1988 PLP 849 (CLC)

Date of hearing: 6th February, 1988. MUHAMMAD ASADULLAH, J.‑‑ Appellants Nos. 1 to 4 obtained a cash credit facility initially up to the limit of Rs.1,50,000 which was subsequently enhanced to Rs.2,50,

000. The goods in dispute consisting of medicines and medicinal products etc. were pledged as security for the said facility while Mirza Safdar Jang Humayun deceased‑appellant No.5 secured the debt by mortgaging his immovable property. The amount due against appellants Nos.l to 4 rose to Rs.3,42,926.37 upto 20‑1‑1975 when the suit was filed for the recovery of the same in a Civil Court at Lahore. On the enforcement of the Banking Companies (Recovery of Loans) Ordinance,1979 (XIX of 1979) the case was transferred to the Court of Special Court (Banking) Lahore. The receipt of the amount from the respondents under the said facility was not disputed by the appellants and similarly the liability to pay the amount found due was not denied by them. The appellants mainly alleged that the respondents had not furnished true and faithful accounts to them and, therefore, they could not admit their liability to the extent of the amount claimed by the respondents. The appellants also alleged that the suit was barred by time and that the same was not filed by a duly authorized person. The learned trial Court framed the following issues:‑ (1) Whether the suit has been filed by a duly authorised person? O.P.D. (2) Whether the suit is barred by time? O.P.D. (3) Whether the plaintiff is entitled to the relief claimed? O.P.P. (4) Relief. The issues were decided in favour of the respondents and the learned Special Judge (Banking), Lahore, passed a preliminary decree for recovery of Rs.3,42,926.37 with costs and with interest at the stipulated rate or 2% above the bank rate whichever is higher, from the date of the institution of the suit till the entire payment of the decretal amount. The learned trial Court held that the realization of the amount was to be effected by sale of pledged goods as well as of the mortgaged property and, therefore, the suit had to be treated to be under Order XXXIV of the C.P.C and hence a preliminary decree was being passed. He also allowed a time of one month for paying of the liability (decretal amount with interest and costs). The appellants have challenged the said judgment and decree through this appeal. We have perused the record and have heard the learned counsel for the parties.

2. Issues Nos.l and 2 are not pressed before us and, therefore, issue No.3 only remains to be discussed and decided. As already pointed out above the appellants did not deny that they had availed of the cash credit facility and they did not dispute the pledging of goods and mortgaging of property. During the pendency of this appeal the parties had the opportunity of 'examining the record and the accounts and consequently a sum of Rs.3,42,926.37 was deposited by the appellants in the Court of Special Judge (Banking), Lahore. After further examination of the said accounts both the parties agreed that another sum of Rs.22,271.33 was also recoverable from the appellants and the appellants undertook to pay even that amount. Vide order dated 23‑9‑1985 they were allowed to pay the amount within a fortnight. This order of deposit was subject to adjustment in the final order. Now that the parties have checked the accounts finally, the learned counsel for the appellants has not disputed the quantum of money payable by them under the impugned decree. In other words the learned counsel for the appellants has not disputed the decree so far as the amount payable by the appellants, as mentioned therein, is concerned. The learned counsel for the appellants has, however, disputed the rate of interest and has also argued that the appellants are entitled to adjustment of prices of their pledged goods which according to him have become unfit for human consumption due to the negligence of the respondent. It is only these two points on which he has contested the appeal now.

3. So far as the rate of interest is concerned the legal position is very clear. Clause (a) of subsection (2) of section 8 of the Banking Companies (Recovery of Loans) Ordinance, 1979 (XIX of 1979) clearly provides that in the case of interest bearing loans the decree shall provide "for interest at the contracted rate or at the rate of 2% above the bank rate, whichever is the higher". The learned counsel for the appellants could not refer to any legal provision contrary to the said legal provision. Accordingly, under the said law the interest was payable as claimed and the learned trial Court has awarded the interest exactly in the terms provided in the said clause (a) of subsection (2) of section 8 ibid. Therefore, the interest has been rightly awarded.

4. The learned counsel for the appellants has argued that as the pledged goods were medicines or medicinal products etc. the same should have been taken care of by the respondents so as to ensure that the same were not rendered unfit for human consumption. So far as the factual position about the goods is concerned there is no dispute that almost all of the same have become unfit for human consumption and as such useless for the purpose. Government Analyst, Drugs Testing Laboratory, Punjab, Lahore, was appointed a Local Commissioner to examine the said goods and to make a report about their condition. His report is on file and it shows that all the medicines and almost all the other goods pledged by the appellants have become unfit for human consumption and have been rendered useless. The question, therefore, remains as to whether the goods deteriorated due to negligence of the respondents or it were the appellants who had to take care of the same. The document through which the said goods were pledged is on file as Ext.P.10. Its condition No.15th runs as follows:‑ "That no responsibility will lie with the Bank in respect of the quantity, quality or condition on final outturn of the Goods, Produce and Merchandise now pledged or hereafter to be pledged to the Bank under this Agreement and it shall be the responsibility of the Borrower that the Goods, Produce and Merchandise for the time being pledged shall be in accordance with and conform to the description and declaration of and made by the Borrower in the schedule and or pledge letters." A reading of the said clause of the agreement of cash credit will show that the Bank has no responsibility "in respect of the quantity, quality or condition on final outturn of the goods". Therefore, there was no responsibility on the bank to take care of the pledged goods except to guard the same against theft or pilferage. It was for the appellants to maintain the godowns in proper condition and to store the goods in such a condition that the same did not deteriorate and become useless. Even the godown had to be provided and was provided by the appellants. The report of the Local Commissioner is sufficient to show that the godown was shabby and ill ‑ventilated and had poor storage conditions. As such the medicines had to deteriorate, Again, the medicines etc. had to become useless by efflux of time because medicines do expire after a given date even if the same are stored in a well‑maintained godown. The learned counsel for the appellants has referred to A.M. Burq and another v. Central Exchange Bank Ltd. and others (P L D 1966 Lahore 1), and has reiterated that it is the responsibility of the bank to take care of the goods. A reading of the said case will show that it related to shortage in stocks and did not relate to deterioration of goods due to poor storage conditions or ill‑ventilated godown. In our case no such shortage, theft or pilferage is alleged. The appellants themselves provided a bad godown with poor storage conditions and they did not thereafter take care to keep the efficacy of the medicines etc. intact. As a matter of fact it were the appellants who were the technical persons and who were in the knowledge as to when a particular drug is to expire and as to how the same would be deteriorated even before the date of expiry of goods. With this technical knowledge, it was their duty to approach the bank for disposal of the goods well within time before the goods deteriorated. Therefore, they are now estopped from laying any blame on the respondents. However, as already said no responsibility lay on the respondents to maintain the quality of the drugs etc. during the period the same remained stored with, them. Accordingly no allowance or adjustment for the deterioration of the drugs etc. can be allowed to the respondents. It may be mentioned that in the two written statements filed by the appellants they never took any objection that the goods stored by them must have expired by `them and that the same had deteriorated due to the negligence etc. of the respondents. For that reason too they cannot claim any allowance or adjustment on that account.

4. In view of the above discussion the finding of the learned trial Court on issue No.3 is also maintained. The appeal is dismissed with costs. A.A./S‑197/L Appeal dismissed.