Liability of surety

2025 CLD 369 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 9Civil Procedure Code (V of 1908), O.II, R.2Contract Act (IX of 1872), S. 128Suit for recovery of financeLiability of suretyJoint cause of actionPlaintiff/bank filed suit against principal borrowers and surety for failure to repay finance facilitiesValidity

Plaintiff/bank by provisions of O. II, R. 2, C.P.C. was precluded from splitting claim which had its foundation in joint cause of action against all defendants

Provision of Explanation to O. II, R. 2, C.P.C. supported case of plaintiff/bank in treating cause of action against all defendants as unified and joint

Plaintiff/bank proved its case against defendants for recovery of amounts under finance facilities in question and mark-up under Running Finance facility in addition to preliminary decree that was passed earlier

High Court decreed the suit in favour of plaintiff/bank and against defendants, jointly and severally

Suit was decreed accordingly.

2025 PLD 263 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 9Civil Procedure Code (V of 1908), O.II, R.2Contract Act (IX of 1872), S. 128Suit for recovery of financeLiability of suretyJoint cause of actionPlaintiff/bank filed suit against principal borrowers and surety for failure to repay finance facilitiesValidity

Plaintiff/bank by provisions of O. II, R. 2, C.P.C. was precluded from splitting claim which had its foundation in joint cause of action against all defendants

Provision of Explanation to O. II, R. 2, C.P.C. supported case of plaintiff/bank in treating cause of action against all defendants as unified and joint

Plaintiff/bank proved its case against defendants for recovery of amounts under finance facilities in question and mark-up under Running Finance facility in addition to preliminary decree that was passed earlier

High Court decreed the suit in favour of plaintiff/bank and against defendants, jointly and severally

Suit was decreed accordingly.

2025 CLD 270 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Ss. 9 & 22Contract Act (IX of 1872), S. 124Suit for recovery of bank guaranteeLiability of surety

Appellant / bank issued bank guarantee to secure finance facility extended by respondent / finance company to borrower company

Suit filed against appellant / bank was decreed by Trial Court in favour of respondent / finance company

Validity

If principal debtor defaults or fails to repay his debt, the guarantor is equally liable to fulfill the obligation

Partial performance and acceptance of contractual duties necessitates full performance

Appellant / bank failed to discharge its contractual obligations

Right of respondent / finance company to seek enforcement of remaining guarantees through legal proceedings was justified

High Court declined to interfere in judgment and decree passed by Trial Court as there was no legal infirmity or jurisdictional defect

Appeal was dismissed, in circumstances.

2024 CLD 1247 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S.118Civil Procedure Code (V of 1908), O.XXXVII, Rr. 1 & 2Contract Act (IX of 1872), S. 128Suit for recovery of moneyLiability of suretyDishonored chequePresumption

Appellant / defendant was aggrieved of judgment and decree passed by Trial Court for recovery of amount mentioned in cheque which was dishonored on presentation

Plea raised by appellant / defendant was that he issued the cheque merely as surety

Validity

Appellant / defendant undertook to pay Rs.1,500,000/- without requirement of any reference to principal debtor

There was nothing on record suggesting that anything contrary had been settled between the parties

Witnesses were cross-examined in length but nothing adverse or sufficient to rebut the presumption arising under S. 118 of Negotiable Instruments Act, 1881, was noticed

Appellant / defendant admitted signing second agreement and did not deny issuance, presentation and dishonoring of the cheque

High Court declined to interfere in the judgment and decree and imposed cost upon appellant / defendant as Trial Court had reached the correct conclusion

Appeal was dismissed in circumstances.

2024 MLD 1761 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

O.XXXVII, Rr. 1 & 2Contract Act (IX of 1872), S. 128Negotiable Instruments Act (XXVI of 1881), S. 118Suit for recovery of moneyLiability of suretyDishonored chequePresumption

Appellant / defendant was aggrieved of judgment and decree passed by Trial Court for recovery of amount mentioned in cheque which was dishonored on presentation

Plea raised by appellant / defendant was that he issued the cheque merely as surety

Validity

Appellant / defendant undertook to pay Rs.1,500,000/- without requirement of any reference to principal debtor

There was nothing on record suggesting that anything contrary had been settled between the parties

Witnesses were cross-examined in length but nothing adverse or sufficient to rebut the presumption arising under S.118 of Negotiable Instruments Act, 1881, was noticed

Appellant / defendant admitted signing second agreement and did not deny issuance, presentation and dishonoring of the cheque

High Court declined to interfere in the judgment and decree and imposed cost upon appellant / defendant as Trial Court had reached the correct conclusion

Appeal was dismissed, in circumstances.

2022 CLD 1395 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 9 & 22Contract Act (IX of 1872), Ss. 129, 133, 135 & 136Suit for recovery of financeMaintainabilityNew management, liability ofLiability of suretyAppellants/defendants were guarantors who assailed judgment and decree passed against them by Banking Court

Plea raised by appellants/defendants was that after their resignation from Board of Directors of the company, new management was responsible for finances availed from respondent/Bank

Validity

Condition precedent for maintaining a suit under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 by a financial institution was commission of default by a customer in fulfilment of any obligation with regard to a finance

Neither members of new management fell within the definition of 'customer' who would have committed any default nor any finance was extended by respondent /bank to members of new management nor they ever defaulted in fulfillment of any obligation

Members of new management never executed or replaced guarantees executed by appellants/defendants

Principal debtor company was separate juristic person and its liability could not be transferred to its shareholders

Members of new management were only shareholders and not guarantors

Banking Court rightly dismissed suit against new management

Mandate of law contained in provisions of Ss. 129, 133, 135 & 136 of Contract Act, 1872 created a right in favour of surety which was private in nature

Parties by fiction of law were allowed to surrender, relinquish or waive those rights by agreeing with each other

Members of new management did not fall within the definition of 'customer', therefore, their non-impleading was neither malicious nor unlawful

Resignations of appellants/defendants from directorship or selling project of principal debtor company to third party or transferring shares in their favour had not absolved appellants/defendants from their liability as guarantors' liability as the same was coextensive with that of principal debtor company and they were jointly and severally liable to pay decretal amount

No restructuring or rescheduling between respondent/Bank and new management, therefore, appellants' liability as guarantors never stood discharged

High Court declined to interfere in judgment and decree passed by Banking Court as there was no legal infirmity in it

Appeal was dismissed, in circumstances.

2017 PLD 203 PESHAWAR-HIGH-COURT Judicial Precedent

Ss. 47 & 145Execution petitionObjectionSurety not party to the suitExecution of decree against such suretyLiability of suretyScope

Executing Court deleted the names of sureties from execution proceedings on the ground that they were not party in the original suit and no decree was passed against them

Validity

Impugned order in view of the provisions of S.145, C.P.C. had not been passed in accordance with law

Guarantor could be burdened to the extent and in accordance with the terms of guarantee executed by him

Surety was liable to fulfil his commitment with regard to payment to which he had taken responsibility

Executing Court could lawfully proceed against the sureties for recovery of amount to the extent of decree

Names of sureties were unlawfully deleted from the panel of judgment debtors in execution proceedings

Executing Court could recover decretal amount from guarantors/sureties

Impugned order passed by the Executing Court was set aside

Constitutional petition was allowed in circumstances.

2017 CLD 380 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 126Contract of guaranteeLiability of suretyPrincipleLiability of surety is always considered to be co-extensive with that of principal debtor

Guarantors are jointly and severally liable to pay outstanding amount to creditor unless contents of contract provide otherwise

Liability of surety immediately arises after failure on the part of principal debtor to payout legally due liability against him

Creditor in such regard is legally entitled to proceed in case of default of principal debtor against surety/guarantor, as per terms of contract

While determining liability of guarantors/sureties technicalities, unless insurmountable, were not to be taken into consideration.

2013 CLD 558 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 128Limitation Act (IX of 1908), Art. 58Liability of suretyScopeRecovery of loan amount from guarantor/suretyLimitationProvision of S.128 of Contract Act, 1872 would not affect application of statute of limitationRight of action against guarantor would generally arise at the same time as right of action against principal debtor

Principles.

2007 YLR 2764 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 47, 145 & O.XXXVII, R. 3Qanun­e-Shalzadat (10 of 1984), Art.129 (e)Execution of decreeLiability of suretyConditional leave to defend the suitJudicial acts and functionsPresumptionPlaintiff sought recovery of money on the basis of pro noteTrial Court granted conditional leave to defend the suit subject to furnishing of surety bondAppellant executed surety bond in favour of defendant

Defendant absented from the proceedings during the trial, and after passing ex parte proceedings, the suit was decreed ex parte

In execution of ex parte decree, order was passed against appellant as he had undertaken to pay the decretal amount

Validity

Appellant, besides giving surety bond to place of defendant, got his own statement recorded before Trial Court undertaking responsibility of payment of decretal amount in case suit of plaintiff was ultimately decreed

Judicial proceedings could not be belied / dispelled except through any ' solid proof

Presumption of regularity / correctness was attached. to judicial proceedings

Land of appellant was attached in execution of a money decree and no legal / factual defect could be pointed out in the proceedings so taken

Appellant could not absolve himself of the liability undertaken by him on the basis of mere bald and unfounded assertions

Controversy was correctly put to rest by the Trial Court without committing any error of law / facts

High Court declined to interfere with the order passed by Executing Cowl-Appeal was dismissed in circumstances.