SAHARA TRADING INTERNATIONAL (PVT.) LTD. and otherss vs BANK ALFALAH

ORDER

IFTIKHAR MUHAMMAD CHAUDHARY, J.---Petitioners seek leave to appeal against the judgment dated 28th June, 2004 passed by Lahore High Court. Lahore in RFA No,61 of 2004. Whereby appeal filed by petitioners has been dismissed and the judgment/decree of the Banking Court dated 12th January. 2004 has been maintained.

2. Precisely stating the facts of the case, out of which instant petition has emerged. Are that petitioner No,1 (M/s. Sahara Trading International (Pvt) Ltd.) availed a cash finance facility to the tune of Rs,19 million vide sanction advice dated 28th July. 1989 and this amount was enhanced to Rs,22 million on 29th June. 2001 when the facility was renewed. At the behest of petitioner No,2 Union National Bank, Abu. Dhabi (UAE) (herein after referred to as 'UNB') agreed to furnish irrevocable and unconditional guarantee to the respondent-bank as per terms and conditions incorporated in the instrument of guarantee deed, which was extended from time to time. Besides it, petitioner No,2 had also mortgaged her immovable property in order to secure the facility. It is stated that petitioner No,1 defaulted in reimbursing the cash facility as such on 25th September.

2003, suit for recovery of sum of Rs,27,355,729.06 as stood on 31st August, 2003 with future markup till the final realization of the liability/amount due and the cost of the suit alongwith cost of the funds. Etc., was filed. Notices were duly issued by the Banking Court in terms of section 9(5) of the Financial Institutions (Recovery of Finance) Ordinance, 2001 (hereinafter referred to as the Ordinance'). In response to the notices, petitioner No,1 did not file application under section 10 of the Ordinance for leave to appear and defend the suit. However, petitioner No,2 prayed for leave to appear and defend the suit vide application dated 7th November, 2003.Respondent plaintiff contested the application on behalf of petitioner No,2. Learned Banking Judge declined to grant relief to petitioner No,2 on the premises that no bona fide dispute has been pointed out and no tenable explanation has been offered and the application was dismissed, as a result whereof the suit was decreed in favour of the respondent/plaintiff and against the petitioners, as prayed for, on the basis of documents available on record. Appeal filed by the petitioners before the Lahore High Court, Lahore, has been dismissed vide-impugned judgment. As such instant petition for leave to appeal has been filed.

3, Mr. Tariq Mehmood learned ASC contended that petitioner No, I had availed the finance facility through petitioner No,2 being its Chief Executive, as per the documents relied upon by the respondent-Bank itself, therefore application dated 7th November, 2003 for grant of leave to defend the suit should have been treated by the Banking Court as well as by the High Court on behalf of both of them in the interest of justice and petitioner No,1 may have not been non-suited merely for technical reasons. Reliance in this behalf has been placed by him upon the judgment in the case of Ali Khan & Co. v. Allied Bank of Pakistan Ltd. (PLD 1995 SC 362).

4. It may be noted that admittedly petitioner No,1 is a Private Ltd. Company under the Companies Ordinance, 1984. It has got its own independent juristic character. As far as petitioner No,2 is concerned, she enjoys statedly authority of its Chief Executive but simultaneously she also stood guarantor for reimbursing the finance facility by furnishing the bank guarantee from `UNB', therefore, in dual capacity she has got her independent legal character/status to perform under different provisions of law, as according to sanction advice dated 28th July,' 1999, while acting on behalf of petitioner No,1 (M/s. Sahara International Pvt. Ltd.) she has to discharge her obligations in accordance with 'terms and conditions noted therein being one of the contracting party whereas, as a guarantor she has to play a different role, in pursuance whereof she _managed Bank- guarantee in favour of respondent Bank from `UNI3', on independent A conditions, as well as the contract which is to be performed separately as per the terms and conditions mentioned therein in detail. A perusal of the these conditions reveals that petitioner No, 2 enjoys a distinct status comparing to the principal debtor i,e, petitioner No,1, therefore, on having made- distinction, we persuade to examine as to whether the petitioner No,1 being principal borrower, without seeking permission to appear and defend the suit, at a subsequent stage either at appellate or before this Court, by filing a Constitution petition or petition for leave to appeal, can question the validity of decree passed by the Banking Court? Admittedly summons were issued by the Banking Court under section 9(5) of the Ordinance but no request was made by it for leave to defend the suit, therefore, as per the mandate of section 10 of the Ordinance, it would be deemed that facts mentioned in the plaint have been admitted by the petitioner No,l, therefore, by default, in not filing application for leave to defend, petitioner No,1 as a principal borrower shall be precluded to question the validity of the decree which essentially has been passed by the Banking Court, after having taken into consideration the material/documents attached with the plaint.

5. Learned counsel himself referred to the judgment reported in the case of Ali Khan and Co. (ibid) and relied upon its following para:-- In our view, notwithstanding the above omission in Rule 3, the effect of refusal of the Court to grant leave or failure on the part of the defendant to comply with the condition of the leave, will be the same i,e, the defendant shall not be entitled to defend the suit on any ground and the Court would pass a decree in favour of the plaintiff. However, this does not necessarily mean that the Court is not required to apply its mind to the facts and the documents before it. Every Court is required to apply its mind before passing any order or judgment notwithstanding the factum that no person has appeared before it to oppose .Such an order or that the person who wanted to oppose was not allowed to oppose because he failed to fulfill the requirements of law."

Although above judgment has not rendered any help to the learned counsel but despite of it, he emphasized that the Court is bound to pass a decree after applying its mind to the facts and the documents before it, notwithstanding the fact that petitioner No,1 has not applied for leave to defend. As far as the proposition of law is concerned, there is no cavil with it but as it has been held herein above that decree has been passed by the Banking Court after taking into consideration the material available on record, therefore, we feel no hesitation in concluding that as the petitioner No,1 being the principal borrower in its own juristic capacity/status has not applied for leave to defend, according to section 10 of the Ordinance, after receiving summons issued by the Banking Court under section 9(5) of the Ordinance, therefore, the application which was submitted by petitioner No,2 having a distinct and different status being a guarantor shall not be deemed to be application for leave to defend on behalf of petitioner No,1 as well and in such view of the matter, the Banking Court has rightly decreed the suit.

6. Next question for consideration is as to whether petitioner No,2 in her capacity as guarantor could challenge the legality or otherwise of the decree. In this context first of all it may be seen that undoubtedly petitioner No,2 submitted an application for leave to defend the suit as guarantor. A perusal of the contents of the application, copy of which is available on record, persuades us to hold that no substantial question of law and fact was raised, 'requiring determination of the claim of the guarantor, therefore, learned High Court had rightly declined to interfere in the judgment of the Banking Court.

7. It is equally significant to point out here that as far as the guarantee furnished by the petitioner No,2 to facilitate the petitioner No,1 to enjoy the financial facility is concerned, it creates separate contract between respondent-creditor as well as guarantor or the Bank, who has furnished the guarantee and petitioner No,2, after having consented tofurnish guarantee from the `UNB. Had no authority to challenge the claim of respondent, independently on merits embodies in the plaint because respondent can en cash the bank-guarantee furnished by said Bank, if the amount due against petitioner No,1 is not reimbursed. The law concerning the status of furnishing of Bank guarantee has been settled by this Court in the case of M/s National Construction Co. Ltd. v. Aiwan- e-Iqbal Authority (PLD 1994 SC 311. Pak Consulting & Engg. (Pvt). Ltd. v. Pakistan Steel Mills (2002 SCM R 1781) and Shipyard K. Damen International v. Karachi Shipyard and Engineering Works Ltd.

(PLD 2003 SC 191). In the last mentioned case on the basis of judicial consensus, it was observed as follows:- "The bank guarantee is an autonomous contract and imposes an absolute obligation on the bank to fulfill the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable."

' Applying the above principle on the facts and circumstances of the case in hand, it can safely be held that as the petitioner No,1 failed to adjust the financial facility availed by it, therefore, the Bank i,e, `UNB' who has agreed to furnish Bank guarantee has to waive his rights of subrogation and proof in any liquidation of the principal debtor until and unless all sums owing to the Bank by the principal debtor have been paid to the Bank in full, therefore, in view of such categorical commitment, petitioner No,2 had no case to challenge the validity of the decree 12th January, 2004 and in such circumstances, learned High Court in the impugned judgment has rightly observed that it was not available for petitioner No,2 to set out the 'plea that the suit of the respondent is premature or without cause of action. Thus in view of the above discussion, we see no substance in this petition as such same is dismissed and leave declined.