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High Court Appeal No.37 of 1973, decided on 25th February, 1987.

‑‑‑O.XXXVII, Rr. 2 & 3‑‑Banking Companies (Recovery of Loans) Ordinance (XIX of 1979), Ss. 6, 7 & 12‑‑Suit for recovery of loans‑ Application for leave to defend suit, rejection of‑‑Appeal against‑ Application of defendants to appear and defend recovery suit filed against them, was rejected by Special Court in spite of fact that defendants had made out plausible defence and had raised triable issues requiring determination by Court‑‑Order of special Court rejecting application of defendants was set aside by High Court in appeal with direction that security already deposited by defendants should be treated as security for purpose of suit.

P L D 1963 S C 163 ref.

Waheed Farooqui for Appellants.

I.H. Zaidi for Respondent.

Date of hearing: 25th February, 1987.

This High Court Appeal is directed against the order passed by learned Single Judge of this Court dated 19‑3‑1973 in Suit No.336/72 whereby he rejected the application of the appellant under Order XXXVII, Rules 2 and 3, C.P.C. for permission to defend the suit and decreed the suit of the respondent /plaintiff .

We have heard the learned counsel for the parties and have also gone through the record and proceedings of the case.

The facts of the case briefly are that the appellant No.1 and one Tariq Hussain Niazi who were carrying on business in partnership maintained four accounts with‑ the Meri weather Tower Branch of respondent who is a Banking Company. These accounts were Nos.107, 130, 181 and 13. Accounts Nos.130 and 181 were Joint Account, while Account Nos.107 and 13 were in the name of Tariq Hussain only. In these Accounts unauthorised credits were given on the dishonouired cheques. The Accounts were adjusted and it was found that a balance of Rs.1,70,000 was outstanding against defendant No.1 and Tariq Hussain. Defendant/ Appellant No.1 and defendant /appellant No.2 who was grandfather of Tariq Hussain guaranteed to pay this amount and executed such promissory notes. Each of the two defendants/ appellants executed separate promissory notes in sum of Rs.1,70,000 a letter of continuity, a D.P. note. Appellant No.1 also executed acknowledgement of the debt of Rs.1,70,000 in respect of Account No.130 and appellant No.2 executed a letter of guarantee. All these documents were executed by the appellant on 29‑5‑1971. The appellants however, failed to make the payments hence the suit, whereby the plaintiffs/ respondents claimed Rs.2,00,055.64 with 10 per cent interest per annum from the date of filing of the suit which was decreed by the impugned order.

Both the appellants had filed application under Order XXXVII, Rules 2 and 3, C.P.C. for permission to defend the suit. In their applications and affidavits and in support of the applications, various grounds were urged. It was alleged therein that the amounts had been withdrawn by Tariq Hussain who is son of Col. A.W. Niazi, who was very influential person and under whose influence, the plaintiff/respondent threatened and pressed the appellants to execute the said promissory notes and other document and thereby saving Tariq Hussain. It was further contended that the Accounts between the parties have not been settled and the plaintiff /respondent had not rendered any Account to fix the dues against them. It was further contended that liability of appellant No.1 was only to the extent of Rs.1,02,000 whereas appellant No.2 had undertook to pay Rs.68,000 only on behalf of Tariq Hussain. In this respect, reliance was placed on certain statements made by the parties in proceedings before the Martial Law Authorities. It was also contended that certain payments have been made to the Bank which have been shown in paragraph 4 of the application under Order XXXVII, rule 2, C.P.C. filed by appellant No‑.2 which are produced as under:‑

"4. It was agreed that I will undertake to pay the liability of Tariq Hussain i.e. Rs.68,000 persuant to this I made the following payments to the plaintiff Bank:‑

(1) 26‑5‑1971 ‑ By cheque No.AKEA‑447115 Rs. 2,465

(2) 24‑8‑1971 ‑ By cheuqe No.AKEA‑447126 Rs.20,000

(3) Sale proceed of the car which was sold

by Mr. Firdous Khan of Sarhad Bank Rs. 5,250

(4) Documents of Plot of Land in Ayub

National Park Rawalpindi (Appx) Rs.35,000

Documents handed over to Mr. Z.U.

Ahmed Legal Adviser to Sarhad Bank

as the Bank insisted that Bank will

sell the property themselves.

Total: Rs.62,715"

In counter‑affidavit filed on behalf of the respondent in Para 6 of the payments shown in para 4(l)(2)(3) of the application are impliedly admitted but it was stated that the said amount was placed in Suspence Account and it was adjusted in some other Accounts of Tariq Hassan. It is contended that the appellant No.2 had undertaken to pay the liabilities of his grandson Tariq Hassan and, therefore, the respondent exercising the general lien credited the same to other Accounts of Tariq Hassan.

It is contended by the learned counsel for the appellants that the liability of appellant No.2 arose only on the basis of the documents executed by him which limited his liability and guarantee to Rs.1,70,000 for which he had executed the promissory note as well as the letter of guarantee and, therefore, the Bank could not have credited the said amount to any other Accounts. Whether there was any other undertaking given by the appellant No.22 as an issue that could be decided by the Court after holding trial.

It was further contended that the averments made in pars. 4 (iv) is that the document of plot of the land in Ayub National Park Rawalpindi was handed over by appellant No.2 to Mr. Z.U. Ahmed Legal Adviser of respondent, who had not filed any counter‑affidavit to deny this averment. Therefore, the Court had to try the case to find out as to what became of this plot. It is contended that all these contentions of the appellant in their application and affidavit require trial and a plausible defence is made out by them, therefore, the Court without trial could not have fixed their liability. Reliance is placed on P L D 1963 S C 163 where their Lordships have made the following observations:‑

"Where the defendant discloses upon his affidavits facts which may constitute a plausible defence or even show that there is some substantial question of fact or law which needs to be tried or investigated into, then he is entitled to leave to defend. What is more is that even if the defence set up be vague or unsatisfactory or there be a doubt as to its genuineness, leave should not be refused altogether but the defendant should be put on terms either to furnish security or to deposit the amount claimed in Court. The principles upon which the provisions of Order XXXVII of the Code of Civil Procedure, 1908 should be applied are not dissimilar to the principles which govern the exercise of the summary power of giving liberty to sign final judgment in a suit filed by a specially endorsed writ of summons under Order XIV of the Rules of the Supreme Court in England. One of such principles laid down by the court of Appeal is that at the stage when leave to defend is sought the Judge is not to try the action; he is to see that there is a bona fide allegation of a triable issue, which is not illusory; he need not be satisfied that the defence will succeed: it is enough that such a plausible defence is verified by affidavit. Under Section 118 of the Negotiable Instruments Act, 1881 there is an initial presumption that a negotiable instrument is made, drawn, accepted or endorsed for consideration, but this presumption and the onus is on the person denying consideration to allege and prove the same.

Mr. I.H. Zaidi appearing for the respondent could not satisfy us as to how the payments mentioned above specially payments at No. (2) and (3) which were made after the execution of promissory note, could be adjusted in some other account. He also could not satisfy the Court as to what happened to the documents of the plot.

In our view plausible defence has been made out by the appellants and triable issues have been raised which require determination by the Court.

We, therefore, allow this appeal, set aside the judgment/decree, grant the appellant leave to defend the suit. The appellants have already furnished security, which may be treated as the security for the purpose of the suit.

H.B.T. /M-164/K Appeal allowed.

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