P L D 1986 Karachi 107 (PLP)

7. All the defendants filed their Written Statements denying the various allegations made in the plaint. The following Issues were then framed in the suit :‑ "(1) Did plaintiffs grant irrevocable inland letter of credit facility to defendant No. I on the terms and conditions mentioned in paras. 1, 2 and 3, of the plaint ? (2) Was payment schedule in respect of the abovementioned Inland letter of credit facility revised from time to time as mentioned in para. 4 of the plaint ? (3) Did Dr. Syed Afzal Imam, the predecessors of defendants Nos. 2, 2(0), 2(b), 2(c) and 2(d) equitably mortgage his property bearing No. J/14, Muree Road, Rawalpindi on 16‑2‑1966 as security for irrevocable letter of credit facility agreed to be granted to defendant No. I as mentioned in para. 7 of plaint ? (4)‑Did defendant No. 3 equitably mortgage his property bearing No. 4, Row No. 8, Sub‑Block E in Block 2, Nazimabad, Karachi, on 30‑3‑1967 as security for irrevocable Letter of Credit facility agreed to be granted to defendant No. 1 as mentioned in paras. 6 and 8 of the plaint ? (5) Did defendant No. I fail to pay instalments to Karachi Autos in respect of Inland irrevocable Letter of Credit, dated 20‑5‑1966 as mentioned in para. 11 of the plaint and as such defendant No. I was liable to pay a sum of Rs. 1,25,661.03 up to 15th November, 1970 to the plaintiffs ? (6) Are plaintiffs in any way bound by alleged agreement, dated 5‑9‑1967 between defendant No. 1 and defendants Nos. 4 and 5 who have been joined as third party under Hon'ble Court's order, dated 22‑11‑1972? If not, have these defendants any right to contest plaintiffs' claim in the above suit on any ground whatsoever ? If yes, to what extent ? (7) Is plaintiffs' suit barred by limitation against defendant No. I as stated in para. 2 of the written statement of defendant No. 5 (third party) and in the written statement of other defendants,? (8) Is plaintiffs' suit bad for non‑joinder of Messrs Zahoorul Islam and Mujahid Farooq as alleged in para. 2 of the written statement of defendant No. 3 ? (9) Did substitution of. earlier Letter of Credit, dated 5‑4‑1966 (wrongly stated as 5‑6‑1966) by 20‑5‑1966 was done without the consent of 'original defendants Nos. . 2 and 3 and as such it tentamounted to variation of original contract as alleged in para. 3 of the written statement of defendant Na. 3 ? (10) Did defendant No. 3 deposit title‑deeds of his property by way of security on account of misrepresentation of .facts .made by Dr. Syed Iqbal Imam and the plaintiffs, as alleged in para. 5 of the written statement of defendant No. 3 ? If yes, what is .the effect ? (11) Did defendant No. 3 equitably mortgage his property on the basis of the partnership, dated 26‑2‑1967 to the knowledge of the plaintiffs as a security for a loan of Rs. 1,95,000 which has already been paid as alleged in para. 8 of the written statement of defendant No. 3 ? (12) Did alleged (wrongly stated as attached) application of payments on behalf of defendant No. 1 from defendants Nos. 4 and 5 amount to variation of contract without the consent of knowledge of defendant No. 3, as alleged in para. I 1 of his written statement ? If yes, what is the effect (13) To what relief or reliefs and against which defendant or defend ants to what extent are plaintiffs entitled ?

8. Plaintiff and defendants Nos. 1 and 3 led their evidence and submitted their arguments in the case. My findings are as under :‑ Issue No 1.‑Plaintiffs have produced in evidence agreement for Irrevocable Letter of Credit, agreement for cash credit and Hypothecation Deed for advances (Exhs. 11, 12 and 13) duly signed by defendant No.

1. It is pertinent to note that Exh. 13 has been signed by Syed Iqbal Imam as proprietor of defendant No. 1, the firm of Mujahid Transport. These A documents are sufficient to establish that the plaintiffs granted Irrevocable Inland Letter of Credit facilities to defendant No. 1 on the terms and conditions mentioned in paras. 1, 2 and 3 of the plaint. Finding in affirmative. . Issue No, 2.‑On perusal of Exhs. 14 to 19 which are the various letters exchanged between the plaintiffs, the defendant No. I and Karachi Autos, the payment schedule was agreed that the first instalment will be due on I‑10‑1966 and the last instalments will become due on 1‑9‑1968 (Exh. 14). This payment schedule was revised whereby the first instalment was to become due on I‑1‑1967 and the last on 1‑1‑1969 (Exh. 19) as mentioned in para. 4 of the Plaint. The Ending is in affirmative. Issue No. 3.‑The plaintiffs‑have produced the agreement .for securing cash credit facility, to defendant No..l (Exh: 24) signed by Syed Afzal, Imam, the predecessor of defendants Nos. 2, 2(a)., 2(b), 2(c) and 2(d), ands also memorandum of deposit of title deeds signed by him. (Exh. 34)1 both these documents have been signed on 16‑2‑1956 by the said Syed Afzal Imam, whereby he equitably mortgaged his property bearing No. 4/14 Murree Road, Rawalpindi on 16‑2-1966 as security for Irrevocable Letter of Credit facility agreed, to be granted to defendant No.

1. The plaintiffs have also placed on record some other documents (Exhs. 25 to 28) connected with the said property. The finding is in affirmative. Issue No. 4.‑The plaintiffs have produced an offer of defendant No. 3 to equitably mortgage his property in question ‑by way of security for the Letter of Credit No. 101/ILC/AQ for Rs. 2.16,733.26 opened by the plaintiffs on behalf of defendant No. 1 (Exh. 31), agreement signed by defendant No. 3 for securing cash credit account/loan of the debtor, defendant No. 1. (Exh. 32), Memorandum of Deposit of Title Deeds by defendant No. 3, securing repayment of the aforesaid loan to the plaintiffs. The plaintiffs have also placed a number of other documents on record (Exhs. 35, 37 to 43) which relate to the, immovable property mortgaged by defendant No.

3. Besides these documents there is an admission in the Written Statement by defendants. Nos. 1 and 2 to that effect. Mr. Z. t

3. Ahmad, learned counsel for defendant No. 3, however, contended that defendant No. 3 had, in fact, stood guarantor for defendants Nos. 4 and 5 and not for defendant No.

1. For this assertion, be placed,, his 'reliance on Partnership Deed and the. Agreement (Exhs. 47/1 and 47/2) and submitted that the Firm of defendant No. 1 was taken over by .defendants Nos.' 4 and 5 as on and from 26‑2‑1967, with liabilities of the loan of the plaintiffs. The submission is of little significance so far as the liability of defendant No. 3 is concerned. There is nothing on record to show that the said Partnership Deed (Exh. 47/1) or the Agreement (Exh. 47/2) was ever. brought to the notice of the plaintiffs. Syed Iqbal Imam (defendant No. 1) in his statement admitted defendant No. 3 mortgaged his property as security for the loan granted by the plaintiffs to Mujahid Transport on 20‑5‑1966 which, on his own showing, was a proprietorship concern. It can, therefore, be, safely concluded that defendant No. 3 equitably mortgaged his property in question on 30‑3‑1967 as security for Irrevocable Letter of Credit facilities granted to defendant No. I. The finding is in affirmative. Issue No. 5.‑The plaintiffs in pare. 11 of the plaint have alleged that a sum of Rs. 1,25,661.03 is due as on IS‑11‑1970 which the defendant has failed to pay. The plaintiffs have produced Statement of Account (Exh. 23) which supports the claim. The plaintiffs have also produced evidence as to the payments made by them to the Karachi Autos through the United Bank Ltd. (Exhs. 46/2 to 46/40). These documents included 19 Bills of Exchange drawn at sight during the period from 6‑6‑1967 to 16‑I‑1969 for Rs. 1,25,661.03. Before filing the suit a legal notice, dated 8‑4‑1970 (Exh. 22) was served by the plaintiffs on defendant No. 1 who failed to give any reply. The Statement of Account (Exh. 23) and l, other documents attended to it have gone unchallenged. The finding is therefore, in affirmative. Issue No. 6.‑Syed Iqbal Imam, the then proprietor of defendant No. I has made over his proprietorship firm to defendants Nos. 4 and 5 (Exhs. 47/1 and 47/2), but at no point of time the said partnership Deed or the Agreement was brought to the notice of the plaintiffs. It was thus an arrangement between defendant No. 1 on the one hand an defendants Nos. 4 and 5 on the other. The plaintiffs are in no way bound by the agreement, dated 5‑9‑1967 arrived at between defendant No. I and defendants Nos. 4 and

5. Since defendants Nos, 4 and 5 have been joined as third party, vide order, dated 2‑11‑1972, they have a right contest the plaintiff's claim. But it is noticed that the said defendants took no interest in the proceedings, Except the filing of Written Statement, they neither entered the witness‑box nor led ,any evidence Defendants Nos. I and 3 who examined themselves were also not cross examined on their behalf. Even at the stage of arguments in the suit the said defendants and their counsel chose to remain absent. It may however, be pointed out that defendants Nos. 4 and 5 have accepted an taken upon themselves the liabilities of defendant No. 1 which is evident from Exh. 47/1 and Exh. 47/2. Thus, these defendants as per Exh. 47/1 and 47/2 had undertaken categorically to pay the dues of the plaintiffs Finding accordingly. Issue No. 7.‑This issue was not at all argued by the defendants. The plaintiffs. however, have placed their reliance on clause (c) of Article 132 of the Limitation Act, 1908 which prescribes a period of 12 years to enforce the payment of money charged upon immovable 'property and the time is to run when the money becomes due, The last date for re‑payment was extended upto 1‑1‑1969 and the last payment under the Schedule was to be made on 16‑1‑1969. However, last payment of Its. 9,000 was received by the plaintiffs on 25‑9‑1969. The suit was filed on 12‑11‑1970 and the same is clearly within time. Finding in negative. Issue No. 8.‑This issue was also not argued except making just reference in a passing way by the learned counsel for defendants Non, I and

2. Admittedly Zahoorul Islam and Mujahid Farooq who wet guarantors at an earlier stage already stood discharged of their liabilities on release of their property and defendant No.3 mortgaging his property in their place. Zahoorul Islam and Mujahid Farooq, in the circumstances ate not necessary or proper parties. In this respect reference may be made to Exhs. 21‑

31. The suit is, therefore,' not bad in law for their non‑joinder. Finding accordingly. Issue No. 9.‑Admittedly the earlier Letter of Credit was established in favour of Messrs Mack Trucks on 5‑4‑1966 (wrongly mentioned as 5‑6-1966 in the issues) and in substitution thereof another Letter of Credit was established in favour of Karachi Autos by the plaintiff on 20‑5‑1966. This substitution of the original Letter of Credit wits do with tire consent of the guarantors as stated in para, 3 of the plaint. This fact has not been denied by defendant No.

2. The question of consent of defendant No. 3 does not arise as he was not the guarantor at theta time. Mr. Z. U. Ahmad invited my attention to (Exh. 12) which men the name of Altaf Hussain defendant No. 3) but it is of little sign' as the said exhibit does not bear his signature, as guarantor, nor he mortgaged his property on 20‑5‑1966. Finding accordingly. Issue No. 10.‑The onus to prove this issue was on defendant NO. 3 who has failed to prove the same. In his examinations‑in-chief, he merely stated that he signed Exhs. 31, 32 and 33 in good faith and without reading them. He did so because he had full faith in his brother defendant No.

4. The finding is in negative. Issue No. 11.‑The defendant No. 3 mortgaged his property in con sideration of the plaintiffs' releasing the property of Zahoorul Islam and Mujahid Farooq. There is no mention in the documents relating to mortgage that he mortgaged his property on the basis of Partnership Deed, dated 26‑2‑1967. the loan still remains unpaid P. W. I has denied knowledge of the alleged Partnership. There is a denial by him during the course of his cross‑examination that the alleged Partnership Deed, dated 26‑2‑1967 (Exh. 47/1) or the alleged agreement, dated 5‑y‑1967 (Exh. 47/2) was sent to or brought to the knowledge of the plaintiffs. The finding is in negative. Issue No. 12--‑It is admitted that the amount of loan for which defendant No. 3 stood guarantor on 30‑3‑1967 was Rs. 1,95,

000. Thereafter, certain amounts were credited into the account of defendant No. 1, the principal debtors, by the plaintiff reducing their liability to Rs. 1,25,661.03. The learned counsel for the plaintiffs submitted that the plaintiffs received the said amounts from defendant No. 1, Mujahid Transport, It had no concern if some amount was actually paid by defendants Nos. 4 and

5. It was further submitted that it had no knowledge that those amounts were paid by defendant No. 4 and 5., Even otherwise the alleged agreement, dated 5‑9‑1967 to repay the loan of the plaintiffs was under an arrangement between defendant No. I on the one hand and defendants Nos. 4 and 5 on the other, to which neither the. plaintiffs were party no bad any knowledge, In view of these facts, the mere application (crediting) of some amounts into account of defendant No. 1 by the Ban allegedly to have been made by defendants Nos. 4 and 5 does not amount to variation of contract. The contention also suffers from a paradox a it is contrary to his plea that he (defendant No. 3) stood guarantor for defendants Nos. 4 and

5. The finding is in negative. Apart from the issues discussed above, it has also been contended by Mr. S. H. Rizvi, learned counsel for defendants Nos. 1 and 2 and also by Mr. Z. U. Ahmad, learned counsel for defendant No. 3 that the original agreement between the plaintiffs and defendant. No. 1 for which defendants Nos. 2 and 3 stood guarantors was varied by the plaintiffs inasmuch as the time schedule for repayment was changed. Without the knowledge and consent of defendants Nos. 2 and 3 and, therefore, they are not liable to pay the dues to the plaintiffs.

9. Admittedly letter, dated 20‑5‑1966 establishing Irrevocable Letter of Credit in favour of Karachi Autos at the request of defendant No.

1. The payments under the Letter of Credit were agreed to be made on presentation of the drafts in 24 in talments according to the Schedule given in the said Letter (Exh. 14). The last payment was to be made on 1‑9‑1968, the credit was to be valid for a period of 30 months from the date of the opening.. Defendant No. I by their letter, dated 14‑9‑1966 stated that the last instalment will be paid as on 1‑10‑1968. By letter, dated 15‑9‑1966 (Exh. 16) the plaintiffs wrote to ‑Karachi Autos that the last instalment will become due on 1‑10‑1968. By another Letter, dated 8‑12‑1965 written by defendant No. 1 to the plaintiff the last instalment was requested to be due on f‑1‑1969 which was agreed by the plaintiffs, while conveying the said proposal to Messrs Karachi Autos.

10. Mr. Z. U. Ahmad, in support of his contention relied on three decisions reported as Seth Partapsingh Moholalbhai and another v. Keshavlal Harilal Setalwad and another (AIR 1935 P C 21) Pirthi Singh v. Ram Charan Aggarwal and another (A I R 1944 Lah. 428) Keshavlal Harilal v. Pratapsing Moholalbltai and others (A I R 1932 Bom. 168). In the first named case A I R 1935 P C 21 it was held that unless the surety has assented to the new terms, there is nothing to which he can be bound, for the final obligation of the principal debtor will be something different from the obligation which the surety guaranteed. In the second case A I R 1944 Lah. 428 a contract was made between the creditor and the debtor by which the former had promised to give time to the debtor and instalments were fixed without the surety's assent or even knowledge which prevented him to require the decree‑holder from calling upon the principal debtor to pay off the entire debt or to pay the entire debt himself and then to recover it from the principal debtor. The decree‑holder's petition against the surety was then dismissed.

11. In the third case A I R 1932 Bom. 168 it was observed :‑ "When a contract is varied in a substantial particular, it is not for the Court to say that the surety who undertook the burden of the original contract must or ought to have undertaken the burden of the contract as subsequently varied."

12. There can be no cavil on the proposition that if the original agreement entered into between a creditor and principal debtor, for which another person stood as surety, is substantially varied without the consent of the surety it discharges him as to the transactions subsequent to variance. This applies to a situation where the' contract of the guarantee contemplate a series of transactions extending over a period of time. Likewise, where a creditor does something behind the back of the surety; to hi: prejudice, by advancing more facilities to the principal debtor, which are likely to adversely affect the interest of the surety, the surety is held no more bound, as a guarantor, to discharge the liabilities of the principal debtor. However, if some facilities granted or arrangements made, such as extending time to the principal debtor for repayment are included within the terms of the surety bond, the surety cannot take shelter behind this extension of time, granted by the creditor to the principal debtor. Applying this principle to the facts of the instant case, it appears that both the defendants, Late Afzal Imam and Altaf Hussain specifically agreed, (See Exh. 24 and Exh. 32) respectively, that :‑ "If the Debtor/Debtors shall become bankrupt or insolvent or enter into any arrangement or make any composition with his creditors, the Bank shall be at liberty notwithstanding payment to the Bank by me or any other person of the whole or any part of the sum secured to Bank as creditor and prove for the full amount of its claim, and the Bank shall be at liberty to renew any bills, notes or other securities, which the Bank may then or thereafter hold or be entitled to against the estate of the debtor, or to and accept any composition in respect of the same." In view of this stipulation, it is not open to the surety to take the plea that the time for repayment of loan was extended behind their back and without their knowledge or consent. The time for re‑payment was extended to defendant No. 1 within the stipulation contained in the agreements guaranteeing the. repayment of loan to defendant No.

1. It is also noticeable that defendant No. 3 mortgaged his property as guarantor on 30‑3‑1967 whereas the last date of re‑payment of loan was extended much earlier. ,

13. Mr. Z. U. Ahmad further submitted that the guarantee was without consideration and as such not valid and enforceable. He relied on the following passage from Chitty's Contracts, 28th Edition appearing. ‑_ at page 1020 :‑ "And even in the case of a promissory note given by way of guarantee or a past debt, if it be shown that there was no consideration, such as forebearance, the lack of consideration has been held an answer to an action on the note (h)."

14. He also referred to the three cases listed thereunder : namely Goldshede v. Swan (154 E R 65), Bell, Public Officer of the National Provincial Bank of England v. Welch and Adams (137 E R 851) James M. French v. John T. W. (133 E R 403)

15. I am afraid, the passage quoted and the 3 cases relied on have no application to the facts of the present case. The defendant No. 3 stood guarantor in place of M/s. Zahoorul Islam and Mujahid Farooq on consideration of the plaintiffs' releasing their property, which was equitably mortgaged against the L. C. No. 101/1 L C/80 for Rs. 2, 16, 733. 26 opened by the plaintiffs on 20‑5‑1966, for the purchase of the Vehicles on behalf of defendant No.

1. The said Guarantee cannot, therefore, be said to be without consideration. The plea is, therefore, untenable in law and on facts both. It is, however, noticeable that this plea does not arise out from the above issues or from the evidence.

16. M/s. S. H. Rizvi and Z. U. Ahmad lastly contended that the vehicles were hypotheticated with the plaintiffs who took no steps to recover the amount and as such defendants Nos. 2 and 3, as sureties, stood discharged. Reliance was placed on a decision of the Supreme Court reported as Central Exchange Bank v. Mst. Zaitoon Begum and others (P L D 1968 S C 83), The above case is distinguishable as in that case the goods were pledged with the Bank and was in its possession which was lost by the Bank by its own acts, whereas in the present case the possession of the Vehicles was with defendant No. 1 who were plying them on road and making money It has never been claimed that the said vehicles were ever in possession of the plaintiffs. It has also not been shown that the said vehicles have been lost by the plaintiffs. In fact, no overt act on the part of the plaintiff was alleged. This plea is, therefore, baseless and is rejected.

17. Finally‑Mr. Z. U. Ahmad submitted that it is not a suit for mortgage as the title of the Suit does not mention that it has been filed under Order XXXIV, C. P. C. According to him, it is a simple money suit and the decree, if any, may be passed against defendants Nos. 1, 4 and

5. Mr. Rizvi submitted that the decree may be passed against defendants Nos. 4 and 5 and not against defendant Nos. 1 and

2. The contention is without any force. For interpretation of a document, as to its proper construction, it is the whole document which is to be looked into. The M whole tenor of the plaint alongwith clause (c) of the prayer leases no room for doubt that it is a suit as contemplated by Order XXXIV, C. P. C.

18. Issue No. 13.‑The defendant No. 1 has failed to pay the installments due to the Karachi Autos in respect of Inland Irrevocable Letter of Credit No. 101/I L C/80, dated 20‑5‑1966 which was issued by the plaintiffs at the request of defendant No. 1 in consideration of which deceased Afzal Imam and defendant No. 3 equitably mortgaged their properties as mentioned in the plaint, by way of security for the said facilities granted to defendant No. 1, and as such M/s. Karachi Autos through their bankers presented 19 Bills of Exchange in respect of the unpaid instalments between 6‑6‑1967 and 16‑1‑1969, to the plaintiffs were obliged to pay the said amounts and after giving credit for several payments made by defendant No. 1, it is liable to pay Rs. 1,25,661.03 upto 15‑11‑1970 which the said defendant No. 1 or any one of the defendants have failed to pay till today, alongwith interest agreed thereon. It is, therefore, declared that a sum of Rs. I, 25,661.03 with accruing interest thereon at the rate of 8 % per annum, as claimed, with quarterly rests, w.e.f. 16‑11‑1970 to 23‑12‑1980 and thereafter at the rate of 12% per annum till realisation is due against defendant No. 1 as principal debtor and defendants Nos. 4 and 5 who, on their own sharing, have taken over the liability of defendant No.

1. A preliminary decree in terms of Order XXXIV, rule 4, C.P.C. in Form No. 5‑A of Appendex D‑1 to the Schedule of the Code of Civil Procedure is passed against defendants Nos. 2 and 3 with interest, as aforesaid, fro the date of the suit till recovery. The defendants will also beat the costs of the suit. On payment of the decretal amount, the defendants Nos. 2 and 3 will be entitled to claim indemnity and recovery of the said amount from defendants Nos. 1, 4 and

5. A. A. Preliminary decree granted.