P L D 1987 Karachi 86
Before Tanzil-ur-Rehman, J
HABIB BANK LIMITED-Plaintiff
MUSSARAT ALI KHAN-Defendant
Special Suit No. 5 and Suit No. 422 of 1983 in Civil Miscellaneous Application No. 980 of 1986, decided on 17th November, 1986.
Igbal Kazifor Plaintiff. Amanullah Khan for Respondent. Date of hearing : 17th November, 1986.
The plaintiffs on 20-12-1982 filed the above suit for Rs. 10,86,601 against the defendant who, as alleged was at the relevant time the Managing Director of the internationally recognised Pakistani Construction Company namely. Messrs National Construction Company of Pakistan.
2. The facts as stated in the plaint, are that the defendant approached the plaintiffs at their K. D. A. Branch for an overdraft facility in his Current Account No. 1442, Old No. 1309-48 for Rs.25,000 which facility was allowed to him and utilised by him. The sum due and payable in this account by the defendant to the plaintiffs as on 30-11-1982, inclusive of interest, was Rs. 1,86,40,188. The defendant also obtained another temporary overdraft facility in his Saving Account No. 7628 in the sum of Rs. 15,000. The amount due from the defendant to plaintiffs on this account, inclusive of interest, as on 30-11-1982 was Rs. 33,000. The defendant also obtained another loan from the said Branch of the plaintiffs being Loan Account No. 100047-63 against Hire Purchase of three Jeeps each amounting to Rs. 76,000 total amount of loan being Rs. 2,28,000. In this account the defendant was liable to pay inclusive of interest, Rs. 5,06,000 as on 30-11-1982. The defendant also obtained another Loan under Account No. ‘100048-44 against Hire Purchase of three Jeeps for Rs. 1,50,000. There was a sum of Rs. 3,31,000 inclusive of interest due by the defendant to the plaintiffs as on 30-11-1982. The defendant yet took another loan in Loan Account No. 100035-39 against the deposit of Defence Saving Certificates of the face value of Rs. 30,000. In this account there was a sum of Rs. 30,200 due by the defendant as on 30-11-1982 after allowing adjustment .for the sale price of the above securities amounting to Rs. 56,160 on 14-1-1982. The defendant having failed to pay the said five loans, has been sued in the said sums making a total and claim of 9s. 10,86,601, as aforesaid. The plaintiffs alongwith the plaint have filed promissory notes dated 20-3-1974, 12-2-1977 and 26-2-1977, copy of the Cheque No. 521601 for Rs. 15,000 honoured by the plaintiffs, Hire Purchase Agreements, Letter of Disbursements, Letter of Arrangements, Account Opening Forms and the Statement of Accounts. The summons through bailiff returned unserved as well as by registered post. Ultimately, the defendant was served by publication in the Daily “Morning News”, Karachi. No application for leave to defend having been filed’ the suit was decreed ex parte on 16-2-1984. Application under Order IX, rule 13, C. P. C. was moved by the defendant for setting aside the said decree which came up for hearing before my learned brother, Ibadatyar Khan, J. who was pleased to allow the said application and set aside the said decree by his order dated 16-2-1986. Thereafter, the defendant on 22-2-1986 riled an application under Order XXXVII, rule 3, C. P. C. for leave to defend which has been argued before me.
3. Mr. Iqbal Kazi, learned counsel for the plaintiffs raised a preliminary objection that the application under Order XXXVII, rule 3 is time-barred and not maintainable. In support of his contention that the application under Order XXXVII, rule 3 is time-barred, he submitted that the defendant was served with the summons in the main suit by publication in the Daily Morning News dated 16-12-1983 and the suit was decreed on 16-2-1984 under Order XXXVII, rule 2, C. P. C. The defendant appeared in Court on 9-1-1985 and filed an application under Order IX, rule 13, C. P. C. for setting aside the ex parte decree passed against him. This application was allowed on 16-2-1986. Thereafter, this application under Order XXXVII, rule 3 C. P. C. was made by him on 22nd February, 1986. He, therefore, submitted that the application for setting aside the decree ought to have been filed by the defendant under Order XXXVII, rule 4, C. P. C. instead of Order 1X, rule 13, C. P. C. The plaintiff should have also obtained leave to appear and defend in the same application dated 29-1-1985 because in such a suit the defendant is not entitled to appear till leave is granted to him. Reliance was placed by him on decisions reported as Allied Bank of Pakistan Ltd. v. V. C. Khilnani and 2 others (P L D 1984 Kar. 127), P. N. Films Ltd. and another v. Overseas Films Corporation Ltd. (A I R 1958 Bom. 10), and Messrs Tailors Priya v. Messrs Gulabchand (A I R 1963 Cal. 36).
4.- (i) In the first case P L D 1984 Kar. 127 the plaintiff filed a suit against one Khilnani under Order XXXVII, C. P. C. The said defendant filed an application under rule 3 for leave to appear and defend the suit. The said application was granted subject to furnishing security within three weeks. On 30th October, 1978, the defendant’s sons filed an application under Order XXII, rule 4, C. P. C. for bringing them on record, which was granted on 22-4-1982 and the amended plaint was filed on 27-4-1982. Thereafter, the defendants filed an application under Order XXXVII, rule 3, C. P. C. for leave to appear and defend the suit which was granted by consent on 16-5-1982 on furnishing security, failing which, it was ordered that the suit shall stand decreed against the defendant with costs. The security having not been furnished, the defendant filed an application under Order XXXVII, rule 4 for setting aside decree dismissing the said application, which was dismissed for reasons recorded in the order.
(ii) In the second case A I R 1958 Born. 10; the respondent filed a summary suit against the appellant of which the summons was served on the appellant on 1st September, 1955. The appellant failed to file an application to appear and defend the suit. Consequently, the decree was passed on 16th September and sealed on 17th November, 1955, and a copy of the same was served on the defendant on 24th November, 1955. On 3rd December, 1955, the appellant took out a notice of motion to set aside the decree which was dismissed by a learned Single. Judge of that Court, taking the view that a notice of motion was barred y limitation. Thus, the main consideration in the case before the D. B. was the point of limitation for filing an application under Order XXXVII, rule 4, C. P. C. The order passed by the learned Single Judge was set aside in the appeal and the application was not held to be barred. In the earlier part of the judgment it was however, observed that Order IX, rule 13, C. P. C. was, inapplicable for setting aside a decree passed in a summary suit.
(iii) In the third case A I R 1963 Cal. 36; the plaintiff instituted a suit under Order XXXVII, rule 2, C. P. C. The writ of summons in the prescribed form was served on the defendant. On September 25 the defendant filed a petition praying for the extention of time to make an application for leave to appear and to defend the suit. The petition was rejected by the Registrar on September 28. On October 6, the defendant filed a petition praying for leave to appear and to defend the suit, which was dismissed on October 7, 1961, by a learned Single Judge of that Court. Thereupon, the defendant moved the Court in revision against the said order, which was referred to a Special Bench of three Judges. It was, inter alia, observed that the application for leave to defend a summary suit not made within 10 days from the date of the service of summons was liable to be rejected as the trial Judge bad .no power to extend the time.
As to the cases cited by Mr. Qazi, learned counsel for the plaintiff, it seems that none of them covers the point of limitation which has arisen in this case as to whether the application under Order XXXVII, rule 3, filed by the defendant, without any direction of the Court within 10 days of the order setting aside of the decree under Order 1X, rule 13, in a summary suit, is time-barred or not.
5. Mr. Amanullah, learned counsel for the defendant, on the other hand, submitted that the order passed by a learned Single Judge of this Court under Order IX, rule 13, C. P. C. by which the ex parte decree was set aside, cannot be challenged in these proceedings. It was farther submitted by him that the decree having been set aside on the ground of non-service of the summons on the defendant: he will have a right to file the application under Order XXXVII, rule 3, C. P C. for leave to defend within 10 days from the date of the order setting aside the decree and since the application was filed after about 6 days of the said order, it was within time. Reliance was placed by him on the case of Allied Bank of Pakistan Ltd. v. Messrs Sainji Restaurant and 2 others (1985 C L C 2131), United Bank Ltd. v. Nishat Chemical Industries Ltd. and 6 others (1986 C L C 1985), and an unreported order passed by a learned Single Judge of this Court in Suit No. 339 of 1984 (United Bank Limited v. A. Hafeezsons Limited and others).
6. (i) As to the cases relied on by Mr. Amanullah Khan learned counsel for the defendant, in 1985 C L C 2131, it was held by my learned brother, Saleem Akhtar, J. that the application for setting aside an ex parte decree in a suit under Order XXXVII, C. P. C. should have been filed under Order XXXVII, rule 4, C. P. C. but an application filed under Order IX, rule 13, C. P. C. cannot be dismissed merely because a wrong provision of law has been quoted. The learned Judge, having held that there was no proper and due service of summons on the defendants, set aside the judgment and decree passed in the suit and allowed the defendant to file an application for leave to defend within 10 days from the date of the order.
(ii) In the case of 1986 C L C 1985, the same learned Judge holding that the service was not proper, allowed the application under Order XXXVII, rule 4, setting aside the ex parte decree and allowing the defendant to file an application under Order XXXVII, rule 3, C. P. C. within 10 days.
(iii) In the unreported order in Suit No. 339 of 1984, wherein an application under Order XXXVII, rule 4, read with Order IX, rule 13, C. P. C, was made for setting aside the decree obtained ex parte, was allowed by the same learned Judge and the defendants were directed to file an application under Order XXXVII, rule 3 within 10 days.
It will thus appear that in all the above cases there was direction of the Court to make application under Order XXXVII, rule 3 within 10 days, which is not the case here.
7. A comparative study of Orders VII, VIII, IX and XXXVII. C. P. C. will reveal that the incidents of these Orders are distinct in their nature and scope. Orders VII, VIII and IX deal with all kinds of suits, whereas Order XXXVII, is concerned with suits of a special nature i.e. suits upon bills of exchange, hundies or promissory notes. In a suit under Order VII, C. P. C., after the plaint is admitted, the summons is issued to the defendant for appearance on a fixed date in the summons. On receipt of the summons, the defendant may, and if so required by the Court, shall, present a written statement of his defence at or before the first hearing or within such time as the Court may permit, provided that the period allowed for filing the written statement shall not ordinarily exceed ninety days. Under Order VIII, rule 10 if the party fails to present a written statement called for by the Court, the Court may pronounce judgment against him, A whereas under Order XXXVII, rule 2 the defendant shall not appear and defend the suit (by filing written statement) unless he obtains leave from the Court within 10 days of the service of the summons. Further, the provision of Order IX, rule 6, which provides for ex parte decree, applies where the plaintiff appears but the defendant does not appear when the suit is called for hearing. In other words, the principle underlying Order IX, rule 6 is that the defendant could appear in law, but, in fact, has not appeared, whereas in a summary suit under Order XXXVIL rule 2(2) the defendant cannot appear or defend the suit unless he obtain leave from a Judge. Similar is the case under Order IX, rule 7 that if an ex parte hearing of a suit is adjourned and if the defendant appears at the adjourned hearing and assigns good cause for his non-appearance on the previous date, it is open to the Court to permit him to be beard in answer to the suit as if he had appeared on the date fixed for his appearance. If an ex perte decree is passed against the defendant in an ordinary suit his remedy is provided under Order IX, rule 13 for setting aside the same and if he satisfies the Court that the summons was not duly served, or that he was prevented by any `sufficient cause’ from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit, whereas in a summary suit decreed ex parte against the defendant, the remedy is provided in Order XXXVII, rule 4, which provides that the Court may, under `special circumstances’, set aside the decree and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the Court so to do.
8. I am, therefore, in agreement with the learned counsel for the plaintiff that the provisions of Order IX, rule 13 do not apply to a decree passed in a summary suit and that an application to set aside a decree in a summary suit is regulated by Order XXXVII, rule 4 and not Order IX, 6 rule 13. However, an application made under Order IX, rule 13 cannot be struck down merely for the reason that a wrong provision of law has been, quoted therein. The Court may treat the same under Order XXXVII, rule 4, C. P. C. if the application otherwise fulfils the requirement.
9. It may also be mentioned that the learned counsel have invited my attention to the additional affidavit filed by the defendant in proceedings for setting aside the ex parte decree for treating the application under Order IX, rule 13 as under Order XXXVII, rule 4, C. h C. Learned counsel, however, stated at the bar that this additional affidavit was not brought to the notice of the learned Judge who set aside the ex parte decree. Be that as it may, the fact remains that the solemn affirmation about the application made under Order IX, rule 13 to be treated as made under Order XXXVII, rule 4. C. P. C., is on record as it was a suit under summary chapter. Paragraph No. 2 of the said affidavit reads as under :-
“2. That I say that the application under Order IX, rule, 13, read with section 151. C. P. C., for setting aside ex parte decree with application may be treated as application under Order XXXVII, rule 4 read with section 151, C. P. C., and in the Special circumstances of the case, set aside the ex parte decree and grant unconditional leave to the defendant to appear and defend the suit.”
9. It is true that proper provision of law for setting aside an ex parte decree in a summary suit is available under Order XXXVII, rule 4 and in the instant case the order dated 16-2-1986 setting aside the decree was passed under Order IX, rule 13, but the same, having not been appealed against, has become final and it cannot be challenged before this Court in these proceedings. It is noticeable that the said order merely sets aside the ex pane decree passed on 16-2-1984. It does neither fixes a day for hearing of the suit as provided under Order IX, rule 13, C. P. C. nor says any thin about leave to the defendant to appear and defend the suit. As a consequence of the said order the defendant will be taken to be not served with the summons. Taking the point to its logical conclusion one may argue that the 10 days period of limitation was to start only after the defendant is shown to be served with the summons. However, the defendant’s making the above application, for leave to appear and defend the suit within 10 days of passing the said order can hardly be said to be beyond time as provided under Article 159 of the Limitation Act, 1908.
10. There is yet another plea raised by Mr. Iqbal Kazi that the defendant, on his own showing in the affidavit filed by him for setting aside the ex parte decree, had knowledge of the decree having been, passed against him, as long back as 15-12-1984 and so the application under Order XXXVII, rule 3 is hopelessly time-barred. I am afraid, the, submission- is misplaced. It is not the date of the knowledge of the defendant when he comes to know of the filing of the suit or the decree/ having been paused against him that the limitation will run against him for making of an application under Order XXXVII, rule 3, C. P. C., but it is the date of the service of summons on him. If one looks to Articles 159 and 164 of the Limitation Act, the difference is obvious. Article 164 prescribes that an application under Order IX, rule 13, C. P. C., by a defendant, for an order to set aside a decree passed ex parte can be made within thirty days from the date of the decree or where the summons is not duly served, when the applicant has knowledge of the decree, whereas Article 169, for leave to appear and defend the suit under summary procedure under Order XXXVII, C. P. C., prescribes the period of 10 days, E when the summons is served. It is significant to note that the words “where the summons was not duly served, when the applicant has knowledge of the decree” are not mentioned in Article 159. The date of knowledge is not supposed to be a starting point of limitation for the purpose of counting 10 days for making an application under Order XXXVII, rule 3, C. P. C.
11. The case maybe viewed from another angle also. There being no period of limitation prescribed for making an application under order XXXVII, rule 4, C. P. C., Article 181, of the Limitation Act will be made applicable, which, if applied to this case, will, perhaps, be reckoned from the date of knowledge viz. 15-12-1.984 for the purpose of limitation period. There will, thus, be still time to file application under Order XXXVII, rule 4, C. P. C. If, so, the Court may not feel hesitant, in the circumstances of the case, to treat the above application as made under rule 4, of Order XXXVII.
12. For all the reasons aforesaid, I am of the view that the application for leave to defend is not time-barred.
13. Before parting with discussion, I would also like to say that the law of Limitation, as observed in Bombay case, must he construed strictly against the party who sets up the plea of limitation as the Limitation Act deprives a party of a valuable right and unless the provision in the Limitation Act was clear and beyond doubt, a benevolent construction the construction favourable to the party whose valuable right is being taken away must always be given.
14. Now reverting to the application under Order XXXVII, rule 3, the following pleas have been advanced by the learned counsel for the defendant
(i) The suit is time-barred.
(ii) The suit is in respect of recovery of five loans. All the loans/over drafts, excepts, one loan against which Defence Saving Certificates were hypothecated, are denied.
(iii) The Statement of Account pertaining to loan Account No. 100047 63, has not been certified, as required under section 4 of the Bankers’ Books Evidence Act, 1881,
(iv) The interest was agreed to be charged at the stated rate with three monthly rests, whereas it has been charged with monthly rests.
15. In respect of the first contention, the learned counsel submitted that the first promissory note was allegedly executed on 20-3-1974 whereas the other promissory notes were allegedly executed in the years 1977-78. The suit having been filed in December, 1982, is clearly time-barred as the suit should have been filed within three years of the execution of the promissory notes. Mr. Iqbal Kazi, learned counsel for the plaintiffs referred to section 4 of the Banking Companies (Recovery of Loans) Ordinance 1979 and submitted that the suit is not time-barred. It will be advantageous to reproduce the said section 4, which reads as under :—–
“(1) This section apples only to loans outstanding on the commencing day.
(2) A loan or part thereof outstanding on the commencing day shall, unless secured or repaid earlier, be secured and repaid as provided in this section notwithstanding the fact that the period of limitation within which a suit for the recovery of the loan or part thereof could have been or may be filed, expired or expires on or after the first day of January, 1974.
16. In this respect, reference may be trade to section 3 of the Ordinance which reads that “the provisions of this Ordinance shall be in addition to and, save as hereinafter expressly provided, not in derogation of any other law for the time being in force”. Reading these provision of section 3 with provisions of section 4(2) of the said Ordinance, a loan or part thereof outstanding on commencing day of the Ordinance i.e. First day of April, 1979, shall be payable as provided in this section, notwithstanding the fact that the period of limitation within which a suit for the recovery of the loan or part thereof could have been or may be filed expired expires on or after the First day of January, 1974. According to Mr. Iqbal Kazi the loans in the above suit are re-payable, even if the period of limitation has expired after First day of January, 1974, as the words “save as hereinafter expressly provided” in section 3 of the Ordinance bring the suit based on loans outside the rigour of Limitation Act. It appears that the Banking Companies Ordinance which came into force on 1-4-1979, secures the repayment of loan due on the commencing day of the Ordinance, i.e. first April. 1979. A suit for recovery of loans or part thereof could have been or may be filed notwithstanding the fact the period of limitation within which the said suit could have been filed expired or expires on or after the first day of January, 1974. Section 6-A of the said Ordinance also provides for extension of the period of limitation that a suit for the recovery of a loan, other than loan referred to in section 4, may be entertained by a Special Court within two, years of the expiration of the period of limitation applicable to such suit, if the Special Court is satisfied that the banking company filing the suit had sufficient cause for not filing it within the said period. The question of limitation, as raised, does not seem to be so simple and plain as presented at the bar. However, the contention of the counsel for the defendant raises a triable issue that the suit is time-barred, even if the period of limitation, for argument’s sake, is deemed to be secured up to 1st April, 1979. The suit, according to him, ought to have been filed on or before 1st April, 1982, whereas it has been) filed on 20-12-1982.
16. As regards the second contention, counsel for the defendant submitted that the defendant did not execute any of the documents except the document pertaining to one loan, as referred to in his contention. Mr. Iqbal Kazi, took me through the documents executed and signed by the defendant in respect of the admitted loan as well as the other four loans, including the first Account Opening Form. He also invited my attention to the letter produced by the defendant alongwith his application for setting aside the decree which also bears the signature of the defendant, and submitted that if the defendants signature on the letter dated 17-11-1984 is compared with his signatures on the other documents filed alongwith the plaint, it will bear out that the signatures on all the documents are the same as that of the defendant’s signature on the said letter. Prima facie the defendant’s plea does not appear to be genuine.
17. The third contention as raised is admittedly correct. The learned counsel for the plaintiffs, however, submitted that the defendant took no such plea in the plaint, otherwise certified copy of the statement of Account could have been filed by the plaintiffs alongwith their rejoinder. It was further submitted by him that it is not the Statement of Account as the only basis of the claim, which is supported by other documents such as Annexures ‘K’, `L’, `M’ and `N’ which are the promissory note, Hire Purchase Agreement, Letter of Disbursement and Letter of Arrangement.
18. The last contention as raised by the counsel for the defendant is partly true in respect of one account only, being the loan against the Defence Saving Certificates (Annexure Z) which shows that interest with monthly rests has been charged from 1976 onwards.
19. I am, therefore, clear in my mind that it is a fit case in which leave to defend must be granted. The question which is now agitating my mind is whether it should by granted unconditionally or on some conditions. Reading the defendant’s application under Order XXXVII, rule 3 and the accompanying affidavit it seems to be a bunch of denials of various allegations made in the plaint, but on hearing the learned counsel for the defendant, particularly on the point of limitation and charging interest from the defendant at monthly rests, at least in one account contrary to the agreement, I am satisfied that the plaintiff has a plausible defence and at least two triable issues, which being substantial question of law and fact, need to be examined.
20. There is yet another aspect of the matter. In, 1908, when the Code of Civil Procedure was enforced, the scope of its Order XXXVII was limited to the suits based on promissory notes, Hundies and bills of exchange. Later on, in 1979, by virtue of the Banking Companies (Recovery of Loans) Ordinance, 1979, the scope has been widened so as to include all suits, pertaining to loan which includes an advance, cash credit, overdraft, packing credit, a bill discounted and purchased or any other L financial accommodation provided by a banking company to a borrower. It also includes a guarantee, indemnity, letter of credit or any other financial engagement which a banking company may give, issue or undertake on behalf of a borrower. It also includes a Benami loan, that is, a loan the real beneficiary or recipient whereof is a person other than the person in whose name the load is advanced be granted. Section 7(2) of the $aid Ordinance further provides that the Special Court, which in this case means the High Court as the suit amount exceeds Rs. 10 lacs, shall, in the suits before it, including suit based on mortgages of all kinds or statement of accounts for recovery of money paid to, or to the order of the defendant, follow the summary procedure provided for in Order XXXVII in the First Schedule to the Code of Civil Procedure, 1908. Previously the evidence used to be, generally speaking, almost apparent in the shape of unpaid promissory note, Hundi or dishonoured cheque, whereas today, in view of the above amendment, the state of evidence has not remained so simple, self-explanatory and convincing, as it used to be in the past.
21. It is also noticeable that innumerable instances of fraud committed in the Bank accounts by the bank officials, compelling the Government to establish Special Tribunal for the trial of the cases of Bank frauds cannot be lost sight of which, generally speaking, has impaired, to some extent, the sanctity of the statements of accounts maintained by Banks. Therefore, the Courts, in the context, should act liberally, (I do not at all mean the Courts to be generous) in the matters of granting leave to defendant in summary suits based on loan/accounts, in appropriate cases.
22. To sum up, I grant leave unconditionally to defendant to appear and defend the suit. The written-statement to be filed within one month.
A. A. Leave to appear and defend suit granted.