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Civil Miscellaneous Application in Suit No. 381 of 1983, decided on 29th April, 1986.

---O.XXXVII, Rr. 2 & 3--Banking Companies (Recovery of Loan Ordinance (XIX of 1979), S.7--Suit for recovery of Bank loans--Leave to defend suit--Defendant alleging in application for leave to defend suit that plaintiff-Bank violating terms of agreement had claimed excess amount of interest on loan--Defendant was allowed to defend suit subject, to furnishing security of fixed amount within prescribed period to the satisfaction of Nazir of Court while rest of defendants who had guarantee: repayment of loan either by depositing with plaintiff-Bank document of title of their property to create equitable mortgage or by executing deeds of guarantee, were allowed to defend suit unconditionally.

The plaintiff has filed this suit under Order XXXVII for recovery of Rs. 61,06,791.56 on the allegation that on 15th November, 1980 the defendant No.1 was allowed pre-export advance upto Rs. 5 million. As they failed to effect shipment various amounts borrowed from the State Bank of Pakistan for advancing to the defendant No. 1 under the scheme were paid to it and claim has been made against the defendants. The defendant No.1 had maintained an account with the plaintiff and as security for repayment of the loan a promissory note for Rs.5 million was executed by the defendant No.3 and defendant No. 5 as Directors of the Company. The letter of continuity was also executed by them. Packing credit letter, dated 15-11-1980, letter of arrangement for bills purchase limit and letter of hypothecation were also executed by and on behalf of the defendant No.1. It is also alleged that defendants Nos.2 and 3 being the owners of the properties deposited with the plaintiff the documents of title to create an equitable mortgage to secure indebtedness of the defendant No.1. The defendants Nos.3 to 5 executed and delivered to the plaintiff jointly and severally deeds of guarantee dated 15-11-1980 for repayment of the dues against the defendant No.1. On 5-3-1983 the plaintiff made a demand but the defendants failed to pay, and therefore the suit has been filed. All the defendants have filed application under Order XXXVII, Rule 3, C.P.C. for leave to appear and defend the suit. The defence put up by the defendant No. 1 is that:

While the defendant was negotiating for extension of time with the State Bank the plaintiff without waiting for the result of such negotiation refunded the money to the State Bank.

In my view, this is no valid defence as under the scheme, the plaintiff had certain obligations to the State Bank of Pakistan. Nothing has been brought on record to show that under the scheme the plaintiff was bound to wait for the outcome of negotiation between the State Bank of Pakistan, and the defendant No.1. The State Bank was dealing with the plaintiff and not with the defendant No.1 independently and directly.

The next defence raised by the defendant No.1 is that in the pronote the defendants had agreed to pay interest @ 14% per annum with quarterly rests, but the plaintiff has calculated the interest on the basis of monthly rests which is not according to the agreement between the parties. The learned counsel has pointed out that on such calculation the plaintiff has charged Rs. 10 lacs -in excess of the agreed amount of interest. There is no denial of the fact that the plaintiff has not charged 13% per annum with monthly rests. This seems to be an arguable defence to the extent of the excess amount of interest claimed by the plaintiff. The third defence is that one stamp on the pro-note has not been cancelled. The plaintiff has filed photo copy of the pro-note. The learned counsel for the plaintiff has not filed the original pro-note from the photo copy filed in Court, it seems that the second stamp in the first row from the right hand side has been cancelled.

So far defendant No.1 is concerned to the extent of Rs. 10 lacs it has made out a valid defence. The defendant No.1 is allowed to defend on the condition that it shall furnish a security in the sum of Rs. 50 lacs within a period of two months to the satisfaction of the Nazir of this Court.

The defendant No.2 has put up a defence that he is not connect; J with the defendant No.1 as its Director or in any other capacity and that he has not signed any document of any nature whatsoever complaint it is alleged that the defendants Nos.2 and 3 are co-owner of the property whose title deed has been deposited with the plaintiff and a photo copy of the title document has been produced. The dependents No.2 admits that he is the co-owner of the property and submitted that he has not deposited the title document with the plaintiff as was lying with the defendant No.3. The fact that the title document in possession of the plaintiff shows that it must have been delivered it either by the defendant No.2 or by the defendant No.3 particular, in the circumstances when the defendant No.3 admits that he delivered this document in connection with some other transaction with the Bank which has not been specifically established. In circumstances the presumption is that the document must have before delivered by the defendant No.3 to the plaintiff. The liability of the defendant No.2 on such mortgage will arise if it is established that the defendant No.3 had the authority to create mortgage on behalf defendant No.2 who is a co-owner. Strangely enough there is no memorandum of title deed which is usually obtained by the Bank in such transaction. It therefore creates a strong defence in favour of the defendant No.2 that he had not deposited the title deed personally. There is no other document to create his liability, therefore, he is entitled to an unconditional leave to appear and defend the suit.

The defendant No.3 had executed a promissory note and other loan documents as a Director of the Company. The other capacity in which he is being sued is that he is a mortgagor of the property. He can be liable only to the extent of his share in the mortgaged property because there is no allegation in the plaint that having executed document on behalf of the defendant No.l as its Director he is personally liable. He is, therefore, entitled to defend the suit. To the extent of his liability the mortgage created by him will be sufficient security for the plaintiff's claim. Therefore, unconditional leave is granted to him.

The plaintiff has sued the defendant No.4 as a guarantor. In para 11 of the plaint, it is alleged that on or about 15-11-1980 the defendants Nos.3 to 5 executed and delivered to the plaintiff a joint and several guarantee dated 15-11-1980 whereby they jointly and severally guaranteed the repayment of the plaintiff's dues, in case the defendant No.1 makes default. Photo copy of the guarantee has been produced but it does not bear the signature of the defendant No.4. The defendant No.4 has denied the execution of the guarantee. The learned counsel for the plaintiff states that there is a separate letter of guarantee executed by the defendant No.4 which is in possession of the Bank, but has not been filed with the plaint. The averment made in the plaint shows that only one guarantee was jointly executed by the guarantors, and if the plaintiff keeps the document in its possession without filing it or disclosing it, the same cannot be taken into consideration unless it is properly filed in Court and the other side is given a chance to rebut it. In these circumstances, unconditional leave is granted to defendant No.4 to appear and defend the suit.

The defendant No 5 is alleged to have signed the promissory-note and all other loan documents. He has also alleged to have signed the letter of guarantee. Except the letter of guarantee all other documents are alleged to have been signed by him as a Director. Only the letter of guarantee is alleged to have been signed by him in his personal capacity. He has denied that he has signed any of the documents which have been produced by the plaintiff. He has filed his identity card and passport in support of his contention that the signature on the loan document differs from signature on these documents. In the counter-affidavit Muhammad Nasim has only stated that the defendants Nos. 4 and 5 are jointly and severally guarantor and executed guarantee on 15-11-1958. Copy of the deed of guarantee filed bears the signature of the bank officials who are alleged to have confirmed the signature of these defendants, but they have not filed any affidavit to state that the defendant No.5 had signed this letter of guarantee in their presence. In view of these facts, unconditional leave is also granted to defendant No.5 to appear and defend the suit.

In the view of above order, the application filed by the defendants for striking off their name is dismissed.

H.B.T./B-7/K Leave to defend granted

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