1989 PLP 927 (CLC)

and 2 others‑‑Defendants Suit No.556 and Civil Miscellaneous Appeal No. 4603 of 1986, decided on 8th November, 1988. ‑‑S. 6‑‑Civil Procedure Code (V of 1908), O.XXXVIII, Rr. 2 3‑‑Leave to defend suit‑‑Defendants opened accounts with plaintiff bank and obtained credit facilities‑‑Defendants executed promissory notes in order to secure repayments and hypothecations of goods were registered‑‑Defendants utilised credit facilities but failed to repay‑‑Defendants applied for leave to defend suits‑‑Receipt of credit facilities was denied‑‑Objection for improperly stamping promissory notes was raised‑‑Defendants had purchased bunkers from a third party to whom payment was made and their value was recovered by plaintiffs Dubai Branch from foreign parties as it had purchased bills from the defendant‑‑Held, that defence raised no real issues in the case so as to entitle the defendants to unconditional leave to defend‑‑Leave to defend suit$ was allowed in circumstances with direction to furnish security. Khalid Anwar for Plaintiff. A . Rauf for Defendants. Union Bank of the Middle East filed the above suit to recover Rs.5,303,640.35 from Consolidated Shipping Ltd. and two others under the Banking Companies (Recovery of Loans) Ordinance, 1979 (hereinafter referred to as the Ordinance). It is alleged in the plaint that the defendant No.l opened Account No.1672 with Dubai Bank Ltd., in January, 1982. The defendant No.l also opened an account bearing No.1675 with the plaintiffs‑bank. The said accounts were again renumbered as 506752‑001 and 506752‑004 respectively in 1986. The defendant No.l applied for and was sanctioned overdraft facility in relation to Account No.1672 in the sum of Rupees One Million on or about 16‑1‑1982 which was subsequently enhanced and credit facility up to Rupees Two Million (in relation to Account No.1675 for export of loans and/or overdraft). The Defendants 2 and 3 acted as guarantors. It is the case of the plaintiffs‑bank that by way of security for the grant of the aforesaid credit facilities and in order to secure the repayments thereof the defendants executed demand promissory notes in the sum of Rs.10,000,000 on 14‑6‑1983 by defendant No.l, Agreement of Hypothecation of Goods dated 20‑12‑1982 duly registered under section 114 of the Companies Act, 1913, Agreement of Hypothecation of inland and foreign bills dated 7‑2‑1983 duly registered under section 114 of the Companies Act, 1913, two letters of guarantees dated 14‑6‑1983. It is further alleged that the defendant No.l fully utilised the credit facilities extended to it by the plaintiffs‑bank from time to time but failed/neglected/refused to repay the plaintiffs the sums due and payable to it. It is alleged that in January, 1985 a sum of Rs.19,93,502.25 was outstanding in Account No.137928‑000 and a sum of Rs.22,70,297.69 was outstanding in Account No.137928‑

003. The defendant No. l was requested to deposit sufficient funds into the above accounts . to bring them within the sanctioned limits of Rs.1.5 million and Rs.2 million by means of a letter dated 30‑1‑1985. The defendants did not take any steps to reduce the outstandings to bring them within the sanctioned limit. Ultimately the plaintiffs branch served formal Legal Notice on the defendant No.l as borrower and the defendants 2 and 3 as guarantors. The defendants made no payments to meet their liability and by 4‑6‑1986 a sum of Rs.5,303,640.35 was outstanding. Hence the suit for Rs.5,303,640.35 with costs and future interest calculated at 14$ per cent per annum with quarterly rests. On receipt of the notice of the suit the defendants moved an application under Rule 3 of Order XXXVII of the Code of Civil Procedure for leave to appeal and defend the suit. It is alleged in the application that the Dubai Bank did not advance Rupees ten million. The promissory note is without consideration and the promissory note was not properly stamped. It is the case of the defendants that defendants had supplied Bunkers to various vessels after purchasing the same from Messrs Caltex Pakistan Ltd. The Bank of Dubai had paid the amount to Caltex and the value of the Bunker was recoverable from foreign parties. The plaintiff has not filed correct accounts. The plaintiff has shown balance of Rs.19,93,502.25 and Rs.22,70,297.69. If the interest even at the rate of 14 per cent is calculated the total amount with interest comes to Rs.48,60,619 up to 31‑1‑1985 and Rs.51,59,029 up to 30‑6‑1986. The case of the defendants as set out in the application is that the defendants were entitled to recover the amount from the foreign principals. It is the further case that the Bank purchased the bills and agreed to recover the amount in question from its foreign principal. The Bank filed counter‑affidavit wherein the allegation of purchasing the bills was denied. The allegation that promissory note was not duly stamped was also denied. I have heard the learned counsel for the parties. The execution of promissory note, hypothecation of debts, agreement of hypothecation of goods and two letters of Guarantee are not denied. The defendants admitted in the application that the defendant No.l purchased the Bunker for supplying the same to various foreign principals from Caltex (Pakistan) Ltd. It is also not denied that payment for this Bunker was made to Caltex (Pakistan) Ltd. , by the defendant No.l issuing various cheques on its account maintained with the plaintiff's bank. The defendant No.l was entitled to recover this amount from its foreign principals since it had supplied the bunker to them. However, the case of defendant No.l as set out in the application that the plaintiff‑bank purchased the bills and agreed to recover the amount from the foreign principals. I have perused the documents annexed to the plaint, application, counter‑affidavit and rejoinder affidavit. A perusal thereof shows that the plaintiff‑bank did not agree to purchase the bills but on the contrary the defendant No.l, requested the plaintiff‑bank to credit the amount of the bills in its account. The credit facility was availed by the defendant No.l and the promissory note was executed as security. The promissory note was for Rs.10,000,000 and according to defendants' own showing it was executed. The law has placed suits based on negotiable instruments, which carry a presumption as to their having been made or drawn for consideration in a special class and that because of such matters deserve more expeditious processing. The rules enacted on the subject are so vigorous that unless the Court's leave is obtained the defendants are not entitled what to speak of defending the suit to appear in the same. I am of the view that if the defendant has disclosed such facts as may be deemed sufficient to entitle them to defend, that is to say, although the affidavit does not positively and immediately make it clear that they had a defence yet shows such a state of facts as leads to inference that at the trial of the action they may be able to establish a defence to the plaintiffs claim the plaintiff is not entitled to judgment, and the defendants are entitled to leave to defend, but in such a case the Court in its discretion may impose conditions. Of course, I am not expressing any opinion of the case and I am not finally deciding any of the questions which have been raised in the application for leave to defend. Prima facie I am satisfied that the defence raised by the defendants in their application and the affidavit in support of the application raises no real issues in the case so as to entitle them to unconditional leave to defend. I would, therefore, accept the defendant's application and allow them to defend the suit, but this is subject to their furnishing security within one month to the satisfaction of the 'Nazir' of this Court in the sum of Rs.5,303,640.35. The case shall be listed before the Additional Registrar for further directions on 29‑11‑1988. M.Z.S./U‑44/K Application accepted.