2004 PLP 1472 (CLD)

This is a banking suit filed by National Bank of Pakistan for recovery of Rs.214,752,081.29 against the defendants. The facts in brief as alleged in the plaint are that at the request of the defendant No. 1, plaintiff sanctioned through its letter dated 8‑7‑1997 two finance facilities namely, Packing Finance (Pledge) limit up to Rs.135 million and Inland Bank Guarantee Limit of Rs.10 million to the defendant No.

1. Finance Agreement on mark‑up basis dated 9‑7‑1997 was executed by the defendant No.

1. Defendant No. 1 also executed Demand Promissory Note dated 9‑7‑1997, Letters of Pledge dated 9‑7‑1997, 9‑7‑1998 and 27‑11‑1999, Registration of charge vide certificate dated 23‑4‑1989, Counter Guarantee dated 9‑7‑1997. As further security defendants Nos.2, 3 and 4 executed Guarantee dated 9‑7‑1997. Defendant No. 1 failed to repay the dues amounting to Rs.187,752,081.29 as on 30‑11‑2000. Plaintiff served legal notices dated 8‑9‑1999 and 20‑12‑2000 on the defendants but to no avail and ultimately this suit was filed with following prayer:‑‑ (a) To pass a Judgment and Decree against the defendants, jointly and/or severally, for a sum of Rs.187,752,081.29 along with mark‑up and Central Excise Duty on deferred payments, from the date of suit until payment; (b) To pass a Judgment and Decree against the defendant jointly and/or severally for the repayment of future amounts paid by the plaintiff. (c) To pass a Judgment and Decree against the defendants jointly and/or severally for a sum of Rs.27,000,000 on account of damages @ 20% caused by the defendants to the plaintiffs. (d) To pass a judgment and decree for the sale of pledged goods for the recovery of the decretal amount; (e) To grant costs of the suit to plaintiffs; and, (f) To grant such ether; further/ additional decree or decrees order or orders, relief or relieves, direction or directions that this Honourable Court may deem fit and proper in the facts and circumstances of the case. Defendants Nos.1, 2 and 3 despite service remained absent and only defendant No.4 filed application for leave to defend the suit consequently vide order dated 28‑2‑2002 the suit was decreed against defendants Nos.1, 2 and 3 for Rs.187,752,081.29 with mark‑up of two percent. above rate of State Bank of Pakistan and costs. By the same order defendant No.4 application for leave to defend the suit was granted and he was allowed to contest the suit. Defendant No.4 filed written statement. Following issues were framed by the Court:‑‑ (1) Whether the defendant No.4 has executed Guarantee dated 9‑7‑1997 and 30‑3‑1998? (2) Whether defendant No. 4 replied notice dated 20‑12‑2000 by his letter dated 3‑1‑2001? (3) Whether the suit was filed with full claim of the plaintiff and Guarantee dated 30‑3‑1993 was part of the plaint? (4) What is the nexus between Contract dated 30‑3‑1993 and Contract dated 9‑7‑1997? (5) Whether the claim against defendant is time‑barred? Plaintiff filed affidavit‑in‑evidence of its witness Yousaf Hussain Jafri who was cross‑examined by defendant No.4 Advocate. Defendant No.4 filed his own affidavit‑in‑evidence and he was cross‑examined by plaintiff's Advocate. Mr. Asim Mansoor Khan learned Advocate for the plaintiff has argued that defendant No.4 has executed Guarantee dated 30‑3‑1993 in respect of the facility granted to the defendant No. 1 and by sanction letter dated 8‑7‑1997 the facility already granted to the defendant No.1 was renewed and the guarantee being continuing, defendant No.4 is liable under the same. He has relied upon the cases of Muhammad Mushtaq v. Bashir Ahmad Chaudhry PLD 1991 Lah. 400; Messrs Ruby Trading Company v. Mst. Zainab Khanum 1984 CLC 169; Samar Gul v. Central Government PLD 1986 SC 35; Muhammad Ayub v. Additional District Judge, Gujranwala 1985 CLC 1745; Muhammad Amin v. Member (Colonies), Board of Revenue, Punjab, Lahore 1987 CLC 1216; Mardan Ali v. Rab Nawaz 1991 CLC 82; Ghulam Mustafa v. Mst. Rehmat Bibi 1983 CLC 356; Suwalal Vemichand v. Fazle Hussain Rajabali Bohra AIR 1939 Nag.31; Province of West Pakistan v. Shamsuddin PLD 1966 Kar. 297; S. Chattanatha Karayalar v. The Central Bank of India Ltd. AIR 1965 SC 1856; United Bank Limited v. Haji Bawa Company Ltd. 1981 CLC 89; Emirates Bank International Limited v. Messrs Fair Commission Agency (Pvt.) Limited 1991 CLC 450; Allied Bank of Pakistan Limited v. Zia‑ul‑Qamar Bhatti 1989 MLD 366; National Construction Ltd. v. Standard Insurance Co. Ltd. 1984 CLC 286; National Commercial Bank Ltd. Karachi v. Mohammad Tufail PLD 1975 Kar. 671; Pakistan through Secretary to Government of Pakistan Ministry of Railways v. Messrs Rajastan Alloyes and Steel (Private) Limited PLD (sic) Lah. 157; Ali Muhammad v. Muhammad Hayat 1982 SCMR 8 7 6; Dr. Syed Ali Sajjad Bukhari v. Sabir Ali Shah 1987 CLC 229; Saiyed Ali Amir v. Messrs Dalmia Cement Ltd. PLD 1961 Kar. 255; Messrs Muhammad Anwar Muhammad Iqbal v. Collector of Customs PLD 1976 Kar. 253 and Budho v. Ghulam Shah PLD 1963 SC

553. On the other hand Mr. A. Rauf learned Advocate for the defendant No.4 has contended that the plaintiff suit is only based upon sanction letter dated 8‑7‑1997 and the fresh finance agreement and security documents obtained under it and neither the sanction letter refers to previous facility nor it is pleaded in the plaint. He has submitted that defendant No.4 is not liable and the only guarantee dated 30‑3‑1993 executed by defendant No.4 stands discharged. He has also argued that the suit against defendant No.4 is otherwise time‑barred. He has relied upon the cases of Gulzar Ahmad v. Sindh‑Punjab Goods Transport Co. PLD 1966 Kar. 253; Abdul Ghani v. Mst. Zaheda Begum PLD 1982 Lah. 401 and National Commercial Bank Ltd. Karachi v. Mohammad Tufail PLD 1975 Kar.

671. I have considered the arguments and gone through the record. On perusal of the record, the question in this suit boils down to whether the defendant No.4 is liable to the claim made in the suit on the admitted Guarantee dated 30‑3‑1993 Exh. P.W. 13 and whether the claim is in time against the defendant No.4. The case pleaded in the plaint and reiterated in the affidavit‑in‑evidence of the plaintiff witness is that at the request of defendant No. 1, plaintiff has sanctioned through its letter dated 8‑7‑1997 Exh.P.W.2 two finance facilities namely Packing Finance (Pledge) Limit of Rs.135 million and Inland Bank Guarantee Limit of Rs.10 million to the defendant No.

1. Pursuant to such sanction advice, the defendant No. 1 signed finance agreement on mark‑up basis dated 9‑7‑1997 Exh.P.W.3 under which the defendant No.1 agreed to sell to the plaintiff raw material/finished goods spares/machinery etc. for a total value 'of Rs.135,000,000 and agreed to repurchase the same from the plaintiff at a price of Rs.176,920,

000. Defendant No.1 also executed D.P. Note dated 9‑7‑1997 Exh.P.W.4 for Rs.176,920,000, Letters of Pledge dated 9‑7‑1997 Exh. P.W.5, dated 9‑7‑1998 Exh.P.W.6, dated 27‑9‑1999 Exh.P.W.7, Agreement of Cash Finance Hypothecation of Debts and Current Assets dated 11‑4‑1989 Exh.P.W.9 for Rs.62,937,500 and certificate of its registration dated 25‑4‑1989 Exh.P.W.8, Guarantee dated 9‑7‑1997 Exh.P.W.10 of the defendant No. 1, Guarantee dated 9‑7‑1997, Exh.P.W.11 of the defendant No.2 Nayyar Mahmood for Rs.176,920,000, Guarantee dated 9‑7‑199.7 Exh.P.W.12 of the defendant No.3 Yasmin Mahmood for Rs.176,920,000, Guarantee dated 30‑3‑1993 Exh.P.W.13 of the defendant No.4 Zahid Bashir for Rs.174,590,000, statement of Account Exh.P.W.14, plaintiff's Advocate letter dated 8‑9‑1999 with copy of legal notice dated 8‑9‑1999 addressed to defendants Nos.1, 2 and 3 Exh.P.W.15, Legal Notice dated 20‑12‑2000 addressed to defendant No.3 Exh.P.W.16 and Legal Notice dated 20‑12‑2000 addressed to defendant No.4 Exh.P.W.17. Sanction letter Exh.P.W.2, shows that it is a renewal of finance facilities to the account of defendant No.1 in respect of packing Finance Facility of Rs.135 million, it provides for security inter alia of personal guarantees of all Directors of the defendant No.1 including of Zahid Bashir. In respect of Inland Bank Guarantee facility of Rs.10 million security inter alia is the personal guarantees of the Directors of defendant No.1. This letter lays down additional conditions inter alia that in the event of failure to recover mark‑up and/or to get the fresh documents executed, legal proceedings should be initiated. Pursuant to this sanction letter, fresh documents have been executed including personal guarantees of Directors of defendant No.1 but the record does not show that the defendant No.4 also executed fresh personal guarantee. The guarantee of the defendant No.4 Exh.P.W. 13 is dated 30‑3‑1993 which is in consideration of agreement dated 30‑3‑1993 made between the plaintiff and the defendant No.1. The guarantee amount is Rs.174,590,

000. The plaint as well as plaintiff's evidence is completely silent about the agreement dated 30‑3‑1993 between the plaintiff and the defendant No.1. The agreement dated 30‑3‑1993 has not been produced but it is also not referred to either in the plaint, affidavit‑in‑evidence of plaintiff witness or in any of the documents produced by the plaintiff witness except only in Exh. P. W.13 the guarantee of the defendant No.4. Although the guarantee of the defendant No.4 is continuing one, but the consideration on which it was based was the agreement dated 30‑3‑1993. Plaintiff in order to have this guarantee enforced in the suit was required to prove, that indeed the claim made in the suit arises out of the facilities granted under agreement dated 30‑3‑1993, which facilities were renewed by sanction letter Exh.P.W.2 and the guarantee Exh.P.W.13 being continuing the defendant No.4 is liable under it. Incidentally there is no such case of the plaintiff. Plaintiff witness in his cross‑examination has said as follows:‑‑ "On 9‑7‑1997 no guarantee was executed by defendant No.4. I see the contents of paragraph 14(e) of the plaint and state that no guarantee was executed by defendant No.4 on 30‑3‑1998. The only guarantee executed by the said defendant is Exh.P.W.13 dated 30‑3‑1993.1 see the legal notice dated 20‑12‑2000 served by Messrs. Mansoor Ahmed Khan & Co. upon the defendant No.4. It is correct to suggest that a sum of Rs.214,752,081.29 is demanded through this notice. It is also correct to suggest that such amount is not reflected in any guarantee executed by defendant No.4. It is correct to suggest that there is a reference to an agreement dated 30‑3‑1993 in the guarantee Exh.P.W.13" and no such agreement has been mentioned in the plaint anywhere. I am not in possession of the agreement dated 30‑3‑1993." The plaintiff in this suit is seeking enforcement of the guarantee Exh.P.W.13 in isolation i.e. without at all showing that its claim in the suit is based on consideration which arises out of the agreement dated 30‑3‑1993. No nexus has been established between agreement dated 30‑3‑1993 and the agreement dated 9‑7‑1997 Exh.P.W.3 although there was specific issue on this point. Section 127 of the Contract Act, 1872 provides that anything done, or any promise made, for the benefit of principal debtor may be a sufficient consideration to the surety for giving the guarantee. This provision fixes the engagement of the guarantor to the things already done or promised to be done for the benefit of the principal debtor. In the context of the present case the engagement of the defendant No.4 as a guarantor by the guarantee Exh.P.W.13 was for the benefit of principal debtor the defendant No. 1 arising out of the agreement dated 30‑3‑1993. The claim in the suit is based on agreement dated 9‑7‑1997 Exh.P.W.3 to which the engagement of defendant No.4 as guarantor is not established. Although the sanction letter Exh.P.W.2 required personal guarantees of the Directors of the defendant No. 1 and of Zahid Bashir the defendant No.4 and though personal guarantees from Directors the defendants Nos.2 and 3 Exhs.P.Ws.11 and 12 both dated 9‑7‑1997 were obtained but for reasons best known to the plaintiff's official such guarantee was riot obtained from Zahid Bashir the defendant No.4. Plaintiff's official responsible to implement the sanction letter Exh. P. W. 2 in letter and spirit in order to overcome their wrongful act of not obtaining guarantee from defendant No.4 have fallen upon guarantee Exh.P.W.13 which has no nexus to its claim in the suit. The arguments of the learned counsel of the plaintiff that guarantee is admitted and it is continuing and that defendant No. 1 has defaulted in making repayment and that on over all view of the case the relief could be granted to the plaintiffs. With all due respect to the submissions of the learned counsel, I am unable to persuade myself to get roped up with these submissions for the simple reasons that though the guarantee is admitted but the suit is not based on the consideration of the guarantee nor it is shown that the consideration mentioned in the guarantee passed on to the beneficiary and the beneficiary has failed in its obligation based on such consideration. After all contract of guarantee has to be based on consideration and if the consideration so specified is not brought on record, the Court cannot assume such consideration and grant relief. For the same reasons various authorities cited by the learned counsel for the plaintiff are found to be distinguishable from the facts and circumstances of this case as they mainly relate to the legal prepositions regarding continuing guarantee and on moulding of relief to which there is no cavil. For the above reasons, the suit against the defendant No.4 is dismissed with costs. S.A.K./N‑29/K Suit dismissed.