2006 PLP 619 (SCMR)

CH. IJAZ AHMAD, J.

The detailed facts have already been' mentioned in the impugned judgment. However, necessary facts out of which the present petition arises are that the respondents filed suit for recovery of an amount of Rs.61,660,547.07 against the petitioner'. The contents of the plaint reveal that petitioner had given guarantee for the finance provided by the respondents to Pakistan Switchgear Ltd. in the Lahore High Court, Lahore (Banking jurisdiction). The petitioner filed application for leave to appear and defend in the Banking Court which was dismissed partly vide interim decree dated 15-1-1998'to the extent of the claim of the respondent for the amount of Rs.26,793,

585. The leave was granted to the petitioner to the extent of claim of liquidated damages. Petitioner being aggrieved filed R.F.A. No.62 of 1998. During the pendency of the said appeal the learned Banking Court refused to grant liquidated damages to the respondent-Bank vide final judgment, dated 2-6-1999. Respondent being aggrieved filed R.F.A. No.59 of 2000 by the respondent. The learned High Court dismissed both the appeals vide impugned order, dated 25-2-2004. Hence, this petition.

2. Learned counsel of the petitioner submits that both the Courts below erred in law to decide the case against the petitioner in violation of section 139 of the Contract Act. He further urges that the learned High Court also-erred in law to decide the case against the petitioner in violation of clause/condition No.13 of the Contract Act according to which the amount has been disbursed to the respondent in lump sum but the learned High Court erred in law to decide the case against the petitioner in violation of mandatory provisions of 139 of Contract Act as well as clause 13 of the agreement arrived at between the parties.

3. We have given our due consideration to the contention of the learned counsel of the petitioner and perused the record. It is better and appropriate to reproduce operative part of the impugned order to resolve the controversy between the parties. "Learned counsel for the appellant, while arguing the case stated that, admittedly there are three finances granted to the original borrower, which were through the finance agreements dated 25-6-1988, 27-9-1988 and 2-5-1989, and are based upon Islamic mode of financing i.e. the mark-up basis, Clause 4 of these agreements, clearly stipulates that, the guarantees shall be given by the appellant in pursuance of the agreement, according to clause 4(e), the respondent N.D.F.C. was bound to recover the amount in the first instance from WAPDA, but it committed a lapse in the performance of its obligation, resultantly, the appellant in terms/of section 139 of the Contract Act, stands discharged. It is also argued that, according to condition No.13 of the agreement, the disbursement of the finance, made to the borrower, was to be on the basis of specific schedule depending upon the progress of supply orders of WAPDA, but in breach of this condition, the respondent had disbursed the financing in lump sum, therefore, the guarantee of the appellant, which is strictly on the basis of the financing agreement, cannot be enforced. Lastly, it is submitted that, according to the statement of accounts at page 94 of the file, certain amounts, such as central excise duty, liquidated damages and mark-up, price, have been unauthorizedly entered and exaggerated; these amounts are liable to be excluded. We have heard the learned counsel for the parties and find that, under the law, the guarantee is an independent contract between the parties. In these guarantee documents, which are admitted by the appellant, the appellant in clear, unequivocal and unambiguous terms had guaranteed to stand as surety for whatever amount is due to the respondent from the main borrower. As the main borrower in this case undoubtedly has defaulted in the payment of the dues, resultantly, the appellant was bound to discharge its surety obligation. From the record and also the arguments, raised before us, we do not find that, the provisions of section 139 of the Contract Act, ale attracted to the facts and circumstances of the case. Resultantly, we do not find any merit in the argument, which is hereby repelled."

4. After reading the aforesaid operative part of the impugned order we are of the view that the learned High Court had rightly discarded the pleas raised by the petitioner before the learned High Court with cogent reasons. The same are in accordance with the dictum laid down by this Court in Rafique Hazquel Masih's case 2005 SCMR

72. The relevant observation is as follows:-- "Furthermore section 128 of the Contract Act specifically mandates that "the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract". "In absence of any specific stipulation in the contract of loan or any consideration of equity, a guarantor cannot take up the plea that the Bank should enforce the liability against the principal debtor before proceedings against the guarantor. The reason being that the Bank grants loan only on the guarantee and in absence of letter/contract of guarantee the Bank may not have sanctioned the loan."

5. It is pertinent to mention here that the petitioner had given a guarantee at the time of sanctioning loan facility to the original loanee by the respondent. Guarantee means that it is an undertaking by a 3rd party for one of the parties to the contract whereby the 3rd party binds itself to see that the promise or condition would be fulfilled according to covenant. A contract of a guarantee is a contract to meet the promise or discharge the liability of a 3rd person in case of his default. The person who gives the guarantee is called the surety, a person in respect of whose default the guarantee is given is called the creditor. (see section 126 of the Contract Act).

6. It is also pertinent to mention here that section 139 is not attracted in the present case whereas section 128 is applicable in the given circumstances. The liability of the guarantor/surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract as envisaged in section 128 of' the Contract Act, 1872, unless it B is otherwise provided by the Contract. They are jointly and severally liable to pay the outstanding amount to the creditor. A guarantor cannot shirk from the liabilities incurred by him through the execution of documents as law laid down in the following judgments:-- (i) Rafique Hazquel Masih v. Bank Alfalah Ltd. and others 2005 2005 CLD 95; (ii) Platinum Insurance Company Ltd. v. Daewoo Corporation PLD 1991 SC 1; (iii) Ram Sagar Singh v. Yogendra Narain Prasad Singh AIR 1975 Pat. 239; (iv) Ashrafi Rai v. Parsbadilal AIR 1959 M.P. 26; (v) Dalchand v. State of Rajasthan AIR 1976 Raj. 112; (vi) Madho Sah v. Sitaram Sali AIR 1962 Pat. 405; (vii) Arumugham Chettiar v. Sadasiram AIR 1971 Mad. 321; (viii) Nagpur Nagrik Sahakari Bank Ltd. v. Union of India AIR 1981 A.B. 153; (ix) Budh Singh v. Mukhund Murailal AIR 1975 A.B. 201 and (x) Kali Cheran v. Abdul Rehman AIR 1918 PC 226.

7. The learned High Court was justified to hold that the section 139 is not applicable in the present case coupled with settled principle of law that the liabilities of the surety cannot be discharged as the law laid down by this Court in Central Exchange Bank Ltd. v. Mst. Zaitoon Begum and 2 others PLD 1968 SC

83. The relevant observation is as follows:-- "Mere forbearance, on the part of the creditor to sue the principal debtor, or to enforce any other remedy against hint, would not, in the absence of any provision in the guarantee to the contrary, discharge the surety, as is provided by section 139 of the Act."

8. It is pertinent to mention here that facts of Mst. Zaitoon Begum's case (supra) are entirely different and distinguished qua the case in hand, therefore, application of the section 139 of the Contract Act is not attracted as held by the learned High Court in the impugned judgment. Section 139 of the Contract Act lays down that if the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which is his duty to the surety requires him to do and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged. It is pertinent to mention here that petitioner has failed to point out any inconsistency against his right in terms of the section 139 of the Contract Act.

9. It is also settled principle of law that a creditor in action against the guarantor is merely required to show existence of liability of the principal debtor and the occurrence of default or breach of the terms leading to the liability. Defence based on the technicalities, loss of' C procedure or covenants to which guarantor is not a party cannot be pressed into service by guarantee. See Sree Meenakshi Mills Ltd. v. Ratilal Tribhovandas Thakar AIR 1941 Born.

108. So far as section 141 of the Contract Act is concerned, this provision was not pressed before the learned High Court by the petitioner's counsel as is depicted from the impugned judgment. It is a settled principle of law that parties are bound ID by their pleadings as laid down by this Court in Mst. Murad Begum's case PLD 1974 SC 322.

10. It is an admitted fact that petitioner had not taken the plea of the section 141 of the Contract Act before the learned High Court as well as in the memorandum of petition before this Court. It is a settled principle of law that the fresh plea cannot be raised before this Court as the law laid down by the Privy Council and this Court in the following judgments:-- (i) John E. Brown Lee v. Vivan Mac Millan AIR 1940 PC 219 and (ii) Ashfaque-ur-Rehman v. Ch. Muhammad Afzal PLD 1971 SC 766.

11. So long as the principal debtor is liable, the guarantor also agrees to be liable Ganga Nath Sen v. Ram Jit Ray ILR (1942) 1 Cal.

11. Even otherwise section 141 of the Contract Act confers a right on the F surety to the benefit of every security which the creditor has against the principal debtor at the time when the contract of surety is entered into (See Citibank N.A. Newdehly v. Juggilal Kamlapat Jute Mills Co. Ltd. Kanpur AIR 1982 Dehly 487). It is an admitted fact that both the Courts below had given concurrent findings of fact against the petitioner. It is a settled principle of law that this Court cannot interfere with the G concurrent findings of the Courts below while exercising power under the Article 185(3) of the Constitution as the law laid down by this Court in the following judgments: (i) Humayun and others v. The State 1986 SCMR 1987 and (ii) Evacuee Trust Property Board v. Muhammad Sharif 1984 Pakistan Supreme Court cases 1501.

12. In view of what has been discussed above, we do not find any infirmity or illegality in the impugned judgment. Even otherwise petitioner's learned counsel failed to point out any question of law of' public importance. Resultantly, the petition being devoid of any merits is dismissed. Leave is refused. M.H./S-6/SC?????????????????????????????????????????????????????????????????????????????????????? Petition dismissed.