2020 PLP 1037 (CLD)

ASIM HAFEEZ, J.

Through this single order we propose to decide this Appeal and R.F.A. No.1136/2014, both of which are against judgment and decree dated 28.05.2014. Facts of the case are straightforward. The claim of recovery, filed by the appellant financial institution, was decreed to the extent of respondents Nos.1 and 2 and suit was dismissed against respondents Nos.3 to

5. R.F.A. No.1136/2014 was filed by the respondents Nos.1 and 2 against the Judgment.

2. Learned counsel for the appellant submits that mere execution of settlement agreement by appellant with the respondents Nos.1 and 2 would not absolve the respondents Nos.3 to 5 from performance of their obligations, undertaken through execution of personal guarantee and mortgage of property to secure the finances availed. Adds that settlement agreement had not brought material variation to the terms of the arrangement, hence section 133 of the Contract Act, 1972 was not attracted. Learned counsel for the appellant referred to judgment reported as Industrial Development Bank of Pakistan v. Hyderabad Beverage Company Private Limited and others (2016 SCMR 451) and National Bank of Pakistan through EVP v. Zia ul Haq Noon and others (2019 CLD 775).

3. Learned counsel for respondents Nos.3 to 5 submits that settlement agreement was effected in suit for rendition of accounts, filed by respondent No.1, sole proprietor of proprietorship entity - wherein respondents Nos.3 to 5 were not impleaded as party. The suit was withdrawn on 18.05.2011, in terms of settlement agreement dated 10.05.2011, which materially varied the terms and conditions of the contract, causing prejudice to the respondents Nos.3 to 5 in terms of sections 139 and 141 of the Contract Act, 1872 - as the appellant had allowed release of the pledge stocks exposing the rights available to the respondents Nos.3 to

5. Learned counsel for the respondents Nos.1 and 2 submits that respondents Nos.3 to 5 were aware of the settlement arrangement and same acquiesced thereto.

4. We have examined the record with the assistance of learned counsel. It appears that the settlement agreement was executed between appellant and respondent No.2, wherein the respondents Nos.3 to 5 were not the signatories or witnesses thereto. It is further apparent that no reference therein was made to the status of the respondents Nos.3 to 5 and securities provided to secure the finances extended. The moot issue is that whether settlement agreement had actually brought material changes in the contractual arrangement, to the prejudice of the rights of the respondents Nos.3 to 5 in terms of the provisions of Contract Act, 1872. In view of the facts and circumstances of this case, we are convinced that substantial questions of law and facts are involved, which questions cannot be decided without grant of leave to defend and allowing the parties to lead evidence accordingly. We concur with the submissions of learned counsel for the appellant that in wake of substantial questions of law and facts raised, the Banking Court erred in law while outrightly dismissing suit against the respondents Nos.3 to 5, instead of allowing leave to defend the suit. In view of the facts pleaded, the respondents Nos.1 and 2 are also entitled to the grant of leave to defend. The judgments referred by the learned counsel for the appellant are distinguishable, when examined in the context of facts and circumstances of this case.

5. In view of the above, we proceed to set-aside the judgment and decree dated 28.05.2014, passed by learned Judge Banking Court-I, grant unconditional leave to defend the suit to the respondents and direct Banking Court No.1, Gujranwala to proceed in accordance with the law hitherto. Any observation made herein shall not influence or prejudice the case of the parties. The suit was filed in the year 2011, and we expect that learned Judge Banking Court-1 Gujranwala shall proceed expeditiously and endeavor to conclude the matter, preferably within eight months, from today. The parties are directed to appear before learned Judge Banking Court-1 Gujranwala on 04.03.2020. KMZ/A-21/L Order accordingly.