1986 PLP 24 (MLD)

"It is now well‑recognized that the banker, unless precluded by agreement, is entitled to combine different accounts of a customer. " The learned Court in the said case also referred to the case of Cranett v. M'Kewan (1873) 8 Ex Ch. 10) wherein it was held that unless precluded by agreement the banker is entitled at any time to combine different accounts kept by the customer in his own right, whether deposit or current and to exercise his lien or set off for the resulting balance. It is neither the case of the defendant No.1 that there was any agreement to the contrary nor the learned counsel for the defendant No.1 was able to point out anything even to suggest that the plaintiff bank was precluded from transferring the amount of Rs. 16,694.97 outstanding against the defendant No.1 to the main account of defendant No.

1. For the abovementioned reasons Issue No.3 is answered in the affirmative and it is held that the plaintiff‑bank was entitled to transfer to the account of defendant No.1 the sum of Rs. 16,694.97 which was outstanding against him in another account. It may be observed that the defendant No. 1 was unable to show that any prejudice has been caused by the transfer of the disputed entry.

11. Regarding Issue No. 4: This issue was not pressed by the defendant No.1. Accordingly, the same is answered in the negative.

12. Regarding Issue No.1: The defendant No.2 guaranteed repayment of the amount of loan under the‑facility granted to the' defendant No.1 as per deed of guarantee, dated 25th August, 1965 Exh. 6/50. The defendant No.1 when confronted with the said document admitted that it bears the signature of his younger brother the defendant No.2. In para. 7 of the plaint it has been expressly pleaded that the defendant No.2 in acknowledgment of his liability to pay the plaintiff's dues as a guarantor executed the deed of guarantee, dated 25th August, 1965 thereby agreeing to pay the plaintiff's dues, which might be found due and payable from the defendant No.1 to the plaintiff. The defendant No.2 though filed his written‑statement but has chosen to remain absent and has not been cared to lead evidence challenging the statement made in the plaint or the evidence. The deed of guarantee Exh. 6/60 executed by the defendant No.2 produced by the plaintiff and admitted by the defendant No.1, thus stands duly proved. In view of the above facts, the Issue No.5 is answered in the affirmative. The defendant No. 2 is accordingly held to be liable as guarantor to repay the amount due by the defendant No.1 to the plaintiffs in accordance with and on the terms and conditions mentioned in the deed of guarantee, dated 25th August, 1965 (Exh. 6/50).

13. Regarding Issue No.6: The deed of guarantee executed on 25th August, 1965 (Exh. 6/50) expressly provides that it is a continuing guarantee and that the plaintiff‑bank shall be at liberty to take steps to enforce payment of the promissory note at any time after notice, demanding payment of the amount due from the principle debtor, posted to the guarantor at his usual or last known address and that any default made in payment for three days after the posting of such notice, shall entitle the plaintiff to recover the amount due and enforce the guarantee against the guarantor. It also provides that no default of the bank in requiring or enforcing the observance or performance of any of the stipulations or terms or the granting of any time or the renewing of any agreement, shall have the effect of releasing the guarantor from his liability or of prejudicing the Bank's rights or remedies against him. The defendant No.2 as noticed above has chosen to remain absent though served with the summons and there is nothing on the record to justify his plea that the said defendant No.2, the guarantor, was discharged. The plea taken by him in para. 2 of his written statement whereby he denied that he is the guarantor of the defendant No.1 is falsified by the deed of guarantee Exh. 5/60. Further the plea that the alleged guarantee if any stood discharged, without any mentioning any fact justifying such a plea, and in the absence of any evidence the plea raised cannot be accepted. Mr. Rehmani, the learned counsel for the defendant No.1 was unable to advance any argument in support of the plea that the defendant No. 2 in any manner has been discharged from the guarantee furnished by him. The learned counsel faced with this situation, submitted that this issue does not concern the defendant No.1 for whom he appears. Accordingly the issue No.5 is answered in the negative.

14. Regarding Issue No.7: It is admitted by both the parties that the defendant No.1 as security for repayment of any amount due by him pledged with the plaintiff his stock of papers which was stored by the defendant No.1 in the godown rented by him situated at Lawrence Road, Karachi. It is the case of the plaintiffs that they took possession Of the said stock on the basis of the statement of the defendant No.1 regarding the contents and the quality thereof, the defendant No.1 agreeing that in case defects, shortcomings or inaccuracies as to the quality and quantity were found in the stock pledged, he shall be alone responsible for the same. It is the case of the plaintiff, as pleaded and supported by the plaintiffs officers Muhammad Mazharul Haq (Exh. 8) and S. 2isuddin (Exh. 9) that subsequently, it was discovered that the quality of the paper which was pledged by the defendant 'No.1 was not the one which was declared by, him but of much inferior quality, and that he had deliberately wrongly declared the quality oaf the goods as superior. A survey has carried out of the said goods on 1st March, 1968 by Mr. Agha Rafiq Ahmed of Messrs Agha & Company who submitted the report; dated 14th March, 1968. A copy of the said survey report was produced alongwith the plaint as Annexure "H", copy of which was also supplied to the defendants alongwith the plaint. In the said survey report the description, qualities and value of the goods have been given. The survey report subsequently produced in evidence and marked as Exh 6/ 1, was put to the defendant No. 1 in his cross‑examination. This report was proved by the plaintiff‑bank who examined Mr. Agha Rafiq Ahmed, the surveyor who deposed that he had conducted the survey and prepared the survey report marked Exh. 6/1. The said report showed the valuation of the stock pledged. The defendant (Sarfaraz Khan) made a significant statement that the goods on arrival, used to be cleared by his clearing agents and that the same after clearance of used to be stored in godown, he then stated: "I cannot say what was the quantity and quality of the paper and board which was for the first time pledged with the plaintiff bank." To a further question put to him in cross‑examination, it was stated:‑‑ "I have record about the stock of paper and board pledged with the bank from time to time. I also have record of delivery obtained by me from the bank from time to time. I cannot say if I have produced the record referred to above in Court. It is correct that if I would have produced the above record it would show the quantity as well as gads pledged with the bank. Reference may here also be made to the plaintiff's letter, dated 15th June, 1967 Exh. 9/3 which was addressed to the defendant No.1 wherein it was expressly stated that the samples of stocks pledged by him with the plaintiff bank were shown in the market and it was found that he had declared some items of the stock of high quality with higher rates than their actual quality and market prices and that in this respect the defendant No.1 had personally discussed the matter with the Manager of the plaintiff‑bank when the defendant No.1 had promised to regularise the account but he had failed to do so. The defendant No.1 was accordingly called upon to adjust the account by depositing Rs. 2, 26, 732 together with accruing interest within 7 days from the receipt of the said notice failing which he was warned that the stock pledged would be disposed of without further notice and legal proceeding would be instituted against him for the shortfall. The defendant No.1 in his reply, dated 17‑6‑1967 (Exh. 6/70) however, contended the quality of goods pledged was correct and prices were based on market value at the time of the pledge. He further stated that he would be able to lift the entire stock by making full payment. Correspondence on the subject continued, plaintiff complaining as to the quality and value of pledged goods and demanding repayment with the warning that in case of default the pledged goods would be disposed of and short would be recovered while the defendant No.1 alleged that its quality was correct, that he would clear the entire dues soon within periods mentioned by him and that if action as threatened was taken, he would hold the bank responsible for the losses suffered by him. In the light of the above discussion, I find that the plaintiff's case that the goods pledged by the defendant No.1 was of inferior quality and of lesser value is supported by the evidence of Mr. Agha Rafiq Ahmed (P.W.1 Exh. 7) who carried out the survey on 1‑3‑1968 in the godowns of the defendant No.1 situated at Lawrence Road, Karachi. The survey report, dated 14‑3‑1968 (Exh. 6/1) has been produced by him. The surveyor frankly admitted that he had drawn samples of all items mentioned in the report but had made no enquiries with regard to quality of the paper. The statement of the witness, the surveyor, remained unrebutted. As against the above evidence of plaintiffs except the word of the defendant No.1, who obviously is an interested party, I find that neither he cared to produce the record of purchase or import of the said pledged goods nor the other records, which he in his evidence admitted to be with him, in proof of his case that the quality or value of the said goods was otherwise than what the plaintiff's witnesses had stated, The defendant No.1 has suppressed the material record in his possession. It is obvious as also admitted by the defendant No.1, that he produced the record it would have shown the correct quantity, the quality and value of the pledged stock. For the reasons that the defendant No.1 has suppressed material record, the Court is entitled to draw adverse presumption against him. For the above reasons, I hold that the paper pledged by the defendant No.1 was inferior in value than what was represented. The Issue No. 7' is answered accordingly.

15. Regarding Issue No.8: As to the acknowledgments made by the defendant No.1 of his liability to pay the dues to the plaintiffs the learned counsel for the defendant No.1, was hardly able to contest the plaintiffs case that he duly made acknowledgments from time to time. I may briefly refer to the acknowledgments made by the defendant No.1. The first in the series is the pronote, dated 25‑8‑1965 followed by letter, dated 6‑10‑1966 of defendant No.1 promising/ assuring the plaintiff, that as per his "repayment programme" submitted by him to the plaintiff, he shall make payments, thus regularly decreasing his liabilities. Thereafter, the defendant No.1 wrote letter, dated 25‑9‑1967 (E.xh.. 602) to the plaintiff whereby while promising to repay the dues, he promised:‑

"We also assure you that we will definitely clear all our liabilities within one year if we get your co‑operation and assistance." Then on 14‑11‑1968, by his letter (Exh. 6/62) the defendant No.1 in which while requesting the plaintiff to waive the "forced" liabilities (created by what the defendant No.1 mentioned as overcharging of the interest, penal interest and other banking and incidental charges) promised to liquidate the dues. The issue No. 8 is accordingly answered in the affirmative, holding further that the suit filed on 12‑3‑1971, is within time.

16. Regarding Issue No. 9: The defendant No.1, who opened the case an a evidence in t e first instance, thus taking upon himself the onus, stated in his evidence (Exh. S) that at the time of delivery of paper stock pledged (paper and board) in his godown where the same was stored, the bank inspector and godown keeper used to inspect the quality of the said goods and that the key and control of this godown was exclusively with the plaintiff‑bank, and that the stock at time was equivalent to 85% of the investment of the bank, After referring to Annexure 'H' to the plaint (i.e. to the survey report subsequently marked Exh. 6/1), the defendant No.1 stated that, the survey was made without reference to him. He then made the following significant statement:‑‑-- "I cannot say whether the valuation show in Annexure 'H' to the plaint is correct or not as it was done in 1968." This statement of the defendant No.1 does not in any manner contradict the case of the plaintiff that the value of the pledged stock was much below the value declared, in any case the value thereof was low as shown in the survey report Exh. 6/1, dated 14‑3‑1968, and thus the plaintiff‑bank was fully justified to call upon the defendant No.1 to regularise the account by taking delivery and clearing the dues. Mr. Izharul Haq (P.W.2 Exh. 8), in his evidence deposed that he was directed to get the stock surveyed, that survey was conducted and found to be inferior of which fact the defendant as well as the controlling authority was advised. The plaintiff's abovenamed witness further stated that he had deputed godown inspector to go and inspect the stock that the said godown inspector took samples and finally the survey was also conducted. Thus, the conclusion is that the inspection of pledged stock took place, that the value thereof at the time of survey as per survey report, dated 14‑3‑1968 (Exh. 6/1 a copy of which was filed with the plaint), was lesser than what was shown at the time the said stock was pledged. I may also point out here once again that the defendant No.1 though maintained accounts, suppressed the same and withheld them from production in Court. The Issue No.9 is answered accordingly.

17. Regarding Issue No.10: The defendant No. 1, in his deposition in the Court, stated that after 14‑3‑1968 he did not obtain delivery of the goods from the bank as it had refused to give delivery of the same. He further stated:‑‑ "According to the agreed procedure we used to obtain delivery of the goods from the bank on payment of 85% of their value plus the expenditure incurred by the bank. However, when they refused to give delivery we even offered them 100% payment but they only gave us delivery for sometimes and thereafter stopped." When cross‑examined, he admitted that the last delivery he took from the bank was in the year 1966 but was unable to produce any letter to show that the bank refused to deliver the goods. On the contrary, the correspondence exchanged between the parties, shows that the defendant No.1 from time to time used to make premises to lift the goods gradually but after raising pleas that due to difficulties faced for one reason or the other, he could not adhere to the same. I may only refer to some of the letters written in 1968 by the defendant No.1 in which year according to him, the plaintiff refused to deliver the goods even against payments. On 8‑5‑1968 (Exh. 6/65), the defendant No.1 wrote that since 21‑3‑1968 he was trying his utmost to dispose of the goods but due to slackness in the market and also due to delay in getting the Delivery orders though backed by cash payments, he could not reach the target. It is clear from a reading of this letter that the defendant No.1. according his own statement was unable to dispose of the goods and thus failed to take delivery for the reason which he described as slackness in the market but in an attempt to avoid consequences of his own default, tried to put blame partly also on the bank which excuse in my opinion is of no avail. On 24‑6‑1968 (Exh. 6/63) the defendant No. l wrote to the plaintiff that owing to general slump in the market he had lifted very little quantity and that such conditions would continue till the end of. July, 1968. On 24‑7‑1968 (Exh. 6/69) the defendant No.1 a for referred to the causes of his failure to lift the pledged goods for the reasons earlier stated. As against the above letters, amongst others from defendant No.1 which need not be referred as the same do not say anything which could advance .his case, I may now refer to some of the letters of the plaintiff‑bank. On 29‑6‑1967 (Exh. 9/2), after drawing attention of the defendant No.1 to the state of account, the plaintiff wrote to him:‑‑ "With reference to your letter, dated 17‑6‑1967 we have to advise that the sample of your stocks pledged to the bank were shown in the market and it was found that you have declared some items of stocks of high quality with higher rates than their actual quality and market prices. In this respect you personally discussed the matter with us and had promised to regularise the account but you have failed to do so. Under the circumstances you are once again called upon to adjust your account by depositing Its. 2,26,732 together with accruing interest within seven days from the receipt of this notice failing which we shall dispose of the stocks pledged with us, without further notice and legal proceedings will be instituted against you for the shortfall." Thereafter as there was no improvement, the plaintiff on 18‑7‑1968, (Exh. 9/4) gave notice to the defendant No.1 as follows:‑‑ "You gave us an assurance to lift the entire stocks pledged to us within six months. We regret to point out that there are no indications that you will take delivery of the stocks within the stipulated period as the quantity of stocks delivered according to our D.Os. is very small. You are fully aware that the bank has shown much indulgence to you and the adjustment of the outstanding in your Cash Credit Account are long overdue. You are hereby called upon to kindly adjust the entire outstanding amounting to Rs.3,00,077/34 excluding interest for the current month within a week's time from the date of the receipt of this letter, failing which we shall dispose of the entire stocks without further reference to yon: and legal proceedings shall be instituted against you for any deficient amount. Please treat it as FINAL NOTICE." As the defendant No.1 still continued to be defaulter the suit was filed in which with the permission of the Court, the Nazir disposed of the stocks. It is obvious that at no time the defendant No.1 offered to pay and/or tendered the amount due from him to the plaintiff to claim release' of the pledged stock. The plaintiff in law was not bound to accept part payments and release pledged stock in instalments. Concessions granted at times could not oblige the bank to give up its right to claim full payment though it can be safely be said that even these concessions, the defendant No.1 could not avail of for no valid reason. The Issue No.10 is thus answered in the negative.

18. Regarding Issue No.18: In support of this issue the learned Advocate for the defendant No.1 could only refer to the bare statement made by his client in his evidence as follows:‑‑ "In so far I understand the reason for refusal on the part of the bank to give us delivery was that they shifted the pledged goods from our godown at Nishtar Road to their own godown at West Wharf without any intimation to us and while shifting the stock of goods from Nishtar Road godown to West Wharf near Customs House, the bank people substituted the stock of inferior quality of goods in place of pledged goods." The defendant No.1, however, during his cross‑examination on the statement made as above, to a question put to him replied:‑‑ "So far as I recollect the stock of papers were shifted from Nishtar Road godown to West Wharf godown by the plaintiff‑bank without intimating us. I was in correspondence with the bank and say that I must have maintained the same. I had made numerous written complaints to the bank about non‑delivery of the goods. I filed the copies of those complaints in the Court. (The witness is unable to produce any such letter addressed to the bank)." The allegation levelled by the defendant No.1 was of a serious nature and it was his duty to have proved the same with positive and convincing evidence. Not only he could not do so, but in my opinion he even failed to establish quality of paper/board he had pledged with the plaintiff. In this respect I may refer to the evidence discussed under issue No.7 from which it would be seen that the defendant No.1 had suppressed the record/accounts which he admitted to have maintained and which if produced would have disclosed the quality of paper/board imported and pledged with the bank. Due to the non‑production of the said record/accounts the Court is justified to conclude that there is no truth in the statement made by the defendant No.1 involving bank employees in acts of criminal nature. The plaintiff denied the reckless allegation made by the defendant No.1 with the plaint a copy of the Survey report Exh. 6/1 was produced, M but the defendant No.1 did not even specify in what respect the same was wrong. The Issue No.11 in the light of the above discussion is answered in the negative.

19. Regarding Issue No.12: As to this issue both the learned counsel concede that there was no evidence on the record to show that there was any negligence on the part of the plaintiff due to which the value of the pledged paper and/or its quality as alleged was impaired. The issue is accordingly answered in the negative.

20. Regarding issue No.13 and 14: The plaintiff has produced statement of account duly certified marked as Exh. 9/1 in which no mistake or incorrectness could be pointed out by the defendant No.1, who admittedly received copy of the same with the summons. According to the said statement of account as on the date off filing of the suit the defendant No.1 was liable to pay Rs. 387,762.74 for the recovery of which the suit was filed. During the pendency of the suit with the permission of the Court the Nazir sold the pledged stock which fetched Rs. 45,251 which amount was deposited in Court on 18‑4‑1972. The defendant No.1 as the principal and the defendant No.2 as the guarantor therefore are liable to pay Rs.3,82,480.34 as detailed below: ‑‑ Suit Amount. Rs.3,87,762.74 Interest on Suit Amount from 13‑3‑1971 to 17‑4‑1972 @ 9% with quarterly rests. Rs.39,968.60 Rs.4, 27, 731.34 Less amount deposited on 18‑4‑1972 in the High Court by Sale of paper. Rs. 45, 251.00 Total: Rs.3,82,480.34 The suit is accordingly decreed against the defendants jointly and severally for Rs. 3,82,480.34 with interest at the rate of 9% per annum with quarterly rests from 18‑4‑1972 till payment. The defendants shall also pay costs of the suit to the plaintiff. A.A. Suit decreed.