P L D 1966 Supreme Court 738 (PLP)

HAMOODUR RAHMAN, J.--‑This appeal, by special leave, is directed against the judgment and order of a Division Bench of the High Court of West Pakistan at Karachi dismissing a Letters Patent Appeal in limine. The said Letters Patent Appeal itself arose out of the judgment and order of a learned Single Judge of the same High Court in an appeal under section 39(11) of the Industrial Development Bank of Pakistan Ordinance, 1961, which was filed by the appellants before us against the order of the District Judge, Karachi, passed on the 9th March 1965, directing, under subsections (7) and (9) of the said section, the sale of a ship and a trawler belonging to the appellant Ocean Industries Limited on the application of the respondent herein. The circumstances in which this application came to be made may be briefly stated as follows:‑ The appellant No. 2 and some others started a partnership firm under the name and style of Martex Enterprise to carry on the business of deep‑sea fishing. This firm on the 10th of January 1961, applied to the respondent bank to guarantee a payment of Rs. 31,06,337.50 for enabling it to obtain a sterling guarantee from a London bank for the payment of the price of a fish factory‑ship S. S. Mahia which it had entered into a contract to purchase from Messrs A. S. Bergens Mekaniske Verksteder, Bergen, Norway, the ship‑builders. The latter had agreed to sell the said factory‑ship on condition that the firm furnished to them a London bank sterling guarantee for the due payment of the price thereof in 10 half‑yearly instalments, the first of which was payable within six months of the date of delivery of the ship at Karachi. The London bankers were not prepared to furnish this guarantee without a similar guarantee to them for the payment of the money in sterling by a Pakistan bank, which in its turn wanted a similar guarantee from the respondent bank. This guarantee required the permission of the Government of Pakistan through its Ministry of Finance for the allocation of the necessary foreign exchange. Whilst this matter was being processed by the respondent bank with the Ministry of Finance the firm converted itself into a private limited company on the 10th July 1961, under the name and style of Messrs Martex Enterprise Limited. Thereafter, the Ministry of Finance having allocated Rs. 24.2 lacs in foreign exchange with interest at the rate of 6 % per annum the respondent bank ultimately on the 11th of January 1962, agreed to furnish the said guarantee to the said Martex Enterprise Limited. This guarantee was issued against the following securities:‑ (a) Mortgage of the fish‑factory ship Mahia, formerly S. S. Sapele, imported from Norway. (b) Personal guarantee and mortgage of personal properties of Mr. Mumtaz Hasan Kazilbash, valued at Rs. 4.58 lacs. (c) Mortgage of fishing trawler, Al‑Hilal. (d) Personal guarantee of Mr. Maqbool A. Sheikh up to the extent of Rs. 4.20 lacs. (e) Personal guarantee of the following directors: (i) Mr. Azizullah Hasan (i) Mr. Azizullah Hasan (ii) Mr. Aziz Omer (iii) Mr. Adamji Ghani (iv) Mr. Raza Kazim, (f) Cash deposit of Rs. 6 lacs by way of margin. It was also subject to the condition that the liability of the respondent bank thereunder shall not exceed the sum of Pakistani Rs. 31,06,337.50 and that the respondent bank shall not be called upon to pay any payment otherwise than in Pakistan rupees. After the furnishing of the above guarantee Messrs Martex Enterprise Limited without the knowledge and consent of the respondent bank converted itself into a public limited company on the 12th June 1962, under the name of Ocean Industries Limited and again without the knowledge and consent of the respondent bank transferred its management on the 25th July 1962, to another company incorporated under the name of Raza Kazim & Company Ltd. The respondent bank claimed that these changes were made in breach of the covenant entered into between itself and Messrs Martex Enterprise Limited for the above guarantee, but it did not terminate the guarantee on account of these breaches as it was entitled to do, for the appellant‑company on the 15th September 1963, entered into a fresh deed of covenant with the respondent bank upon the same terms and conditions as also agreed to be bound by further covenants set out in the deed (Annexure `C'). It is not necessary to mention here all such terms of the covenant but it will suffice to point out that under these terms the appellant‑company undertook to repay on demand forthwith any amount paid by the respondent bank under the said guarantee together with interest and all charges and expenses incurred thereunder. The respondent bank was also given power and authority by this deed "to exercise all rights and remedies and especially to exercise the control of an owner in causing the said ship to perform (whether under Charter Freight or in Ballast or for management or with a view to sell) any voyage or voyages if the borrower makes default in compliance with the terms of the recited mortgage or the terms and conditions of this deed or any of them", as also to "sell the said ship or otherwise dispose of and deal with the same in such manner as the bank may in its absolute discretion think fit." These powers were furthermore "without prejudice to the bank's rights and remedies of suit or other proceedings or otherwise." The factory‑ship named S. S. Mahia arrived at Karachi port on the 12th March 1963, but the company was even before this in financial difficulties and to tide over these difficulties it had on the 15th February 1963, approached the respondent bank for some funds as also requested the bank through its managing agents Messrs Raza Kazim & Company Ltd. to condone its breaches and not to enforce the terms of the guarantee by demanding payment forthwith. In a subsequent letter written by Messrs Raza Kazim & Company Ltd. on the 28ti1 February 1963, to press the request already made it was clearly admitted that breaches alleged by the bank had been committed and condonation was prayed for as an indulgence. The respondent bank, it appears, acceded to this request and not only condoned the breaches but in fact on the 2nd of March 1963, advanced Rs. 53,678 to the appellant‑company to enable it to make up its lack 4 working capital. Notwithstanding this the company again, 10 days later, in breach of its undertakings transferred its management to a Trust, called the National Development Trust, and without the knowledge and consent of the respondent bank on the 19th May 1963, entered into a contract with Sherkate Sehami Shilat Iran to fish in Iranian territorial waters of the Persian Gulf and Oman Sea with the said factory‑ship on terms which were unduly onerous in the then unsatisfactory state of its finances. . The first instalment of the price of the said ship fell due on the 12th September 1963, but as the company was unable to pay the same the suppliers of the ship at the request of the company agreed to extend the time of payment by another three months. Notwithstanding its unsatisfactory financial position the company again on the 8th October 1963, entered into a second contract with the said Sherkate Sehami Shilar Iran, without the permission of the State Bank of Pakistan, on terms which were not only still more onerous but also involved violations of the Foreign Exchange Regulation Act, as large payments in foreign currency were involved. Indeed, on coming to know of this illegality the State Bank of Pakistan wrote on the 26th May 1964, to the respondent bank complaining that the agreement with the Iranian company without its prior approval constituted an offence under the Foreign Exchange Regulation Act but it was refraining from taking legal action in view of the fact that both the respondent bank and the National Bank of Pakistan were heavily involved in the affairs of the appellant‑company Ex post facto sanction was then granted to regularise a fait accompli. The grace period granted by the Norweygian suppliers of the factory‑ship expired in the meantime on the 14th December 1963, but the appellant‑company being, still not in a position to pay the first instalment the respondent bank had under the guarantee furnished by it to pay Rs. 3,10,633.75 to meet the commitment of the appellant‑company. Having paid this sum it called upon the appellant‑company, in terms of the guarantee, to indemnify it in respect of the said first instalment but in spite of repeated demands the appellant‑company could only pay in part Rs. 1,11,000 after much delay. Nevertheless, on the 12th December 1963, the appellant‑company declared a dividend of 71 % and attempted to issue "right shares" to raise its paid‑up capital from Rs. 25 lacs to Rs. 50 lacs presenting a wholly unrealistic picture of its true financial position but even this device did not succeed, for it could not raise more than Rs. 3 lacs and was forced on 25‑1‑64 to again approach the respondent bank for further financial help. The respondent bank with a view to assist the appellant company in rehabilitating itself was not averse to giving such help if it was satisfied that it would be productive of any result particularly since its own securities were in jeopardy. In order, therefore, to obtain a true picture of the extent of the company's financial involvements the respondent bank appointed Messrs Ferguson & Company, a reputed firm of chartered accountants, to examine the affairs of the appellant‑company. The appellant, however, was in such a desperate financial position that it could not even await the report of the accountants which was likely to take a little time. It continued to press the respondent bank to come to its immediate rescue, as the other banks from whom it had already borrowed heavily were not prepared to give it any further accommodation. The involvement of the respondent bank and the National Bank of Pakistan in the affairs of this company was already so heavy that they too were anxious to see that they are not put to further loss. It appears, therefore, that the respondent bank manager was prepared to give such assistance as it legitimately could to pull the appellant‑company out of its difficulties provided its own interests were not further prejudiced. Negotiations were, there fore, started to explore ways and means and ultimately the appellant‑company through its managing agents, the National Development Trust, on the 24th March 1964, addressed a letter to the respondent bank expressing its willingness to place its affairs at the complete control of the respondent bank to induce the latter to come to its immediate rescue. Since the appellant bank claims that this letter was written according to a draft prepared by the legal adviser of the respondent bank and since the case of the appellant‑company is based entirely upon this letter it is necessary to set it out here in full. It reads as follows: "In consideration of the Industrial Development Bank considering our request for waiving the default in payment of the instalments we hereby agree to the following: (i) Till such time as the liabilities of the IDBP and N13P are paid off or till the IDBP in its sole discretion decides that the affairs of the company are satisfactory (whichever occurs earlier) the entire affairs and business of Ocean Industries Limited will be under the unfettered and absolute control and direction of the IDBP. (ii) The IDBP will be free to devise any form for giving effect to the above arrangement and we agree and bind ourselves to execute any documents which the IDBP may be advised to be drawn up for the aforesaid purpose. We undertake to do so without any delay or demur. (iii) If so required by the IDBP, we agree to the suspension or cancellation of the agreement of Managing Agency between us and the National Development Trust. (iv) We also agree that if the IDBP so requires, a sufficient number of the representatives of the bank will be elected as trustees of the National Development Trust so that the Bank's representatives have an absolute majority on the Trust and effectively control the affairs and business of Ocean Industries Limited for and on behalf of Ocean Industries Lt (Sd.) Raza Kazim. for and on behalf of National Development Trust (Sd.) Raza Kazim." The respondent bank, it is said, did not formally commit itself to these terms in writing but acted upon them and gave effect to then by nominating on the Managing Agency Trust four a of its own Officers and an officer of the National Bank of Pakistan and the Trust in its turn at meeting held on the 2nd of April 1964, elected the said nominees as trustees with immediate effect and declared by its resolution of the said date that this was being done "in pursuance of letter dated 24th March 1964" as an "interim measure" to ensure that the respondent bank "is able to exercise complete control over the affairs of the company.' To this the respondent bank did not object. The appellant company also on the 27th March 1964, wrote to the National Bank of Pakistan that it had executed a document on the 24th March 1964, in favour of the respondent bank, drawn up by its legal adviser, by virtue of which it had completely surrendered all powers concerning the business and affairs of the company in favour of the respondent bank and requested that funds may now be released in pursuance of a cash credit facility of Rs. 21 lacs already negotiated. This also the respondent bank did not controvert. Again at the next meeting of the National Development Trust held on the 4th April 1964, the nominees of the respondent bank participated and formally appointed one Mr. Wasim Khan, a nominee of the respondent bank, as the General Manager of the company. On 6th June 1964, the respondent bank replaced two of its nominees on the Board of Trust and on 17th June 1964, nominated 7 additional trustees and thus acquired the control of the National Development Trust. By these acts, the appellant‑company alleges, the respondent bank for all intents and purposes took over and assumed complete control of the management of the company. Indeed, in furtherance of this it even wrote to the National Bank of Pakistan on the 25th April 1964, urging it to release the cash credit advance of Rs. 21 lacs in favour of the appellant‑company which the National Bank was refusing to do unless the Chairman of the National Development Trust, one Mr. Jamshed Marker, also gave his personal guarantee for the repayment of the advance. The appellant‑company further alleges that notwithstanding the fact that the respondent bank elected to take over the company as agreed upon on the 24th March 1964, and in fact entered upon the management and control of the affairs of the company by nominating as many as 12 nominees on the Board of Trustees of the managing agents, it suddenly on the 22nd June 1964, withdrew there from and all its 12 nominees tendered resignation. Thereafter on the 15th July 1964, it served a notice upon the appellant company under section 38 of the Ordinance to forthwith pay the entire amount of the guarantee of Rs. 31,06,337.50 and followed it up by moving an application under section 39 of the above Ordinance before the District Judge of Karachi on the 29th July 1964, out 'of which the present appeal arises. In this proceeding an order of interim attachment of the factory‑ship and the trawler was also obtained on the 30th July 1964, together with a direction for bringing the ship and the trawler back to Karachi waters within one month. The defaults alleged in this application by the respondent bank were as follows:‑ (1) Failure to pay the first and second installments of the price of the factory‑ship which fell due in September 1963, and larch 1964, respectively; (2) Failure to renew the insurance policies of the factory ship and the trawler which fell due on the 14th March 1964, and 6th June 1964, respectively; (3) Incurring of heavy foreign exchange liabilities in respect of the contracts with Sherkate Sehami Shilat Iran without the permission of the respondent bank or the State Bank of Pakistan or the Government of Pakistan; (4) Inability of the company to provide funds even for the maintenance of the crew of the factory‑ship, and (5) Inability of the appellant‑company to pay its debts. The total amount claimed as being due to the respondent bank on the day of the filing of the application was Rs. 26,78,802.93. In this matter the appellant No. 2 filed an affidavit on the 4th August 1964, admitting that the company had been passing through "an acute financial crisis and for a long time has had no funds at all at its disposal." Again, in the petition of objection filed on behalf of the company the allegations in the application moved by the respondent bank were "admitted to be true and "correct" subject only to two exceptions, which are not material for our present purposes, but the application was opposed on the ground that the respondent bank had by acting upon the letter of the 24th March 1964, elected to waive the defaults of the appellant‑company and to take over the manage ment thereof under section 27 (20) of the Ordinance for the purpose of running it. It could not, therefore, now resile from this position and enforce its agreement upon the basis of the aforesaid breaches which had been waived. It was further contended that the respondent bank having by its own election and acts brought the appellant‑company into such a position that it had become impossible for it to fulfil the terms and conditions of the agreement of guarantee, the respondent bank should not be allowed to change its position to the disadvantage of the appellants. It appears that during the pendency of these proceedings the appellant‑company also filed a petition under Article 98 of the Constitution on the 18th August 1964, before the Karachi Bench of the High Court of West Pakistan but the High Court after calling for a report from the respondent bank dismissed the petition summarily, although it was urged before it that the bank having taken over the management of the company had no power to abandon it or at least was estopped from doing so. The District Judge took note of the fact that the precise objection raised before him had already been unsuccessfully raised in the High Court and made the order for the sale of the ship and the trawler under section 39 (7) and (9) of the Ordinance on the 9th March 1965, as the defaults alleged were clearly admitted. The appellant's appeal to the High Court of West Pakistan, Karachi Bench, against the above order, came up for hearing before the same learned Judge who had heard the earlier writ petition. He reiterated the view he had taken in his judgment on the writ petition, held that the contention of the appellant‑company that the respondent bank could not legally withdraw front the management of the company was untenable and upheld the order passed by the District Judge. This decision was again affirmed by the Letters Patent Bench as well on substantially the same grounds. Leave was granted in this case by this Court to consider:‑ (1) Whether the provisions of section. 39 of the Ordinance, which require that where a cause is shown by the opponent an enquiry should follow, had been complied with, and (2) whether the bank having become seized of full control of the company's affairs "with a stated objective which had yet to be achieved" could "suddenly assume a vis‑a‑vis position and enforce its claims as a matter of absolute obligation under the Ordinance." The case of the appellant‑company on the second point, which has been presented before us with admirable ingenuity, appears to be three‑fold. Firstly that since the Ordinance gives to the respondent bank several alternative methods of enforcing its claim in cases of default by an industrial concern under a liability to it the bank cannot, if it elects to have recourse to one of such methods, be allowed as a statutory public functionary to resile from its election either in law or in equity. The bank having elected to take over the management of the company on the 24th March 1964, should therefore, not have been allowed to abandon that concern and enforce its claim by resorting to the special provisions mentioned in section 39 of the Ordinance. Secondly that under even the general law the bank having acted upon the letter and taken up the management and control of the affairs of the appellant‑company must be deemed to have waived the previous breaches, if any, of the agreement of guarantee and to be estopped from enforcing those defaults. Thirdly that since the bank had, after taking over control of the management of the company, acted in such a manner as to alter the position of the company to such an extent as to render it impossible for the company to function at all, it could not be allowed to insist upon enforcing its claims as an absolute obligation under the Ordinance. In elaboration of these contentions our attention has beer drawn to the provisions of subsection (20) of section 27 and sections 39, 40 and 41 of the Ordinance. Section 27, which specifies the businesses which the bank is authorised to transact mentions in subsection (20) that one of such businesses may b the "taking over, running and selling of such industrial concern as have failed to repay in full the loan taken from the bank." Section 39, which is headed as "special provisions of enforcement of claims by the bank", gives it power, after has under section 38 called upon the industrial concern which it has granted any "loan" to forthwith repay the same in full, to apply to the District Judge within the local limits c whose jurisdiction the concern carries on the whole or substantial part of its business. The provisions thereof relevant for the purposes of this case are. "

39. Special provisions for enforcement of claims by the Bank.(1) Where by reason of the breach of any condition any agreement between the Bank and an industrial concern, the Bank becomes entitled to require the immediate payment of any loan before the due date, or where an industrial concern fails to repay such loan by the due date or in compliance with the notice under section 38, an officer by the Bank, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the local limits of whose jurisdiction the concern carries on the whole or a substantial part of its business, for one or more of the following reliefs, namely: (a) an order for the sale of the property pledged, mortgaged, hypothecated 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. .. (6) At the time of passing an order under subsection (3), the District Judge shall issue to the concern a notice accom panied by a copy of the order, the application and evidence, if any, recorded by him and calling upon it to show cause on a date to be specified in the notice why the order of attachment ad interim should not be made absolute or the injunction be not confirmed." (8) If cause is shown the District Judge shall proceed to investigate the claim of the bank and the provisions of the Code of Civil Procedure, 1908 (Act V of 1908), shall as far as practicable, apply to such proceedings." Sections 40 and 41, which are also relevant, are in these terms:‑ "

40. Rights of banks in cases of default.‑(1) Where any industrial concern which is under a liability to the bank under an agreement makes any default in payment or otherwise fails to comply with the terms of its agreement with the bank, the bank may, notwithstanding anything contained in section 39, take over the management of the concern, and may sell or realise any property pledged, mortgaged, hypothecated or assigned by the concern to secure its liability to the bank. (2) Any transfer of property made by the bank in exercise of its powers of sale or realisation under subsection (1) shall vest in the transferee all rights in or to the property transferred as if the sale had been made by the owner of the property. (3) The bank shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of any security held by it as it has with respect to the original goods. (4) Where the bank takes over the management of a concern under section (1) it shall be deemed to be the owner of such concern for purposes of suits by or against such concern, and shall sue and be used in the name of the concern.

41. Recovery of bank's dues.‑Without prejudice to the provisions of sections 39 and 40, all sums due to the bank shall be recoverable as arrears of land revenue Provided that no sum shall be so recovered unless fifteen days' notice has first been given by the bank to the debtor that the sum will be so recovered: Provided further that in so giving notice the bank shall inform the debtor that he may pay by such instalments as may be fixed in the notice and that upon his so paying every instalment on or before the due date the recovery will be suspended but that it will otherwise proceed as to the entire sum outstanding in case of any default in any instalment including the first." Upon a careful examination of these provisions we are unable to agree that the Ordinance provides these methods as alternative methods of enforcing the claims of the bank. Section 40 itself indicates that the taking over of the management of the concern can be made notwithstanding anything contained in section

39. Thus it cannot be said that if action under section 39 is taken action under section 40 cannot thereafter be taken. It is equally incorrect to say that if the management is taken over under section 40 then the provisions of section 39 cannot be resorted to. The terms of section 40 itself show that the bank can even after taking over the management of the concern sell or realise any property pledged, mortgaged or hypothecated. There is nothing in these sections to indicate that the bank cannot obtain such an order for sale by resorting to the provisions of section 39 or under the latter section obtain an order for the transfer of the management of the concern, even though it can itself enter upon such management and sell the property under section

40. Again, section 41 clearly indicates that the power thereunder given to the bank is without prejudice to the provisions of either section 39 or section

40. The fact that recourse has been had to the provisions of section 39 or 40 does not preclude the bank from resorting again to its right: under section 41 to recover its dues as arrears of land revenue. Apart from this we are also unable to accept that the appellant‑company has established with any degree of certainty that the respondent bank did in fact take over the management of the company. The document upon which it bases its claim is the letter of the 24th March 1964, which has been earlier set out in extenso. This document does not, in our opinion, disclose that the action therein contemplated was of the nature envisaged under section 40 of the Ordinance or amounted to a transference of the management to the bank. The management continued to remain with the Managing Agent, the National Development Trust, and the bank merely nominated some trustees on the Board of Trust. This did not amount to either a transference of the management or the taking over of the management by the bank as contemplated by the Ordinance. Again, the very first paragraph of this letter shows that this was a purely interim measure till such time as the liabilities of the respondent bank and the National Bank were paid off or till the respondent bank in its sole discretion decided that the affairs of the company were in a satisfactory position. This rather supports the contention of the respondent bank that the main object of acquiring the control over the affairs and business of the appellant‑company was to obtain a clear picture of the financial position of the company pending the receipt of the report of the auditors already appointed to examine the affairs of the company. This does not show that the respondent bank was entering upon the management of the company or undertaking, as sought to be contended on behalf of the appellant company, to run the same as a going concern, if necessary, even by putting in further funds for the purpose nor does this constitute, in any sense of that term, an election of either one or the other of the remedies prescribed under the Ordinance. At this stage the respondent bank was not thinking of enforcing its rights under the Ordinance but was merely considering ways and means of helping the appellant‑company to retrieve, if possible, its position, though indirectly this may also have been with a view to safeguard its own securities for the irrevocable guarantee that it had furnished. In this view of the matter we think that the letter of the 24th March 1964, does not furnish any ground for the appellants' case of waiver or estoppel. The action taken by the respondent bank on the 22nd of June 1964, to withdraw from the Board of the Trust, the managing agents of the company, was clearly referable to the option given by the first clause of the letter of the 24th March 1964. This option was exercised after the receipt of the report of Messrs Ferguson & Company which, as rightly observed by the High Court, disclosed a shocking state of affairs. The respondent bank was legitimately entitled to say that after considering the report of Ferguson & Company it had decided in its discretion that the affairs of the company were not at all satisfactory and that no useful purpose would be served by further attempting to bolster it up. It was incapable of being set upon a sound financial footing. In the view we have taken of the foundation upon which the appellants' case has been built up it is unnecessary to examine the decisions relied upon by the learned counsel appearing in support of this appeal in any great detail. To establish the case of waiver or estoppel it was necessary to clearly show that the party alleged to have waived its rights had acted in such a manner as to lead the other side to believe that such rights will not be enforced or will be kept in suspense or abeyance for some particular time. The "gist of the equity", as observed by Viscount Simonds in the case of Tool Metal Co. v. Tungsten E Electric Co. (t), "lies in the fact that one party has by hiss conduct led the other to alter his position" yet he cautioned that he would not have it supposed that in commercial transactions "mere acts of indulgence are apt to create rights." A mere gratuitous indulgence shown by not enforcing strictly one's legal rights for a brief period cannot, in our view, give rise to the inference that the rights have been abandoned for all times. No such intention of abandonment can, in our opinion, be spelled out of either the letter of the 24th March 1964, or even the subsequent conduct of the respondent bank in nominating certain representatives to the Board of Trustees of the managing agents. The subsequent increase in the number of the Bank's nominees on the Board, as stated by the respondent bank, may well have been due to the fact that the second appellant, who was the Managing Director of the company, unilaterally and without the consent or knowledge of the respondent bank himself resigned from the Board of Trustees and the other trustees also followed suit. The said second appellant after resigning purported to seek the advice of the respondent bank as to the legality of his resignation and this may well have led the Board of Trustees to amend their constitution by expressly providing for resignation of the trustees. None of these acts, however, can be said to evidence an intention to waive the appellants' defaults or the respondent bank's rights to enforce payment of its dues under the Ordinance. None of these acts can be considered to have gone beyond "the interim measure" contemplated by the letter of the 24th March 1964, and, as such, the appellants' claim that the bank undertook to run the company by advancing more F funds, if necessary, and forgoing its statutory rights under the Ordinance is wholly fantastic, for, in any event, there can be no estoppel against a statute. Before parting with this case it is necessary also to refer to another argument advanced on behalf of the appellant company, namely, that the power under section 39 could only be exercised where the bank had granted a "loan". Recourse to section 39, it is argued, could not have been made, as the bank had not granted any "loan" at all to the appellant‑company but had merely guaranteed the payment of certain instalments payable to the foreign ship‑builder. Subsection (1) of section 39, it is true, says that "where an industrial concern fails to repay such loan by the due date or in compliance with the notice under section 38, an officer of the Bank, generally or specially authorised by the Board in this behalf, may apply to the District Judge." But we are unable to accept the contention that in the present case there was only a debt and no loan or that section 39 was not attracted. The Ordinance of 1961 was, it appears, amended on the 3rd June 1965, by Ordinance XIX of 1965 and the term "loan" was defined as including a guarantee but this it is said supports the appellants' contention, for without this extension of meaning the term "loan" in sections 38 and 39 would not have included a "guarantee". This amendment, it is true, cannot be relied upon as it was made after the decision of the Letters Patent Bench in the High Court but even without the aid of this amendment we have come to the conclusion that after the bank had in fulfilment of its guarantee paid the first two instalments to the ship‑builders and the insurance premia, upon the failure of the appellant company, it became entitled to recover the same from the appellant‑company, the principal debtor, G as money paid to the use of the principal debtor. To that extent the amount paid constituted an advance and the relationship of debtor and creditor arose between the surety and the principal debtor. In this respect the debt also assumed the characteristics of a loan, for the amount so advanced had to be repaid. The term "loan" has, of course, not been defined in the Ordinance of 1961 as it originally stood. What meaning is then to be given to it? Should it be read in a technical sense or in its ordinary or popular sense. Reading the provisions of the Ordinance as a whole it appears to us that the term has been used in its popular sense, for it is difficult to imagine that the framers of the Ordinance only wished the special procedure prescribed by section 39 to protect "loans" in the strict sense and to leave out other debts due to the respondent bank from H industrial concerns. The obvious intention of these provisions appears to us to have been to give the respondent bank a special remedy to recover its claim and dues from defaulting industrial concerns assisted by it. We would, therefore, read the term "loan" in this section as meaning a contract by which a person receives upon his own credit advances of money from another on specified conditions of repayment. It remains only to mention here that so far as the first ground, on which leave was granted, is concerned learned counsel has relied on subsection (8) of section 39 and urged that this makes it obligatory on the Court to hold an investigation where cause is shown. This is true but where the cause shown raises no issue of fact and admits all the allegations of default we fail to understand what further investigation is to be held. There was no dispute in this case as to the facts relating to the, defaults alleged. The only dispute was as to the legal consequence of the subsequent conduct of the respondent bank. The onus of proving waiver, after confession of default, was thus upon the appellants who had set up this case in avoidance of their liability and this they clearly failed to discharge. They called no evidence in support of their case nor asked the Court to give them an opportunity of doing so. They cannot now be allowed to complain that they were denied the opportunity of calling any evidence. Their complaint is wholly unjustified and without any substance. In the facts of this case the provisions of subsection (8) were duly complied with and no illegality was committed. For the reasons given above we are of the opinion that there is no substance in any of the grounds urged in support of this appeal and that it must fail. It is accordingly dismissed, but in the special facts and circumstances of this case we make no order as to costs. A. H. Appeal dismissed.