1991CLC1501 (PLP)

MUHAMMAD BASHIR KHAN JEHANGIRI, J.‑‑In a suit for possession by pre‑emption of certain land, the learned trial Judge directed Habibullah Khan pre‑emptor to deposit Rs.1,00,000 in cash and to furnish Bank Guarantee 'to the tune of Rs.2,00,000 in the Court before 21‑10‑1989. In compliance with the said order, the pre‑emptor deposited Rs.1,00,000 in cash on 12‑10‑1989 and furnished on 5‑10‑1989 from National Bank of Pakistan, Lakki, a certificate which is to following effect:‑‑ "Certified that Mr. Habibullah Khan son of Sahib Khan is maintaining his account with us since 21‑9‑1989. He is our valuable client, has sound business and good reputation in the market. His financial position is satisfactory."

2. The vendee‑petitioner moved on 21‑10‑1989 an application for dismissal of the suit. 1t was averred in the application that the certificate furnished by the pre‑emptor‑respondent did not satisfy the legal requirement of `Bank Guarantee' and, therefore, the suit was liable to dismissal on this score alone. This application was resisted by the pre‑emptor. The learned trial Judge held the view that since "N.W.F.P. Pre‑emption Act, 1987 (hereinafter called as the Act) is silent about the form and specimen of bank guarantee the intention of the legislature behind enactment of section 24 of the Act is to discourage false, vaxatious and frivolous claims of pre‑emption and that the bank guarantee given by him is not bogus on account of non‑deposit of Rs.2,00,000 at his credit" and thus he was not persuaded to dismiss the suit.

3. This order was challenged by the vendee petitioner in a revision under section 115 of Code of Civil Procedure, 1908, which was also dismissed on 12‑12‑1989 by the learned Additional District Judge, Bannu at Lakki Marwat.

4. The vendee petitioner feeling still dissatisfied has sought through this Constitutional petition the annulment of the aforementioned orders dated 31‑10‑1989 and 12‑12‑1989 passed by respondents Nos.l and 2.

5. S. Zaffar Abbas Zaidi, learned counsel for the petitioner contends that the term "Bank Guarantee" implies an undertaking by the Bank to meet the liability of the specified amount incurred by the person in whose favour it has been entered into irrespective of his being a valuable customer or of his having a sound financial position. He also submitted that a Bank Guarantee in banking terminology is a Guarantee pure and simple altogether different from a certificate showing the sound financial position of a customer.

6. Mr. Muhammad Iqbal Kundi, learned counsel for the pre‑emptor respondent, on the other hand, maintained that as no specimen has been prescribed for Bank Guarantee in the Act, therefore, guarantee so furnished fully meets the requirement evisaged by section 24 of the Act.

7. It is common for a statute to contain a provision that certain words and phrases shall, when used in the statute, bear particular meaning. The terms `Bank Guarantee' has not, however, been defined in the Act itself. Under the settled principles of interpretation of statutes the same words or phrases, when used in another Act dealing with the same subject‑matter, often bear the same meaning failing which we shall have to fall back on its dictionary meaning. Applying the first principle we find that the terms "Contract of Guarantee", "surety", "principal debtor" and "creditor" have been defined in section 126 of the Contract Act, 1872 (Act No.IX of 1872) which reads as under:‑‑-- A `contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called "surety", the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the creditor .... ' It would, therefore, be noticed that the contract of guarantee envisaged that the guarantor (in the instant case the Banker) agrees with the creditor (here the Court) to discharge the liability of a third person (the pre‑emptor) in case of his default. It was held in Thakurrey v. Kishendas (76 IC 282) that the contract of guarantee as defined in section 126 ibid is confined to cases of suretyship strictly so‑called. The conditions required for a contract of suretyship as laid own in Mahabir v. Chaudre 1965 IC 370 are (i) there must be a creditor, (ii) a principal debtor, (iii) a guarantor or surety who makes himself liable for the liability of the principal debtor. Strictly speaking a contract of guarantee may be tacit or implied and may be inferred from the course of conduct of the parties concerned.

8. SK Dutt, in the "Law of Conveyancing in British India" (1948 Edition University Law House, Allahabad), while defining guarantee has also invoked the provisions of section 126 of the Contract Act, 1872. According to P.C. Mogha in the "Conveyancer' "a contract of guarantee is a contract to perform a promise or discharge the liability of a third person in case of the latter's default (section 126 of Contract Act)." In Bullen and Leake's "Precedents of Pleadings" by George Kirkhouse Jenkins‑London (1950 Edition), a guarantee has been defined as "a collateral promise to answer for the debt, default, or miscarriage of another who is or is about to become liable for the same debt to person guaranteed." It has also been observed in this treatise that it is of the essence of a guarantee that there should be someone liable as principal and that such a contract is required to be in writing.

9. In the context of section 24 of the Act, also the Bank Guarantee must be in writing for, from the word `furnish' employed in the section the requirement of writing can be clearly spelt out.

10. On the other hand, the `guarantee' in "A Concise Law Dictionary" (Sweet & Maxwell, London, 1964 Edition) has been described as "a collateral promise to answer for the debt, default or miscarriage of another, as distinguished from an original and direct contract for the promisor's own act."

11. From what has been observed above, we are clear in our mind that absence of a specified format in the Act notwithstanding a Bank guarantee must conform to an undertaking by a Banker whereby it undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promisee must exist or be contemplated. In the context o Bank guarantee within the contemplation of section 24 of the Act, therefore, the Bank must undertake in writing to be answerable to the Court for the amount so guaranteed in case of default of miscarriage of the pre‑emtor to deposit the same. A contract of guarantee may be made either in the form of an ordinary deed, in the form of a bond, or in the form of a deed poll, or by a letter addressed to the person or firm to whom guarantee is given. According to P.C. Mogha in the `Conveyances', the form of letter is in vogue in the case of Banks. The stamp duty is leviable as on an agreement.

12. It has already been observed earlier that the form of letter is in vogue in the case of Bank Guarantee. The following precedent or any other form which conforms to the requirement of section 126 of the Contract Act may be furnished to the Court as Bank Guarantee:‑‑ Name of the Bank To The Civil Judge/ Senior Civil Judge. In pursuance of your order dated‑‑‑‑‑‑to A B (pre‑emptor) to furnish Bank Guarantee in the pre‑emption suit No: ‑‑‑brought by him against C D (vendee), we, the undersigned, being the Manager & Officer of the Bank‑‑‑ hereby guarantee to the Court the payment of Rs.‑‑‑‑representing the guaranteed amount as and when required by the Court and we hereby undertake as follows:‑‑ (1) that this guarantee shall be in force and subsisting till intimation by the Court of its determination/revocation; and (2) that we hereby covenant that we shall be liable to the Court on this guarantee to the extent of Rs‑‑‑‑‑‑ Dated, ‑‑‑‑‑Bank Branch Officer Manager.

13. Considering all the factual and legal aspects of the case, we are of the opinion that the certificate furnished by the National Bank of Pakistan, Lakki, to the Court in the suit for pre‑emption in the instant case did not fulfil the requirement of Bank Guarantee within the contemplation of subsection (1) of section 24 of the Act. As a result, this petition is allowed, the impugned orders of the learned Civil Judge and the learned Additional District Judge are lea aside as illegal and without legal authority. Resultantly, the pre‑emption suit brought by the answering‑respondent stands dismissed under subsection (2) of section 24 of the Act. The parties are, however, left to bear their own costs. H.B.T./1227/P Petition allowed.