P L D 1966 (W (PLP)

(5) General.

4. My findings are Issue No. 1 (a) Yes. (b) Yes. This suit can be filed on the basis of these Promissory Notes. Issue No. 2 Yes. Issue No. 3 No. Does not arise. Issue No. 4 Defendants Nos. 1, 2 and 3 are liable. Issue No. 5 As below.

5. Only two witnesses have been examined by the parties, Muhammad Bux, Exh. 5 for defendant No. 1, and Abdul Wadood, Exh. 6, for the plaintiffs. The latter has produced a certified copy of the statement of accounts relating to the defendants. These accounts have neither been assailed nor denied.

6. Mr. Hamid Hussain, learned counsel for the defendants, urges on the basis of section 4 of the Negotiable Instruments Act that the two pronotes in suit were executed without consideration, that although the two pronotes were executed, no consideration in fact passed to the defendants, and that the loan on their basis was a future liability and the suit should have been filed for the balance of the accounts between the parties. His contention is that it is only on a settlement of these accounts that the suit can be based and that the pronotes being executed by the defendants as collateral security, the plaintiffs were debarred from filing this suit.. It has also been urged that the pronotes in suit are in fact an agreement and reliance has been placed on Bherulal v. Ram Rikh (A I R 1951 Ajmer 71). I will dispose of this last objection forthwith as on a mere reading of this judgment of a Single Judge, it is plain that the documents before him which bad to be read as a whole, contained a recital at the end to the effect that certain sums was due from the appellant to the opposite‑party in the Khata of the Third Party, and these amounts were to be entered by the opposite‑party as payable by him. It was observed that the intention underlying the document was that only after certain credit and debit entries had been made and taken into considera tion, a certain amount would be due which the applicant undertook to pay and it was after the credit entries had been made that the ultimate balance was to be struck and which the applicant agreed to pay. In this context, it was held that the test to the intention of the parties was whether the documents as drawn could be held to be negotiable and whether the third person could file a suit on the strength of this document. For these reasons the pronote in that case was held to be an agreement. None of these contentions prevail in the present case. The two pronotes Exhs. P/5 and P/7 clearly state that on demand, the Sind Punjab Agencies jointly and severally promise to pay to the plaintiff the two amounts mentioned in these pronotes for value received with interest and monthly rests.

7. Section 44 of the Negotiable Instruments Act reads as under :‑-- "

44. When the consideration for which a person signed the promissory note, bill of exchange or cheque consisted of money, and was originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportion ately reduced." It is therefore urged that there was absence of any consideration for the pronotes and in any case the consideration was to be at a future date. Exhs. P/11 and P/12 addressed to the plaintiff by the Sind Punjab Agency and signed by defendants 2 and 3 individually describing themselves in their own handwriting as the partners of this concern, enclosing the promissory notes for Rs. 7,000 and Rs. 25,OC0 respectively state that the promissory notes were given as security for the repayment of an overdraft of two amounts of Rs. 7,000 and 25,000 respectively. The over drafts were allowed as from the date of the pronotes and from the letters of request and guarantee, namely the 9th of December, 1958 and the 30th of August, 1960. I do not think that in the circumstances it can be justly argued that these two pronotes P/5 to and P/7 were entirely without consideration. Besides, the aspect that the plaintiff has availed himself of the two alternative remedies available to him, there is nothing which in law prevents the plaintiff from suing on the basis of these two pronotes. It is admitted that cash credit facilities were allowed to the defen dants by the plaintiff and they operated on these accounts and drew balances from the Bank from time to time. The statement of accounts filed by the plaintiffs' witness Wadood has not been challenged. The contention that the suit was substantially one based upon account and not upon a promissory note, is also without substance, as it is established law that the promissory notes were taken as collateral security, that, therefore their legal A character as negotiable instruments is not destroyed in such circumstances, and that they were executed for consideration either for the present or for the future. This aspect urged by learned counsel places reliance op Suit No. 175/63, where Farooqui, J. on similar facts observed in the following terms: "The question which then arises is that in cases where the lender, such as the bank, obtains a promissory note by way of collateral security and opens an account in which advances are made, does the reference to such account or accounts in a plaint alter the character of the suit though it is expressly based upon promissory note or notes? That in this case the bank could institute a suit upon two promissory notes is not disputed by Mr. Rizvi, but what he contends is that in so far as the accounts have been pleaded, this suit must be held to be in substance a suit upon accounts and the mere phraseology of the plaint would not turn it a suit on a negotiable instrument. On a careful and a long consideration of the question I have come to the conclu sion that Mr. Rizvi's contention cannot be upheld. Why should a suit which is based upon a Promissory note lose its character merely because there is a reference to an account? It is not disputed that the consideration of the promissory notes in this case was the advance which was made from time to time in the two accounts. The two promissory notes were admittedly a collateral security for these advances. The security was for the repayment of the loan. A suit is permissible upon a pro missory note and unless the note contains all the terms of the contract the claim may also be made on the original considera tion. It was so held by a Division Bench of this Court in the case of K. Munir v. Rashid Ahmad P L D 1963 Kar.

905. Mr. Arfin cited cases in which it was found that a suit upon a cheque or a promissory note which was given as a collateral security was maintainable." A Division Bench of this Court in L. P. A. No. 103/65 against this finding upheld the view of my learned brother, and dismissed the appeal in limine, holding that such a suit could be filed on the basis of a pronote under the provisions of Order XXXVII, even though the amounts could be determined with the help of accounts. The point raised therefore has been settled and is binding on this Court. My finding accordingly on this issue. Issue No. 2.‑Witness Mohd. Bux for defendants 1 and 2 has stated that Akhtar Ali, defendant No. 3, was originally his employee as a clerk and left his service in 1950, but rejoined the firm in 1958. In this particular transaction in which two pronotes were executed by' defendants 2 and 3 as partners of defendant No. 1 firm, Mohd. Bux stated that Akhtar Ali and he were partners in the loan granted to them as over‑drafts on the basis of the pronotes. Numerous cheques (Exhs. 5/A and 5/B) were signed and executed by the defendants 2 and 3 at different times and over a long period. Sometimes the cheques were signed by defendant No. 2 alone, sometimes by defendant No. 3 alone, each describing himself as a partner of the Sind Punjab Agency. This confirms the averments of the plaintiffs and establishes that defendant No. 1 was a partnership concern with defendants No. 2 and 3 as partners liable for the amounts involved in the present suit. My finding accordingly. Issue No. 3.‑It is difficult to believe the evidence of defendant's witness Mohd. Bux who styles himself as the Proprietor of the Sind Punjab Agency that he was not aware of the implications of the papers allegedly brought to him by defendant No. 3, and already signed by him, in the context of his admission that he then signed them that he is a literate businessman and that by these papers they were allowed an over‑draft by the plaintiff/bank on which they operated and on which Mohd. Bux admits he drew his commission. The cheques etc. produced and the admissions of the signatures on these documents by themselves discredit the contentions of defendant No. 2 on this issue. My finding accord ing against defendant No. 2 also on this issue. Issue No. 4.‑In view of my findings on the earlier issues and the admissions made by Mohd. Bux, there is no doubt that the Sind Punjab Agency with defendants No. 2 and 3 as its partners are liable for the amounts due and as claimed by the plaintiffs. The statement of accounts, Exh. 6/A, produced by the plaintiffs, supports the fact that the loan was availed of and operated upon by the defendants. In the result there will be a decree against the defendants Nos. 1 and 2 and against defendant No. 3 ex parte for the sum of Rs. 26,777.55 ps. as prayed. K.B.A. Suit decreed.