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Petitioner: NATIONAL BANK OF PAKISTAN VS Respondent: MUHAMMAD RAFIQ MALIK AND 2 Other
Court Name: Sindh High Court Judge(s): Naimuddin Ahmed, B. G. N. Kazi Title: NATIONAL BANK OF PAKISTAN vs MUHAMMAD RAFIQ MALIK AND 2 Other Case No.: High Court Appeal No. 7 of 1973 Date of Judgment:1981-03-10 Reported As: PLD 1982 Karachi 135 Result: Order accordingly
JUDGMENT
JUDGMENT NAIMUDDIN, J.-This Inter Court Appeal under section 3(l) of the Law Reforms Ordinance, 1972 as amended by Law Reforms (Amendment) Act, 1972 is directed against the judgment and decree dated 18-12-1971, passed by a learned Single Judge of this Court in Suit No. 334 of 1968, whereby the suit has been partly decreed. The facts giving rise to this appeal so far relevant for the disposal of this appeal, briefly stated, are as follows;-- The National Bank of Pakistan, the appellant, granted to Muhammad Rafique Malik, Muhammad Siddiq Malik and Muhammad Ashiq Malik, all brothers inter se, an overdraft limit of Rs. 55,00 which they utilized in full by drawing various amounts in their Current Account No. 60/5/25 (Exh. 6/5) maintained with the appellant at its Branch known as Local Office at Mcleod Road (now known as 1. 1. Chundrigar Road), Karachi. It was the appellant in the suit filed by it that the respondents had executed a promissory note dated 8-12-1960 for Rs. 55,00 payable to the appellant or order as alleged in the plaint with interest at the rate of 3 percent above the Bank rate with minimum 7 per cent per annum with monthly rests. It may however, be mentioned here that the promissory note does not mention the rate of interest but does mention that the amount is payable with interest. It was also the case of the appellant that the respondents as collateral security for repayment of the loan/overdraft and/or any balance which might at any time be found due and payable equitably mortgaged the shop bearing No. G. I. G. M. 42, situated at Okara by depositing P. T. O. Of the shop issued by the Settlement Department and executeda Memorandum of Deposit of Title Deed dated 8-6-1960. The appellant also pleaded in the plaint that the respondents on various dates mentioned herein
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acknowledged the debt. The first acknowledgement is contained in a Confirmation Slip dated 5-1- 1963 (Exh. 6/5) signed by Muhammad Rafiq Malik and Muhammad Ashiq Malik, respondents Nos. 1 and 3, confirming that an amount of Rs. 65,047.48 as on 31-12-1962 was due to the appellant. The second acknowledgement is also Confirma--tion Slip bearing no date (Exh. 6/6) signed by Muhammad Siddiq Malik, respondent No. 2 but it confirms that a sum of Rs. 73,350.59 was outstanding and due from the respondent as on 31-12-1964. The third acknowledge--ment is also a Confirmation Slip dated 2-8-1965 (Exh. 6/7) signed by Muhammad Rafiq Malik and Muhammad Ashiq Malik, respondents Nos. 1and 3. The fourth acknowledgement is contained in a letter dated 5- 10-1965 addressed by all the respondents to the appellant,which reads as follows; "National Bank of Pakistan, (Torn) Office, Karachi. With reference to our Overdraft Account with you secured by a demand Promissory Note dated the-- Rs. 55,00 with interest made by us in favour of National Bank of Pakistan, we acknowledge for the of section 19 of the Limitation Act IX of 1908 and any purpose limitation law in order to preclude any question of limitation law that we are liable to you for payment of the said Promissory Note with interest (and the same) is to remain in force with. All relative securities agreements and obligations." Since the respondents failed to pay the dues, the appellant filed a suit under Order XXX1V, C. P. C. On the original side of this Court praying for decree in Form 5-A in Appendix `D' to the First schedule a preliminary to the Code of Civil Procedure, also claiming a declaration that the property is the subject-matter of mortgage and is charged with the - payment of appellant's dues of Rs. 96,051.91, with future interest thereon at the rate of 9 percent per annum with monthly rests, charges, expenses. In the suit the appellant also made alternative prayer for a decree for the afore-- said amount. It may be mentioned here that before the filing of the suit Mr. Muhammad Ashiq Malik had died and his legal heirs were joined as defendants Nos. (3a) to (3i). In the written statement the respondent No. 2 generally denied each and every allegation made in the plaint. He also denied the execution of the promissory note on 8-6-1960, deposit of memorandum of deposit of title deed but these denials, it may be pointed out here, were not in accordance with the provision of Order VII, rule 3, C. P. C. And were evasive in nature. He also pleaded that the suit was barred by time. He further leaded that if any decree is passed be allowed to pay the decretal amount P in instalment. The Nazir of this Court who was appointed as guardian actitemof Nos. (Y) to (3h) filed a written statement denying the execution respondents the romisspromissory note, memorandum of deposit of title deed and ack of P led ements for want of knowledgeHe also denied that the late father of nowsaid minor respondents had obtaned any loan and/or overdraft from the the appellant in his individual capacity or jointly with other respondents. Respondents Nos. 1 and (3a to 3e) adopted the written statement ofrespondent No. 2. The Court however, settled the following issues. (1) Whether the suit is time barred? Whether the transaction in suit is mortgage, if not, what is the effect? (3) How much amount is due to the plaintiff? (4) What should the decree be? The learned Single Judge by the judgment impugned in this appeal on the question of limitation on the basis of the letter dated 5-10-1965 (Exh. 6/8) found that the suit was within time. With regard to the issue of mortgage the learned Single Judge came to the conclusion that P. T. O. Did not vest
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ownership in a person and therefore it could not be termed to be a document of title and as such its deposit did not create any valid mortgage. He, however, came to the conclusion that even if the mortgage was; not proved the appellant was still entitled to recover the money from the respondents. With regard to issue, as to what amount was due to the appellant, the learned Judge disallowed interest on the amount of Rs. 55,000 on the ground that the promissory note did not mention any rate of interest and in view of the provisions of section 80 of the Negotiable Instruments Act, 1881, the appellant was entitled to interest on the amount of the promissory note only from the date of the suit as it had not made any demand before the filing of the suit and accordingly decreed the suit for Rs. 55,000 %kith interest at the rate of 6 per cent. Per annum from the date of the suit till realization and proportionate costs. We have heard Mr. Mansoorul Arfin Advocate for the appellant and Mr. Nizam Ahmed Advocate for the minor respondents. The other respon--dents have not appeared to contest the appeal in spite of service of notice of the appeal on them. It is submitted by the learned counsel for the appellant that the appellant is entitled to interest at the rate of 6 per cent. Per annum from the date of the promissory note in accordance with the provisions of section 80 of the Negotiable Instruments Act, 1881 (hereinafter called the Act). Mr. Mansoorul Arlin also questioned the finding of the learned Single Judge on the issue of mortgage. Now, therefore, the points which require determination in this appeal, in our view, are as follows (1) From what date the interest is payable on a demand promissory note where the rate of interest is not mentioned therein. (2) What is the nature of P. T. O. Issued under the Displaced Persons (Compensation and Rehabilitation) Act, 1958 and whether its deposit creates any equitable mortgage? Now, we would proceed to deal with the first point first. We may state here that the learned Single Judge in view of the provisions of sections 74, 79 and 80 of the Act and mainly relying on the judgment of Sulaiman, C. J., in Nath Shah v. Lala Durga Shah (AIR 1936 All. 160held that "interest is to be calculated from the date when the amount of the principal ought to have been paid". He further came to the conclusion that "the amount due on a demand promissory note becomes payable only on demand". He reasoned, "if the amount itself becomes payable only on demand, 1 cannot understand how interest, which is in the nature of damages in cases of this kind, become payable without an actual demand". We may have therefore, first to examine what is understood by the words "on demand" used in a demand promissory note. These words are technical words of English Law which, though it may seem paradoxical, only mean without demand or immediately or forthwith. These words have come up for consideration in several cases. The first case to be noticed in Sh. Imam Ali v. Ch. Muhammad Shafi (PLD 1956 Lah. 341In this case it was observed by Kaikaus, J. At page 348 of the report as follows :- "The words `on demand' are technical words English Law 'which, paradoxical though it may seem, only mean without demand. The object of saying that a promissory note is payable on demand is only that payment is not to be withheld till a particular date as in the case with promissory notes payable on a specified date." Reliance was placed by him on Perumal Ayyun v. Alagirisami Bhaggavathar and others (I L R 1.920 Mad. 245and Tirumalandham Surayva v. Tirumalanadham Bapirazu and others (AIR 1916 Mad. 486), wherein it' was held that words "on demand" are technical words of English Law which mean immediately or forthwith. Besides relying on several English authorities which we will refer to immediately hereafter, the learned Judge relied on section 19 of the Act, and Articles 59 and 73 of the Limitation Act, 1908. According to the provisions of section 19 of the Act a promissory note payable on a specified date is payable on demand. According to Barji4 Parle, J. In Norton v. Ellam (46 P R 644), a promissory
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note, payable on demand, is a present debt, and is payable without any demand, and the limitation begins to run from the date of it'. According to Sir Richard Garth in Ram Chander Ghosaul v. Juggutmonmohiney Dpbee (1 L R 4 Cal. 283"where a man promises to pay a sum of money on demand which it is his duty to pay whether a demand to be made or not, then the money becomes payable at once and no demand is necessary before suing him for it". In Capp v. Lancaster (78 E R 794) and Rumball v. Ball (88 E R 616), it has been held "it is not necessary to allege a demand in a suit on a note payable on demand". Thus principle laid down in the above-mentioned cases is recognized in Article 73 of the Limitation Act, 1908 which provides that limitation for promissiory note payable on demand begins from the date of the note. We may here also refer to a post-Partition decision from.. The Indian jurisdiction in Nuthu Gounder v. Perumayammal (AIR 1961 Mad. 347). In this case it was held by Ramchandra lyer, J., as follows:-- "The expression 'on demand' in a promissory note has a technical meaning, viz., payable immediately or forthwith. In such cases, no actual demand is necessary to make the money due under the promis--sory note exigible. Similarly, if the amount of the promissory note is made payable at the end of a fixed period, it will still be a promis--sory note as the date of payment is certain and therefore the liabilitywould be unconditional. No further demand would be necessary to make the amount due." We may however, here mention that there has been a considerable difference of opinion in different High Courts with regard to the liability of payment of interest on a demand promissory note where the interest or rate of interest is not specified therein. Prem Lall Sein v. Radha Bullay Kankara AIR 1931, Nath Sah v. La.' Durga Sah AIR 1936 All. 160, Hunna Gopalan v. Vuppuluti Lakhminarassamma AIR 1940 Mad. 631.and Bhanwarulal and another v. Sm. Ratanjod AIR 1955 Ajmeer 13are the cases noticed where in the learned Judges have allowed interest from the date of the suit or from the date of service of summons treating the filing of the suit or the service of summons as a demand. While Patna, Lahore, Bombay, Orissa High Courts and Chief Court of Judicial Commissioner of Oudh in Bishunchand v. Audh Behari Lal (2PLJ451 = AIR 1917Pat.533). Framroz Eduljee Dinshaw v. Mahmed Essa (AIR 1926 Born. 241), Ganpat Tukaram Mali v. Sopana Tukaram Mali (AIR 1928 Bom. 35), Khurshed Haq v. Ramditta (AIR 1928 Lah. 665), Ghasi Patra v. Brahma Thati (AIR 1962 Orissa 35), Amar Singh v. Pratan Singh (AIR 1935 Oudh 518), the learned Judges have taken the view that interest is payable from the date of demand promissory note. Allahabad High Court also in an earlier case namely, A. Williams v. (Firm) Kallu Mal Magan Lal (AIR 1935 All. 451has taken the same view. The cases referred to above need further examination. We will first consider the case of Prem Lall Sein v. Radha Bullay Kankara. In this case Lord Williams, J. Sitting singly observed as follows :- "In my opinion, the phrase `date at which the same ought to have been paid' has no reference to the `amount due' on the note as has been assumed, by all the Judges to whose judgment I have referred, but relates to the `interest' due thereon." But this view has not been followed in AIR 1936 All. 160 from where we will quote hereafter. The learned Judge after referring to several English cases namely Yi'ebster v. British Empire Mutual Life Assurance Co. ((1880) 15 Ch. D 169), Cameson v. Smith (2B & All 305and Lowndes v. Collins ((1810) 17 Ves. 28observed as follows:- "It is clear from the above cases that interest is only payable as damages, that is, in case of default, and it follows that where there is no specific agreement to pay interest, it cannot be claimed until after demand, or from the fixed period of payment, as the case might be." But all these English cases do not refer to any statutory provisions like section 80 of the Negotiable Instruments Act, 1881. It may be pointed out here that where rate of interest is mentioned in the Demand Pro--missory Note it is allowed under section 79 of the Negotiable Instruments Act
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obviously on the basis of the agreement contained in the note and where the interest or rate of interest is not mentioned it is allowed under section 80 of the Act implying an agreement to 'that effect and therefore, the view that the same is awarded in the nature of damages with utmost respect, appears to be misconceived while considering the liability as to payment of interest under section 80 of the Act. In Nath Sah v. Lal Durga Sah (AIR 1935 All. 160the learned Judges of Allahabad High Court were considering the meaning of the words "same" used in section 80 of the Act, whether it means the interest or the amount of principal due and they referred to the conflict of opinion among different High Courts in these words :- "The Bombay High Court in 52 Born. 88 (Gunpat Tukaram v. Sepana Tukaram) the Lahore High Court in Khurshed Haq v. Ramditta Mall, 1928 Lah. 665 and the Patna High Court in 2 PLJ 451 (Bishun Chand v. Audh Behari Lal) have taken the view that the word "same" must mean the amount of principal and not the interest. On the other hand a learned Judge of the Calcutta High Court in 58 Cal. 290 (Prem Lal Sen v. Radhaballah Khankara AIR 1931 Cal. 140) came to the con-- clusion. That the word "same" should mean interest. The section has been amended by Act XXX of 1926, and the words `notwithstanding any agreement relating to interest between any parties to the instru--ment' have been added therein." The learned Judge proceeding further observed :- "There are difficulties in either view. If the word `same' were to refer to interest only and not to the amount, then in a case where there is neither specification of any rate of interest nor even of interest, it would be difficult to see from what date interest ought to be calculated as there would be no date from which interest ought to have been paid, unless it were assumed that it would necessarily become payable on the date on which the principal would become payable. On the other hand, if the word `same' refers to the amount, then there may be difficulty in applying the section to a case where the principal amount is due immediately, but there is a Contract that interest would payable after a fixed time, though no rate of interest is specified. If the interest is to be calculated from the date when the principal becomes payable. It would be contrary to the written contract. The matter is not free from difficulty, but we think that on the whole the word `sane' should be understood to refer to the amount due on the. Instrument and not to the interest on that amount, because the noun `amount' was interest to it before the amendment. It would therefore follow that interest is to be calculated from the date at which the amount of the principal ought to have been paid'. This is a reasonable construction because the Legislature was providing for payment of interest in a case where no rate of interest is specified and it is quite reasonable to assume that interest should be calculated from the date on which the principal sum becomes payable. Now, there is a clear distinction between (1) an amount payable immedi--ately and (2) an amount payable on demand or an amount payable after the expiry of a fixed time after demand or after sight or after presentation. In the first case there can be no doubt that the principal amount becomes payable immediately and in such a case interest has to be charged from the date. But where the amount becomes payable only on demand or at sight or on presentation, it would be difficult to say that the amount ought to have been paid on the very date of the interest. No doubt it is not necessary for a plaintiff to make any previous demand of payments before instituting his suit on the basis of a promissory note. Such a suit cannot fall on the mere ground that no previous demand had been made. (Underlining' for emphasis) is ours Nevertheless the amount cannot he said to have been payable until the demand is made, and in this case the demand is not considered to be made until the suit is filed. This was the view expressed in Prem Lal Sen v. Radhaballah Kankara, AIR 1958 Cal. 290."
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It will be seen from the above-quoted passage that the learned Judges in this case have not followed the view of the learned Single Judge in the Calcutta case on the point whether the word `same' used in section 80 of the Act refer to `interest' only or the `amount due'. It will also be noticed from the same passage that the learned Judges have held that it is not necessary for a plaintiff to make any previous demand of payment before institution of his suit on the basis of promissory note. 7 he above view of the learned Judges appears to be in accord with the provisions of sections,19, 22, and, 64 of the Act which read as follows :- "19. A promissory note or bill of exchange is payable on demand- (a) where it is expressed to be so, or to be payable at sight or on present--ment, or (b) where no time for payment is specified in it ; or (c) where the note or bill accepted or indorsed after it is overdue, as regards the person accepting or indorsing it. 22. The maturity of a promissory note or bill of exchange is the date at which it falls due. 64. Subject to the provisions of section 76, premissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder. Exception.-Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof, nor is presentment necessary to charge the acceptor of a bill of exchange. Explanation.- . It will be seen from the above-quoted provisions of sections 19, 22 and Exception to section 64 that when a promissory note is payable on demand and is not payable at a specified place no presentment is necessary in order to charge the maker thereof. Now, if the presentment is not necessary it follows that no demand is necessary to charge the maker thereof with the! Liability and since the word "same" used in section 80 of the Act has been held by the learned Judges in Allababad case to mean the principal amount and not the amount of interest, it followed that the principal amount together with interest payable thereon becomes payable immediately and without any demand, if we keep the technical meaning of the words on demand quoted hereinbefore, land the provisions of Article 73 of the Limitation Act in view, for the period of 3 years provided in Article 73 runs from the date of the demand promissory note thereby implying that it is payable immediately. For the view that the amount cannot be said to have been payable until) demand is made, the learned Judges have followed the view of Lord Williams, J. In Calcutta case, which has been dissented from by the learned Judges of the Division Bench in AIR 1935 Oudh 518 and the learned Single Judge in AIR 1962 Orrisa 35. In Madras case Nunna Gopalan v. Vuppuluri Lakshminarasamma none of the cases referred hereinbefore have been considered nor the technical mean--ing of the words "on demand" have been considered and the view is contrary to the view taken in Ghulamali v. Pakistan PLD 1960 Kar. 581. In fact the judgment is not on section 80 of the Negotiable Instruments Act and also does not take into consideration various sections of the Act mentioned hereinabove. The Ajmeer case of Bhanwarlal and another v. Sm. Ratanjot which is by Judicial Commissioner and before whom Full Bench case of Bombay High Court, Ganpat Tukaram Mall v. Sopana Tukaram Mall (AIR 1928 Born. 35) Oudh Chief Court, Amar Singh v. Pratan Singh and A. Williams v. Firm Kallu Mal Magan Lal were cited, has preferred Allahabad view in AIR 1936 All. 160 without considering various provisions of the Negotiable Instruments Act and without giving reasons why he did not consider proper to follow the Full Bench view of Bombay High Court which was -most exhaustive judgment on the point under consideration.
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However, the contrary view, expressed in the Full Bench Judgment of Bombay High Court reported as AIR 1928 Bom. 35 deserves to be followed for it takes into consideration all the relevant provisions of the Act namely, sections 19, 22, 32, 64, 74 and 76 and examine them in detail in addition to sections 79 and 80 of the Act and the same is in accord with the Lahore view in Khurshed Hay v. Ramditta (AIR 1928 Lah. 665) and the view of Kaikaus, J. In Sh. Imam Ali v. Ch. Muhammad Shafi (PLD 1956 Lah. 341) on the meaning of the words "on demand". It is not necessary to examine all these cases while taking the same view in detail here and it would suffice to reproduce the conclusion reached in Bombay case which is quite clear. It reads :- "After careful consideration then of the Act, and of the numerous authorities in India and in England that have been cited to us, I would holding that a promissory note like the one we have here matures and falls due within the meaning of section 22 at the date when it is made. Consequently, under section 32, the maker is bound to pay it at that same date, and presentment for payment is unnecessary having regard to section 64. In my judgment, therefore, the date at which the suit note `ought to have been paid by the party charged' within the meaning of section 80 is the date. Of the note itself. In the present case the party charged is the maker. If he had been the indorser, different considerations would arise, for, under the explana--tion to section 80 the indorser would be liable to pay interest only from the time that the receive notice of dishonour." We may here quote some observations made by Marten, C. J. Before reaching the above- mentioned conclusion. These appear at page 38 of the report: "In my opinion, the first essential to determine is what is the maturity of the suit promissory note, for under section 32 this is the date at which the maker has to pay it. Now, under section 22, the maturity of this note is the date at which it falls due. We have no guidance in the Act as to the meaning of maturity in the case of the suit promissory note. Nor, as I have already said, is there any definition in the Act of the words "on demand" which are mentioned in section 19 and elsewhere. But it is well-settled law in England that a promissory note payable on demand becomes payable at once. A leading case on the subject is Norton v. Ellan (1837) 2 M & W 461. In that case there was a note payable with interest on demand, and the question was from what time the statute of limitation began to run. Baron Parke, in giving judgment, said (p.…
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