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Suit No.570 and Civil Miscellaneous Application No. 5338 of 1984, decided on 29th June, 1986.

‑‑‑S. 6‑‑Civil Procedure Code (V of 1908), 0. XXXVII, R. 3‑‑Suit for recovery of bank loan‑‑Leave to appear and defend‑‑Defendants raising defence that statement of account given by plaintiff was not correct, promissory note and security documents which were signed in blank were filled in by plaintiffs unauthorisedly and that there were material alterations in documents which were unauthorised and same were not binding on defendants‑‑Defence raised making case of defendants arguable‑‑Plaintiff were to be required to produce evidence to establish correctness of statement of account and that if documents were delivered in blank, whether they were completed in accordance with authority given by executants and within a reasonable time‑ Defendants allowed to appear and defend suit on furnishing security in circumstances.

Jaffari's case 1984 S C M R 684 rel.

‑‑‑S. 6‑‑Civil Procedure Code (V of 1908), O.XXXVII, R.3‑‑Suit for recovery of bank loan‑‑Leave to defend suit‑‑No document pointed out by plaintiffs to have been executed by defendant as a guarantor or otherwise‑‑Unconditional leave to appear and defend granted.

Noorullah Manjhi for Appellant.

J.H. Rehmatullah for Respondents

Date of hearing: 29th June, 1986.

The plaintiff has filed the suit under Banking Company's Recovery of Loan Ordinance 1979. The defendant No. 1 is a public limited company which has borrowed money from the plaintiff. Defendants No.2 , 3 are also public limited companies and had provided guarantee and securities to the plaintiff for various financial accommodations and facilities provided by the plaintiff to defendant No.l. The defendants Nos. 5, 6, 7 and 8 are guarantor of defendant No.l. The defendant No.l opened account No. CA‑01573‑1 in the then Commerce Bank Limited. To secure the repaym‑3nt the defendant No.l mortgaged land, building and machinery. The trawlers of defendant No.3 were also pledged. After the Banks Nationalisation Act 1974, in July 1974 the assets and liability of the Commerce Bank were merged with the plaintiff. The defendant No.l utilized the secured over draft facility from time to time in the said current account at the City branch of the plaintiff and regularly operated till 30‑5‑1981. It has been alleged that the defendant No.l executed promissory note in the sum of Rs.3,024,683.70 dated 29‑4‑1974 and delivered it to the plaintiff with a letter of continuity and letter agreeing to pay penal interest. Another promissory note in the sum of Rs.24,94,719.36 was executed on 31‑12‑1975. Again on 1‑1‑1976 the defendant No. l executed another promissory note for Rs.40,50,50,0 and a mortgage deed on 7‑2‑1976 for a sum of Rs.40,50,500. The defendant No.l confirmed the correctness of the debit balance and acknowledged its liabilities in the year 1975‑76, 1977, 1979 and 1980.

On 6‑11‑1979 the defendant No.l also obtained loan against packing Credit Account Part II with the plaintiff's City Branch. The plaintiff allowed loan from time to time against pledge of stocks. Another account of similar nature was also opened on 10‑12‑1980 in which the defendant No.l was allowed advances. The account was closed on 29‑12‑1980 and the debit balance of Rs.7,32,783 was transferred to LAPC Part II raising the total liability in that account to Rs.15,65,583. The defendant No.2 created equitable mortgage of its leasehold rights in respect of plot No.20 West Wharf Road, Karachi and a Memorandum of deposit of title deed dated 2‑7‑1982, was also executed. The defendant No.3 to secure the advances created a mortgage/pledge on four trawlers owned by it. With the permission of the Plaintiff two trawlers were sold by defendant No.3 and sales proceeds were deposited in the account at Corporate Branch of the plaintiff. At the request of the defendant No 1. against hypothecation of stocks and security provided by defendants No. 2 to 8 and mortgage of land by defendant No.l the plaintiff granted cash credit facility from time to time in account No.CC‑29. The defendant No.l executed promissory note for Rs.20 lacs on 14‑9‑1972 and letter of hypothecation. The defendant No.l also executed promissory note in the sum of Rs.16,27,607.74 on 31‑12‑1977 and another promissory note for Rs.49,75,785.46 dated 26‑12‑1981 and also confirmed the correctness of the debit balance on 31‑12‑1970 and thereafter in the year 1974, 1975, 1976, 1977, 1978, 1981 and 1982. The defendant No.l executed a mortgage deed on 7‑2‑1976 for Rs.40,50,500 mortgaging plot No.4 Block 'A' in the Fish Harbour, West Wharf Karachi with construction and machinery thereon. A promissory note dated 16‑7‑1981 for a sum of Rs.18,30,933.20 was also executed by defendant No.l with a letter of continuity and letter of hypothecation. To secure the debit balance of Rs.7,658 M. in the cash credit loan account, packing credit and other facilities, the defendant No.l executed a memorandum confirming deposit of title deed dated 2‑7‑1982 creating an equitable mortgage in respect of the land with all construction machinery thereon. The defendant No.3 also executed a memorandum of confirming deposit of title deed dated 2‑7‑1982 in respect of property mortgaged by it on 2‑7‑1982. The defendant No.l admitted the correctness of the account and acknowledged its liability to the extent of Rs.7,658 million on 30‑6‑1982. Up to 7‑4‑1984 a total sum of Rs.10,226,111.42 was due and payable by the defendants towards the principal and accrued interest as stated in the statement of account. The Defendants No.l, 6 and 8 have filed application under Order 37 Rule 3 C.P.C. The defendant No.7 is stated to have died. The defence shown in the affidavit is that the suit is time barred, the document have been materially altered and the amount shown therein have been filled in without the authority of the defendants, the statement of account is incorrect and the suit against the guarantors is time barred. In the statement of account several entries have been alleged to be either incorrect or unauthorisedly made and at this stage there does not seem to be any valid explanation for such entries. It has been alleged that promissory Annexure '2/181 and the letter of hypothecation were signed in blank in 1973 and in 1974. The hypothecation deed Annexure 7/21 clearly shows that it was filled subsequently. There is obvious overtyping and alteration. It is alleged that these two documents are not binding and have become invalid. It is further stated that pronote and documents Annexure Z/21 to Z/34 were signed in blank and the dates and amounts have been filled in without authority and the defendant No.l is not bound by it. The same objection has been made in respect of Annexure Z/40 also. It has been submitted that under the guarantee the liability of defendants No.4 to 8 is limited to Rs.20 lacs and that the defendant No.8 has not signed any document nor furnished any guarantee while defendant No.7 has died two years back.

In a netshell the defence raised on behalf of the defendants is that firstly the accounts are not correct, secondly the promissory note and security documents were signed in blank and have been filled in by the Plaintiff unauthorisedly, and thirdly there are material alterations in the documents, which are unauthorised and the same are not binding on the defendants.

So far defendant No.7 is concerned he has died and, therefore, the question of proceeding against him does not arise. The learned counsel for the Plaintiff has not been able to point out any document executed by defendant No.8 as guarantor or otherwise. In the circumstances unconditional leave to appear and defend the suit is granted to defendant No.8.

The defendant No.l is the principal debtor whereas defendants No. 2. 3, 4, 5 and 6 have from time to time and in one way or the other executed documents to secure the loan. So far the statement of account is concerned the learned counsel for the defendant No.l has pointed out certain irregularities and debit entries which according to the defendants are not correct but it has not been stated that if such incorrect entries are excluded, the defendant No. l's account will not run in debit. Therefore, such objection can be ascertained on production of evidence by the Plaintiff. So far alterations are concerned from the photocopy of the documents filed by the Plaintiffs it seems that the letter dated 29‑5‑1974 regarding delivery of pronote seems to have been over typed as the year appears to be 1984 but on figure 8 figure 7 has been typed. So far the letter regarding acknowledgement of liability is concerned the learned counsel has pointed out that the number and date printed on the form indicates that it would have been printed in 1976 and, therefore, it could not have been executed in 1974. However the promissory note dated 1‑1‑1976 does not seem to be materially alternated. The defendant No. l has mortgaged his property by registered mortgage dated 7‑2‑1976 for Rs.40,50,500. In the memorandum of deposit of title deed signed by Pakistan Industrial Limited insertions and over typing so far the year, amount, and date are concerned seem to be apparent. Considering the defence raised' by the defendants it seems that they have made an arguable case for defending the suit. The Plaintiff will be required to produce evidence to establish the correctness of the statement of account. So far promissory notes are concerned if it is proved to be materially altered it may render it invalid. The Plaintiff has also to establish that if the documents were delivered in blank, it has completed them in accordance with the authority given by the executant and within a reasonable time. If the defendant succeed in proving that these documents are invalid the claim or part of the claim may be barred by time. In these circumstances in view of the principles laid down in Jaffari's case 1984 S C M R 684 the defendants No. 1, 2, 3, 4, 5 and 6 are allowed to appear and defend the suit on furnishing security in the sum of Rs.5 Million to the satisfaction of the Nazir within a period of two months. The defendant No.8 is granted unconditional leave to appear and defend the suit.

M . Y . H / U‑7 / K Application allowed.

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