NATIONAL DEVELOPMENT FINANCE CORPORATION Versus NATIONAL DEVELOPMENT FINANCE CORPORATION

ORDER

The instant R.F.A. No.62 of 1998 as also R.F.A. No.59 of 2000 are connected matters, thus are being disposed of together.

2. Briefly stated the facts of the case are that, the respondent N.D.F.C, brought a suit for the recovery of an amount of Rs.61,660,547.07 inter alia against the appellant, suing it as the guarantor, for the finance provided to Pakistan Switchgear Limited. Pakistan Switchgear Limited, did not contest the matter. The appellant applied for leave to appear and defend, which application has been partly dismissed to the extent of the claim of the respondent for the amount of Rs.26,793,585, under the interim decree passed on 15‑1‑1998, which is impugned in this appeal. But the leave was granted with regard to the claim of liquidated damages of the respondents. Anyhow, during the pendency of this appeal, the respondent's claim of liquidated damages has been denied through the final judgment dated 2‑6‑1999, which has been impugned in R.F.A. No.59 of 2000 by the N.D.F.C.

3. Learned counsel for the appellant, while arguing the case stated that, admittedly there are three finances granted to the original borrower, which were through the finance agreements dated 25‑6‑1998, 27‑9‑1988 and 2‑5‑1989, and are based upon Islamic mode of financing i.e. the mark‑up basis; Clause 4 of these agreements, clearly stipulates that, the guarantees shall be given by the appellant in pursuance of the agreement; according to clause 4(e), the respondent N.D.F.C was bound to recover the amount in the first instance from WAPDA, but it committed a lapse in the performance of its obligation, resultantly, the appellant in terms of section 139 of the Contract Act, stands discharged. It is also argued that, according to condition No.13 of the agreement, the disbursement of the finance, made to the borrower, was to be on the basis of specific schedule depending upon the progress of supply orders of WAPDA, but in breach of this condition, the respondent had disbursed the financing in lump sum, therefore, the guarantee of the appellant, which is strictly on the basis of the financing agreement, cannot be enforced. Lastly, it is submitted that, according to the statement of accounts at page 94 of the file, certain amounts, such as central excise duty, liquidated damages and mark‑up price, have been unauthorizedly entered and exaggerated; these amounts are liable to be excluded.

4. We have heard the learned counsel for the parties and find that, under the law, the guarantee is an independent contract between the parties. In these guarantee documents, which are admitted by the appellant, the appellant in clear, unequivocal and unambiguous terms had guaranteed to stand A as surety for whatever amount is due to the respondent from the main borrower. As the main borrower in this case undoubtedly has defaulted in the payment of the dues, resultantly, the appellant was bound to discharge its surety obligation. From the record and also the arguments, raised before us, we do not find that, the provisions of section 139 of the Contract Act, are attracted to the facts and circumstances of the case. Resultantly, we do not find any merit in the argument, which is hereby repelled.

5. As regards the argument that, according to condition No.13 of the contract, the amount has been disbursed to the respondent in lump sum, suffice it to say that, again the same reason shall prevail that the appellant, irrespective of the main agreement, stood surety for repayment of the amount due from the principal borrower and this obligation is not dependent upon any terms of the finance agreements mentioned above. Thus even if there is some deviation; which cannot be equate to a breach of the contract, and the amount in lump sum has been paid to the borrower, that does not absolve the appellant from its liability as a surety.

6. The last submission that, unauthorized and excessive amounts have been added to the statement of accounts, we have considered the mark‑up agreement and find that, the amount claimed in the suit, is strictly in line with the mark‑up price of the agreements. Nothing excess thereto has been claimed or granted to the respondent, by virtue of the impugned decree, therefore, the argument has no force. Resultantly, we do not find any merit in this appeal (R.F.A. No.62 of 1998), which is hereby dismissed.

7. As regards the second appeal (R.F.A. No.59 of 2000), the question involved is, whether in the final decree, the Court below has rightly refused to grant the liquidated damages to the appellant in this appeal. The learned counsel for the appellant has tried to argue that, the liquidated damages can be agreed to be paid by the parties in case of the violation; however, condition entitling the liquidated damages is that, the person, claiming the amount needs to prove the loss suffered on account of the violation; in this case, the appellant has duly established on the record that, they had suffered damages/loss due to the non‑payment of the amounts of finance, on the due date.

8. We are afraid, this argument has no force for the reason that, according to the view of a Division Bench of this Court in the case reported as Allied Bank of Pakistan Limited Faisalabad vs. Messrs Asisha Garments through proprietor and 2 others 2001 MLD 1955, the term "finance" does not include the liquidated damages under the Banking Tribunals Ordinance, 1984 and, therefore, the claim of the bank in this behalf does not fall within the purview of the jurisdiction of the Banking; Tribunals, as is in the present case. Moreover, the learned counsel for the appellant has failed to establish on the record, if before the institution of the suit, the guarantee was ever enforced by the respondent and that was refused. Resultantly, in the light of above particular law cited, we do not find any merit in this appeal, which is hereby dismissed.

9. However, before parting, on the request of the learned counsel for the appellant in R.F.A. No.62 of 1998, we would like to observe that, the present judgment shall not cause prejudice to the rights of the appellant, if it wants to settle the matter with the respondent on the basis of a compromise or any incentive scheme of the State Bank of Pakistan.

M.A.W./S‑49(A)/L Order accordingly.