1993 PLP 661 (MLD)

AHMED YAR KHAN, J.‑‑‑ Petitioner General Investment Ltd. has impuged judgment, dated 12‑11‑1981 passed by Judge, Special Court for Srndh at Karachi constituted under the Banking Companies (Recovery of Loan) Ordinance, 1979. Briefly stated the facts giving rise to the present appeal are that appellant General Investment Ltd., sold a property bearing Survey Sheet NO.C‑1‑10, situated in Civil Lines Quarter, Karachi to City Bank NA for a consideration amounting to Rs.1,26,08,00p out of which a sum of Rs.1,02 44 was to be paid to the appellant as advance money by the City. Bank NA provided that a bank guarantee is furnished to that effect. Appellant approached the respondent i.e. Dubai Bank Limited to furnish the aforesaid bank guarantee. Thereafter the bank guarantee was furnished by Dubai Bank as required, and the aforesaid amount of advance was paid by the City Bank NA to the present appellant, as advance money for the aforesaid sale transaction. It was agreed between the parties that the balance of the price i.e Rs.2,364,Opp was to be paid by the purchaser i.e. City Bank NA to the present appellant ‑at the time of execution of the sale deed (Annexure IVD) in the presence of the concerned Registrar. Such promissory note (Anna. VI) was also executed on 10‑6‑1980 by the appellant in favour of Dubai Bank Ltd. The bank guarantee (Amax. VIII) provided by Dubai Bank Limited in favour of the City Bank NA reads as follows:‑‑ "We Dubai Bank Limited P‑76 do hereby unconditionally guarantee the repayment by the vendor (defendant No.1) of the advance and further unconditionally undertake to pay to you upon receipt of demand in writing and without question or reference to the borrower the sum of Rs.10,244,000 at any time after 180 days from the date here of and until vendor shall have conveyed the said plot to you by duly executed and registered sale deed or the end of the 270 days from the date thereof whichever is earlier." Such agreement of sale (Annx.IVG) was also entered into between the appellant and City Bank NA. In para. 3 of the aforesaid agreement, the appellant had agreed that within a period of 180 days from the date thereof he shall obtain, at his own costs from Karachi Metropolitan Corporation and other authorities, requisite sanction, and permission for conversion of plot in question into commercial plot and other necessary orders and certificates to that effect. It was further provided that the appellant within the aforesaid period shall provide to the purchaser the evidence of fulfilment of the aforesaid condition which shall be examined by Messrs Surridger Beechano being legal advisers of the vendee i.e. City Bank NA. It is averred by the appellant that he fully complied with the aforesaid conditions, and obtained necessary NOC from the concerned authorities and furnished the same to the vendee i.e. City Bank NA. The aforesaid No ?Objection Certificate etc., were examined by the legal adviser of City Bank NA i.e. Messrs Surridge and Beechano, who opined that the appellant had failed to comply with the legal requirements as mentioned in the agreement of sale (Annx. IVG) and had failed to obtain the requisite No‑Objection Certificate from Karachi Metropolitan Corporation. As such the purchaser i.e., City Bank NA called upon the present respondent i.e., Dubai Bank Limited to pay the aforesaid advance amount in terms of the guarantee, as the appellant had failed to perform his legal obligation during the stipulated period mentioned in clause (3) of the agreement to sale. In view of the conditions laid down in the guarantee reproduced in the earlier part of this judgment, the respondent Dubai Bank Limited promptly paid on 3‑1‑1981 the guaranteed amount of Rs.1,02,44,000 to the vendee i.e. City Bank NA. Thereafter the respondent Dubai Bank demanded the payment of the aforesaid amount from the present appellant i.e. General Investment Limited: The appellant refused to pay the aforesaid amount to the respondent as according to him the respondent Bank was not justified to pay the guaranteed amount of Rs.1,02,44,000 to the City Bank NA on demand without proper verification of facts from the appellant. There was exchange of correspondence between the appellant and Dubai Bank Limited but the matter could not be resolved, hence respondent Dubai Bank Limited filed suit No.67/1981 against the present appellant for the recovery of the aforesaid amount before the Special Court. The appellant moved an application before the Special Court requesting the grant of leave to defend the suit. After hearing the parties at length, the learned Judge Special Court passed the impugned judgment dated 12‑11‑1981 whereby the application moved by the appellant for leave to defend the suit was rejected, and the suit of the respondent i.e., Dubai Bank Ltd., was decreed in full. Mr. Raja Qureshi, learned counsel for appellant adopted the same arguments, which are mentioned in the memo of appeal. Mr. Naimur Rehman addressed this Court on behalf of respondent Dubai Bank Limited. The main contention raised by the learned counsel for the appellant has been that the encashment of the guarantee given by respondent Dubai Bank Ltd., was not called for as the appellant had obtained the requisite no?-objection certificate and other relevant documents as required under clause (3) of the agreement within the stipulated time. Reference has also been made to some admissions, which were allegedly made by the respondent in his letter-dated 14‑12‑1980 whereby the plaint was to be dismissed in limine. It was contended that before making payment to the City Bank NA. It was proper for the respondent Dubai Bank Ltd., to make inquiry about the performance of the conditions by the appellant pursuant to clause (3) of the agreement to sell within the stipulated time. It has been contended that the aforesaid agreement to sell was the principal contract within which the aforesaid guarantee arose, as such before en-cashing the aforesaid guarantee it was obligatory for the respondent Dubai Bank Ltd. to make inquiry about the performance of the main contract. It was also contended that since City Bank was the main party in the original contract i.e., agreement to sell, hence the suit was bad for non joinder, of proper and necessary party i.e. City Bank NA. It was finally contended that in any case the City Bank NA had no right to call upon the respondent Dubai Bank Ltd. to pay amount of guarantee as the appellant had already discharged their obligation under clause (3) of the agreement within the stipulated time. Reliance has been placed on the case of Fine Textile Mills Limited, Karachi v. Haji Umer PLD 1963 SC 163 wherein it was held that:‑‑ "Leave to defend is to be granted in cases wherein the defendant prima facie had some plausible defence to make." Reliance is also placed on to the case of Industrial Development Bank of Pakistan v. Nadeem Flour Mills and others 1981 S C M R 143, which is on the point of jurisdiction of the Special Court established under Banking Companies (Recovery of Loans) Ordinance. On the other hand Mr. Naimur Rehman learned counsel for the respondent vehemently contended that there were three documents i.e., agreement to sell between the appellant and City Bank NA, the bank guarantee executed by Dubai Bank Ltd., at the instance of the appellant and the letter of indemnity executed by the appellant. According to Mr. Naimur Rehman, out of those three documents, the two documents i.e., agreement to sell, and the Bank Guarantee executed by respondent were relevant for the purpose of deciding the present appeal. He invited our attention to the contents of the aforesaid bank guarantee, which have already been reproduced in the earlier part of this judgment. He urged before us that the aforesaid guarantee provided unconditional repayment of the aforesaid advance money without reference to the borrower and without making any inquiry in respect of the obligation to be discharged under the provisions of agreement to sell. He?vehemently, argued that in view of the aforesaid unconditional guarantee it was the duty of respondent Dubai Bank Ltd., to pay on demand the aforesaid advance money to City Bank NA forthwith. He placed reliance on (1978) 1 All ER 976, which reads as under: ‑‑ "A performance guarantee was similar to a confirmed letter of credit. Where therefore, a bank had given a performance guarantee it was required to honour the guarantee according to its terms and was not concerned where either party to the contract, which underlay the guarantee, was in default. The only exception to that rule was where fraud by one of the parties to the underlying contract had been established and the bank had notice of the fraud. Accordingly as the defendant's guarantee provided for payment on demand without proof of conditions, and was in the nature of a promissory note payable on demand, and the plaintiffs had not established fraud on the part of the buyers, the defendants were required to honour their guarantee on the demand made by the Libyan Bank. It followed that the. Judge has been right to discharge the injunction and that the appeal would be dismissed." He submitted that in the present case there had been no allegation of fraud by the appellant on the part of respondent Dubai Bank Ltd., as such the respondent was required to honour the guarantee on demand by the City Bank NA. We are therefore of the considered view that under the circumstances and in view of the unconditional guarantee, it was not obligatory upon the respondent to make inquiry about the performance of the conditions laid down in the agreement to sell. It was mandatory for the respondent to pay guarantee amount i.e. the advance money to the City Bank unconditionally on demand, and they rightly did so, as such in our view the leave to defend the suit was rightly refused by the learned Judge, Special Court, and the suit was properly decreed against the‑appellant. In this view of the matter impugned judgment does not call for any interference and the present appeal stands dismissed with no order as to costs. H.B.T./G‑314/K????????????????????????????????????????????????????????????????????????????????? Appeal dismissed