P L D 1984 Karachi 257 (PLP)

This order will govern the disposal C. M. As. No. 3892/83 to 3896/83, filed in Suit No. 243/1983 and C. M. A. No. 1920/83 filed in Suit No. 187/1983, by the defendants for leave to defend the suits under Order XXXVII, rule 3, C. P. C. A common question of law is raised in all the above-noted three applications and, therefore, it will be convenient to decide the same together. C. M. As. No. 3892/1983 to 3893/1983 are filed by the defendants in Suit No. 243/1983, which is based on mortgage of immovable property while C. M. A. No. 1920/1983 is filed in Suit No. 187/1983 which is based on statement of accounts. Both the above-mentioned suits were initially filed before the Special Court created under Banking Companies (Recovery of Loans) Ordinance XIX of 1979, but in view of the amendments made therein by Banking Companies (Recovery of Loans) (Amendment) Ordinance II of 1983, these suits have been transferred to this Court for trial. (I will hereinafter refer the original Ordinance XIX of 1979 as "Ordinance of 1979" and the Amending Ordinance II of 1983 as the Ordinance of 1983 respectively). The learned counsel for the defendants in Suit No. 243/83, contended that no leave to defend is necessary in the suit as it is based on a mortgage and therefore provisions of Order XXXIV, C. P. C. are applicable. Reliance in this behalf is placed by the learned counsel on the observations made by the Supreme Court in the case of Industrial Development Bank of Pakistan v. Messrs Nodeem Flour Mills (1981 S C M R 143). In Suit No. 187/1983 also, the learned counsel for the defendant, relied on the above case of I. D. B. P. v. Nadeem Flour Mills and further contended that after the transfer of the above Suit to this Court, upon enforcement of Ordinance of 1983, this Court is seized of the matter in exercise of its original civil jurisdiction and as such the procedure prescribed for conduct of the Suit in section 7 of Ordinance, 1979 is no more applicable to it, and the proceedings after transfer are governed in accordance with the provisions of C. P. C. It is also contended by the learned counsel that the suit of the plaintiff is not based on any pronote, or bill of exchange or a hundy and as such the procedure prescribed for obtaining leave and passing of a decree in accordance with the provisions of rule 2 of Order XXXVII is not at all attracted in the present case. On these premises it is contended that it is not at all necessary for the defendant to obtain any leave to defend the suit under Order XXXVII, rule 3, C. P. C. Besides these legal contentions several defences on merits are also raised in the above applications and in the alternative the defendants have prayed for uncondi­tional leave to defend the suits. I will first deal with the legal contentions raised by the defendants' counsel as in the event of their succeeding on these submissions it will not be necessary to examine their defences on merits. In reply to the above legal submissions of the learned counsel for the defendants, the learned counsel for the plaintiff's contended that this Court after transfer of above suit upon promulgation of Ordinance of 1983, is trying them as a "Special Court", and therefore it will follow the procedure prescribed under the Ordinance of 1979 for conduct of these suits. It is also urged on behalf of plaintiffs that Ordinance of 1979 being a special statute, its provisions to the extent of inconsistency will prevail over the provisions of C. P. C. With regard to decision of Supreme Court in the case of I. D. B. P. v. Nadeem Flour Mills, the learned counsel for the plaintiffs jointly contended that it did not support the contention of defendant in any manner and is quite distinguishable on facts. In order to correctly appreciate the contentions of the learned counsel for the parties, it is necessary to examine here in detail some of the provisions of Ordinance of 1979 and Ordinance of 1983. Prior to the enforcement of Ordinance of 1979 all suits over the value of Rs. 1,00,000 irrespective of their nature, were tried by this Court in exercise of its ordinary Original Civil Jurisdiction. By Ordinance of 1979 "Special Courts" were created to deal exclusively with cases in respect of claims filed by a Banking Company against the borrowers, or by the borrowers against the Banking Company ; but under section 6 thereof some specified classes of cases were excluded from the jurisdiction of "Special Courts". In the year 1980 some amendments were made in the Ordinance of 1979 but these amendments are not relevant for decision of controversy before me. However, the amendment made in the year 1983 by Ordinance of 1983 introduced radical changes in the constitution and jurisdiction of "Special Courts" and I will refer here some of the provisions of amending Ordinance of 1983, which are relevant for decision of the points raised before me. Section 2(f) of Ordinance of 1979 was substituted by a new section 2(f) which consisted of 2(f)(i) and (ii), b Ordinance of 1983. In order to fully appreciate the contention of learned counsel for the defendants, it is necesssary to reproduce here section 2( f )(i and (ii) of the Ordinance of 1979, which reads as under :- Section 2(f)(i)(ii) ; "(f) "Special Court" means- (i) in respect of a case in which the outstanding amount of the loan does not exceed one million rupees, or the trial of offences punishable under this Ordinance, a person who is or has been District Judge or an Additional District Judge and is appointed by the Federal 'Government, by notificatiqn in the official Gazette, to be a Special Court to exercise jurisdiction within such territorial limits as may be specified in the notification, and, in the absence of such appointment, the District Court ; and (ii) in respect of any other case, the High Court in the exercise of original Civil jurisdiction." (Underlining" is by me) From reading of the above definition it is quite clear that the "Specials Court" created under sub-clause (i) of clause (f ) of section 2 of the Ordinance has jurisdiction to try all cases in which the outstanding amount of loan did not exceed Rs. 1 Million besides having exclusive jurisdiction to try all offences pucishable under the Ordinance, while the "Special Court" established under sub-clause (ii) of clause (f ) of section 2 (ibid) possesses jurisdiction to try all other cases. It is also clear that the Court established under sub-clause (ii) of clause (f ) of section 2 (ibid) as "Special Court" is the High Court in exercise of its original Civil Jurisdiction. On the basis of the above underlined ­portion of the definition in clause (f)(ii 1 of section 2 (ibid), the learned counsel for the defendant in Suit No. 187 of 1983 contends that this Court is not bound to follow the procedure prescribed in section 7 of the Ordinance of 1979 for trial of suits under the Ordinance but will follow the procedure laid down in the Code of Civil Procedure, 1908 which is applicable to this Court in exercise of its original civil jurisdiction. It is urged, that the expression used in section 7(2) of the Ordinance of 1979, while defining the procedure for conduct of suits before "Special Court" is, "in exercise of its civil jurisdiction" in contradistinction to the expression "in exercise of original civil jurisdiction" used with reference to this Court in section 2(f )(ii) of Ordinance 1983. It is, therefore, contended that the procedure laid down in section 7 (ibid) will be applicable only to "Special Court" constituted under '[Here in italics) section 2(fxi) of Ordinance of 1983. 1 am not impressed by the argument of learned counsel. Section 7 of Ordinance of 1979 reads as under :- ''

7. Procedure of Special Court.-(1) Suits before the Special Court 'shall come up for regular hearing as expeditiously as possible and, except in extraordinary circumstanses and on grounds to be recorded .r Special Court shall not allow adjournment. (2) In the exercise of its civil jurisdiction, the Special Court shall in all suits before it, including suits based on mortgages of all kinds on statement of accounts for recovery of money paid to, or to the order of, the defendant, follow the summary procedure provided for in Order XXXVII in the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908)." After carefully examining the language of section 7 reproduced above, I have not been able to discover anything therein which could support the interpretation suggested by the learned counsel for the defendant. I am in no doubt after reading the above section 7, subsection (1) that the procedure prescribed thereunder is applicable to all civil cases tried by a "Special Court", irrespective of the facts whether it is a "Special Court" constituted under sub-clause (i) or (ii) of clause (f ) of section 2 of the Ordinance of 1983. The expression "in exercise of its civil jurisdiction", used is section 7(2) of the Ordinance by the Legislature, is only intended to define the nature of jurisdiction of the "Special Court" which it exercises in respect of a civil case (suit) under the Ordinance, and which is quite distinct from its criminal jurisdiction also possessed under the Ordinance of 1979, for trial of offences under it. Similarly the contention of the learned counsel for the defendant that High Court while defined as a "Special Court" in the Ordinance, is referred as the High Court, in exercise of original civil jurisdiction and therefore, it will follow the procedure prescribed under the Code of Civil Procedure and not that which is prescribed under the Ordinance of 1979, is equally without merit. The use of expression "in exercise of its original Civil jurisdiction" in section )(f)(ii) of Ordinance of 1983 is only meant to define the nature of jurisdiction of this Court which it exercises as a "Special Court" in respect of cases filed before it under the Ordinance of 1979 and is quite understandable as ail cases over the value of Rs. 1 million under the Ordinance are filed directly before it and thereafter they are proceeded like the original cases instituted before the Court of First instance. It should also be borne in mind that the High Court in addition to Original Civil Jurisdiction, also exercises several other types of jurisdiction for example, Extraordinary original civil and criminal jurisdiction, criminal appellate jurisdiction, civil appellate jurisdiction, civil revisional jurisdiction, criminal revisional jurisdiction, testamentary and intestate jurisdiction, constitutional jurisdiction etc. Apart from it the appellate jurisdiction under the Ordinance of 1979, against the orders and decrees passed by a "Special Court" also vests in the High Court. The Legislature, therefore, in order to distinguish the nature of jurisdiction of High Court, which it exercises as a "Special Court" in respect of suits filed before it under the Ordinance of 1979, from other jurisdictions which it also possessed, defined it as the High Court in exercise of original civil jurisdiction. The use of the above expression, with reference to this Court in section 2(f)(ii) of the Ordinance in my view does not in any manner suggest or indicate that this Court is not to act as a "Special Court" within the meaning of Ordinance of 19 9 while dealing with a case under it or that it is not bound to follow the procedure prescribed for the conduct of cases before the "Special Court" in that behalf. The learned counsel for the defendant relied on the cases of Asad Ali and 9 others v. Settlement and Claims Commissioner, Karachi, and another (P L D 1974 Kar. 345) ; Ahmed Khan v. Chief Justice and the Judges of High Court of West Pakistan (P L D 1968 S C 171) and Mumtaz Khan v. Chief Settlement and Rehabilitation Commissioner (P L D 1966 S C 276), to explain the meaning of expression "Original Civil Jurisdiction" used in the Ordinance. In my humble view none of these cases are of any assistance to the learned counsel. In the first referred case of Asad Ali. the scope of expression "Original Civil Jurisdiction" used in section 3(1) of Law Reforms Ordinance of 1972, came up for consideration before a Full Bench of this Court consisting of five learned Judges, with reference to appeals which were filed against the judgments of a learned Single Judge of this Court in petitions filed under Article 98 of the 1962 Constitution. The Bench unanimously ruled in the above case that the decision of a petition under Article 98 of the Constitution by a Single Judge is not a judgment in exercise of original civil jurisdiction of the Court and therefore no appeal under section 3 of the Law Reforms Ordinance, 1972 was maintainable. In the second noted case of Ahmed Khan the learned Judges of Supreme Court considered the question of payment of court-fee on constitutional petition under Article 98 of the 1962 constitution with reference to section 4 of Court Fees Act. It was contended before the Supreme Court in the above case that by presenting a petition under Article 98 of the Constitution the original civil jurisdiction of the High Court is invoked and as the Lahore High Court did not possess ordinary original civil jurisdiction, the came must fall necessarily within its extraordinary original civil jurisdiction. The contention was repelled by the Supreme Court with these observations which appear at pages 181-182 of the report :- "Speaking with great respect, the mere fact of a matter coming directly before the High Court under a law would not suffice to bring it within the ordinary original civil jurisdiction, however, frequent such occasions may be, if the words in clauses 12 and 13 of the relevant Letters Patent be given their full effect. The ordinary original civil jurisdiction was confined to the trial of suits arising within the local limits of that jurisdiction. The extraordinary original civil jurisdiction was given for the removal and trial of suits pending or falling within the jurisdiction of Courts subordinate to the High Court. Every other jurisdiction of a civil nature conferred by the letters Patent would as contended by the learned Attorney-General be best described as special jurisdiction or as statutory jurisdictions, since some of those jurisdictions were to be exercised under existing statutes. In the case of the Lahore High Court, there was no power to receive suits in the ordinary original civil jurisdiction, there being no provision in the relevant letters patent in that behalf. The Lahore High Court had testamentary and intestate jurisdiction to be exercised in accordance with law, and matrimonial jurisdiction exerciseable under its own law. The jurisdiction of a general nature that it possessed was that conferred by clause 9 and described as extraordinary original jurisdiction which was confined to power to remove and try suits pending before its subordinate Courts." In the last mentioned case of Mumtaz Khan, the Supreme Court held that an order passed by a Single Judge in Writ jurisdiction pertaining to a civil matter, amounts to exercise of original jurisdiction within the contemplation of section 108 of Government of India Act and, therefore, it is appealable as a judgment under clause 10 of the Letters Patent of the High Court. It is quite clear from the above discussion that in the first and the third noted cases the point for consideration before the Courts related to the nature of jurisdiction of High Court which it exercises while deciding a writ petition under the constitution qua the provision of appeal against such decision, while in the second noted case the Court considered the question regarding payment of court-fee on Constitutional Petition with reference to nature of such proceedings. I will now refer to the decision of Supreme Court in the case of LD.B.P. v. Nadeem Flour Mills relied by the learned counsel for the defendants in both the cases. In that case an application was filed before the High Court by

1. D. B. P. (appellants) under section 39 of the

1. D. B. P. Ordinance, 1961, for attachment and sale of the Mills of respondent in the case. While the above application was pending, Ordinance XIX of 1979 was promulgated and, therefore, the High Court returned the above application to appellant for presentation to proper forum. The decision of the High Court returning the application was challenged before the Supreme Court and it was contended that provisions of Ordinance XIX of 1979 were not applicable to appellant, but this contention was repelled by the Supreme Court. It was also contended by the appellant before the Court in the case that the object of setting up "Special Court" under the Ordinance of 1979 is to provide Speedy remedy to the Banks whereas the appellant is deprived of a much effective and speedy remedy available to it under section 39 of the Ordinance, 1961. The Court after comparing the two provisions reached the following con­clusions which appear at page 146 of the report:- "As the Special Court" shall follow the summary procedure for in Order XXXVII of the Civil Procedure Code, we may explain here that if a suit is filed under Order XXXVIi the defendant in not permitted to defend it, unless he obtains the leave of the Court for so doing under rule 3 of the Order. But, even in suits in which leave is not given, the Court cannot decree the suit until the period of limitation prescribed for obtaining leave under Article 199 of the Limitation Act has expired and the defendant has not sought permission to defend the suit, Further, even after the suit is decreed, the plaintiff can recover the decretal amount only through execution proceedings. We now turn to section 39 of the first Ordinance. If the petitioner is entitled to recover money due to it, all it had to do under this section was to file an application for "(a) an order for the sale of the property pledged, mortgaged, hypotheticated or assigned to the Bank as security for the loan or (b) transfer of the management of the concern to the Bank, or (c) an injunction ad interim where there is apprehension that machinery or equipment may be removed from the premises of the concern without the permission of the Board". And, if it filed such an application, subsections (3) and (4) of section 39 prescribed that the Court "shall pass" an ad interim order attaching the delendant's properties or that it "shall pass" ad interim injunction "restraining the concern from transferring or removing any machinery or equipment without the consent of the (Petitioner'). "This ad interim order was of course subject to notice, but it provided the petitioner with an extremely effective way of recovering its advances, because the ad interim order effectively crippled the defendant's power of transferring his assets in order to defeat the petitioner's claim. As there is no similar provision in Order XXXVII, it is obvious that the remedy available to the petitioner under section 39 of the first Ordinance was such more effective than the new remedy under section 7 of the said Ordinance, the more so, as the benefit of section 39 was available for. all types of claims including mortgages." After the above conclusions the following further observations were also made by the Court at pages 146 to 147 which are specifically relied by the learned counsel:- "We are aware that the second Ordinance also prescribed that the proce­dure provided for in Order XXXVII shall be followed in suits on mort­gages and on suits on statements of accounts. But the Special Court has no power to alter the law, therefore, section 15 empowers the Federal Government to frame rules. But, according to Mr. Chundrigar, no rules have been framed yet and we have also not been able to trace any rules. Therefore, if in the instant case, the petitioner's claim had been solely on a mortgage, the Special Court would have been compelled to follow the ordinary procedure for suits by treating it as a long cause matter as no rules have been framed. However, even on the footing that rules have been framed, there will be complications in the way of a banking Company which seeks to follow the procedure of Order XXXVII in a suit, for example, on a mortgage. What does the direction that "the Special Court shall in all suits before it ......... follow the summary procedure provided for in Order XXXV11" mean? Order XXXVII prescribes that a defendant shall not be permitted to defend the suit without the leave of the Court. So the rules, if any, framed under section 11 of the second Ordinance could contain a similar power with regard to suits on mortgages. But the procedure of Order XXXV11 is a speedy procedure not merely because the defendant cannot contest the same without obtaining leave, but also because the defendant has to obtain leave within ten days of the service of the plaint on him. But this period of seven days is not prescribed in Order XXXVII, but in the Schedule to the Limitation Act. And, further the Schedule to the Limitation Act also prescribes the period of limitation for filing suits of all types whatsoever. Therefore, if the Federal Government frames any provision with regard to limitation in the exercise of its powers under section 11 of the Ordinance it is bound to lead to litigation about the vires of the rules. We are deeply disturbed by these aspects of the Second Ordinance and as its object is to enable banks to recover their loans speedily it is certainly very anomalous that the petitioner has been deprived by this very Ordinance of the very efficacious remedies available to it under the first Ordinance. But this is not only anomaly in the Second Ordinance. 7 hus, for example, we pointed out earlier that the petitioner's application stood transferred to the Special Court, because it had sought the recovery of an amount exceeding Its. 1 lac. This observation had reference to section 6 of the first Ordinance, according to which the Special Court does not have the jurisdiction to entertain a claim which "does not exceed one Jac rupees" the High Court has no jurisdiction to entertain it, although the Special Court is a Court subordinate to the High Court. To say the least this provision has created a very awkward situation for the High Court of Sind. Finally, Mr. Chundrigar drew our attention to the fact that the provisions of Second Ordinance were not applicable to the Agricultural Develop­ment Bank of Pakistan. That is correct, because section 1 expressly prescribes that the Second Ordinance "applies to all banking companies except the Agricultural Development Bank of Pakistan ". But, precisely because a similar exemption has not been granted to the petitioner, it follows that the petitioner is bound by the provisions of the first Ordinance. This petition, therefore, fails and is dismissed but a copy of this Order shall be sent to the Law Secretary." I have carefully gone through the above observations of Supreme Court and in my humble opinion, these observations cannot be construed as meaning that no leave to defend is required in a case before the "Special Court" which is based on mortgage of immovable property or statement of account. 1n my most humble view the above observations of the Supreme Court were intended to point out to the law-makers the practical difficulties and the anomalies existing in the legislation. This fact is well evident from the ultimate direction of the Court to the Order for sending a copy thereof to the Law Secretary. The learned counsel for defendant in Suit No. 187/1983 also contended that the procedure prescribed under Order XXXVII, C. P. C. cannot be followed in the present case as the suit is based on "Statement of Accounts" and not on a negotiable instrument mentioned in sub-rule (1) of rule 2 of Order XXXVII, C. P. C. sub-rule (1) of rule 2 of Order XXXVII, C. P. C. provides that a summary suit should be based on a bill of exchange, promissory note or a hundy. This sub-rule also prescribes the form of a plaint in a sum­mary suit and also the forms of summons to be issued to defendant in such a suit. Sub-rule (2) of rule (2) of Order XXXvII provides that a defendant who is served with the summon as prescribed in sub-rule (1) ibid will not appear or defend the suit unless he obtains leave from a Judge. These provisions of C.P.C. D were existing Laws on the date Ordinance XIX of 1979 was promulgated and, therefore, the Legislature was aware that summary suits under Order XXXVII, C. P. C. could be filed only on those negotiable instruments which are mentioned in sub-rule (1) of rule 2 of Order XXXVII, C. P. C. In spite of this knowledge, the Legislature provided in section 7 of Ordinance XIX of 19791 that in all suits before the "Special Court" including suits based on mortgages' of all kinds or statement of accounts for recovery of money paid to, or to l the Order of, the defendant, follow the summary procedure provided for in Order XXXVII in the First Schedule to the Code of Civil Procedure, 1908. The clear effect of section 7 of Ordinance of 1979, therefore, in my opinion, is, that a suit before the "Special Court" may not be based on one of the negoti­able instruments mentioned in sub-rule (1) of rule 2 of Order XXXVIl, C.P.C.I but the procedure applicable for conduct of such a suit before the "Special Court" is same as prescribed in Order XXXVII, C. P. C. I am, therefore, of the considered view that this Court acts as a 'Special Court' within the meaning of section 2(f ) (ff) of the Ordinance of 1963, in a case which is filed before it in accordance with the provisions of the Ordinance, 1979 as amended by Ordinance of 1983, and, as such by virtue of section 7 of the Ordinance of 1979 the procedure prescribed for obtaining leave to defend in a summary suit under Order XXXVII, C. P. C. is applicable to such suits. The defendants in the above suits, therefore, cannot appear and defend the same unless they obtain leave in accordance with the provisions of Order XXXVII, C. P. C. Having dealt with the legal submissions of learned counsel, I will now consider the defences on merits disclosed in the leave applications in the two suits. In Suit No. 243/1983, which is filed by Habib Bank Limited, National Bank of Pakistan and United Bank Limited, jointly, each one of the plaintiffs allowed loan/overdraft facilities to defenand No. 1 in the sum of Rs. 34,90,369.42 which has been fully utilized by defendant No.

1. In respect of these loans/overdraft facilities the defendant No. 1 executed separate promissory notes in the sum of Rs. 34,90,369.42 in favour of each plaintiff alonewith 2 letters. In respect of facilities extended by plaintiff No. I to defendant No. 1 defendants Nos. 3, 4 and 5 executed personal guarantees in favour of plaintiff No. 1, in respect of facilities extended by plaintiff No. 2 to defendant No. 1, defendants Nos. 4 and 5, executed personal guarantees in favour of plantiff No. 2 and in respect of facilities extended by plaintiff No. 3 to defendant No. 1, defendant No. 2 executed its guarantee in favour of plaintiff No.

3. Subsequently defendants Nos. I and 2 as security for re­payment of aforesaid loan/overdraft facilities granted by plaintiffs Nos. I to 3, executed jointly a Mortgage Deed in respect of their property bearing Surveys Nos. 20, 21 and 23, Sheet LL-5, situsted at Club Road, and Victoria Road, Civil Lines, Karachi, together with building and structure standing thereon and plants, equipment, machinery, fixtures and fittings installed therein known as 'Hotel Metropole'. In all the five applications the following common defence has been raised by the defendants:- "

5. That the plaintiffs deliberately avoided to disclose the true and relevant facts to the context of which the disputed transaction took place. A new Company under the name of Karachi Properties Investment Company (1974) Limited was incorporated to establish and run Hyatt Regency Hotel. Huge amount of loan was advanced by the plaintiffs to the said Company to carry on its project. The shares of this Company were not put into the market for want of requisite sanction from the Government. The plaintiffs on their own initiative held a meeting and suggested to the defendants to obtain loan of Rs. 1,03,60,000 from them. so that they could invest into the shares of the new company. The mode in which the said amount of loan was to be utilized was mutually discussed, and finally it was settled that the said loan would be utilised in the following manner:- (I) Rs. 93,60,000 will be invested in the shares of Karachi Properties Investment Co. (1974) Ltd. (2) Rs. 8,60,000 will be paid to Grindlays Bank Ltd. to clear the balance loan pending with them. (3) The remaining Rs. 2,00,000 will be used for payment of stamp duty on the mortgage deed. The intention of the plaintiffs was to reduce the huge amount of loan advanced to the said Company by Rs. 93,00,

000. However, with the connivance and under instructions of the plaintiffs. Karachi Properties . Investment Company (1974) Limited, utilized the said amount without having issued any shares to the defendants and did not leave the sum in a separate account as Share Application Account prior to the issuance of the allotment letters. The plaintiffs themselves committed breach of the settlement by behaving fraudulently towards the defendants.

6. That the plaintiffs insisted upon the transaction and forced the defendant to agree to that. The transaction was thus procured under duress. The defendants will further state the factual position in this regard in their written statement.

7. That the loan as per the mutual arrangement was obtained for specific purpose. The loan was never utilized by defendant No. 1 for their purpose. It was for purpose of the share application of the new company as per the instructions of the plaintiffs who clearly held out that they would not insist upon the repayment till the new company was able to sell its shares or reimburse the defendants for the amount of this loan.

8. That Karachi Properties Investment Co. (1974) Ltd. is a necessary party. The loan was advanced by the plaintiff for the benefit of the said company and it ought have been joined as a defendant in this suit.

9. That clause 3 of the mortgage deed was not the essence of the contract and the alleged breach would not give rise to any cause of action to the plaintiff to file this suit.

10. That the amount of interest claimed by the plaintiff is excessive and cannot be granted.

11. That the statement of account showing the outstanding amount is incorrect". From reading of the above averments made in the affidavits tiled inj support of leave application it is quite clear that the defendants have not denied the loan/overdraft facility to them but have pleaded that the loan was given by the plaintiff with specific understanding that out of the total amount of loan a sum of Rs. 93.00,000 will be applied towards purchase of the shares of Karachi Properties Investment .Company (1974) Ltd., Rs. 8,60,000 for payment to Grindlays Bank Limited to clear the balance loan pending with them and Rs. 2,00,000 towards payment of stamp duty on mortgage decd. It is further alleged that the sum of Rs. 93,00,000 was utilezed out of the above amounts by Karachi Properties Investment Company (1974) Ltd. but shares of the equivalent value were not issued to defendants under the instructions of plaintiffs. It is also alleged that in these circumstances Karachi Properties Investment Company (1974) Ltd. is a necessary party to the suit. Besides above allegation it is also alleged that the transaction was procured under duress and plaintiffs have committed breach of agreement. Although, there is general denial of all the above allegations in the counter­ affidavit filed on behalf of plaintiffs in the suit but 1 find that the plaintiffs have not specifically controverted the allegations that out of the amount of loan/overdraft a sum of Rs. 93,00,000 was agreed between the plaintiffs and the defendants to be utilized towards purchase of shares of Karachi Properties Investment Company (1974) Limited, and that this amount was so utilized by the said Company but it did not issue the shares of the above value to defendants because of the connivance and instructions of plaintiffs. If this allegation of defendants is true then its effect on the transaction has to be determined. 1, therefore, feel that defendants have made out a case for grant of leave and accordingly grant their applications. I have not imposed any condition on the defendants while granting them leave as the plaintiffs' loans are fully secured under a registered mortgage of immovable. property which is more in value than the claim in suit. The defendants shall file their written statement within 3 weeks from today and as soon the written statements are filed the suit will be fixed for final disposal. In Suit No. 187/1983, the plaintiff had advanced money to defendants for imports of goods under L. I. M. account in November 1973. The imported goods were pledged with plaintiff who sold the same and for the balance the defendants are sued. In the leave application both the defendants have asserted that the claim in the suit is time barred as it was filed after about eight years of the grant of loan. The plaintiff has claimed extension of time on account of acknowledgment by the defendants. The defendants have denied this fact and have claimed that the alleged letters acknowledging the liability are not signed by defendant No. 2 or any other person authorised on his behalf to acknowledge the liability. It is an admitted position that defendant No. 2 is the proprietor of defendant No. 1 and the letters relied by the plaintiff as acknowledgment of liabilities are signed by someone else as Manager of defendant No.

1. Apart from it the defendants have contended that in 1976, they brought an offer for Rs. 5,35,000 for the pledged goods but the plaintiff rejected the same and sold the goods for Rs. 5,40,000 after 4 years and as such their liability was_ unnecessarily increased on account of accumulation of interest for these four years. The defendants have thus made out plausible defences which need investigation at the trial of suit. I accordingly grant them unconditional leave to defend the Suit. The written statement is to be filed by theta within 3 (three) weeks. M. z. M. Order accordingly.