2017 PLP 233 (CLCN)

SYED SAEEDUDDIN NASIR, J.

This common judgment will dispose of all the applications for leave the defend the Suits being C.M.A. No. 1362/2013 in Suit bearing No.183/2014 and C.M.As. Nos.2355/2014 and 2356/2014 in Suit No.306/2014 under Order XXXVII(3) read with section 151, C.P.C. The present suits have been filed by the plaintiff against the defendants for recovery of Rs.92,32,131/- in Suit No.306/2014 and Rs.40,68,392/- in Suit No.183/2014, on the basis of dishonored cheques.

1. Brief facts of the case are that the Defendant No.1 and the Plaintiff were engaged in the business relationship since 2003, the Plaintiff used to provide the Defendant No.1 the facility of dying, bleaching and printing of gray cloth with cloth, and on cloth supplied by the Defendant No.1 to the Plantiff according to the needs and requirements for Defendant No.1's export order. The defendants have filed leave to defend applications under Order XXXVII(3) read with section 151, C.P.C. through its authorized representative in which they have contended that the plaintiff had filed the titled suits on the basis of the cheques which were given as guarantee/security and without consideration as per the practice and norms of the market against the plaintiff who had already received all the payments.

2. The learned counsel for the defendants Mr. Irfan Haroon, while arguing the applications for leave to defend the suits has inter alia contended that liability of the defendant No.1 being a private Limited Cornpny registered under the Companies Ordinance, 1984, being a separate legal entity could not be treated as that of its Directors/Shareholders (defendants Nos.2 and 3) or foisted on them merely on Eccount of contract having been signed by any of them for and on behalf of company. He stated that the impugned liability, if any, prima facie is against the company (defendant No.1) of which the defendants Nos.2 and 3 are Directors as such the names of the defendants Nos.2 and 3 are liable to be struck off.

3. The learned counsel for the defendants has further contended that all the cheques were presented in the months of November and December 2011 and February, 2012, however, the plaintiff had filed the title suit in April, 2013 approximately after two years and the plaintiff had failed to produce any request made by the defendant No.1 for extension of time. Therefore, the suit is barred by limitation.

4. He next contended that there is a great contradiction with regard tc amount and dates of the cheques and amount and date of invoice which do not coincide with each other. The invoices annexed with the plaint are forged, fabricated and fake and does not shown any acceptance by or on behalf of the defendant No.1 nor the dates and amount of the said invoice correspond with each other and with the amount and dates of cheques.

5. The legal notice dated 16th March, 2013 also sent approximntely two years of the alleged dishonor of the said cheques in which the plaintiff falsely claimed an amount of Rs.13,300,433/-, therefore the suits are barred by limitation.

6. The next arguments that Mr. Irfan Haroon extended is that the plaintiff had not produced any gate pass, shipping documents and any other documentary evidence with regard to the shipment of goods and its acceptance thereof by the defendant No.1 into the Export Processing Zone.

7. He further argued that the grant of unconditional leave to defend the suits to the defendants is a fundamental right guaranteed under the Constitution through insertion of Article 10-A, hence the unconditional leave is the fundamental rights of the defendants in order to substantiate his arguments the learned counsel for the defendants has placed reliance on following case law:- 1. 2006 CLD 191 - M/s. Sakhi Dattar Cotton Industries and Oil Mills v. M/s. Mehmood Pvt. Ltd. and others. 2. 2001 YLR 526 [Karachi] - Ehtesham Ghazi v. Isharuddin and others.

3. PLD 2000 Lahore 414 - Ayaz Durrani and others v. Chairman, WAPDA and others. 4. 1993 CLC 1222 [Lahore] A. Rehman v. Tehsildar Lahore and others 5. 1995 CLC 299 [Lahore] - Shamim-ud-Din v. Federal Government of Pakistan and others. 6. 1983 CLC 1042 [Lahore] - M/s Franksons & Co. v. Mian Muhammad Hussain. 7. 2005 CLD 521 [Karachi] - Muhammad Ali Enterprise v. Special Banking Court No.III and others.

8. PLD 199 Karachi 398 - Agrofoster (Pvt.) Ltd. and others v. Judge, Banking Court No.5 and another. 9. 2002 CLC 439 [Peshawar] - Javed Qayyum Khan v. Muhammad Ismail Sabri.

8. Conversely, the learred counsel for the plaintiff has submitted that there was a good relationship between the Defendant No.1 and the Plaintiff, the Defendant No.1 used to make payments to the Plaintiff through cross cheques signed by the Defendants Nos.2 and

3. The Defendant No.2 early in the year 2010 informed the Plaintiff, that the Defendant No.1 has received a big order of export of garments from the countries out side Pakistan and in order to meet the export order in time, the Defendant No.1 placed a huge work order of dying, bleaching and printing of finished product on gray cloth (without cloth) to the Plaintiff, according to the needs and requirements for Defendant No.1's export orders, the Plaintiff fulfilled the orders to the satisfaction of the Defendant No.1 as per agreed periodic commitment of delivery of the finished product.

9. He further states that against fulfillment of the periodic commitment of delivery of the finished product by the Plaintiff to the satisfaction of the Defendant No.1, the Defendant No.1 continued to pay the billed invoice amount to the Plaintiff through cross cheques and the cheques were encashed by the Plaintiff without any let or hindrance. In the later part of the year 2010, the Defendant No. 1 issued cheques amounting to Rs. 92,32,131/- and Rs.40,68,392/- to the Plaintiff, the details of which are mentioned in the list of cheques available in the case files. The said cheques on presentation for encashment by the Plaintiff were dishonored by the Bank Al-Habib, Shahra-e-Faisal and Landhi Branches, Karachi on the ground of insufficient funds.

10. The Plaintiff issued notices to the Defendants for making payment of the said dishonored cheques amounting to Rs.92,32,131/- and Rs.40,68,392/- to the Plaintiff, but the said notices were returned un-served. The Plaintiff, therefore, prayed for judgment and decree against Defendants jointly and severally for a sum of Rs.92,32,131/- and Rs.40,68,392/- with compensation/bank mark up at the prevailing rate from the date of filing of the present suits till realization of the amount.

11. Learned counsel for the plaintiff next contended that the defendants have filed the Resolution of Board of Directors with leave to defend applications, is of 23.1.2013, which is also of General in nature, i.e. to manage the affairs of the defendant company with the banks etc, hence, the said resolution dated 23.1.2013 passed earlier before the filing of the leave to defend applications in the summary proceeding suits under Order XXXVII, C.P.C. cannot be treated special resolution for filing the same.

12. He further contended that this Court has held that resolution passed on an earlier date cannot be treated as special resolution authorizing the plaintiff to file suits on behalf of the company after a lapse of several years.

13. He next contended that the present suits are based on negotiable instrument i.e. dishonored cheques and presumption under the law is, the same were issued against consideration unless presumptions rebutted by the defendants. The defendants in their leave to defend applications has not denied/disputed the issuance of cheques, signature on the dishonored cheques and memo issued by the banks on account of dishonor of the cheques for insufficient funds in the account. The defendants in their leave to defend applications have admitted the issuance of cheques, mode and manner of payment procedure/practice of defendants adopted before issuance the said cheques of the plaintiff.

14. He next contended that the contention of the defendants that the cheques were issued as security/surety is vague, unfounded and baseless. If, that was the position, then the defendants could instruct their bank for stopping payment against the said cheques, the cheques were issued for payment against the consideration and not as security/surety and all cheques have been dishonored on the sole ground of "insufficient funds."

15. Learned counsel also contended that the suits are within time. Article 64-A of the Limitation Act provides period of three years limitation for filing suit under Order XXXVII, C.P.C. when debt become payable, in the present case the cheques were dishonored in July 2011 and December, 2011, and debt become in July 2011 and December 2011.

16. On the point of limitation the learned counsel for the plaintiff has stated that suits are within time, Article 64-A of Limitation Act provides three years limitation for filing suit under Order XXXVII, when debt becomes payable, in the present cheques were dishonoured in Juiy 2011 and December 2011, the suits have been filed on 10.4.2013, the suits are within the period of limitation.

17. The defendant No.1 is a juristic person and defendants Nos.2 and 3 being the Directors of defendant No.1 regulates its functions, arraying defendants Nos.2 and 3 as party in the suit is not fatal, moreover, the defendants Nos.2 and 3 have not denied the issuance of cheques and their signature on the dishonoured cheques. In order to substantiate his arguments, the learned counsel for the plaintiff Mr. Ghulam Mohiuddin has relied upon the following case law:-

1. PLD 1997 Karachi 276 - Sirajuddin Paracha and others v. Mehboob Elahi and others. 2. 2007 MLD 1424 [Karachi] - M/s. Shell Pakistan Ltd. v. M/s. Bhoja Air (Pvt.) Ltd. 3. 2011 CLC 191 [Karachi] - Muhammad Tariq Siddiqui v. Nasir Ali and another. 4. 2011 CLC 195 [Lahore] - Asad Azuz v. University of Health Science and others. 5. 2005 SCMR 800 - Sh. Muhammad Irfan and others v. Sitara Commission Shop and others.

18. I have heard the learned counsel for the parties, perused the material available on the records of the cases, and examined the case law with their able assistance and have come to the conclusion that it is an admitted position that the plaintiff at the request of the defendants, pursuant to the proposals issued by the defendants, used to provide the Defendant No. 1 with the facility of dying, bleaching and printing of gray cloth with cloth, and on cloth supplied by the Defendant No.1 to the Plaintiff, according to the needs and requirements for Defendant No.1's export orders.

19. In return the defendants used to pay the charges for the services provided by the plaintiff throuoh cheques, which used to be duly signed by the Directors, the defendants Nos.2 and 3 on behalf of defendant No.1. The defendants in their applications for leave to defend the suits have categorically admitted that they have executed the cheques for the aforesaid amount of money to the plaintiff by putting their signatures on the cheques. However, the defendants have stated that the said cheques were issued to the plaintiff on account of guarantee/security and without consideration as per the practice and norms of the market against the plaintiff who had already received all the payments.

20. It is pertinent to mention here that not even single document has been filed by the defendants along with their applications to leave to defend the suits which could support the version of the defendants that the cheques were issued to the plaintiff as guarantee/security as per the market practice. Similarly, no document has been placed on record to show that the plaintiff has been paid the entire amount claimed through the suits. All the cheques were issued for payment against the consideration and not security/surety.

21. When the aJoresaid cheques were deposited by the plaintiff with the Bank for encashment, the same were dishonored with the endorsement made on them by the Bank as "Insufficient funds".

22. In my view, once the parties agreed to particular mode and manner of payment, then there was no justification to object to such mode and manner of payment. Objections of the defendants on such count were therefore, not tenable. The defendants have failed to point out any discrepancy in the accounts and the details of cheques issued by or on its order as detailed in the plaint. Just a bald and sweeping statement that the cheques were issued to the plaintiff as guarantee/security as per the market practice, alone would not be sufficient to earn unconditional leave to defend the suit.

23. The defendants have neither disputed any invoice nor any dishonored cheques, nor showed that any amount of dishonoured cheques was paid to the plaintiff subsequently. The only plea taken by the defendants Nos. 2 and 3 in the leave to defend applications to shift their liability upon the defendant No. 1 is that the liability of defendants Nos. 2 and 3 is limited to their shares in the defendant No.1, which is private limited company, therefore, they are not liable to make repayment of a debt incurred by the defendant No.1. I am totally in disagreement with this argument of the learned counsel for the defendants inasmuch as after all the defendants Nos.2 and 3 are Directors/Shareholders of the defendant No.1 who did not deny the issuance of cheques to the plaintiff. In the case law reiied upon by the learned counsel for the plaintiff (Muhammad Irfan v. Sitara Commission Shop) supra 2005 SCMR 800 it is held that where the Directors/Shareholders of the Company did not deny issuance of cheques on behalf of a limited company were impleaded as defendants and whereas the limited company was not impleaded as one of the defendants in the suit for recovery of money, is not fatal to the suit. The defendants Nos.2 and 3 are indeed liable to pey the plaintiff the amount of dishonoured cheques issued in the name of defendant No.1 by them to the extent of their shares in the defendant No.1.

24. Moreover, the defendants have filed the Board Resolution of the Board of Directors for filing the leave defend applications dated 23.1.2003, which is general in nature authorizing only to manage the affairs of the defendant company. Therefore, the same cannot be treated to be good for filing leave to defend applications in view of judgment of this Court reported in PLD 1997 Karachi 276 - Sirajduddin Paracha v. Mehboob Elahi supra wherein the principle laid down by this Court is that, for filing the suit on behalf of company special resolution shall be passed in that respect before instituting proceeding on behalf of corporation. Therefore, I hold that even the Resolution filed along with leave to defend applications does not authorize any one to file the same inasmuch as the Resolution is of 23.1.2003 and the leave to defend applications were filed on 17.1.2014. No fresh Resolution of the Board of Directors passed after the institution of the present suits has been filed along with the applications for leave to defend the suits, therefore, the applications for leave to defend the suit are also not filed by a competent person duly authorized by the defendant No.1.

25. Article 64-A of Limitation Act provides three years limitation for filing suit under Order XXXVII when debt becomes payable. In the present case cheques were dishonoured in July 2011 and December 2011, the suits have been filed on 10.4.2013, the suits are within the period of limitation, therefore, the arguments of the counsel for the defendants that the suit is barred by limitation is totally devoid of force. Consequently, I hold that the suits are well within time.

26. The entire case law relied upon by the learned counsel for the defendants in favour of leave granting orders, is in respect of Financial Institutions (Recovery of Finances) Ordinance, 2001, which is based upon totally different considerations as compared to the ones contemplated by Order XXXVII of the Code of Civil Procedure, 1908 therefore, the same are not relevant to the facts of the case in hand.

27. The defendants have not been able to make out a case for the grant of leave to defend the suits as the defendants have not been able to raise any plausible defence, triable issue, and/or raise substantial question of law or fact for the grant of the same. It is settled law of the superior Courts of Pakistan that in the summary suit on promissory notes and cheques when the defence sought to be set up is fake, without any material to support, and just bald allegations witnout any substance, both on legal and factual planes, the leave is to be refused outright, and when the issues raised by the defendants in the leave to defend applications are illusory, the leave should not be granted, and should be refused.

28. I am fortified in my view by the judgment reported in cases of Fine Textile Mills Ltd. Karachi v. Haji Umar PLD 1963 Supreme Court page 163 and Muhammad Anwar v. Hoechst Pharmaceutical PAU (Pvt.) Ltd. reported in 1989 MLD page 1711. I, therefore, dismiss the applications bearing C.M.A. No. 1362/2013 in Suit bearing No.183/2014 and C.M.As. No. 2355/2014 and 2356/2014 in Suit No.306/2014 under Order XXXVII(3) read with section 151, C.P.C., for leave to defend the suits, filed by the defendants and decree the suits as prayed along with costs of the suits. ZC/S-43/Sindh Suits decreed.