2004 PLP 416 (YLR)

(c) Civil Procedure Code (V of 1908)

O.XXXVII, Rr.3 & 4

Decree, setting aside of

Special circumstances

Leave to defend the suit, grant of

Passing of decree against Director of limited company-- Director of the company sought setting aside of decree on the ground that he could not be made responsible for the debts of the company

Trial Court dismissed the application under O.XXXVII, Rr.3 & 4, C. P. C.

Validity

Director of the company could not be made responsible for the debts of the company unless he had in any way guaranteed the payment of the same-- Special circumstances had been made out which had been overlooked by the Trial Court

Judgment and decree passed by the Trial Court was contrary to established law, without jurisdiction and the same was set aside

Leave to defend the suit was granted to the Director of the Company and the case was remanded to Trial Court for decision on merits

Appeal was allowed accordingly. Muhammad Yousuf v. Abdul Majeed PLD 1993 Lah. 244 and Haji Khuda Bux Nizamani v. Election Tribunal and others C.P. No.D-1605 of 2002 rel. I.H. Zaidi for Appellant. M. Ilyas Khan for Respondent No. l (absent). Dates of hearing: 3rd and 24th February, 2003. United Air Travels Limited ("United") filed a suit against Jetset Package Couriers (Pvt.) Limited ("Jetset") and Mr. Tahir A. Khan, Chairman of Jetset, the two defendants, under Order 37, rules 1 and 2, C.P.C. for recovery of Rs.4,01,400 on the basis of five cheques issued by Jetset. The defendants filed an application under Order 37, rule 3, C.P.C. for leave to defend the suit wherein they pleaded that United should have filed a suit for rendition of accounts as all payments made to them were subject to rendition of accounts and not a suit under Order 37 providing a summary procedure for recovery of money on negotiable instruments. They also pleaded that the suit was bad for misjoinder of the parties inasmuch as Tahir Khan, defendant No:2, was neither a necessary or a proper party in the suit nor was he personally liable for the amount claimed from Jetset. United in their counter-affidavit disputed the assertion made by the defendants and stated that the defendant No.2 being the Chairman of the Company was a necessary party and was therefore jointly and severally liable to make the payment due against the defendants. On 5-10-1993, the learned District Judge rejected the defence taken by the defendants, dismissed the application for leave to defend and decreed the suit with costs. Thereafter, United filed Execution Application No.14 of 1993 wherein Jetset filed an application under Order 37(4), C.P.C. on behalf of defendant No.2 wherein he contended that the cheques having been issued by a limited company, he was neither a necessary or a proper party in the suit nor was he personally liable for the amount as a Director of Jetset. By order dated 28-2-1994, the learned District Judge dismissed the said application, inter alia, on the' ground that no special circumstances had been made out and that the application had been filed after expiry of three months from the date of the passing of the decree. Aggrieved by the aforesaid order, Tahir Khan, appellant (defendant No.2 in the suit) has filed this appeal.

2. Mr. I.H. Zaidi, learned counsel for the appellant contended that the application under Order 37, rule 4, C.P.C. was within time and that the learned District Judge could not pass a decree against the Chairman/Director of Jetset in respect of the cheques issued by a limited company. He added that a suit for recovery of a claim based on negotiable instrument(s) must be for the exact amount shown on the instrument and if the claim is for any other amount where negotiable instruments are also relied upon, the claimant must file an ordinary suit for recovery of money.

3. I have heard Mr. I.H. , Zaidi, learned counsel for the appellant and have considered the arguments advanced by him in support of the appeal.

4. One of the grounds on which the District Judge dismissed the application under Order 37, rule 4, C.P.C. filed by Tahir Khan was that it was barred by limitation as it had been filed after expiry of 30 days from the date of the passing of the decree. No period of limitation has been provided in the Limitation Act for filing an application under Order 37, rule 4; consequently, Article 181 of the Limitation Act which provides a period of three years is applicable in respect of such an application (Habib Bank Limited v. Musarat Ali Khan PLD 1987. Karachi 86, 95). Accordingly, it is held that application under Order 37, rule 4, C.P.C. filed by defendant No.2 was within time.

5. The other reason given by the learned District Judge for dismissal of the application of Tahir Khan was that no special circumstances had been made out to set aside the decree. The term "special circumstances" has not been defined in C.P.C. or any other law. However, according to the judgment in the case of Muhammad Yousuf v. Abdul Majeed PLD 1993 Lahore 244 at 248, it has been held "that the words 'special circumstances' occurring in rule 4, would not connote 'ordinary circumstances' or event of routine out would indicate circumstances which are uncommon, rare and exceptional ...." In para.3 of the plaint, United alleged that the defendant had issued five cheques totalling Rs.4,75,000 towards payment of air tickets provided by United to Jetset and in para.5 United stated that after adjustment of ,refunds a sum of Rs.4,46,400 remained unpaid. Thereafter, in paragraph , 6 United alleged that Jetset had given them a cheque of Rs.45,000 towards the debt leaving a balance of Rs.4,01,400.. When the said amount remained- unpaid United filed the suit for recovery of Rs.4,01,400 under Order 37, rules .1 and 2,~C.P.C. basing its claim on the five cheques, which had been given by the defendants to United, copies of which were filed alongwith the plaint. Under Order 37, rule 2, C.P:C. in all suits upon bills of exchange, Hundies or promissory notes, the plaintiff is entitled to payment for the principal sum due on the instrument and for interest calculated in accordance with the provisions section 79 or section 80, as the case may be, of the Negotiable Instruments Act, 1881 (Habib Bank Ltd. v. Kaycee Corporation PLD 1980 Karachi 143) which could not be done in the present case as the claim filed was for a lesser amount than the total of five cheques. The defendants had taken the plea that United should have filed a suit for accounts but instead it had filed a suit for recovery of Rs.4,10,400 when the sum due on the five cheques issued by the defendants was Rs.4,75,

000. The defendants had also pleaded that the director of Jetset which is a private limited company could not be made liable for the debts of the company. It is well-settled that a director cannot be made responsible for the debts of the company unless he has in any way guaranteed payment of the same (see judgment dated 16-9-2002 passed in Haji Khuda Bux Nizamani v. Election Tribunal and others C.P. No:D-1605 or 2002).

6. In view of the above discussion, ii is apparent that the impugned judgment was patently contrary to establish law and without jurisdiction and consequently a case of special circumstances was made out which has been totally overlooked by the learned District Judge in his order dated 28-2-1994. Accordingly, the order dated 28-2-1994 and the judgment anus decree dated 5-10-1993 passed by learned District Judge are hereby set aside, leave to defend the suit is granted to Jetset and Tahir Khan and the case is remanded to the trial Court to decide the same on merits. There shall be l no orders as to costs. M.H./T-55/K Case remanded.