P L D 1988 Karachi 628 (PLP)

AJMAL MIAN, J.‑‑(1) The following question has been referred to this Full Bench for its opinion:‑ "Where the appellant does not deposit, the decretal amount Court before admission of appeal can the security furnished to the Bank for repayment of loan be treated as a security for the purposes of admitting the appeal as required under section 12(5) of the Ordinance?"

2. The facts leading to the making of the reference have been succinctly stated in the referring order and need not to be repeated. However, it will suffice to observe that a mortgage decree for a sum of Rs.12,89,716.74 with interest at 14$ per annum with quarterly rests on the decretal amount from 17‑9‑1984 till payment and costs was passed on 27‑8‑1986 against respondents Nos. 2 to 5 and the appellant/ defendant No.4, who was a guarantor of the suit loan amount by a learned single Judge of this Court in Suit No. 824 of 1984 on the original side, while acting under the Banking Companies (Recovery of Loans'! Ordinance, 1979 (hereinafter referred to as the Ordinance). Tae appellant being aggrieved by the judgment/decree had filed the above appeal on 1‑12‑1986 without depositing of the decretal amount or without furnishing of security of the decretal amount with the permission of the Court in terms of sub‑section(5) of section 12 of the Ordinance, But the above appeal was admitted to regular hearing on 11‑‑12‑1981 by a Division Bench of this Court.' When the stay application came up for hearing, the learned counsel for the respondent/the decree-holder Mr. Iqbal Kazi prayed for re‑calling of the admission order for want of compliance of section 12(5) of the Ordinance. Since there are conflicting views of the Benches of MIS Court on the question, whether a security furnished to the bank for repayment of a loan amount can be treated as a security, for the purposes of above section 12(5), the above question has been referred to this Full Bench.

3. Mr. J.H. Rahimtoola, learned counsel for the appellant in the above appeal has urged that there is nothing in sub‑section (5) of section 12 of the Ordinance as to exclude the acceptance of the same security under the above subsection, which was given against the repayment of loan at the time of obtaining of the loan.

4. On the other hand Mr. lqbal Kazi, learned counsel for respondent No. 1 / decree‑ holder has made two‑fold submissions, namely, that subsection (5) of section 12 of the Ordinance contemplates security aliunde and secondly, that in any case the security given against the loan may be available to the judgment‑debtor, who had furnished the security at the time of the loan and not to a judgment‑debtor, who had not furnished the security.

5. Mr. J.H. Rahimtoola in support of his above submission that there is nothing in subsection (5) of section 12 as to exclude the acceptance of the same security under the above subsection, which was given against the repayment of loan at the time of obtaining of the loan, has referred to the language used in subsection (5) of section 12, whereas Mr. lqbal Kazi has in addition to the placing of reliance on the above section 12 as a whole, has referred to an unreported order passed in First Appeal No.60 of 1980 (Consolidated Sugar Mills Ltd. v. Pakistan Industrial and Credit Investment Corporation), wherein a Division Bench while dismissing the stay application in an appeal filed under section 12 of the Ordinance made following observations:‑ "On a plain reading of the provision, it would be very clear that stay cannot be granted, rather an appeal cannot be admitted, unless the appellant deposits in cash an amount equal to the decretal amount, or, if the High Court so orders in its discretion, security is furnished. We asked Mr. Zari if he was prepared to deposit the decretal amount, and his main contention was that the respondent was fully secured, as the mill itself was mortgaged with the respondent, who also had a floating charge on the mill and held a full power of attorney in regard to the assets of the appellant mill. It seems Mr. Zari would wish us to interpret subsection (5) of section 12 of the Ordinance in the manner that, if a security had been given by the judgment‑debtor at the time of obtaining the debt, the same should be considered to be sufficient even after the decree has been passed. We are afraid we cannot accept that contention in view of plain terms of law. On the other hand, we are of the view that the Legislature was conscious that banking loans are generally advanced after security because if that was not so, then section 4 may not have found a place in the Ordinance. Section 4 provides for the Banking Company calling upon the debtor to furnish further security. On such premises, we are very clear in our mind that subsection (5) of section 12 of the Ordinance contemplates security aliunde, and without reference to the security that was offered at the time of obtaining the loan, or the mortgage that was created at that time. In these circumstances, we asked Mr. Zari if the appellant could furnish Bank Guarantee, and, in fact, Mr. Aziz Munshi with his usual fairness, stated before us that if a Bank Guarantee is furnished by the appellant the decree may be stayed. Mr. Zari stated that the appellants were in no position to furnish Bank Guarantee." He has also referred to the case General Investment Ltd. v. Dubai Bank Ltd. 1982 CLC 2252, in which another Division Bench of this Court while ordering the placing of respondent /decree‑holder's application for recalling of the admission order of the appeal on the ground of failure to deposit the decretal amount or at the discretion of the Court to furnish security in respect thereof observed that the security referred to in section 12(5) of the Ordinance is aliunde and independent of the security which in the circumstances may be the subject‑matter of the suit itself. He has also invited our attention to an order passed by another Bench in the above reported case upon respondent/ decree‑holder's application for recalling the order of admitting the appeal, and wherein it was held that the property mortgaged with the respondent should be treated as a security in terms of section 12(5), and thus a contrary view was taken. It may be pointed out that in the latter case the parties filed Petitions for Leave to Appeal against the above orders before the Supreme Court but the same were disposed of by consent of the learned counsel for the parties and the matter was remanded to the High Court with the direction to decide the question, whether the value of the mortgaged property was sufficient to cover the decretal amount and in case of any deficiency, the same should be ordered to be made good by furnishing additional security.

6. To re‑enforce his above submission Mr. lqbal Kazi has contended that the Ordinance provides a special procedure for the disposal of a suit and an appeal arising therefrom against a final judgment /decree; and that the intention of the law‑makers was to minimise the period of litigation by providing in the proviso to subsection (1) of section 12 that no appeal shall lie against an interlocutory order which does not dispose of the entire case before the special Court and by making the right of appeal confined to the grounds mentioned in subsection (2) of section 12 and by providing deposit of decretal amount or at the discretion of the Court to furnish security equivalent to the judgment debt. It was further contended by him that, if we were to keep the above object in view the only inference can be that the security referred to in subsection (5) is a security aliunde and independent of the security furnished against the loan. In support of his above submissions, he has referred the case of Muhammad Muzaffar v. Allied Bank of Pakistan PLD 1987 Kar. 501, in which a Division Bench of this Court has held that appeal against an interlocutory order which does not dispose of the entire case before the special Court does not lie. He also placed reliance on the case of Mir Afzal v. Allied Bank of Pakistan Ltd. and others 1986 SCMR 1533 and the case of Col. (Retd.) Syed Mukhtar Hussain Shah v. Wasim Sajjad and 30 others PLD 1986 SC

178. In the former case the Hon'ble Supreme Court declined petition for leave against an order of the Peshawar High Court dismissing the petitioner's application to ,substitute some other security in place of furnishing of the Bank guarantee in terms of subsection (5) of section 12 of the Ordinance, whereas in the latter case, the Hon'ble Supreme Court enunciated inter alia, the principles of interpretation of statutes on the question whether a particular provision in a particular statute is directory or mandatory and inter alia observed that if an affirmative direction is followed by a negative, the same makes it mandatory. In our view, the above two citations are out of context. The basic question before us is, as to whether from the language employed in subsection (5) of section 12 of the Ordinance, we can infer that an appellant/judgment debtor is required to furnish security aliunde and independent of the security furnished by him against the loan amount. In this regard, it may be advantageous to reproduce subsection (5) of section 12 of the Ordinance, which reads as follows:‑ "(5) No appeal shall be admitted for hearing unless the appellant deposits in cash with the High Court an amount equivalent to the judgment debt or, at the discretion of the High Court, furnishes security equal in value of such amount."

7. A plain reading of the abovequoted subsection (5) indicates, that it does not prohibit the filing of an appeal without depositing oil an amount equivalent to the judgment debt or at the discretion of the High Court furnishing of security of equal value to such amount but it prohibits admission of an appeal. To put it precisely ant appellant/judgment‑debtor can present an appeal without deposition of the decretal amount or furnishing of security in the above terms but he cannot seek admission of the appeal without either depositing the amount of judgment debt or at the discretion of the Court furnishing of security equivalent to such amount. It may also be noticed that the above subsection (5) does not specify the nature of security which is to be accepted but on the contrary it gives discretion to the Court to accept security equal to the amount of judgment debt. In our view, if we were to accept the contention of Mr. Iqbal Kazi that a security furnished against a loan amount cannot be accepted as a security in terms of above subsection (5), we would in fact be reading into the above provision, the words "other than the security already furnished against the loan amount", which are not employed therein. We are inclined to hold that the word "security" used in the above subsection will include any security equivalent to the amount of judgment debt to the satisfaction of the Court. It will also include even the security which was originally accepted against the loan.

8. We may also observe that if an appellant wishes to furnish security in place of depositing of an amount equivalent to the judgment debt, lie will halve to make an application to the Court for obtaining an order to that effect. The Court while disposing of such an application after notice to the parties will have to dilate upon the question, whether the security which was furnished against the loan, amount at the time of obtaining loan is still valid and sufficient to cover the judgment debt. If a respondent/decree‑holder can demonstrate before the Court. that on account of the passage of time or for any other reason, the security which was accepted by him against the loan account has lost its value or its value is substantially produced or that the property which was accepted by the respondent at the time of granting loan is such, which is not readily disposable, the Court in such a case will have to appropriate order to pass an a ensure that in case of dismissal of the appeal the judgment debt is realised without any further delay. The Court has discretion either to ask for additional security for the deficient amount or to reject such a security and ask for a fresh security if the facts of the cases I demand. We may further observe that the question, whether the security which is being offered by an appellant/judgment‑debtor is~ sufficient to cover the judgment debt is to be decided by the Court afresh and, therefore, the factum that the respondent/decree‑holder had accepted certain property or other articles as a security against the loan amount, would not constitute an estoppel against the respondent/decree‑holder as to debar him from pleading that the facts of the case demand that the security which was accepted against the, loan, should not be accepted.

9. As regards the second submission of Mr. Iqbal Kazi that in, any case the security given against the loan may be available to the judgment‑debtor, who had furnished the same at time of obtaining of the loan and not to a judgment‑debtor, who had not furnished it, it may be observed that if the judgment‑debtor, who had furnished the security at the time of obtaining of the loan is willing to re‑tender the sage security in terms of subsection (5) of section 12 of the Ordinance on behalf of the appellant/judgment‑debtor, who might hive not furnished the security against the loan, the Court can accept C the above property as a security in compliance with the above provision provided it covers the amount of judgment debt and there is no legal impediment in respect thereof. We may further observe that an appellant will have to file affidavits of the owner/owners of the property before the Nazir of this Court and the copies thereof are to be given to the other side as per rules of the Court and the Nazir will have to go into the question of validity and sufficiency of the security tendered in the absence of any consent on the part of the decree holder.

10. The upshot of the above discussion is that our answer to they' abovequoted question is that the Court has discretion even to accept the security furnished to the Bank for repayment of loan as a security for the purpose of admitting the appeal in terms of section 12(5) of the Ordinance, provided it covers the amount of the judgment debt and there is no legal impediment in respect thereof. A.A./U‑38/K. Reference answered.