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Petitioner: CENTRAL BANK OF INDIA VS Respondent: Syed MUHAMMAD ABDUL JALIL SHAH And OTHER
Court Name: Lahore High Court Judge(s): Mian Allah Nawaz, Ghulam Mahmood Qureshi Title: CENTRAL BANK OF INDIA vs Syed MUHAMMAD ABDUL JALIL SHAH And OTHER Case No.: Regular First Appeal No.44 of 1969 Date of Judgment:1997-10-30 Reported As: 1999 CLC 671 Result: Order accordingly
JUDGMENT
JUDGMENT MIAN ALLAH NAWAZ, J.--- This judgment will govern two Regular First Appeals namely 44 of 1969 and 4 of 1970. Both these have arisen out of judgment and decree passed by the learned Civil Judge, 1st Class, Multan, dated 8-2-1969. The appellant, in Appeal No.44 of 1969 is the Central Bank of India Ltd., Bombay through Assistant Custodian Enemy Property, Lahore (hereinafter described as Creditor/Bank/Plaintiff). The second appeal is by New Bank of India Ltd., through same functionary (hereinafter known as "Mortgagee"), Syed Abdul Jalil Shah/predecessor-in-interest of respondents Nos. l to 10, was the sole owner of registered partnership known as Messrs Jalil Cotton Factory (hereinafter described as Borrower/Defendant). Respondent No.2 shall be referred to as "Guarantor". '2. Factually speaking, on 2-12-1946 the Borrower opened a cash credit account in Multan Branch of the Creditor with maximum limit of Rs. Six lacs. The Borrower started availing the facility, executed a deed of hypothecation on 12-12-1946. On the same date, he executed a deed of pledge as well as pronote. The aforesaid instruments were executed, as securities for repayment of loan alongwith interest at the rate of one per cent. Above the rate of Reserve Bank of .India with monthly rest. The Borrower deposited with the Bank Trust Deed dated 9-8-1946/pertaining to agricultural land measuring 22 Bighas of land known as "Bagh Chela Ramwala, situated in Tarf Sadhu Hassan and Tarf Ismail within the urabn limits of Municipal Committee, Multan. Respondent No. l agreed to maintain a margin of 25 to 30% of pledged goods in the constructive custody of land. As the Borrower was not able to make repayment as well as to keep the requisite pledge stock, he executed a mortgage-deed, dated 15-2=1947 (Exh.P.10). This showed that the stock value of borrower was Rs.4,11,700 while bank dues were Rs.4,87,505-10-9. Unfortunately the position of the
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pledged stocks further deteriorated and so on 12-4-1947 the Borrower further executed a mortgage-deed (Exh.P.Ll) admitting the entries of statement of accounts furnished to him by the Bank and also admitting the position of his pledged stock qua his liability in following terms: 1.Details of pledged stock: Cylinder Oil 300 Maunds CBS Rs.25Rs.7,500 Kappas 4 F 600 Maunds -- Rs.18Rs.10,800 Kappas 289 F 2000 Maunds @ Rs.20Rs.40,000 Cotton Loose 4F 375 Maunds -- Rs.20Rs.15,000 Cotton Seeds 4F 900 Maunds -- Rs.10Rs. 9,000 Cotton Seeds 289E 2400 Maunds @ Rs.8/8Rs.24,000 Fully pressed cotton bales 289E @ 149-7-10 Maunds @ Rs.50.Rs.35,500 Cotton loose 4F, 300 Maunds @ Rs.40Rs.12,000 2.Value of pledged stockRs.1,54,200 3.Outstanding liability of Borrower towards BankRs.4,26,903-14-3 At this juncture the guarantor executed a letter, dated 5-2-1947 under which he undertook to repay the liability of the Creditor. 3. Since the Borrower was not able to repay his liability, the Central Bank of India brought a suit on 27-8-1952 against respondent No. l in the Court of Senior Civil Judge, Multan with following prayers:-- "(a) That a decree for payment of the amount of Rs.3,74,836-8-0 referred to above may be passed in favour of the plaintiff against the defendants and both the defendants be held jointly and severally liable for the payment of the whole decretal amount. (b) That in case of default the mortgaged properties described in paras.5,.7 and 10 of the plaint be sold except that property described in para. 10 be sold subject to the charge of the New Bank of India Ltd., Multan City, as mentioned in para. 11 of the plaint and the sale proceeds be appropriated towards the repayment of the decretal amount. (c) That in case the sale proceeds are found insufficient to pay the amount due to the plaintiff- Bank then liberty be reserved to the plaintiff-Bank for obtaining a decree for realising the balance from other properties of the defendants and the person of defendant No. 1. (d) That the plaintiff may be allowed interest from the date of institution of the suit till the date of the payment of the whole amount due to the plaintiff. (e) That the plaintiff may be awarded the costs of suit; and (f) That the plaintiff may be granted any other relief which may be appropriate in view of the facts of the case and provisions of law." Despite efforts, service could not be effected upon the Guarantor who was so proceeded against ex parte. The mortgagee lodged an application for being impleaded as party which was allowed and mortgagee was so arrayed as defendant No. 3. 4. That suit was contested. It was pleaded therein that the Creditor, at the time of the filing of the suit, was in possession of the pledged goods worth Rs.Ten lacs; that the Bank, with the dawn of independence had migrated to India without accounting for the pledged goods; that the suit on that ground was incompetent. It was further objected that the suit was filed on the basis of deed of hypothecation, deed of pledge dated 12-12-1946 and deed of mortgage dated 15-2-1947 and so it was barred by time under Article 57 in Schedule to Limitation Act. On facts, it was pleaded that Messrs Jalil Cotton Factory was owned and run by the guarantor who had migrated to India; that the deeds, mentioned above though executed by him, yet were signed by under undue influence and coercion of Guarantor.
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5. On the above pleadings, the learned trial Court framed as many as 35 issues on 1-12-1962. Two additional issues were also framed namely I-A and I-B on 6-2-1963. Thereafter, the borrower lodged a suit (No.299 of 1968) for rendition of accounts on 12-10-1962 against the creditor bank. In this suit four additional issues were framed. The evidence was recorded by the learned first Court in Bank's suit. Upon the consideration of the material on record, the learned trial Court decided issue No.33 against plaintiff/holding that the statement of account furnished by the plaintiff was insufficient to prove the liability of the borrower. Issue No.27 was decided against the bank with a conclusion that the plaintiff had neither 'returned nor tendered accounts with regard to pledged stock and so the suit was incompetent. Issues Nos.2 and 17 were decided jointly. On these issues, it was found that the bank was in possession of the pledged goods. On the basis of the above conclusions, the learned first Court held that the suit was not competent. Issues Nos.3, 4, 13 and 14 were dealt with jointly and it was held that the suit was beyond time under Article 57 in Schedule to Limitation Act. Issue No. 16 was adjudicated against the borrower. Issue No. l was not decided as impressed. Issue No.5 was decided against the plaintiff and it was held that the suit was not competent. Issues Nos. 8, 9, 10 and 11 were decided against the Bank. Issues Nos. 14, 22, 23, 24, 25 and 26 were also answered against plaintiff. Issues Nos. 18, 19, 21, 28, 30, 31 and 32 were found against the plaintiff. On these findings the suit was dismissed on 8-2-1969. 6. Feeling aggrieved the Central Bank of India as well as the New Bank of India preferred appeals bearing R.F.A. Na. 44 of 1969 and 4 of 1970. These appeals came up for hearing on 5th, 6th, 7th, 8th and 12th of October, 1991 and reserved for its decision. The decision was announced on 6-6-1992 allowing appeals. Feeling dissatisfied, Syed Iftikhar-ud-Din Haider Gardezi and 9 others successors-in-interest of Syed Muhammad Abdul Jalil Shah Gardezi/defendant No. 1, filed Civil Appeal No. 461 of 1992 in the Supreme Court. The same was allowed by apex Court on 24-10-1995 in following terms:------- "Result of the above discussion is that this appeal is remanded to the High Court to be heard and decided within three months without fail. The impugned judgment and decree of the High Court is set aside. Learned counsel for the parties may raise and argue as many questions of law and facts as they may like during the hearing. With these observations, this appeal succeeds and is allowed with no order as to costs. " The record of this case was received by this Court on 6-5-1996. This is how these appeals have been reheard. 7. The learned counsel for the appellant/Central Bank of India, in support of Appeal No. 44 of 1969, reiterated whatever was argued by him on 5th, 6th, 8th and 12th of October, 1991. He simply stated that he had no other points in his armoury. Contrarily, Ch. Khurshid Ahmed, Senior Advocate/learned counsel for the Borrower reiterated earlier contentions alongwith following points: (i ) Relied upon Exh.P.17 and statement of Saeed Ahmad (D.W.11) to contend that the report of the said witness demonstrated that the statement of account of Bank suffered from manifest discrepancies and was not worth to determine borrower's liability. According to the learned counsel, the lender was required to prove the statement of account by strong and cogent evidence. Reliance was placed on the Australasia Bank Ltd. v. H.S. Mahmood Hassan Akbar PLD 1983 Kar. 431 and Ashraf Ali v. Bank of India Ltd. 1981 CLC 1582. It was pointed out that the testimony of D.W.11 was expert opinion and could not be lightly ignored. (ii) That Issues Nos. 19, 22, 23, 24, 25 and 26 were decided by the first Court correctly. The borrower had taken up the plea that the guarantor was legal advisor to Non-Muslim Bank; that he had appeared in the witness-box and proved that he was merely a figure head while actually the guarantor was the real borrower; that Exh.D.8 was a trust-deed and so it could not serve the
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purpose of equitable mortgage. So Issues Nos.28, 31 and 32 had been correctly decided by the Court below. (i.e) On the question of interest it was submitted that the same had been declared in violation of the injunctions of Islam and so this Court cannot decree the interest against Syed Abdul Jalil. Strength was sought from Mahmood-ur-Rehman's Faisal v. Secretary, Ministry of Law PLD 1992 FSC 1. 8. From the above resume of facts, the contentions of the parties following points fall for determination: (1) Whether the instant suit was competently instituted? (2) Whether the instant suit was barred by time? (3) Whether the plaintiff had rendered accounts to respondent No. 1, with respect to stock pledged by respondent No. 1, as required by section 172 of the Contract Act, if not, whether the plaintiff had right to file the instant suit? . (4) Whether Issues Nos. 19, 22, 23, 24, 25 and 26 were correctly adjudicated upon by the Court below? (5) Whether finding of first Court on Issues Nos.28, 31 and 32 were not open to any exception? 9. As regards the first point, suffice it to note that the suit was filed by the plaintiff/public limited Company inqorporated under the Indian Companies Act, 1913. The plaint was signed, verified and filed by Mr. S.R. Jariwala as recognised agent of the Company under Rule 1 of Order XXIX, C.P.C. The deed of general attorney, in favour of the said attorney, was executed on 2-5-1951 by two Directors namely Mr. B.D. Lan and Mr, Premchand. The statement of Mr. S.R. Jariwala was recorded on Commission wherein he deposed that he was the Principal agent of the plaintiff in Pakistan and was also bank attorney. As against this evidence, Syed Abdul Jalil appeared as D.W. 12 and did not utter a single word to controvert the above assertion. The point for determination is whether the plaintiff had proved that the suit was competently instituted. Similar point cropped up for consideration in Messrs Muhammad Sadiq v. The Australasia Bank Ltd. PLD 1966 SC 684. In this case, Australasia Bank Ltd. Brought a claim for recovery of loan against Kh. Muhammad Sadiq through attorney. The suit was contested and a plea was taken that it was filed by a person who did not have the legal authority to file it. The learned Original Court upheld this objection and dismissed the suit. On appeal before the Division Bench, the two Judges differed on this question and so the matter was referred to a third Judge who felt necessity of recording evidence, In this exercise, the memo. Of Association, Articles of Association of the Bank and Resolution authorising the Director to appoint attorney were brought on record. On this material, the learned third Judge held that the suit was validly Instituted and decreed the suit. On further appeal, the Supreme Court answered the question in following terms:----- "This brings us to the next question as to whether the suit had been competently filed. As already stated, one of the learned Judges of the High Court had taken the view that since the power of attorney had affixed to it the common seal of the company there was a presumption that the power of attorney was lawfully executed, and then the onus was on the other side which challenged the validity of the power of attorney to show that it was ultra vires the powers of the company. The third learned Judge evidently did not agree with this view, for, if he had done so he would not have called for the additional evidence. We are unable to uphold the view that the production of the power of attorney bearing the common seal of the company was by itself sufficient. In saying this the learned Judge has evidently overlooked that as a rule the Articles of Association of a company contain special provisions prescribing for the manner in which the seal of the company may be affixed and that those who deal with a company are bound to see that the document on the face of it, accords with those provisions of the Articles. It is only when it does so and the instruments is on the face of it
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regular, persons dealing with a company have a right to presume that the seal so affixed has been duly affixed, that the Directors were duly appointed and their signature duly made. The burden only then shifts to prove the contrary on those who allege it. Again, the law requires that, prima facie, those who deal with a person acting under or purporting to act under a power of attorney are put upon enquiry and are bound to satisfy themselves as to the authenticity of that power. It is only when such a person acts or purports to act under a properly executed power that the principal cannot repudiate his action. This rule, has been accepted as settled over since the decision of the Court of Exchequer Chamber in England in the case of Royal British Bank v. Turquand 1856 EL and BI 327). According to this rule persons dealing with a company are bound to read the public documents of a company i.e. Its Memorandum and Articles of Association and to satisfy themselves that the transaction entered into or proposed to be entered into is not inconsistent therewith, but they are not bound to do more, nor are they required to enquire into the regularity of the internal proceedings or what has been called "the indoor management of the company", for, they are entitled to assume that all other things have been done regularly. There are, of course, exceptions to this rule, but we are not concerned with those exceptions here. We have referred to these provisions in order to Indicate that once the authority of Muhammad Khan to present the plaint was challenged, a reference not only to the power of attorney was called for but also to the Articles of Association of the company. It will be observed that in the preamble to the Articles of Association it is clearly stated that the regulations contained in Table ' A' of the First Schedule to the Companies Act shall not apply this company but only the Articles adopted shall apply. Under Article 125 thereof Khawaja Bashir Bakhsh was appointed the permanent Chairman of the Board of Directors for as long as he was qualified and willing to act as such. Under Article 123 two Directors were sufficient to form a quorum and at a meeting at which this quorum was present the meeting could under Article 126 exercise all or any of the authorities and powers and directions given by or under the Articles of the Company. Article 131 vested the general control of the company in the Directors and Article 132 inter alia, gave them power to institute conduct, defend, compound or abandon legal proceedings and to authorise or empower "the managers or other officers for the time being of the company to exercise and perform all or any of the powers, authorities and duties conferred or imposed upon the Directors". Article 135 provided that the custody of the common seal of the company shall be with the Chairman of the company and that the seal shall not be used except by the authority of the Directors or a Committee of the Directors in the presence of one Director at lease who shall sign every instrument to which the seal is affixed and every such instrument shall be countersigned by the permanent Chairman or some other person appointed by the Directors. Now a reference to the power of attorney itself shows that it was signed by two Directors and the permanent Chairman and it was also sealed with the Common seal of the company. The said three Directors also appeared before the Registrar for presenting this document and there admitted its execution. We have also now the resolution of the Board of Directors passed on the 20th of December, 1942, which approved the terms of the power of attorney to be given to Muhammad Khan as also itself registration. Clause 6 thereof gave him the power to commence, prosecute, or proceedings and clause 8 thereof expressly authorised him to make, sign, execute, present and file all applications, plaints, petitions or written statements, etc. It is clear, therefore, that Muhammad Khan was properly and lawfully empowered by the Directors who themselves had express power given to them under the Articles of Association to delegate their authority and the delegation so made empowered Mr. Muhammad Khan to sign, execute and present plaints, on behalf of the company. The suit was, therefore, in our view, rightly held to have been competently filed".
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10. Applying these principles to the facts of the case in hand, we are in no doubt that the findings of the learned first Court on this issue was/is not correct. From the evidence, it is crystal clear that the plaint was filed by S. R. Jariwala who was appointed attorney vide deed dated 2-5-1951. The said instrument was executed by the two Directors of the Company and the Manager who had necessary powers under Article 116(11) of the Article of Association. Under Clause (7) of Deed of Attorney, S.R. Jariwala was empowered to initiate any action on behalf of Bank and take to its final conclusion. In our view, the aforesaid evidence was sufficient to prove that S.R. Jariwala had authority to file the suit. On this finding we set aside the finding of Court below on Issues Nos.7, 8, 9 and 10 and hold that the suit was competently brought by the plaintiff. 11. Now we come to the point of Limitation. Before we proceed further, it needs to be restated that the Pakistan Limitation Act, 1908 (hereinafter shortly stated as 'Act') is comprehensive code dealing with all matters relating to Limitation of actions, appeals, applications and so on and so forth. The Courts are obliged under section 3 to give effect to it regardless of calls of expediency or convenience of the parties. The Trial Court held that the instant suit was under Article 57 of the Act. This reads as under: "Article 57 For money payable for money lent Three years, When the loan is made ............ A simple reading of this provision will show that it covers the suits for recovery of loan advanced by lender without effecting any writing and without fixing any date for its repayment. From this, it clearly follows that this Article was inapplicable to facts of the case in hapd which was filed to recover the outstanding amount due to the plaintiff firstly against the person of respondents Nos. 1 and 2 severely and jointly and then by sale of properties mortgaged under mortgage deed dated 5-12-1947 and 12-4-1947. It was further prayed therein that if the outstanding amount was not realised through the aforesaid remedies, then the liabilities of respondent No. 1 be satisfied from personal properties of respondents Nos. l and 2. Obviously the suit embodied multiple reliefs noted above. The question is as to which Article in Schedule to Act is applicable to this suit. This question has never been free form difficulty. Articles 116 and 132 of Schedule to Act are relevant. These came up for consideration before the Full Bench in Sahib Dayal v. Maherban AIR 1923 All. 1. After the survey of the case-law, the Full Bench concluded that Article 132 ibid applies to actions to enforce charge on mortgage-deeds by sale of mortgaged immovable property while Article 116 ibid covers the suits for recovery of deficiency arising out of such sale. This view was approved in Thiruvendipuram Chengalmma Garu and others v. Vemasani Veerarghava Naidu (1928) 114 IC 340 and Sheo Das Pande v. Munj Behari and another (1928) 114 IC 813, R. Ratnasabapathy Chettiar and others v. Davasigamony Pillai AIR 1929 Mad. 53 and Kishan Sahai and others v. Renumath Singh and others AIR 1929 All. 139. The above point came up for examination before the Full Bench of Lahore High Court in Ch. Kidar Nath and others v. Mian Saraj-ud-Din AIR (33) 1946 Lah. 97. In this case, the question referred to Full Bench was "Whether the mortgage, who lost his right to recover the mortgage-debt as ordinary debt, after the lapse of time, retains right to recover the debt out of sale-proceeds of mortgage-property and has brought such property to sale, through recovering the full amount, can be permitted to recover interest for six years prior to the institution of suit by a personal decree". Before answering the question noted above, the Full Bench dealt with the scope of Articles 116 and 132 in Schedule I to the Act and approved the view noted above in following words:------ "It is beyond dispute that a suit for the enforcement of a personal covenant express or implied in a registered mortgage deed is governed by Article 116, Limitation Act. There was at one time some doubt as to the implication of certain observation made by their lordships of the Judicial
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Committee in Ganesh Lal v. Khetramohan (5 Pat. 585) but by now it is well settled that those observations were not intended to alter the law as applicable to actions for the enforcement of personal covenants whether express or implied against a mortgagor in respect of the mortgage debt. The Full Benches of the Madras and the Allahabad High Courts in 52 Mad. '105 and 52 All. 369, a Division Bench of this Court in 16 Lah. 137, a Division Bench of Pat. High Court in 13 Pat. 228 and a Division Bench of Calcutta High Court in 35 CWN 1030, have dealt with this question at considerable length and had laid it down that in spite of the observation in 5 Pat 585, Article 116 Limitation Act, is the Article applicable to actions for the enforcement of personal covenants in registered mortgage-deeds. Article 116 gives the parties six years for a suit for compensation for the breach of a contract in writing registered, the terminus qua being the date when the contract is broken, or, where there are successive breaches, when the breach in respect of which the suit is Instituted occurred. According to the language of the article, therefore, a suit for the enforcement of the personal covenant express or implied, in a registered mortgage-deed, can be brought within six years from the date of breach of that covenant. The question that we have to consider in the present case, is, whether the breach of the personal covenant for the payment of the principal mortgage money occurred more than six years prior to the institution of the suit, there can be a separate and independent breach of the covenant to pay interest subsequent to the lapse of time for the enforcement of personal covenant in respect of the principal, so as to entitle the mortgagee to maintain an action within six years from the date of such breach." 12 The ratio deducible froth the foregoing examination is that Article 132 ibid covers the suit for recovery of money/charge on immovable property mentioned in the mortgage deeds by their sale while Article 116 ibid applies to suits for recovery of outstanding debt on the basis of personal covenant' incorporated in the mortgage deeds. Guided by this rule, it is clear to us that relief with respect to recovery of money lent on the basis of personal covenant in the mortgage deed was covered by Article 116 in Schedule to the Act while the prayer regarding realisation of outstanding amount of debt by sale of property in mortgage deed was covered by Article 132 in Schedule to the Act. Clearly…
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