1997 PLP 2111 (MLD)

Rs.38,74,869 According to him, there were six members of the Managing Committee of M/s. Jagan Agricultural Cooperative Society, that only those Cooperative Societies were given loans which were registered with the Registrar of Cooperative Societies and that the loans were meant for the benefit of the members of the debtor-societies. He produced the promissory notes in respect of the three loans (Exhs. 3, 6 and 8) and stated that respondent No.2 had signed them as Chairman and Arbab Ali and Shafi Muhammad as directors. He also produced guarantee-forms Exhs.4, 7 and 9 and submitted that respondent No.2 and others had signed them only as guarantors and not as borrowers. He also placed on record a copy of bye-laws of M/s. Jagan Agricultural Cooperative Society as Exh.10-A. P.W.3 Assistant Vice-President of I.D.B.P.

According to him M/s. Ruby Rice and General Mills Limited had not taken any loan from I.D.B.P. P.W.4 Deputy Registrar of Companies.

He stated that respondent No.2 held 27 thousand shares of M/s. Ruby Rice and General Mills Limited out of a total of four lakh shares and was also one of its directors. He produced copy of Form 29 (as 12-A) in respect of M/s. Ruby Rice and General Mills Limited which showed that respondent No.2 was one of the eleven directors of the company and also its Chief Executive. It also showed that M/s. Investment Corporation of Pakistan, N.B.P., U.B.L., H.B.L., M.C.B. and Allied Bank Ltd. owned, amongst themselves, two lakh shares, exactly half of the total of the four lakh shares. P.W.5 Senior Assistant Vice-President of P.I.C.I.C.

He proved loan agreement Exh.13-A executed by Directors Mehboob Ali Bhayo and Shahid on 13th March, 1974 on behalf of M/s. Ruby Rice and General Mills Ltd. It is for D.M. 13,65,

218. He also produced an undertaking signed as guarantors by the eight directors of M/s. Ruby Rice and General Mills Ltd. as Exh.13-B wrongly described as "list of Board of Directors of the Mill" in the examination-in-chief of the witness). P.W.6 Assistant Vice-President. United Bank Limited. --According to him M/s. Ruby Rice and General Mills Ltd. were granted loan by the Consortium in 1976 and a sum of Rs.57,92.777 stood outstanding against M/s. Ruby Rice and General Mill Ltd. as on 31-12-1993 by way of share of loan of U.B.L. P.W.7 Assistant Vice-President, Litigation Department Habib Bank.-- According to him, M/s. Ruby Rice and General Mills Ltd. had no account with Habib Bank and the later had not granted any loan to the Mill. P.W.8 Manager of National Bank of Pakistan, Shikarpur.

According to him, a loan of Rs.35 lakh had been disbursed to M/s. Ruby Rice and General Mills Ltd. between February, 1976 and March, 1977 and on 30-9-1993 an amount of Rs.44,53,940.62 was outstanding against the Mill and that the National Bank of Pakistan obtained on 9-1-1993 a decree against the Mill in the sum of Rs.2,25,54,138.06 (Rupees two crore twenty-five lakh fifty-four thousand one hundred thirty-eight and paisas six only) with 14% interest. In cross-examination he stated that this loan was in addition to the Consortium loan and the loan agreement was signed by Haji Mehboob Ali Bhayo and he produced copy of loan agreement as Exh. 16-A, and copy of degree as Exh.16-B. P.W.9 Sub-Manager, Agricultural Bank, Shikarpur Branch.

He proved a personal loan of Rs.2,42,900 granted to respondent No.2 on 25-9-1989 and on 30-9-1993 a sum of Rs.2,67,699 was outstanding against respondent No.2. P. W.10 Officer Grade-II, Muslim Commercial Bank, Shikarpur.

According to him, respondent had stood as guarantor in respect of loans granted to six persons belonging to his family. The names of borrowers and the amounts of respective loans are given by the witness. The total outstanding amount of these loans as on 18th June, 1988 and on 30th September, 1993 comes to Rs.4,25,

931. P.W.11 Assistant Vice-President, Head Office, Habib Bank Limited.-- According to him, two loans of 2-1/2 lakh each total Rupees five lakh were given to M/s. Ruby Rice and General Mills Limited during 1976-77. He could not give the amount of loan outstanding on 30th September, 1993 as M/s. Ruby Rice and General Mills Limited had gone into liquidation in 1990 when the outstanding amount was Rupees twenty lakh (Rs.20,00,000). P.W.12 Office of Habib Bank Limited.

He was given up. P.W.13 Law Officer, I.C.P.

He proved two loans advanced to M/s. Ruby Rice and General Mills Limited by the Consortium of which I.C.P. was a leading member. He produced copies of the two loan agreements as Exhs. 21 /A and 21/B. According to him, the actual dues as on 15th September, 1993 could not be calculated because of M/s. Ruby Rice and General Mills Limited had gone into liquidation but he estimated the outstanding amount as on 15th September, 1993 to be at least five million in case of each loan Rupees ten million in all. He conceded that respondent No.2 had not signed the loan agreements but only the "Directors undertaking" as one of the directors and he produced the under-respondent No.2 had not signed the loan agreements but only the "Directors' undertaking" as one of the directors and he produced the undertaking as Exh.21/C. P.W.14 Office Grade-I, Main Branch, National Bank of Pakistan

According to him, the share of National Bank of Pakistan in the Consortium loan granted to M/s. Ruby Rice and General Mills Limited was Rs.7,50,000 and the up-to-date outstanding amount was Rs.36,02,

160. He produced copy of up-to-date statement of account as Exh.22/A, copy of re-structuring agreement dated 30th July, 1986 as Exh.22/B and copy of supplementary agreement, dated 31st March, 1987 as Exh.22/C.

6. This was all the evidence adduced by the petitioner. Respondent No.2 has only examined himself in defence and has not produced any witness. In his affidavit-in-evidence he denied the allegations made in the petition. Nothing material was asked of him in cross-examination except that he was confronted with his signatures on various documents already on record and he affirmed his signatures on Annexures A and B to the petition and Exh.3 but could not do so in respect of Exhs.4, 6, 7, 8 and

9. He could not say off-head that at the moment he or his family was holding 27,000 shares of M/s. Ruby Rice and General Mills Limited but he was sure that at no point of time in the past he had held more than 5 per cent. shares of M/s. Ruby Rice and General Mills Limited and his wife and children never held any share in this company.

7. I shall take up the four separate loans seriatim; (a) Loan in respect of M/s. Ruby Rice and General Mills Limited.

8. The argument of learned counsel for the petitioner is that loans advanced by the various banks and financial institutions of M/s. Ruby Rice and General Mills Limited total to around rupees seven crores thirty-two lakhs fifty three thousand four hundred and thirty-five only (Rs.7,32,53,435) on the basis of the evidence brought on record and as summarised in the preceding pages and respondent No.2 owns 27,000 shares of this company which amount to 6 per cent. of the total shares which are 4 lakhs and therefore he is responsible for 6 per cent. of the loan-amount which comes to more than Rs.42 lakhs and therefore he was debarred from contesting the election. Learned counsel very conveniently overlooked to examine as to whether respondent No.2 "mainly owned" this business concern. By virtue of explanation to subsection (7) of section 12 which was incorporated in the Statute on 27th August, 1993, the expression "mainly owned" means ownership of 51 per cent. or more shares in a business concern. Now, it is the case of petitioner himself that respondent No.2 owns not more than 2,000 shares out of total of 4,00,000 and thus owns about 6 per cent. of its shares. Respondent No.2, therefore, does not "mainly own" M/s. 'Ruby Rice and General Mills Limited. Loans of this business concern, whatever their magnitude, cannot be of any relevance for purposes of a declaration under sub-clause (iii) of clause (2) of section 12 of the Act and cannot debar respondent No.2 from being a candidate for election. It may be noted that every defaulter is not debarred from contesting election. A debtor may be liable to refund the loans and may be proceeded against in a Banking Court or Tribunal under the Banking Companies (Recovery of Loans) Ordinance, 1979 or even under the summary chapter of Civil Procedure Code and even a guarantor may be likewise liable to be proceeded against in terms of the letter of guarantee, and in many cases he is as good as a borrower and the actual beneficiary of the loan for which he ostensibly stands as guarantor, but an election is altogether a different matter. Under ordinary law a person can stand as a candidate for election to the National Assembly or any of the Provincial Assemblies irrespective of the fact that he may owe trillions of rupees to any bank, financial institution, cooperative society or corporate body and had become a defaulter. It was under section 12(2)(iii) that one was debarred from standing as a candidate if he, his or her spouse or dependent, or a business concern mainly owned by the aforesaid, owed a loan of one million rupees or above which remained unpaid for more than one year from the due date. This provision of law restricts the right of a citizen to stand for an election and therefore must be construed strictly.

9. Learned counsel of the petitioner also argued that respondent No.2 had given undertaking in respect of the loan of I.C.P. to M/s. Ruby Rice and General Mills Limited and therefore he had become personally liable for it and thus this loan had become his personal loan and since its amount exceeded one million rupees, he was debarred from being a candidate under section 12(2)(iii) of the Act. Learned counsel referred me to the evidence of P.W.13 Mr. Ebrahim Yousufani who, while conceding that respondent No.2 was not a signatory to the two loan agreements entered into between the Mills and I.C.P., had stated that he had, alongwith other directors, signed the "directors' undertaking Exh.21/C. The argument is fallacious. "Directors' undertaking" is not personal undertaking of the directors. Besides, while it may make the directors personally liable in an action at law by the creditors, it does not bring them within the purview of section 12(2)(iii) of the Act. It may make respondent No.2 a debtor under the banking laws and liable for the repayment of the loans but it does not make hi 'in a defaulter in terms of section 12(2)(iii) of the Act:

(b) Loan in respect of M/s. Jagan Agricultural Cooperative Credit Society Limited.

10. The other business-concern in respect of which respondent No.2 is said to be a defaulter in terms of section 12(2)(iii) of the Act is M/s. Jagan Agricultural Cooperative Credit Society Limited. According to the learned counsel for the petitioner respondent No.2 is a member of Managing Committee of this company which is heavily in debt and' therefore he comes within the mischief of section 99(f) of the Act. This provision of law is reproduced below:

"Section 99(1).

A person shall not be qualified to be elected or chosen as a member of an Assembly unless

(a)

(b)

(c)

(d)

(e)

(f) he is sagacious, righteous, non-protiligate, honest, ameen and pays his debts specified in subsection (2) of section 12. "

11. P.W.2 Mr. Mazhar Ali Memon, Controller, Sindh Provincial Cooperative Bank Limited, stated that this business-concern is its account holder, respondent No.2 is one of the six members of its Managing Committee and operated its account. He could not say how many shares of this business concern were held by respondent No.2. He also produced the following documents:-- (1) (a) Copy of demand promissory note dated 25-4-1978 for Rs.233,700 Exh.3 (b) Guarantee Letter of the same date Exh.4 (c) Another guarantee letter of the same date Exh.5 (2) (a) Copy of Demand Promissory Note dated 10-6-1978 for Rs.10,67,550 Exh.6 (b) Guarantee Letter of the same date Exh.7 (3) (a) Copy of Demand Promissory Note dated 20-12-1978 for Rs.9,33,015 Exh.8 (b) Guarantee Letter of the same date Exh.9 (4) Copy of letter dated 9th December, 1993 Exh.10 which is from the bank to the Returning Officer stating that according to the Cooperatives Act, Managing Committee of a Cooperative Society is responsible for payment of all the liabilities of the said Society. The letter gave the names of the members of the Managing Committee of M/s. Jagan Agricultural Cooperative Society which are six including the names of respondent No.2 and his brother Aijaz Ali. The letter further stated that father of respondent No.2 and respondent No.2's three brothers Mehboob Ali, Bostan Ali and Sikandar Ali respectively were also debtors of the bank, although amount of their debt was not disclosed. A sum of Rs.21,86,102 as principal and Rs.16,88,767 as interest total Rs.38,74,869 was shown as outstanding against M/s. Jagan Agricultural Cooperative Society. In cross-examination this witness P.W.2 Controller, Sindh Provincial Cooperative Bank Limited, conceded that the bank advanced loans only to the societies registered under the Cooperative Societies Act and that such loans were meant for the benefit of the members of the society and that the three promissory notes were signed by respondent No.2 and his brothers Arbab Ali and Shafi Muhammad in their capacities as Chairman and directors of the Society and not in their personal capacity and that the three guarantee forms Exhs. 4, 7 and 9 were signed by respondent No.2 and others as guarantors.

12. Now, to begin with, does respondent No.2 mainly own M/s. Jagan Agricultural Cooperative Society? The onus was on the petitioner to show that respondent No.2 or his spouse or any of his dependents owned at least 51 per cent. of the shares of this business concern. Not a shred of evidence has been brought on record by the petitioner to discharge the onus of proving this. Apparently, neither the spouse nor any of the dependants of respondent No.2 has anything to do with this business-concern and only respondent No.2 is connected with it. The connection between respondent No.2 and this business concern, per para. 7 of the petition, is that he is its Chairman. Now per bye-law No.7, the share-capital of the society the business concern M/s. Jagan Agricultural Cooperative Society is Rupees one lakh divided into 3,600 A class shares of Rs.25 each and 1,000 B class shares of Rs.10 each and the qualification of a director per bye-law No.28 is that he should hold 12 "A class shares" total Rs.300. Board of Directors is to consist per bye-law No.27 of nine persons six to be elected, two nominated by the Registrar and one by the financing bank. A Chairman as per bye-law No.30 is to be elected on annual basis from amongst the elected six members of the Board of Directors. Thus a Chairman need not have more than Rs.300 worth of ownership in the share capital of Rs.One lakh which comes to 0.3 per cent. It was for the petitioners to show that respondent No.2 owned at least 51 per cent. of the shares but in the absence of any evidence I shall presume that respondent No.2 owned only 12 "A class shares" worth Rs.300. Thus the ownership of respondent No.2 is only to the extent of 0.3 per cent. and not 51 per cent. or more. The execution of promissory notes by respondent No.2 and by Arbab Ali and Shaft Muhammad does not make the loan their personal liability. They had signed them on behalf of the society as its Chairman and directors. No question was put to respondent No.2 as to the extent of his ownership in M/s. Jagan Agricultural Cooperative Society. I would therefore hold that this business concern was not "mainly owned by respondent No.2 or by his wife or dependents" and is therefore beyond the purview of section 12(2)(iii) of the Act (c) Loans of M.C.B. and Allied Bank to the tune of Rs.0.827 million.

13. The only evidence in respect of this loan is that of P.W.10 Haji Sanaullah, an officer of M.C.B. Shikarpur. He however stated that respondent No.2 was not an account holder in his bank and thus did not support the petitioner. No one was examined from the Allied Bank. This charge thus totally fails. Indebtedness of respondent No.2 to these two banks to the tune of Rs.0.827 million has not been proved.

14. P.W.10 Haji Sanaullah has however shown that respondent No.2 had stood guarantor in respect of six loans to six different persons the total of which comes to Rs.4,25,931 but in the light of the judgment reported as 1994 SCMR 1299 (Ghulam Mustafa Jatoi v. Additional District and Sessions Judge/ Returning Officer) a guarantor is not a borrower in terms of section 12(2)(iii) and therefore this part of the evidence of this witness is irrelevant. (d) Personal loan of Agricultural Development Bank, Shikarpur.

15. Learned counsel for the petitioner confined his arguments in respect of the loan of M/s. Ruby Rice and General Mills Limited and M/s. Jagan Agricultural Cooperative Society and did not say anything about the personal loan of respondent No.2. However, in para. 6 of the petition it was alleged that respondent No.2 owed Rs.2,67,699 to Agricultural Development Bank, Shikarpur, and respondent No.2 had admitted this loan in his written statement. P.W.9 Mr. Imtiaz Ali Soomro was also examined to prove this very loan although there was no necessity to prove an admitted fact. The designation of this witness was wrongly typed in evidence sheet as "Stib-Manager. Zaari Bank, Shikarpur" instead of Sub-Manager ADBP, Shikarpur. His correct designation was recorded in the Reader's diary of 18-8-1994 when he recorded the attendance of the witnesses who were present on that date but could not be examined as the undersigned was out of the country on that date and the witnesses were bound down for 25-8-1994 when they were examined. Necessary correction has been made in evidence sheet on 1990-1995. This amount is almost one quarter of Rs.one million which is necessary to disqualify a person from standing as a candidate in the election for a seat for National Assembly or Provincial Assembly under section 12(2)(iii) of the Act and learned counsel of the petitioner very wisely refrained from referring to this loan while submitting his arguments.

16. In short, while it has been proved that respondent No.2 was Director and Chief Executive of M/s. Ruby Rice and General Mills Limited and Chairman of M/s. Jagan Agricultural Cooperative Society and both these business concerns were heavily indebted to various banks and financial institutions but it has not been proved that respondent No.2 mainly owned" these companies and therefore their loans are of no account and do not attract the mischief of section 12(2)(iii) of the Representation of the People Act, 1976. Alleged loans taken by respondent No.2 from M.C.B. arid Allied Bank have not been proved and the loan of Rs.2,67,699 which respondent No.2 owes to Agricultural Development Bank, Shikarpur Branch, admitted though it is, well below the amount of Rs.one million as prescribed under section 12 (2)(iii) of the Act. It therefore follows that respondent No.2 is not a defaulter in terms of section 12(2)(iii) of the Act. The issue is therefore decided in the negative.

17. In view of the above findings, the petition is dismissed with costs which I assess at Rs.5,000.

18. These are the reasons for the short order announced in the earlier part of the day. A.A./148/E Election petition dismissed.