2003 PLP 882 (CLD)

Contrarily, learned counsel for the applicant defendant No.3 conceded that in the matter of demand guarantees, period of limitation runs only upon demand but referred to paras. 8, 9 and 11 of the plaint to show that by its own admission, plaintiff has made demand on the guarantors /defendants and even in para. 11, plaintiff admits the accrual of cause of action upon non-payment of loan by defendants on due dates, despite repeated demands. Learned counsel for the applicant defendant No.3, therefore, states that suit is admittedly barred by time.

6. I have considered the submissions of the learned counsel for the parties and have also examined the record in the present case. Para. (i) of the personal guarantee executed by defendants shows that nature of guarantee was that of a "demand guarantee". Said para. while recounting covenant and undertakings of the defendants, is prefaced by the following words: "Due payment and discharge on demand of the loan plus all moneys and liabilities paid or incurred or which you may pay or incur to or for the use or accommodation of the Borrower in respect of the loan together with interest thereon, and all costs, charges, commissions payable thereon and expenses connected therewith incurred or that may be incurred by you."

7. In Comparative Law of Security and Guarantees by Philip R Wood, 1995 Edn. demand in the case of demand guarantees has been discussed as under:-- "The guarantee should be payable on demand so as to establish clearly (what is probably the law) that the statute of limitations runs from the demand, not the date of the giving of guarantee. Multiple demands should be expressly allowed, e.g. to cover future liabilities not caught by the initial demand." Reference has also been made to the case of Bradford Old Bank v. Sutcliffe (1918) 2 KB 833 recorded in Chorley and Smart Leading Cases in the Law of Banking, Sixth Edition, 1990. The law in the said case is settled as under:-- "But another answer was given by the plaintiffs i.e. that the cause of action did not accrue until demand by them and that no demand had been made until the realization of the debentures in 1912, less than six years before the beginning of the action. This seems to depend upon the construction of the document ????It was argued on behalf of the defendant that the words 'on demand' should be neglected because the money was due, and therefore a demand was unnecessary and added nothing to the liability. This proposition is true in the case of what has been called a direct liability for example, for money lent. There the liability exists as soon as the loan is made, and a promise to pay on demand adds nothing to it, as in the case of a promissory note for the amount payable on demand, and the words 'on demand' may be neglected. It has, however, been held long ago that this doctrine does not apply to what has been called a collateral promise or collateral debt, and I think that a promise by a surety to pay the original debt is such a collateral promise or creates a collateral debt. The only question, therefore, is whether an the construction of the guarantee the parties meant the words 'on demand' to mean what they say. I cannot doubt that they did." Notes were also added in the treatise as under:-- "Notes. This decision may be compared with that in Lloyds Bank Ltd. v. Margolis, which turned on demand under a mortgage. In an earlier case, Parr's Banking Company Ltd. v. Yates it was held, also by the Court of appeal, that in a case of a guarantee that had no demand clause, in the words of Vaughan Williams L.J. the right of action on each item of the account arose as soon as that item became due and was not paid, and the statute ran from that date in each case'. The decision was criticized at the time, and it may be that in similar circumstances today the matter would be viewed differently but in practice a demand clause is of course included in all bank guarantee forms." Similarly, in the case of National Bank of Pakistan v. General Tractor and Machinery Co. Ltd. 1996 CLC 79, it was held that:-- "It is finally submitted by Mr. Ansari, relying on the case of Commerce Bank Ltd. v. Messrs Crescent Paint Colour and Varnish Works Ltd. PLD 1975 Kar. 504. that acknowledgements and part payments by defendant No.1 do not bind the defendant No.2 and, therefore, cannot extend the period of limitation against him. Once again, there can be no cavil with the proposition of law but the argument overlooks the fact that by the guarantee (Exh.10) the defendant No.2 had undertaken to make payment 'on demand' and it is not the case of defendant No.2 that any demand was made by the plaintiff, prior to the filing of the suit, for payment under the guarantee. It is an established law that the period of limitation in the case of a guarantee such as the one in this case begins to run from the date of demand for payment and that in the absence of any prior demand, the filing of the suit amounts to a demand for payment."

8. In view of the above, there is no dispute with the proposition raised by the learned counsel for the plaintiff that, for any demand guarantee, period of limitation starts running upon demand made upon the guarantors by the beneficiary. Learned counsel for the applicant has also conceded this proposition but referred to paras. 9 and 11 of the plaint to emphasize that plaintiff has admitted making demand upon the defendants for, payment under the guarantees.

9. I have examined the entire plaint including paras. Nos.8, 9 and 11 therein. In para.9 the plaintiff has specifically pleaded "that the plaintiff continued to ask the defendants to fulfil their obligations under the aforesaid guarantee and to liquidate outstanding liability guaranteed by them but to no avail. Further in para. 11, it was pleaded "that cause of action arose... secondly when dues against the loan were not paid on due dates, despite demands..."

10. In view thereof, the plaintiff in its own pleadings has admitted making repeated demands upon the defendants to settle the outstanding liabilities of the company on the basis of their guarantees. It is intriguing to note that despite specifically asserting demands, plaintiff has withheld the dates of demands made by it upon the said defendants. In order, to show that its claim as well as suit were within time against the defendants, it was the sanctimonious duty of the plaintiff to bring all necessary and essential facts before the Court and to plead the same in its plaint. Withholding of dates as well as record thereto relating to demands, leads to an obvious presumption against the plaintiff.

11. In view of the above admission of making repeated demands and withholding of record thereto qua dates or demand, leads me to only possible conclusion that said demands were made by the plaintiff obviously when it made the demand for, payment of its claims on the company against which winding petition was filed in 1981. The present suit is, therefore, held to be beyond the period of limitation and the plaint therein is rejected with no order as to costs. This order shall dispose of all pending PLAs and C.Ms. therein. M.B.A./P-126/L????????????????????????????????? ??????????????????????????????????????????????? Order accordingly