or at all sent to the plaintiff?
(6) Whether the defendant No,1 was right in charging the said 32 DSCs with other FAPE or other Banking Loans?
(7) Whether the plaintiff, received Rs,5,16,213 as alleged or any other amount/sum, and interest debited is liable to be struck down?
(8) What should the decree be?
6. Learned trial Court decided Issues Nos,1, 3 and 6 together, in affirmative. It was concluded that the subject Defence Saving Certificates were offered as a security for a single transaction and not as a continuing security. However, while dealing Issues Nos,5, 7 and 8 the learned trial Court came to a conclusion that the liability of the appellant/plaintiff against the pledged share was to the extent of Rs,3,00,000 for a single transaction. Total realized value of pledged share was Rs,5,16,213 and since the appellant had received a sum of Rs,1,85,000 from the respondent No,2 as a consideration for offering her certificates as security such amount was deducted from the sale realization and the suit was decreed in the sum of Rs,331,213 jointly and severally against all the respondents excepting respondent/ defendant No,5 who is merely a forma respondent.
7. Learned counsel for the appellant Messrs I.H. Zaidi and Mansoor Ahmed Khan raised three-fold contentions, (i) since finance was only in respect of the single transaction, liability was discharged on 19-10-1994, thereafter, no fresh agreement was executed that could be used to further charge the subject Defence Saving Certificates, (ii) when the learned trial Court came to a conclusion that, subject Defence Certificates were offered for a single transaction while deciding Issues Nos,1, 3 and 6 then, nothing was left at the discretion of the Court not to allow the claim of the plaintiff. Lastly that statement of account filed by the defendant No,2 showed that the said facility was discharged and satisfied as the statement of account shows "NIL" balance on 19-12-1994.
8. Learned counsel urged that encashment of pledged. Defence Certificates, by the bank after the satisfaction of the liability was illegal and unjust. Therefore, the appellant/plaintiff is entitled for the return of Defence Saving Certificates or the entire amount that could become due on maturity of each Defence Saving Certificate. It was further urged that the deduction of the amount of Rs,1,85,000 by the learned Court is not justified, as such amount only represented consideration out of private arrangement between the appellant/plaintiff and defendants/respondents Nos,2(a) and 3(a) as a consideration for offering DSC, as security.
9. As against this Ms. Naheed A. Shahid, learned counsel for the Bank respondent No,1 contended that subject DSCs were pledged in 1994. Learned counsel drew our attention to a letter dated 16-5-1994 and another undated letter authorizing the respondent No,1 to encash said certificates. It was contended that the appellant was very well aware of her liabilities and no exception could be taken for the encashment of DSC, to adjust the liability.
10. Mr. Muhammad Habib Khan appearing for respondents Nos,2(a) to 3(b) supports the judgment and adopts the documents of Ms. Naheed A. Shahid as referred to above.
11. Mr. Azhar Farid appearing for UBL, appellant in I.A. No,19 of 2001 contended that the plaintiff . In suit continued to receive profit from the respondents Nos,2(a) to 3(b) against the pledge of certificates, which shows that said certificates were offered as a continuing security, according to him said certificates were rightly encashed.
12. Both Ms. Naheed and Mr. Azhar appearing for UBL contended that the plaintiff in collusion with respondents Nos,2(a) to 3(b) had filed the suit to defraud and trick the U.B.L. It was prayed that the suit of the plaintiff be dismissed as against the Bank.
13. We have heard the arguments and perused the record.
14. Main point for determination before the learned trial Court, was, "whether the pledged Defence Saving Certificates, were offered as a continuing security or not". Section 174 of the Contract Act, 1872 raises statutory presumption as to continuing security in favour of the pawnee who advances or lends money subsequent to the creation of pledge of goods against any particular liability, debit or promise. For ready reference section 174 of the Contract Act is reproduced as follows: "Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances". The pawnee shall not, in the absence of a contract to that effect retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee."
15. In this case subject Defence Saving Certificates were pledged on 3-7-1997 against loan advanced to the respondents Nos,2(a) and 3(a) business concern of respondents Nos,2(b) and 3(b) respectively. Apparently, appellant never demanded restoration or return of pledged Defence Saving Certificates from the respondent No,1, UBL, who continued to extend financial accommodation to the borrower presumably against the security of such Defence Saving Certificate. Under circumstance in view of section 174 of the Contract Act, strong statutory presumption as to continuing security arises in favour of the respondent No,1 UBL.
16. A party, in whose favour statutory presumption is raised need not prove the fact on which it is based onus to rebut statutory presumption, lies on a party alleging a state of fact contrary to such presumption. For reference see Jatindra Nath Malik v. Sushilendra Nath Palit (AIR 1965 Cal. 328).
17. In this case, as the facts unveiled, presumption as stated above was strongly in favour of the respondent No,1 UBL, that such Defence Saving Certificates were offered as continuing security. Now it is to be examined how far the appellant/plaintiff was able to rebut such presumption.
18. From the records it appears that the short term finance FAPE was granted by UBL on 3-7-1994 to AlGhous Enterprises defendants/respondents Nos,2(a) and 3(a) a business concern of defendants/respondents Nos,2(b) and 3(b). On 14-11-1994, said financial facility was admittedly adjusted as per bank statement on 3-5-1995 (Exh.D/11-L). Such fact was admitted by the witnesses of the UBL, who in cross-examination admitted that, Exh. D/3 a letter addressed by Al-Ghous Enterprises dated 13-11-1994 FAPE loan of Rs,3,00,000 was sanctioned against depositing of the subject certificates. Said loan was granted up to December, 1994. It was further admitted that, no other letter of pledge was offered by the borrower. Witnesses also admitted that, said loan was repaid in 1995. Attention of the witness was drawn towards entries dated 3-5-1995 and 31-12-1995 in the statement of account showing NIL balance. It was further admitted by the said witness that besides above, no other documents of pledge of said certificates were secured by the Bank. Said witness of the respondent No,1 was also confronted with the plaint in Suit No, 82 of 1990 (Exh.D-11) filed against Al-Ghous Enterprises defendants Nos,2(a) to 3(b). He admitted that nowhere in the plaint it was mentioned that the amount claimed in said suit was the balance due after the adjustment from the encashment of the subject DSC. The witness was also ignorant as to how the said certificates were encashed. Surprisingly enough realization and adjustment of the amount from Defence Saving Certificate is not reflected in the statement of account produced in evidence nor there is any plausible explanation for not doing so. It is common banking practice, whenever any amount is realized in satisfaction or discharge of liability same is always reflected in the Bank statement. Assertion of appellant on oath to the effect that subject Defence Saving Certificates were offered for one FAPE accommodation on 3-7-1994, was not controverted. On the contrary admitted by the respondent No,1 UBL's witness as discussed above. Learned trial Court in appreciation of the evidence produced rightly came to the conclusion, that the subject 32 Saving Certificates were offered/pledged in respect of one time FAPE finance facility and not as a continuing security. Once the Court came to a such conclusion then, a security could not be used for any subsequent facility or financial accommodation, such being the position, the respondent C No,1 was not justified to encash the said certificates and appropriate the sale proceeds towards the satisfaction of any other liability of the borrower. Contention of the learned counsel for the respondent No,1 Ms. Naheed A. Shahid in Ist Appeal No,10 of 2001 and Haider Raza in Ist Appeal No,19 of 2001 appearing for the UBL, that appellant cannot be allowed to reap profit twice on the same certificates; inasmuch as on one hand she was receiving consideration from the borrower and at the same time claimed return of her pledged certificates. Contentions are fallacious. The amount that was paid by the defendants Nos,2(a) and 3(b) to the appellant was on account of and as a consideration of the plaintiffs offering her property as a security against the finance availed by them and as long as said security is not restored to her. She as of her right received such amount from defendant/ respondent No,2(b). It being independent transaction, therefore, the learned trial Court was not justified to deduct the amount received by the plaintiff from the defendant/respondent No,2(b) as a consideration for such private arrangement.
19. For the foregoing reasons, we hold that encashment of 32 Defence Saving Certificates pledged with respondent No,1 as one time security against other liabilities of borrowers was unwarranted.
20. Where the pledged goods are wrongfully sold, the pledgor remedy is to sue pledgee for having converted pledged goods for his own use and claim recovery of its realizable value.
21. Respondents had encashed 32 Defence Saving Certificates of various denomination in all amounting to rupees three lacs before the date of maturity. Maturity value has been calculated to be rupees thirteen lacs. As far as claim for general damages in the sum of Rs, 10 lacs and Special Damages in the sum of Rs,5 lacs are concerned, it may be observed that the plaintiff admitted to have received Rs,1,500 per month from borrower for utilizing her pledge DSC as security for loan she has not led any evidence to establish any damages therefore same is declined. Ist Appeal No,10 of 2001 in terms of above is allowed, Suit No,268 of 1998 is decreed in the sum of Rs,13,00,000 being the realizable value of DSC as on the date of maturity with 14% mark-up from the date of suit till realization. 1st Appeal No,19 of 2001, for the foregoing reasons is dismissed.