MESSRS HABIB BANK LTD. vs MESSRS KAYCEE CORPORATION, KARACHI

' The plaintiff has brought this suit under Order XXXVII, C. P. C. For the recovery of Rs, 1,97,169.11. The plaintiff's case is that the defendants were granted loan facility to the extent of Rs, 2,00,000 on 17-4- 1974 against the pledge of 400 bags of plastic Moulding Compound imported through them. The defendants executed a promissory note dated 17-4-1974 in the sum of Rs, 2,00,000 to secure the payment of the amount, which may be found due and payable under the loan facility, with interest at 3 % above the State Bank rate with minimum interest at 11 % per annum. The defendants also executed letters of arrangement, continuity and pledge on the same date in favour of the plaintiff.

Further reliance is placed upon defendant's letter dated 13-10-1976, which is purported to constitute acknowledgement within the meaning of section 19 of the Limitation Act.

2. The defendants were served with summons in the form prescribed under Order XXXVII, C. P. C. On 20-9-1978 which required them to obtain leave to defend the suit from the Court within 10 days.

However, no application for leave to defend was made and instead an application under Order VII, r. 11, C. P. C was filed on 24-10-1978, which was dismissed as withdrawn on 14-1-1979. The defendants moved the present application on 14-1-1979 under rules 22 and 23 of the Sind Chief Court Rules, read with Order XXXVII, rules 2 and 3 and section 151, C. P. Code.

3. Mr. Mohsin Siddiqui, learned counsel for the defendants, contended that the suit as framed did not lie under Order XXXVII, C. P. C. And it was, therefore, not necessary for the defendants to apply for leave to defend and the suit was liable to be tried as an ordinary long cause suit. According to him mere mention of Order XXXVII, C. P. C. In the plaint did not alter the nature of the suit and it was open to the Court to examine the pleadings in order to satisfy itself as to whether the suit in fact did lie under the said Order. It was contended that the nature of claim and the kind of decree to be passed on are be both laid down in Order XXXVII which have restricted scope. According to Order XXXVII the amount claimed in the suit must be based on an instrument as mentioned in rule 2 thereof and the decree can be passed only for the principal sum due on the instrument and the interest calculated thereon in the prescribed manner. He relied upon the plaint and pointed out that admittedly the promissory note was secured by the plaintiff as a security for the payment of the loan and the amount shown therein was not paid to the defendants on its execution. He further referred to the statement ' of account filed with the plaint to show that the defendants were in fact paid only Rs, 63,317 at the time of the execution of the promissory note. He further made reference to various entries in the statement of account which pertain to service charges, duty, sales tax and godown rent and contended that there was no agreement between the parties for the payment of such charges and the plaintiffs had, therefore, to prove the same as also satisfy that the same were legally recoverable. The learned counsel did not press the application under Order XXXVII, rules 2 and 3, C. P. C. And confined his arguments on the basis of section 151, C. P. C. And rules 22 and 23 of the Sind Chief Court Rules.

4. Mr. Hamza Ali, learned counsel for the plaintiff, opposed the application and contended that since the defendants were duly served with notice prescribed under Order XXXVII, C. P. C. And no leave to defend, as required under rule 3 had been obtained, the defendants could not be heard in the matter and the claim of the plaintiff was deemed to be admitted and the suit decreed accordingly. According to him the contention raised by the learned counsel for the defendants, at best, may have justified the grant of leave to defend, which, however, was not asked for. He relied upon a judgment in the case of Bank of Bahawalpur v: Sind Punjab Agencies (1) to support his contention that the suit was competent under Order XXXVII, Civil Procedure Code. He also relied upon section 44 of the Negotiable Instruments Act.

5. I have given some anxious consideration to the contentions raised-by the learned counsel. The provisions of Order XXXVII, C. P. C. Need close examination for the determination of the contentions raised by the-learned counsel. Order XXXVII, rule 2 is as under : "2.-(1) All suits upon bills of exchange, hundies or promissory notes, may in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed : but the summons shall be in Form No, 4 in Appendix B or in such other form as may be from time to time prescribed.

(2) in any case in which the plaint and sommons are in such forms respectively the defendants shall not appear or defend the suit unless

(I) PLD 1966 Kar. 249 he obtains leave from a Judge as hereinafter provided so to appear and defend ; and, in default of his obtaining such leave or of his appearance and defence in pursuance thereof the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree ;

(a) for the principal sum due on the instrument "and for interest calculated in accordance with the provisions of section 79 or section 80, as the case may be of the Negotiable Instruments Act, 1881, up to the date of the institution of the suit, or for the sum mentioned in the summons whichever is less and for interest up to the date of the decree at the same rate or at such other rate as the Court thinks fit ; and

(b) for such subsequent interest, if any, as the Court may order under section 34 of this Code ; and ' No Form of plaint has been prescribed as mentioned in sub-rule (1) of rule 2. However, the defendants were admittedly served with the summons in the prescribed form. Sub-rule (2) lays down that in any case in which the plaint and summons are in the prescribed form, the defendant shall not appear or defend the suit unless he obtained leave and in default the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree. According to clause (b) of sub-rule (2), such decree is to be for the principal amount due on the instrument and for interest as specified therein. It is thus clear that the basis of the claim in a suit under Order XXXVII must be confined to any of the instruments mentioned in sub-rule (1) of rule 2 and the power of the Court is also restricted to the grant of a decree for the principal sum due on the instrument and interest calculated in the prescribed manner. As such the mandatory requirement of Order XXXVII is that the plaint should disclose an open and shut case ; for the plaintiff to prove, and the defendant to defend, with reference to the instrument relied upon in the plaint and no more. The nature of the pleading under the Order, summary as the same are, aimed at speedy disposal of the suits, leaving title for the Court to do by way of framing of issues and recording of evidence ; the only proof required, being in respect of the instrument relied upon.

' The plaintiffs have claimed interest at 13% with monthly rests and interest at the rate is included in the suit amount. Promissory Note provided for payment of interest at 3% above the bank-rate and, therefore, evidence will be necessary for proving the thank rate at the relevant time and a decree cannot be passed straightaway. Besides the plaintiff will also have to prove the amount of service charges, duty, sales tax and godown rent regarding which there is, nor could be any agreement in the promissory note. In the circumstances the allegation in the plaint with regard to the amount claimed cannot be deemed to be admitted within the meaning of sub-rule (2) of rule 2 Order XXXVII. In order to bring the suit within the meaning of Order XXXVII, it is to be judged whether decree can be passed as laid down in clause (a) of sub-rule (2) of Rule 2 of Order XXXVII, that is, for the principal amount due on the instrument and for interest which is to be calculated either on the basis laid down in the instrument itself and otherwise B in accordance with the provisions of section 79 or section 80, as the case may be, of the Negotiable Instruments Act, 1881. Such requirement is no present in the instant suit.

' The judgment in the case of Bank of Bahawalpur referred to above is distinguishable on facts and is not relevant. Section 44 of the Negotiable Instruments Act will also have no application to the facts of this case. The said section simply lays down that when the consideration for which a person signed a Promissory Note, Bill of Exchange or Cheque consisted of money and, was originally absent or has subsequently failed in part, the sum which a holder, standing in immediate relationship with such signer is entitled to receive from him, is proportionalely reduced. This provision can be called in aid only where there was any failure of consideration originally or subsequently in part only, in which case the amount recoverable under the instrument is liable to be reduced in proportion to such failure.

8. For the foregoing reasons the application must be granted and the suit is ordered to be treated as an ordinary long cause suit and the same will be tried accordingly. The defendant should now file the written statement within two weeks and further proceedings should be regulated by the Additional Registrar as applicable to ordinary suits.