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First Appeal from Original Order No. 274 of 1976, decided on 11^th July 1979.

(a) Industrial Development Bank of Pakistan Ordinance (XXXI of 1961)-

-- S. 39 (3).-Attachment--Coercive measures to be resorted to only when essential-Borrower's property pledged, mortgaged, hypothe cated or assigned to creditor Bank-Sufficient to meet liability Proceedings of attachment of surety's property, held, cannot be initiated in circumstances-View that Court has no option except attachment of surety's property, held, erroneous.-[Attachment].

(b) Industrial Development Bank of Pakistan Ordlnsoce (XXXI of 1961)-

-- S. 39 (3)-Words and phrases---'Or'-User of word 'or' in S. 39 (3) though apparently giving powers to District Judge to proceed against surety's property instead of borrower's yet leaving encumbered property and proceeding against that of surety pre posterous-Giving word 'or' any other meaning, held, would nullify operation of S. 141 of Contract Act, 1872 and other established principles of law of contract-Contract Act (IX of 1872), S. 141. Pords and phrases].

(c) Industrial Development Bank of Pakistan Ordinance (XXXI of 1961)-

S. 39 (6)-Notice to surety-Issue of show-cause notice to 'person liable for payment', held, shall have to be read in sub section (6).

Ibrahim v. Muhammad Hussain P L D 1975 S C 457 ; Maxwell's Interpretation of Statutes, 11th Edn., pp. 221-222 ; Muhommad Ismail v The State P L D 1969 S C 241 and Muhammad Amir Khan v. Controller of Estate Duty P 'L D 1962 S C 335 ref.

(d) Industrial Development Bank of Pakistan Ordinance (XXXI of 1961)-

S. 39 (11)-Appeal-District Judge not issuing notice to appel lant (sure-Appellant applying for recall of ad interim order DisposaI of such application, held, shall be deemed to be under subsection (7) and order thereon appealable. -[Appeal (civil)].

Muhammad Mohsin Ansarl for Appellant.

Sardar Saml Hayat for Respondent No. 1.

Ihsan-ul-Haq Chaudhry for Respondent No. 2.

Dates of hearing : 22nd October 1978 and 5th March, 1979

This appeal arises out of an application moved by respondent No. I under section 39 of the Industrial Development Bank of Pakistan Ordinance, 1961.

2. The Acts giving rise to this litigation are . that on 4th July, 1970, the Respondent Bank sanctioned loan to Respondent No. 2, in foreign exchange equivalent to Rs. 1,69,000 at the pre-devaluation rate, for the import of machinery for setting up a printing press, which was subse quently increased to Rs. 2,28,000. Respondent No. 2, availed of this loan and imported the machinery in question The repayment of the loan was secured by hypothecation of this machinery is favour of the Respondent Bank. Additionally, the Australia hank now merged in the appellant-Bank at the instance of the be furnished a continu ing Bank guarantee to the respondent Bank. It is the cast of the creditor that the principal debtor, i.e. respondent No. 2. installed part of the machinery at a place other than the site agreed t between the parties and also committed default in repayment of the loan, according to the repayment schedule, forming part of the credit agreement. On 31 st March 1976, the total amount outstanding against him, including the interest and other charges stood at Rs. 12,31,984.04. As the principal debtor failed to repay the loan, the respondent-Bank invoked the bank guarantee and called upon the appellant to clear the liability. Despite reminders and issue of notice under section 38 of the Ordinance. the loan was nor repaid. Consequently. on 4th June, 1976, respondent No. 1, filed an application under section 39 of the Industrial Development Bank of Pakistan Ordinance, 1961, before the learned District Judge, Lahore, for absolute attachment of the property of t-he principal debtor as enumerat ed in Schedule II appended with the application and such other property of the surety described in Schedule 1V thereof, as may fetch on being sold sufficient amount to clear the outstanding liability.

3. The learned District Judge in pursuance of subsection (3) of sec tion 39, on 1st June, 1976, ordered attachment ad interim of the pro perties mentioned in these schedules, and further restrained the principal debtor as well as the surety from removing or in any manner transferring the said properties.

The property as per Schedule IV sought to be attached was entire cash and other valuable securities lying in the Bank Square Branch of the appellant Bank together with furniture, carpets, cars, air-conditioners and other articles owned by the appellant. It appears that the execution of the warrant for attachment was resisted by the staff of the appellant Bank. However, the appellant moved the learned District Judge to re call the order dated Ist June, 1976 on the ground that the bank guarantee was violative of section 27 of the Ordinance and was also .hit by sec tion 23 of the Contract Act. The other main plea raised was that the pro ceedings could be initiated against the surety only if the assets of the principal debtor were not found sufficient to cover the liability.

4. The learned District Judge held that under section 32 of the Ordinance, the Respondent Bank, was authorized to impose such condi tions, as it may consider necessary, to protect its interest in securing the guarantee regarding repayment of the loan. He was also of the view that section 27 was not exhaustive of the kind of the securities against which, the loan could be advanced arid further observed that the order dated 1st June, 1976 was ad interim in nature which did not foreclose the liability of the principal debtor or that of the surety. As a result of these findings the request for the recall of the attachment order was rejected on 13th December, 1976. This order has been impugned through the appeal before this Court.

5. The learned Counsel for the appellant has argued that under section 141 of the Contract Act a surety is entitled to the benefit of all the securities which the creditor has against the principal debtor but there was collusion between the respondents and they manoeuvred, .that the entire amount be recovered from - the appellant that leas Bed District Judge in law, was bound to first proceed against the principal debtor, and in case the entire debt could not lie reared out of the sale proceeds of the debtor's assets proceedings could only then try waited against the appellant. He contended that the business which the respondent Bank can transact is enumerated in section 27 of the Ordinance, which does not provide grant of loan against the security of third party. In the submission of the learned counsel the Respondent Bank's acceptance of the guarantee given by the appellant, is unlawful and that therefore, it cannot be enforced against the appellant.

6. Mr. Sami Hayat, the learned Counsel for the respondent No. 1 raised a preliminary objection that the application was filed under clauses (a) and (c) of section 39 and the learned District Judge passed the ad interim order attaching the property of respondent No. 2 and that of the appellant, in exercise of the powers resting in him under sub section (3) of section 39 ; such order is not appealable as, section 39(11) provides appeal only against an order passed under, subsection (7) or sub section (9) of section 39. He referred to subsection (1) and subsection (3) of section 39 as amended by the Industrial Development Bank of Pakistan (Amendment) Ordinance, 1965, and argued that irrespective of the pro visions of section 141 of the Contract Act the learned District Judge, through at interim order, is competent to attach the property of the principal debtor or of the guarantor of both and recover the debt from sale proceeds of the Guarantor's property i-lone. He further contended that the guarantee tendered by the appellant is c6vered by section 32 of the Ordinance and can be enforced against him.

7. The learned counsel representing respondent No. 2, adopted the arguments advanced by the learned counsel for the' respondent-Bank and cited Ibrahim v. Muhammad Hussain (P L D 1975 S C 45 'I) to urge that the appeal against the interim order did not lie.

8. 1 have heard the learned counsel for the parties and remained the record. 1t is obvious that the order dated 1st dune, 1976 was passed by the learned District Judge under subsection (3) of section 39 of the Ordinance. The operative part of this order runs as under :--

"Petition be registered. Notice to the respondents for 22cid instant with capies of the petition.

Subject to all just exceptions, I also order attachment ad interim of the property detailed in Schedules 2 and 4. In terms of suit section (3) of section 39, Industrial Banks Ordinance, the respondents are also restrained from removing or transferring in any manner the abovesaid properties.

The amended subsection (3) empowers the learned District Judge to pass "an order ad interim attaching the property referred to in clause (a) as aforesaid r9; such other property of the concern or of the person liable for payment of the loan or of both as is likely in his estimation to fetch on being sold, an amount equivalent to the outstanding liability of the concern to the Bank ",

The learned District Judge thus bas the power to attach ad interim not only the borrower's such property as may have been pledged mortgaged. By hypothecated or assigned to the creditor Bank but also his other property and so also the property has suerly. While attaching the property of the debtor and the surety, other that. the one mentioned la clause (a) of subsection (3), there is however, a rider on the powers of the District judge, that he must satisfy himself that out of the "other property" only so much is attached, as on being sold, is likely to fetcb an amount equivalent to the liability of the debtor. The attachment of one's property Is a coercive measure which has to be resorted to only when essential. The District Judge's order ad interim, in respect of the "other property" must disclose that be through- an estimation of the view of the property has found it incumbent to proceed against so much of the other property . By the process of reasoning it follows if the brrowers property pledged mortagagaed hypothecated or or assigned to the creditor Band is sufficient to meet his liability possibly the proceedings for attachment of the surety property can not be initiated. The order dated lst June, 1976, is however, completely silent on this issue. The view taken by the learned District Judge that subsection (3) does not leave any option with the Court, in the matter of attachment of the property oil surety, thus cannot be upheld.

9. It was argued that the word "or" in subsection (3) in the expression or of the person liable for payment of the loan or of both",

is disjunctive and the District Judge has an absolute choice to proceed against the property of the surety to the exclusion of the property satis fied in clause (a) and the borrower's other property. Though the user of the word "or" in subsection (3) apparently is wide powers to the learned District Judge to proceed against the property of the surety to. the exclusion of the borrower, yet it would be preposterous to leave the encumbered property and proceed against the surety. This line of reasoning finds support from the fact that so far as the other property of the borrower or that of the surety is concerned, as observed above, the District Judge has to first satisfy himself that only so much property is attached, as may fetch an amount sufficient to meet the liability. Further-

more, provisions of law should not be interpreted in a manner as to conflict with the established principles of law or be repugnant to the provisions of other statutes which are not repealed or modified by it. It is well settled that a creditor has a lien over the property, mortgaged or assigned to him by the borrower. The recovery of loan advanced against the charge created against some property, has got to be made first by disposal of such property, and only when its sale proceeds fall short of the outstanding liability, that the recovery can be enforced in accordance with law, by sale of other property of the borrower. Under section 141 of the Contract Act a surety is entitled to every security which a creditor has against the debtor. I feel, if the meaning sought to be put on the word "or" by the respondents' learned counsel are accepted, that is calculated to nullify the operation of section 141 of the Contract Act C and other established principles of law of contract. Such a construction is to be avoided. The words ' or of both" figuring in subsection (3) are' not without significance. By user of this expression, powers have been conferred on the District Judge to adjudge in each case, as to whether, in the circumstances thereof, keeping in view the estimation of the value of the borrower's property, the attachment of the surety's pro perty is called for. The surety's property, thus can be proceeded against only subject to the conditions and in the circumstances, discussed in the earlier part of this judgment.

10. As records the submission that the Bank guarantee executed by the appellant in favour of the respondent Bank, being violative of section 27 is not enforceable, I am inclined to agree with the learned District Judge that section 27 is not exhaustive and the guarantee in question is not in any manner hit by section 23 of the Contract Act. There is no merit in this argument of the learned Counsel for the appellant.

11. For determination of the respondent's objection to the maintainability of the appeal, a reference to the scheme of section 39 will provide that after . passing the order ad interim attaching the property, the District Judge is under an obligation to proceed under subsections (6) (7) (8) and (9), which run as under:---

"1(6) At the time of passing an order under subsection (3), the District Judge shall issue to the concern a notice accompa nied by a copy of the order, the application and evidence, if any, recorded by him and calling upon it to show cause on a date to be specified in the notice why the order of attachment ad interim should not be made absolute or. the injunction be not confirmed.

(7) If no cause is shown on or before the date specified in the notice under subsection (4) or subsection (6), the District Judge shall forthwith make the order ad interim absolute and direct the sale of the attached property or transfer the management of the concern to the Bank or confirm the injunction.

(8) if cause is shown the District Judge shall proceed to investi gate the claim of the Bank and the provisions of the Code of Civil Procedure, 1908 (Act V of 1908), shall as far as practic able, apply to such proceedings.

(9) On completing an investigation under subsection (8) the District Judge shall pass an order ....,,"

It is to be noticed that subsection (3) was amended by Ordinance XIX of 1965, and the words "or of the person liable for payment of the loan or of both were added therein but no corresponding amendment has been made in subsection (6) for issue of show cause notice to "the person liable for payment, i. e. the surety although through order ad interim his property is liable to attachment. It could not have been the intention of the legislation to deny show cause notice to the surety. This omission appears to be the result of slip of the draftsman. In this connection in Maxwell's Interpretation of Statutes, 11th Edn. at pages 221 and 222, it has been laid down :-- .

Where the main object and interpretation of a statute are clear, it must not be reduced to a nullity by the draftsman's unskil fulness or ignorance of the law, except in a case of interest or the absolute intractability of the language used."

The law enunciated in this respect, by the Supreme Court in Muhammad Ismail v. The State (PLD1969SC241) is that :-

"Even though. as s general rule, a Court of Law is not authorised to supply a cassus omissus or to alter the language of a statute for the purpose of supplying a meaning, yet in certain circumstances it is permissible for the Courts to give effect to the true and patent intention of the law-maker to supply the omission in order to avoid doing a manifest injustice."

The view taken by Kaikaus, J. in Muhammad Amir Khan v. Controller of Estate Duty (PLD1962SC 335) is also to the same effect. In order to snatch with the intention of the legislature the issue of show cause notice, to the "person liable for payment" shall have to be read in subsection (6).

12. It is noteworthy that the learned District Judge did not issue any notice to the appellant but as observed above the appellant, himself put in appearance in the Court and applied for recall of the order ad interim.

The disposal of this application shall be deemed to have been made under subsection (7), It is correct that while acting under this subsection the District Judge has to make the order ad interim absolute and direct the sale of the attached property but no such direction has been given under the impugned order; nevertheless it has the effect of making the order ad interim absolute. The right of appeal is referable to the source of exercise of power and not to the incorrect exercise of such power. It may be observed, if the reply to the show cause notice is frivolous or otherwise untenable the District Judge may reject it surrmarily and wilt not be bound to embark upon investigation of the claim of the Bank. Such summary section, will tantamount to non-showing of cause in contemplation of subsection (7). There is no provision for disposal of the appellant's application and it shall be deemed to have been dealt with either under subsection (7) or subsection (9) read with subsection (8) P although the impugned order is deficient in contents both with regard to subsection (7) as well as subsection (9). The impugned order is thus appealable under subsection (11) of section 39.

13. For the foregoing reasons this appeal is accepted, the impugned order is set aside and the case is remanded to the learned District Judge who shall decide it afresh in accordance with law.

There will be no order as to costs.

K. M, A, Appeal accepted.

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