Lawyers Directory Listing
Unlock direct contact details for up to 10 lawyers so you can call or WhatsApp the right legal professional and move your matter forward with confidence.
Suit No. 334 of 1973, decided on 13th May, 1984.
‑‑‑Art. 3‑‑Civil Procedure Code (V of 1908), O.XXXIV, R.1‑‑Recovery of Bank loan, entitlement to‑‑Plaintiff though not entitled to reverse entry in respect of Pak Currency Loan, yet would be entitled to recover same with specific interest with six monthly rests in addition to other amounts in respect of other items in Pak Rupee‑‑Nazir of Court was appointed as Commissioner who after notice to parties would take accounts and would ascertain amount payable by defendants in the light of findings of Court.
A.I. Chundrigar for Plaintiff.
M.G. Dastgir and S.N. Hyder for Defendants.
Dates of hearing: 29h April and 6th May, 1984.
This is a suit for the recovery of German DM 2,22,702.27 plus 7‑344% interest per annum with six monthly rests and costs etc.
2. The brief facts leading to the filing of the above suit are that the above suit was filed on 2‑6‑1973, for the recovery of Rs.8,23,239.48 under Order XXXIV, C.P.C. on mortgage in respect of a foreign currency loan credit of DM 1,79,160, which was advanced under a credit agreement dated 27‑11‑1965, then equivalent to Pak Rupees 2 10,000 to the borrower, defendant No.l. The credit agreement was executed by defendants No.2 and 3 as the Directors of Defendant No.l. As a security, a promissory note dated 27‑11‑1965 was executed by defendant No.1 in favour of defendants No.2 and 3 which was endorsed by the above defendants No.2 and 3 in favour of the plaintiffs. The defendant No.1 under an agreement of hypothecation dated 27‑11‑1965 hypothecated the plant, machinery, spare parts, accessories, equipments, goods and all movable properties belonging to defendant No.l. The defendant No.1 also executed an agreement dated 20‑12‑1965 for creating mortgage on future assets. The defendants No.2 and 3 jointly and severally guaranteed the re‑payment of the plaintiffs dues under a letter of guarantee dated 27‑11‑1965. Furthermore, the defendant No.2 created an equitable mortgage by a deposit of title deeds in respect of the bungalow mentioned in para 9 of the plaint. The defendant No.1 also executed and got registered a mortgage deed dated 30‑5‑1967 in respect of the properties mentioned in para 11 of the plaint. As the defendant No.1 defaulted in the payment, the above suit was filed for the above reliefs. It may be observed that after the enforcement of the foreign Currency Loans (Rate of Exchange) Order, 1992 (President's Order No.3 of 1982), hereinafter referred to as the Order, the plaintiffs filed an amended plaint on 22‑10‑1983 in pursuance of order dated 9‑10‑1983, passed by this Court, whereby inter alia the plaintiffs claim amount was mentioned in German DM i.e. 2,22,702.27 DM instead of Pak Rupee for the purpose of mortgage decree as well as for alternate decree for money.
The defendants No.1 and 3 had filed a joint written statement on 30‑9‑1974, whereas the defendant No.2 had filed separate written statement on 7‑10‑1974. After the filing of the amended plaint, the defendants No.1 and 3 filed amended written statement on 17‑1‑1984, whereas defendant No.2 filed the amended written statement earlier on 23‑11‑1983. It may be observed that the defendants No.1 and 3 inter alia have pleaded that the credit agreement dated 27‑11‑1965 is not conscionable equitable, fair or binding on the above defendants and that the same was vitiated by under force and pressure. It has also been averred that the plaintiffs had charged interest at exorbitant rate of interest coupled with compound interest and penal interest without any justification and that too in foreign currency. It has been further averred that the plaintiff bank was not entitled to charge interest on the loan it advances to the industrialists. It has also been pleaded that there is no provision in the statute for charging penal interest muchless to charge such interest in foreign currency. It has also been pleaded that the plaintiffs had recalled the loan on 5‑5‑1973 much before the expiry of the loan period which was to expire on 31‑12‑1975. It has also been averred that the plaintiff has claimed interest twice for the period from 2‑10‑1973 to 31‑12‑1975. It has also been pleaded that the guarantee is ultra vires and the I.D.B.P. Ordinance is invalid, improper and of no legal effect, it has also been denied that the above defendants are liable toy the alleged due amount or any of the various items rimed by the plaintiffs. It has been further averred that the plaintiffs had granted a fresh loan of Rs.1 Lac at the request of defendant No.1 on 28‑6‑1970 in order to enable it to re‑phase the original loan so as to make the industry viable. It has been further averred that this rupee loan was a simple money loan and had nothing to do with, the earlier mortgaged loan and bore a separate number being No.10/237/141 repayable in Pakistan rupee with 9% interest per annum. It has also been averred that the above amount was adjusted against the instalments due on the foreign currency loan on 29‑6‑1970. It has also been averred that the above entries were reversed and the same were converted into foreign currency loan on the alleged ground that no documentation had been carried out by defendant No.l. It has also been pleaded that the above rupee loan had become time barred. It has been further pleaded that the plaintiff is not gtitled to claim the above rupee loan in the above suit. It has also been pleaded that the plaintiff is not entitled to claim dues on the basis of the forged value rate of foreign exchange. In the amended written statement the above pleas have been reiterated. It has also been averred that the plaintiff has received from the Court a sum of Rs.6,25,000 being the sale proceeds of the mortgaged plant and machinery which amount was factually in excess to the extent of Rs.1,14,139.44 as per accounts filed on 1‑12‑1980, which they are liable to refund. It has also been pleaded that 'the plaintiff is not entitled to claim at the post‑devaluation rate of exchange.
The defendant No.2 in his original written statement as well as in the amended written statement has more or less repeated the averments made by the defendants No.1 and 3 in their written statement. He has also pleaded that his liability was to the extent of the original amount and that on account of inactions and omissions on the part of the plaintiffs, he stands discharged from his liability as the guarantor.
3. On the basis of unamended pleadings of the parties, the following issues were adopted by consent of the learned Advocates of the parties on 27‑1‑1979:‑
(1) What amount, if any, is due to the plaintiff on the date of this suit from the defendants or any of them
(2) Whether the registered mortgage created by defendant No.1 dated 30th May, 1967 is valid. If so, what is its effect
(3) Whether the plaintiff could legally reverse the fresh rupee loan granted to the defendant No.1 which was adjusted against the over dues and remained so adjusted in the books of accounts of the plaintiff for over two years before devaluation. If not what is the effect
(4) Whether the plaintiff could charge interests over and above the agreed rate of 7‑3/4 per cent
(5) At what rate of exchange are the plaintiffs entitled to claim the repayment of the amount, if any, due to it from the defendants
(6) What is the effect of the exchange rate risk charged by the plaintiff
(7) Whether the defendant No.2 has created a valid mortgage by deposit of title deeds, if so what is the effect
(8) Whether there has been any inaction or omission on the part of the plaintiffs as alleged by he defendant No.2, if so, whether the defendant No.2 stood discharged of his liabilities if any, and to what extent
(9) Is the suit not maintainable on account of mis-joinder of cause of action
(10) What is the effect of the conversion into grant of the DM 20 Million loan extended to the Government of Pakistan by the Kreditaustalt Fur Wieideraufbau (KFW)
(11) What should the decree be
After the filing of the amended pleadings the following additional issue was framed:
"Whether the sale proceeds of the properties sold in pursuance of the order dated 19‑8‑1979 received by the plaintiff's was in excess to the plaintiffs claim. If so, what is its effect "
4. The plaintiffs in support of the suit examined P.W.1 Muhammad Aleemuddin Exh.5 and P.W.2 Syed Rauf Ahmad Exh.42 and have produced a number, of documents Exh.6 to Exh.46, whereas the defendants examined D.4.1 Syed Masood Ali Naqvi Exh.48, D.W.2, Dr. M.R. Khan Exh.56, who have produced a number of documents Exhs. 49 to 55, and Exhs. 57 to 63.
My findings on the above issues are as follows:‑
This issue is covered by general issue, namely issue No‑11, and, therefore, it does not require any separate discussion.
The learned counsel for the parties have fairly conceded that the above issue has become redundant in view of the fact that by a consent order dated 19‑8‑1979 the mortgaged machinery etc. covered by the registered mortgage deed dated 30‑5‑1967 was sold for a sum of Rs.6,25,000 which amount was paid to the plaintiffs in pursuance of the order dated 20‑4‑1980 on the conditions contained therein. The above issue has, therefore, not been pressed by the learned counsel for the defendants.
This issue has been hotly contested by the learned counsel for the parties. It may be observed that the defendant No.1 through its letter dated 23‑6‑1970 (Exh. 31 at page 384 of the file of evidence) addressd to the plaintiff's Chief Manager requested for a loan of Rs.1 Lac in order to pay the same against the then outstanding amount in respect of the aforesaid foreign currency loan. It may be advantageous to reproduce the contents of the same, which read as follows: ‑
"The Chief Manager, Industrial Development Bank of Pakistan, Karachi.
Dear Sir,
With reference to our discussion on the subject of over dues, we have to submit that we propose that in order to clear the over dues we may be sanctioned a rupee loan of Rs.1,00,000. Our present arrears are Rs.84,969 and the June instalment being Rs.18,208 being the total to Rs.1,03,177.
If a rupee loan of Rs.1,00,000 is sanctioned to us in order to clear the over dues we will pay back the rupee loan in 12 equal monthly instalment commencing from the first of the next month.
The recovery proceedings from the City Deputy Collector may be withdrawn. after the above arrangement is finalised.
Thanking you.
Yours faithfully,
For Chemfabs Limited
Sd/‑
(S.M.A. Naqvi)"
It seems that the defendant No.11s request contained in the above‑quoted letter was acceded to by the plaintiffs inasmuch as the credit entry of Rs.1 Lac was made on 29‑6‑1970 in the foreign currency loan account, leaving a balance of Rs.7,451.81 as the balance outstanding and a separate Pak Rupee loan account bearing No.10/237/141 was opened showing debit of Rs.1 Lac. It further seems that the plaintiffs through their letters dated 13‑8‑1970, 19‑10‑1970 and 11‑11‑1970 (all the three exhibited as 31) asked the defendant No.1 to clear the balance of Rs.7,451.89, failing which the recovery proceedings for the entire overdues, namely, Rs.1,07,451.89 i.e. including the above Rs.1 Lac advance of loan, would be taken through the City Deputy Collector. It appears that no action was taken by the plaintiffs in pursuance of the above letters. However, after the, devaluation of Pak Rupee on 11‑5‑1972 the above entry of giving credit of Rs.1 Lac in the foreign currency loan account was reversed on 26‑6‑1972 reflected in Exh.43.
8. It has been contended by Mr. A.L. Chundrigar that the above entry of giving credit of Rs.1 Lac on 26‑6‑1970 in the foreign currency loan account was merely a paper work and that in view of section 3 of the Order, the plaintiffs were entitled to reverse the above entry. On the other hand, it was urged by M/S. S. Nazir Hyder and M. Dastgir that the plaintiffs had advanced a separate loan of Rs.1 Lac in response to defendant No.1's request contained in the above quoted letter Exh.31, and that the above amount was paid by defendant No.1 towards discharging the liability in the foreign currency loan account. In this regard it may be pertinent to quote the relevant portion of the statements of P.W.1 Muhammad Aleemuddin Exh.5 and P.W.2 Syed Rauf Ahmad Exh.42, which readjs as follows:‑
Aleemuddin
". ..At the request of the defendants the plaintiff had converted the overdue amounts into rupee loans. Such entries relating to rupee loans were reversed after the devaluation of Pakistan rupee. As a result of such reversal of entries the outstandings against the defendants rose consequent to devaluation of Pakistan rupee. I see page 3 of the overdue instalment and interest account of Exh.36 (Page 111 of the Court file), and entry in regard to adjustment of overdue foreign amount of Rs.1 Lac appears in that document. The rupee account and the foreign exchange account were no doubt separate. Yet inter‑related.
The rupee in favour of defendants was created on 29‑6‑1970. This rupee loan was created at the request of the defendants because they had expressed their inability to pay the instalments. Besides the three letters (Exh.31) the plaintiff gave no notice 'Lo the defendants to come and execute any fresh document in respect of the new rupee loan that was created against them. Before reversing the entries in regard to rupee loan the plaintiff gave no notice or intimation to the defendants.
Syed Rauf Ahmad.
"On 29‑6‑1970, the plaintiff showed in the accounts an overdraft facility in favour of the defendants to the extent of Rs.1 Lac. This amount of Rs.1 Lac was shown as credit in the foreign exchange account and as a debit in their rupee loan account. Often times this device is adopted in cases of such account‑holders who have committed default in payment of instalments. By adopting this device the bank assures that the foreign exchange account is straight and regular and the defaults get reflected in the rupee loan account. This entry in regard to overdraft of Rs.1 Lac shown in the accounts on 29‑6‑1970 was reversed on 26‑6‑1972. The entry was reversed because the defendants did not enter into agreement or execute documents necessary for sustaining of the overdraft. This reversing of the entry is reflected at pages 3 and 5 Exh.43.
Such entries are encircled in red."
From the above‑quoted portions or the evidence of the plaintiff's witnesses, it is evident that Rs.1 Lac loan was given under a separate account on the terms contained in the above‑quoted letter dated 23‑6‑1970, namely, the loan was to be repaid in 12 equal monthly instalments. The rate of interest was 9%. It is also evident that no notice was given to defendant No.1 by the plaintiffs for the execution of any documents in respect of the above fresh loan of Rs. 1 Lac as admitted inter alia by P.W.l. It is also apparent that before reversing the above entry in the foreign currency loan account no prior notice was given to defendant No.l.
Mr. A.I. Chundrigar has relied upon my observations contained in the judgment dated 20‑3‑1984, given by me in Suit No.96/74 Industrial Development Bank of Pakistan v. M/s. Haji Dosso Limited, which read as follows:‑
"It may be noticed that under the above‑quoted section 3. it has been provided that notwithstanding anything contained in any other law for the time being in force, the judgment of any Court, or any agreement, contract or other instrument the rate of exchange for the purpose of conversion is Pakistani currency for repayment in respect of outstanding foreign currency loan or any part thereof or interest in respect thereof is payable to the Financial Institution on the day of the commencing of the Order and shall be deemed at all material times to have been the rate of exchange in force under section 23 of the State Bank of Pakistan Act, 1956, on the date on which the loan, part or interest is actually repaid or paid to the Financial Institution and that all the parties by whom the loan, part or interest is repayable or payable shall make the repayment or payment accordingly. It is, therefore, evident that the intention of the Legislature by providing deeming clause in section 3 was to make a borrower of a foreign currency loan liable to repay loan on the basis of conversion of the foreign currency at the rate notified by the State Bank of Pakistan in section 23 of the State Bank of Pakistan Act, 1956, prevalent on the day on which the loan, part or interest in actually repaid or paid to the Financial Institution notwithstanding anything contained in any other law for the time being in force, the judgment of any Court or any agreement, contract or other instrument. In my view, the fact that on 20‑10‑1970 the above foreign currency loan were converted into local currency loan for the purpose of repayment has been nullified by above section 3 of the Order, which has retrospective effect and shall be deemed to be in force even on 20‑10‑1970. Furthermore, as observed hereinabove the above section 3 is to be given effect notwithstanding any law or agreement, contract or instrument."
9. In my opinion, the above observations are not relevant to the instant case. In the above‑cited case the question in issue was, whether the Industrial Development Bank of Pakistan were entitled to claim payment of the loan amount on the basis of the rate of foreign exchange obtaining on the date of actual payment on the assumption that a foreign currency loan existed in terms of section 3 of the LIN Order or whether they were to recover on the basis of a Pak currency loan in view of the conversion of the foreign currency loan into Pak rupee loan in the said case on 20‑10‑1970. While dealing with the above question, it was held by me that in view of the language of section 3 of the Order the aforesaid conversion of the foreign currency loan into Pak rupee loan was nullified, as above section 3 provides that notwithstanding anything contained in any other law for the time being in force, the judgment of any Court, or any agreement, contract or other instrument, the rate of exchange for the purpose of conversion into Pak currency for repayment in respect of an outstanding foreign currency loan or part thereof or interest in respect thereof on the day of the commencement of the Order and shall be deemed at all material times to have been the rate of exchange in force under section 23 of the State Bank of Pakistan Act, 1956, on the day on which the loan, part or interest is actually paid to the Financial Institution and that all parties by whom loan, part or interest is repayable or payable shall make the repayment or payment on the above basis. In the present case, the point in issue is, whether an entry of credit made by the plaintiffs on 26‑6‑1970 crediting Rs.1 Lac towards discharging partly the then outstanding amount of the foreign currency loan could have been reversed after the expiry of nearly two years on 26‑6‑1970, unilaterally. I am inclined to hold that the transction of Rs.1 Lac loan is a separate transaction in law and the credit entry of Rs.1 Lac in the foreign currency loan account cannot be reversed merely on the ground that this money was provided by the plaintiffs as a loan to defendant No.1 though under a separate loan transaction. In law the defendant No.1 had paid the above sum of Rs.1 Lac to the plaintiffs for discharging partly the then outstanding liability under the foreign currency loan. It is not the case of the plaintiffs that if defendant No.1 would have paid Rs.1 Lac from its own sources towards discharging partly the then outstanding foreign currency loan liability, they could have reversed the above entry of Rs. 1 Lac. It may also be observed the above credit of Rs. 1 Lac in the foreign currency loan account was given on the basis of converting the foreign currency into Pak Rupee at the rate of foreign exchange obtaining at the date of giving of the above credit in terms of clause 6 of the credit agreement Exh.6. I am further inclined to hold that section 3 of the Order does not nullify the payments which were already made towards the foreign currency loan on the basis of the rate of foreign exchange prevalent on the dates of payments prior to the enforcement of the Order. It speaks of "the outstanding foreign currency loan or any part thereof or interest in respect thereof payable to a Financial Institution". In this view of the matter, the credit entry of Rs.1 Lac in the foreign currency loan account could not have been reversed by the plaintiffs after the expiry of two years. It may also be pointed out that according to the plaintiffs P.W.1 the above entry was reversed as the defendant No.1 had failed to execute the documents pertaining to the above loan of Rs.1 Lac and not 'because section 3 of the Order. It may again be observed that the plaintiffs have not produced a single document to indicate that at any point of time they had asked the defendant No.1 to execute fresh documents in respect of the above loan of Rs.1 Lac. The plaintiff's three letters dated 13‑8‑1970 , 19‑10‑1970 and 11‑11‑1970 (all the three marked as Exh.31) only contain the demand for the payment of Rs.7,451.89. It is, therefore, evident that the ground for reversing the above entry of Rs.1 Lae given by the plaintiffs above witness is not sustainable. My findings, therefore, on issue No.3 is in the negative. The effect of the above finding would be that the foreign currency loan account is to be re‑worked out on the assumption that the above entry of Rs.1 Lac was correctly made and was not to be reversed.
As per clause 5(ii) of the Credit Agreement (Exh.6) the plaintiffs are entitled to interest on the loan at the rate of 7‑3/4% and as liquidated damages at 11% as per sub‑clause (iii) to above clause 5 of the Credit Agreement. From the statement of accounts, it seems that at some time the plaintiffs had charged interest at the rate of 11%. It may be pertinent to quote the relevant portion of the statement of P.W.2 Syed Rauf Ahmad Exh.42, which reads as follows:‑
"On amounts overdue interest has been charged at 11 per cent but on the other amounts whether in foreign exchange or Pakistan currency interest has been charged at 9 per cent."
It may be observed that the plaintiffs have claimed only 7‑3/4% interest from the date of the suit till payment. I have inter alia held in my judgment dated 20‑3‑1984 given in the aforesaid Suit No.96/74 that for the reasons recorded therein, the plaintiffs are not entitled to penal interest in any case from the date of the suit. As regards the penal interest prior to the date of the filing of the suit I had not held that the plaintiffs were not entitled to claim the same. It may be observed that in the case of Chuni Lai and another v. Munnalal and others reported in 131 Indian Cases 368, a Division Bench of the Lahore High Court in 1930 upon an appeal of a mortgagee granted 15% interest instead of 12% interest as per terms of the mortgage deed after the commission of the default. Without expressing about the correctness of the above view, it will suffice to observe that the defendants have not been able to make out a case for re‑adjustment of the entries in respect of the above 1J% interest in terms of clause 5(iii) of the credit agreement (Exh.6). However, the plaintiffs are not entitled to penal interest even for the period prior to the date of suit in foreign currency for the reasons recorded in the judgment dated 20‑3‑1984 referred to hereinabove in para. 14. The penal interest is to be calculated in Pak rupee for the period prior to the filing of the suit. The plaintiffs are entitled to interest at 7‑3/4% with six monthly rests from the date of the suit on the balance of the foreign currency loan amount in foreign currency and 9% on the above Pak rupee loan of Rs.1 Lac with six monthly rests.
This issue was not pressed in view of the clear language of section 3 of the Order.
It was contended by M/s. Nazir Hyder and Dastgir that since under the credit agreement the plaintiffs had recovered 3/4% towards the risk of foreign exchange rate, they were the insurers as to the risk of fluctuation in the rates of foreign exchange. On the other hand, it was contended by Mr. Chundrigar that this 1% was covered to cater for the risk of the Government of Pakistan and had nothing to do with the risk of fluctuation of foreign currency involved in the credit agreement. It may be observed that in view of section 3 of the Order, the defendants are obliged to pay at the rate of foreign exchange in force under section 23 of the State Bank of Pakistan Act, 1956, on the date on which the loan, part or interest is actually repaid or paid notwithstanding anything contained in any other law for the time being in force, the judgment of any court, or any agreement or contract or other instrument. Even if it is to be held that there was an agreement between the plaintiffs and the defendants contrary to section 3 of the Order, the same will not be enforceable. Furthermore, clause 6 of the credit agreement (Exh.6) expressly provides that the borrower shall bear the risk of fluctuation in the exchange rate of rupee and Pound Sterling and Deutch Marks. The above covenant was agreed to by the defendants notwithstanding that they had agreed to pay 1% towards the foreign exchange risk. My answer to this issue is that there is no effect of charging above 1% as the risk of exchange rate.
On this issue there is documentary evidence in the form of a search certificate dated 4‑9‑1965, issued by the Sub‑Registrar, Karachi, certified copy of the extract from the record of rights maintained by the City Survey Office, another search certificate dated 19‑4‑1965, issued by the Sub‑Registrar, Karachi, completion plan of the Bungalow, lease agreement dated 2‑4‑1960 executed between the President of Pakistan and defendant No.2 in respect of the plot of land bearing No.2/157‑5, Survey Sheet No.35/P‑1, measuring 1000 Sq. Yds situated in P.E.C.H. Society4 duly registered with the Sub‑Registrar on 6‑4‑1960 and memorandum of deposit of title deeds in respect of the above plot and the Bungalow thereon (Exh.14).
It was urged by Mr. Dastgir that the memorandum of deposit of title deeds (Exh.14) contains the terms and conditions of the mortgage and, therefore, the same should have been registered. It will be advantageous to reproduce herein below the above Exh.14, which reads as follows:
To,
The Industrial Development Bank of Pakistan,
Kandawala Building,
Corner of Garden/ M. A. Jinnah Road,
Karachi.
Dear Sir,
I/We hereby confirm, admit and acknowledge that the title deeds mentioned in the First Schedule hereto relating to the properties fully described in the Second Schedule hereto have already been deposited by me/us to and with you for securing repayment to you of the loan which you have granted and/or which you have agreed to grant to M/s. Chemfabs Limited Karachi, upto a limit of DM 1,79,160 equivalent to Pak Rs‑2,10,000 (Rupees Two Lacs and Ten Thousand Only) and with repayment to you of any further sum that may be advanced by you to M/s. Chemfabs Limited Karachi, by way of loan together with interest thereon at 7‑3/4 per cent per annum with six monthly rests and all other charges, costs, expenses and commissions which have been or which may be incurred or sustained by you or which have accrued or may accrue due to you.
(Description of title deeds)
(1) 99 Years lease‑deed No.1008 dt: 6‑4‑1960.
(2) Sub‑licence Form (A) No.464 dt: 18‑2‑1960.
(3) Search Certificate dated 4‑9‑1965.
(4) Extract from City Survey Officer dated 5‑5‑1965.
(5) Search Certificate dated 4‑5‑1965.
(Description of properties)
Bungalow No.157/2, P.E.C.H.S., Karachi, with all other construction & superstructures, etc.
Yours faithfully
Sd/
(Dr. M.R.Khan)"
A perusal of the above‑quoted memorandum of deposit of title deeds clearly indicates that this does not create a mortgage as to require the registration. It reduces in writing the factum that the title deeds mentioned in the First Schedule relating to the property mentioned therein have already been deposited by the executant with the plaintiffs bank in order to clear repayment of the loan mentioned therein. The above contention of the learned counsel for the defendant No.2 seems to be devoid of any force.
On the issue, it will suffice to refer to clause 4 of the Letter of Guarantee (Exh.11) executed by defendants Nos.2 and 3, which reads as follows: ‑
"(4) That you may as you think fit with or without reference or notice to us at all times without prejudice to this Guarantee and without discharging or in any way affecting our liability hereunder, grant time or other indulgence to or accept or make any composition or agreement with the Borrower or any person or persons liable in respect of the indebtedness and liability hereby guaranteed and also vary, abstain from perfecting exchange renew, discharge, release realise, enforce and deal with any securities, guarantees, obligations or decrees now or hereafter held by you in respect thereof."
Apart from the above express clause and other clauses of the Letter of Guarantee, which keep the above defendants liability intact. I have noticed that there was no inaction on the part of the plaintiffs as to disentitle them to invoke the above Letter of Guarantee. It is an admitted position that the plaintiffs had issued a number of notices for the payment of the dues. It is also an admitted position that the proceedings were initiated before the City Deputy Collector to recover the dues. My finding on the above issue is in the negative.
It was first argued by Mr. Dastgir that rupee loan of Rs‑1 Lac being a separate transaction could not have been included in the above suit under Order XXXIV, C.P.C. but subsequently he did not press this issue and, therefore, no finding is required to be recorded. However, it will suffice to observe that in the above‑quoted Exh.14 under Issue No.7, the defendant No.1 has acknowledged the factum of depositing of the title deeds for securing the loan mentioned in the above memorandum and also for subsequent loan which might be advanced by the plaintiffs. In this view of the matter, even otherwise on merits the above contention is devoid of any force. My finding on this issue is accordingly in the negative.
It was urged by Mr. Nazir Hyder, the learned counsel for defendants No.1 and 3, that under the schedule annexed to the credit agreement (Exh.6), the agreement entered into between the plaintiffs and the Foreign Lending Agency, has become part of the credit agreement. It has been further contended by him that the above 'agreement places embargo on the plaintiffs right to charge interest more than the amount of interest mentioned in the above agreement which according to the learned counsel was 21% above the interest mentioned in the above agreement which was 51%. It may be pertinent to quote the clause of the schedule to the credit agreement relied upon namely, clause 9 which reads as follows:‑
"The Borrower hereby declares' that it has duly inspected examined and studied the Administration Agreement between the Bank and Kreditanstalt Fur Wiederaufbau and the Borrower hereby agrees and undertakes to adhere to, abide by and comply with, all the terms and conditions contained in the said Administration Agreement."
From the above‑quoted clause, it cannot be spelled out that the plaintiffs cannot charge interest more than what has been provided in the aforesaid agreement entered into between the plaintiffs and the Foreign Lending Agency. In my view, the rights and obligations of the parties to the suit are to be regulated on the basis of the terms and conditions contained in the credit agreement (Exh.6). My finding on this issue is that there is no effect of the conversion of the loan amount into grant of DM 20 Million loan as to the liabilities of the defendants.
These issues can conveniently be taken up together. I have inter alia held in my judgment dated 5‑4‑1984 in J. Misc. No.18/78, Industrial Development Bank of Pakistan v. Yousuf Industries Limited and others that the plaintiffs are entitled to claim the payment in terms of section 3 of the Order only in respect of the balance of principal amount and the contract rate of interest i.e. in the present case 7‑3/4% but the other items are to be calculated in Pak Rupee. I see no reason to take different view in the present case. I would, therefore, hold that the plaintiffs are entitled to receive payment of the balance of principal amount of loan and 7‑3/4% being the contract rate of interest with six monthly rests in terms of section 3 of the Order i.e. the above two amounts are to be calculated in foreign currency and they are to be converted in Pak Rupee on the basis of the rate of foreign exchange obtaining in terms of section 3 of the Order on the date of actual payment/realisation. I have already held under issue No.3 that the plaintiffs were not entitled to reverse entry in respect of Rs.1 Lac Pak Currency Loan. The above amount is, therefore, to be excluded from the foreign currency account apart from the other items except the above two items, namely, the balance of principal amount and the interest at the rate of 7‑3/4%. The plaintiffs are entitled to receive Rs. 1 Lac with 9% interest with six monthly rests in addition to the other amounts in respect of the other items in Pak Rupee. The above case requires recalculation of the amount in terms of my above findings. It is a fit case for appointment of a Commissioner I, therefore, appoint the Nazir of this Court as the Commissioner who shall after notice to both the parties C take accounts and shall ascertain the amount payable by the defendants in the light of my findings and shall submit his report to this Court within four weeks from the date of the receipt of the copy of this order and each of the parties shall deposit a tentative fee of Rs.750 subject to final order. Upon receipt of the above report the final order as to the amount shall be passed for the purpose of mortgage decree.
A.A./1‑19/K Order accordingly.
Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.
🔍 Find a Lawyer