1984 PLP 1035 (MLD)

It would be convenient to discuss these issues together. In these issues there are two sets of arguments, one relates to the limitation against the defendant No.1, and the other relating to defendants Nos. 2 and

3. First I will deal with the limitation against the defendant No.

1. As I have held that the account is not mutual open, and current account, the suit on the basis of statement of account is not' within time. The learned counsel for the plaintiff has pressed the additional ground that as the promissory note was executed by the defendant No.1 on 30-6-1969 and the suit was filed on 5-8-1972, during vacation the suit is within time. The defendant No.1 in his written statement has not denied the execution of the promissory note, but has pleaded that the promissory note was executed in blank and was delivered on 8-2-1964 at the time of taking the loan, and it was filled in by the plaintiff without the consent or authority of the defendant No.1. The learned counsel for the plaintiff on the other hand contended that it was executed on 30th June, 1969 as mentioned in the promissory note, and further that in view of section 118 of the Negotiable Instruments Act, a negotiable instrument bearing the date shall be presumed to be made or drawn on such date unless the contrary is proved. Section 118 lays down a special rule of evidence applicable to the negotiable instrument. It casts burden of proof on the executor to establish that the date mentioned in the instrument is not correct. The presumption under section 118 is rebuttable, and therefore, it is open to a party challenging the correctness to prove that the date mentioned is no correct. I will, therefore, examine the evidence on this aspect of the case. The only evidence available on record is of P.W.1. The defendants have not examined any one. P.W.1 in his examination-in-chief has stated that a loan in the sum of Rs.1,40,000 was advanced to the defendant No.1. He further stated that the defendant No.1 had executed a demand promissory note at the time of taking the advance. I produce the original promissory note Exh.7/1." Therefore, according to the plaintiff's own witness the promissory note was executed at the time of advancing the loan which was in the year 1964. The witness further stated that in the record there was no blank promissory note, and it was not the practice of the bank to obtain blank promissory note. He however, stated in cross-examination that he cannot say whether his earlier statement was correct. The plaintiff's witness having admitted that the promissory note was executed at the time of granting advance the presumption attached to the pronote is destroyed and the burden has shifted on the plaintiff to Drove that it was executed on 30-6-1069. Mr. Z.U. Ahmed, the learned counsel for the defendant No.1 has referred to the statement of account filed by the plaintiff in which on 16-1-1967 there is a debit entry of 25 paisa on account of revenue stamp and another similar entry is dated 21-12-1967 for 30 paisa On the basis of these entries the learned counsel has contended that if the defendant No.1 would have executed the promissory note on 30th June, 1969 there ought to have been a debit entry of 50 paisa (8 Annas) being the cost of revenue stamp affixed on the promissory note. Admittedly there is no such entry on 30th June, 1969. All the entries in the year 1969 relate to the interest. This contention of the learned counsel for the defendant No.1 lends support to the averment of the defendant No.1 that the promissory note was not executed on 30th June, 1969. The plaintiff has not led any evidence by producing any record to establish that the promissory note was executed on 30-6-1969. It has not examined any one of its employees before whom this promissory note was executed on 30-6-1969. In these circumstances, my finding is that the promissory note was executed in blank and delivered to the plaintiff at the time when loan was advanced in 1964. A blank promissory note duly executed and delivered to a person is an inchoate instrument and as provided by section 20 of the Negotiable Instruments Act, prima facie gives the authority to the person who: receives that paper to make and complete it into a negotiable instrument, with the condition that the amount should be the same as specified therein or where no amount is specified the amount filled in should not exceed the amount covered by the stamp fixed on the instrument. The person signing such document shall .be liable on such instrument for the amount specified or filled in the instrument provided it is filled in within a reasonable time. It would be proper to reproduce section 20. "Inchoate stamped instruments,--(1) Where one person signs and delivers to another a paper stamped in accordance with the law relating to stamp duty chargeable on negotiable instruments. either wholly blank or having written thereon an incomplete negotiable instrument, in order that it may be made or completed into a negotiable instrument he thereby gives prima facie authority to the person who receives that paper to make or complete it, as the case may be, into a negotiable instrument for the amount, if any, specified therein, or, where, no amount is specified for any amount, not exceeding, in either case, the amount covered by the stamp. (2) The person so signing shall, subject to the provisions of sub?section (3), be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course, for the amount specified in the instrument or filled up therein: Provided that no person other than a holder in due course shall receive from the person so signing the paper anything in excess of the amount intended by him to be paid thereunder. (3) In order that any such instrument may on completion be enforce?able against any person who became a party thereto before such completion, it must be filled up within a reasonable time and strictly in accordance with the authority given: Provided that if any such instrument after completion is negotiated to a holder in due course, 3t shall be valid and effectual for all purposes in his hands and he may enforce it as if it had been filled up within a reasonable time and strictly in accordance with the authority given." It may be mentioned here that the present section 20 of Negotiable Instruments Act was substituted by Ordinance 49 of 1962. Subsections (2) and (3) are newly added provisions and the restriction imposed by subsection (3) was unknown to the previous section. Now an inchoate instrument should be completed within a reasonable time. The words "reasonable time" have not been defined in the Negotiable Instruments Act and, therefore, its correct meaning and, import was to be determined before deciding the span of time during which an inchoate instrument should be completed. According to Black's Law Dictionary, the words "reasonable time" means:- "Such length of time as may fairly, properly and reasonably bet allowed or required, having regard to the nature of the act on duty or subject-matter, and to the attending circumstances." In Ballentine's Law Dictionary, third edition: "reasonable time" has been defined as "a period consistent with reasonable dispatch and without unreasonable delay; a time that is reasonable considering the nature, purpose, and circumstances of the relevant act; for performance of contract in absence of condition as to time, a time which is reasonable from the stand?point of the subject-matter of the contract, the situation of the parties, their intention, what they contemplated at the time the contract was made, and the circumstances of the case attending performance." From the above meanings it is clear that "reasonable time" provided in a contract or instrument must be interpreted according to the facts and circumstances of each case. In determining what time is reasonable, it should not be extreme and arbitrary. It should be determined according) to the facts, circumstances, obligations and duties of the parties In, commercial cases particularly relating to the banks and negotiable; instruments the reasonable time has to be determined by looking into the nature of the instrument, usage of the trade or business, facts of" the particular case and the intention of the parties. In Monkland v. Jack Barclay (1951) 2 K B 252, it was held that all the circumstances should be taken into account in deciding what is a reasonable time. Having determined the meaning and import of the words "reasonable time" it is now to be considered in what context and for what purpose it has been used in section 20 of the Negotiable Instruments Act. When a person signs and delivers to another a blank stamped paper the intention is to make or complete it in future into a negotiable instrument. The person who receives such a document has a prima facie authority to complete it into a negotiable instrument. The restriction imposed by law is that the amount if not stated in the instrument. Would be an amount not exceeding the amount covered by the stamp. The other condition is that it must be filled up within a reasonable time and strictly in accordance with the authority given by the executant. Delivery of a blank stamped instrument duly signed, unless otherwise proved, prima facie confers an authority on the receiver to fill it according to the intention of the parties. The object of giving the blank instrument is to give security of a continuing nature to the? receiver or a creditor. In fact by delivering such document the executant lends his mercantile credit to others. The liability of person who signs and delivers the blank instrument arises only when the blanks are filled in and the instrument is completed. Till then the instrument is not a valid Negotiable Instrument and no action is maintainable on it. Reference can be made to Montaghe v. Perkins (1853) 22 L J C P

187. Where the date has not been mentioned in the instrument the receiver has the authority to fill in the date which should fall within a reasonable period. The object of delivering such document to a party is to furnish a continuing guarantee to the receiver, therefore, the intention of the executor is that it may be held as security for the amount due and in case of default it may be utilized by the receiver. In this background in my view the reasonable time within which the receiver should complete the document by filling in the blank including the date should be a period of three years from the date of its execution. However, if before the expiry of the period of three years the executant inde?pendently acknowledges his liability according to law and period of limitation is thereby extended, then the receiver/holder can complete the inchoate document into a negotiable instrument within three years from the date of such acknowledgment. In the present case there have been few deposits. The last being in July, 1966, therefore, in my opinion the reasonable time for completing the blank document should be within a period of three years from the date of the last transaction or deposit made by the defendant No.1. Where there has been no dealing between the parties, the reasonable time would be a period of three years from the date when the instrument was executed in blank. The other objection raised by the defendant No.1 at the time pronote was produced was that it is under stamped. The learned counsel for the defendant No.1 has not addressed a word about it. However, Mr. Mansoorul Arifin the learned counsel for the plaintiff has referred to Stamp Act and West Pakistan Finance Ordinance, 1969 where the stamp duty under Article 49 of the Stamp Act was raised to Rs.10. This amendment was operative from 1-7-1969 and, therefore, it is not applicable to the pronote in suit as it is dated 30th June, 1969. According to the law applicable at the relevant time the promissory note is properly stamped. In view of my finding on the validity of the promissory note the suit against the plaintiff No.1 is within time, as it was filed on 5-8-1972 i.e. during vacation when the Court was closed. As regards acknowledgment of liability by the defendant No.1 the plaintiff has produced his letters. The last acknowledgment of liability was made by the defendant No.1 on 25-4-1966. However, such acknowledgment of liability will not save the period of limitation, but as the promissory note is valid, the suit against defendant No.1 is within time. The question remains whether the suit is within time against the defendants Nos. 2 and

3. The defendant No.2 is alleged to be guarantor for the loan. The guarantee was executed by the defendant No.3 as attorney of the defendant No.2. Both the defendants have denied the execution and admissibility of the guarantee. The plaintiff has produced documents to show that the guarantee was executed by the defendant No.3 on behalf of the defendant No.2 acting as his attorney. The fact that such, representation was made is clearly established from the correspondence made by the defendant No.3. The defendant No.2 has denied his liability on the ground that the defendant No.3 is not his attorney. In fact the pleadings of the defendants Nos. 2 and 3 in this regard are most confused and vague. The suit against the defendant No.2 will be maintainable provided it is found that the defendant No." has executed the guarantee as the attorney of the defendant No.2. The plaintiff has alleged that the defendant No.3 acting as attorney of the defendant No.2 executed the guarantee on 29-10-1965. The burden is, therefore, upon the plaintiff to establish it. P.W. is not aware of the facts of the case and cannot depose anything from his knowledge. The plaintiff has produced an unsigned copy of the power-of-attorney but it has not been proved to have been executed by the defendant No.2. There is no document executed or written by defendant No.2 from which it can be established that he had appointed defendant No.3 as his attorney. All the letters and notices addressed by the plaintiff to defendant No.2 were sent through defendant No.3 who has replied them as his attorney. The plaintiff has, therefore, failed to establish that the defendant No.3 has executed the deed of guarantee as attorney of the defendant No.2. In this regard it may also be mentioned that the defendants Nos. 2 and 3 have pleaded that the manager of the plaintiff had represented that to meet the objection of State Bank of Pakistan a deed of guarantee may formally be executed. The defendants have not produced any evidence to substantiate this allegation and have failed to establish it. It may however, be noted that in the letters written by the defendant No.3 from time to time, he had represented himself to be the attorney of the defendant No.2 without producing any power-of-attorney. The defendant No.2 does not seem to have written any letter to the plaintiff but the entire correspondence and commitments have been made by defendant No.3 on behalf of defendant No.2 and personally as well. The plaintiff was also dealing with the defendant No.3 as is obvious from Exhs.7/17, 7/18 and 7/19 addressed to him demanding the loss due from the defendant No.1. Exh. 7/19 was replied by the defendant No.3 personally (Exh.7/20) who paid Rs.10,000 and promised to pay the entire amount. Similar assurance was given by defendant No.3 in Exh.7/27. In Exh.7/30, dated 1-5-1968 while replying the legal notice although defendant No.3 has signed it as the attorney of the defendant No.2 he stated as follows:- "(1) That the Bank had advanced Rs.1,00,000 (Rs. one lac) only to Mr. Azizullah Hasan against Usmania Glass Shares and 1 stood as his guarantor. (2) That out of this Rs.1,00,000 I, the guarantor, had paid to your clients Rs.45,000 plus the interest. In view of this, it is not understood how your clients have arrived at the figure of Rs.1,59,551.20. This is apparently wrong and requires clari?fication. In the circumstances explained above, I would request you to please let me know the correct amount, and on receipt of the same, I will take up the matter with your clients General Manager and will arrange payment of the balance actually due." These facts lead to the conclusion that the defendant No.3 though representing to be the attorney of defendant No.2 had been dealing with the plaintiff personally and had no authority to act on behalf of the defendant No.2. The defendant No.3 has not led any evidence to prove his plea. The plaintiff has pleaded specifically that if the defendant No.3 is held to have executed the guarantee unauthorisedly then he would be personally liable to compensate the plaintiff for the loss suffered in that regard. Mr. Mansoorul Arfin. the learned counsel for the plaintiff, has referred to section 235 of the Contract Act which reads as follows:- "A person untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing." As it has been held that the defendant No.3 has untruly represented himself to be the attorney of the defendant No.2 and has been dealing with the plaintiff continuously and regularly it has to be seen whether this dealing is covered by the principle and the provision of section 235 of the Contract Act. The applicability of section 235 depends on the facts that a person has falsely represented to be the agent of another person, and such third person induced by this false representation has dealing with, the pretended agent and suffers loss, and further that the alleged principal has not ratified the act of the pretended agent. On proof of these ingredients the pretended agent will be liable to compensate for the loss or damage incurred by the third person. Mr. Arfin the learned counsel for the plaintiff has referred to Peshori Parshad and others v. Secretary of State A I R 1938 Cal.

151. In this case at the request of the residents of the locality the Government agreed to establish a telegraph office on the condition that deficit expense would be met by the local merchants who executed a deed of guarantee to that effect. When the claim was made the father of defendant No.2 repudiated it on the ground that his son had no authority to execute the bond on his behalf. It was held that the son (defendant No.2) is liable for the loss caused to the Government by professing to act for his father when his father did not ratify the act. The learned counsel for the plaintiff referred to Bheek Chand and others v. Parbhuji A I R 1963 Raj.

84. In this case the plaintiff filed suit against three partners of a firm on the basis of Khata under a bona fide belief that they constituted a firm and relied on the acknowledgment signed by the respondent who had untruly represented that he was the authorised agent of the firm. On fact it was found that respondent was not the partner and the acknowledgment made by him was not binding upon the firm. The suit was dismissed against the firm but it was held that under section 235 Contract Act the plaintiff is entitled "to receive compensation from the pretended agent." The same principle was enunciated in Hasan Bhoy and others v. H.C. Lapham and others ILR 7 Bom.

51. Reference can be made to (Muttavi) Venkatacharyulu and another v. Ram Krishan Rao A I R 1930 Mad. 439 where a person borrowed money from the creditor purporting to be an agent of the Deve Asthana and on that faith the creditor advanced the money to the borrower. The principle of section 235 was applied, and the person who had borrowed the money was held to compensate for the loss which he had put to the creditor by such representation. In Ratan Singh v. Hafizullah A I R 1924 Oudh 184 where the agent representing his principal, purchased goods on her behalf, but the latter repudiated the act of the agent, the agent was held liable for the rice. The principle is well-established that if a person makes untrue representation of having authority to act as agent for another and the plaintiff acting on such representation deals with him and ultimately if it turns out that he had no authority from the principal or his act is not ratified the plaintiff is entitled to claim from the pretended agent the damages suffered by him. In such cases the claim is based not on tort but on breach of warranty of authority. In this regard reference is made to Chitty on Contracts, twenty-fourth Edition Vol. II para. 2084 at page 45 where the principle of law has been summed up as follows:- "One who expressly or impliedly warrants that he has the authority of another is liable for breach of warranty of authority to any person to whom the warrant is made and who suffers damage by acting on the faith thereof, if in fact he had no such authority. This is a specific type, in fact probably the original type, of collateral contract the agent offers to warrant his authority in return for the third party's dealing with his principal. It was formerly thought that a person who misrepresented his authority could not be made liable unless the misrepresentation was negligent. But although it is true that fraud or negligence is essential for an action in tort to lie against the agent, it is clear that the absence of these elements is no defence to an action for breach of warranty of authority. 'The fact that the professed agent honestly thinks that he has authority affects the moral character of his act; but his moral innocence, so far as the person whom he has induced to contract is concerned, in no way side such person or alleviates the inconvenience and damage which he sustains. The obligation arising in such a case is well-expressed by saying that a person, professing to contract as agent for another, impliedly, if not expressly, undertakes to or promises the person who enters into such contract, upon the faith of the professed agent being duly authorised. that the authority which he professes to have does in point of fact exist.' The rule is not confined to contracts; it cover every transaction of business into which a third party enters on the faith of a representation that the person with whom he is doing business has the authority of some other person. Provided that the authority does not in fact exist at the material time, it is immaterial that the agent originally had such authority and did not know and had no means of ascertaining that the authority had been terminated." Reference can be made to the observations made in Collen v. Wright) (1857) 8 F & B 647, Starkey v. Bank of England 1903 A C 114 and Yongee v. Toynlee 1910 I K B

215. Section 235 makes an agent personally I liable where he untruly represents to be an agent and on that belief the third party deals with him which act is not retified by the alleged employer. The question then arises what would be the quantum of damages. In such case the quantum of damages would be the same which the plaintiff would be entitled to recover from the principal if the agent would have acted under a proper authority. In the present case the defendant No.3 had guaranteed as agent of the defendant No.2 and if the authority would have been proper and authorised the plaintiff would have been entitled to recover the guaranteed amount from the defendant No.2. The guaranteed amount is equivalent to the claim of the plaintiff for which the above guarantee was executed. Therefore, the defendant No.3 is liable for the plaintiff's claim which has been proved by cogent and clear evidence. In view of the above discussion my finding is as follows:- (i) Issue No.2--(a) In the negative against defendants 1 and 3. (b) Suit is not maintainable against defendant No. 2 hence the question does not arise. (ii) Issue No.3--In the affirmative. (iii) Issue No.4--In the negative. (iv) Issue No.5--Guarantee was executed by defendant No.3. Untruly representating to be the attorney of defendant No.2. Issue No.6. In view of my findings on the afforestated issues, the defendants Nos. 1 and 3 are jointly and severally liable to pay the plaintiff's claim. The plaintiff has claimed Rs.2,38,920.48 being the amount due on the loan advanced to the defendant. The plaintiff has produced statement of account and vouchers in support thereof. The statement of account is duly verified as provided by Bankers' Books Evidence Act. The defendants have, not examined any witness, nor they have been able to point out in what manner the statement of account is incorrect. The plaintiff, has therefore, established its claim for Rs.2,38,928.48. Mr. Mangi the learned counsel for the defendant No.3 has contended that the liability of the defendant No.3, if at all, is in respect of only Rs.40,

000. He has referred to the cross-examination of P.W.1 where he has stated that the guarantee Exh.7/4 covers a single loan and that an amount of RN.40,000 was advanced to the defendant No.1. In my opinion the liability of the defendant No.3 will be governed in terms of the deed of guarantee. According to the guarantee deed the defendant No.3 has guaranteed to pay and discharge all liabilities of the principal debtor in respect of the over draft or other credits or accommodation or financial assistance with all interests thereon. The liability undertaken by the defendant No.3 and guaranteed is not restricted to only Rs.40,

000. The contention of the learned counsel is, therefore, of no force. Messrs Z.U. Ahmed, Azhar Ali Siddiqui and A.-G. Mangi the learned counsel for the defendant contended that as the defendant No.1 has already delivered to the plaintiff 15000 shares of Usmania Glass Sheet Factory Ltd. with duly executed transfer deed and transfer fee has been paid, the plaintiff is not entitled to claim any amount. This contention is in the nature of a counter claim which has not been properly pleaded nor any court-fee has been paid. Mr. Arfin has made a statement at the bar that the share certificates were pledged with the plaintiff and the same have not been transferred and are in the custody of the plaintiff. The learned counsel further contended that it was not obligatory on the plaintiff to sell them and adjust the sale proceeds in its claim. In this regard the learned counsel has referred to Usman Malik v. Bank of Bahawalpur P L D 1959 Kar. 725 where it was held that under section 176 of the Contract Act the pledgee before exercising his right to sell the pledged goods must give notice of sale to the pledger. It was further held that this right is not subject to any contract to the contrary entered into by the parties. The learned counsel, therefore, contended that although the transfer deed was executed and transfer fee had been paid, the plaintiff could not have sold the shares without first serving a notice on the defendant. Mr. Mangi, has pointed out that a notice Exh. 7/11 was served but nothing turns on it. Reference was also made to Messrs Continental Syndicate of Trade v. Lloyds Bank Ltd. where it was held that "the words of section 176 of the Contract Act???..merely require that the notice should contain an intimation of the (Pawnee's) intention to sell the goods if the debt was not paid within a reasonable time." it was further held that after notice it is for the Pawnee to choose the time to put his power of sale into operation. In A.M. Burq v. Central Exchange Bank P L D 1966 Lah. 1 it was observed that the pledgee's right to sell the pledged good and right to sue upon a debt are concurrent rights and the pledger cannot compel the pledgee to sell those goods and adjust in the price in payment of debt. A close scrutiny of these authorities makes it plain that under section 176 the pawnee's right to sell the pledged good cannot be exercised without first serving the pawner with a notice of sale. The provision does not fix any period within which the pawnee should sell it after notice. However, if such power is exercised it can be challenged on grounds of absence of bona fide, negligence and mala fide. The right to sell the pledged goods is concurrent with the pawnee's right to file action for recovery of the debt. It is not necessary, nor a pledger can compel the pledgee first to sell the goods, adjust the sale proceeds and then file suit for the balance. If the pledged good has not been sold the pawnee should keep this security intact and return it to the pawner on payment of the debt. The shares were pledged with the plaintiff who had concurrent right to either sell the shares and appropriate the sale proceeds or to keep it intact and file a suit for recovery of its claim. Once the claim is satisfied, the plaintiff will not be entitled to retain the shares pledged to it. The defendants have not alleged any negligence or mala fide on the part of the plaintiff in dealing with the pledged goods, therefore, such a plea cannot be allowed to be raised at this stage. In the result the suit is decreed for Rs.2,38,920.48 against the defendants Nos.l and 3 jointly and severally with interest l Rs.10$ per annum with quarterly rests, from the date of the suit till payment with cost. The suit against the defendant No.2 is dismissed with no order as to cost. A.A.???????????????????????????????????????????????????????????????????????????????????????????????????? Suit decreed.