INDUSTRIAL AIR CONTROL (PAK.) (PVT.) LIMITED, KARACHI Versus ALPHA INSURANCE COMPANY LTD.

1. By this appeal, the appellant has assailed the judgment passed by ivth Additional District Judge (South) Karachi in Civil Suit No. 4 of 1987. Briefly the facts are that the present respondent No.l had filed the said suit under Order XXXVII, C.P.C. for recovery of a sum of Rs.65,000 against the present appellant. The case of the plaintiff is that the defendant in suit had dealings with Shaafi Woollen Industries Limited, Karachi and at the instance of the defendants in the suit who are present appellants, the present respondent No.l had executed unconditional guarantee at Karachi on 24‑3‑1986 in favour of the Messrs Shaafi Woollen Industries Limited guaranteeing on demand and without any reference to the contractors the payment a sum not exceeding Rs.65,000 to the said Woollen Industries. According to the terms and conditions of the guarantee and said amount on demand by the said woolen Industries would be final binding and conclusive. The present appellants are also said to have executed a counter‑guarantee in favour of the present respondent No.l undertaking to pay to them on demand any sum of money which they had to pay to them or they are called upon to pay under the said guarantee against the advance deposit payment together with all costs, charges and expenses. The present appellant No.2 also executed such counter‑guarantee on 24‑3‑1986 undertaken jointly and severally to the present respondent No.l. It is also in the plaint that the present appellant through his Finance Director/Defendant No.3 in the suit and appellant No.3 in present appeal executed a promissory note on 27‑3‑1986 to the said effect. On 3‑9‑1986 the said Woollen Industries lodged their claim for Rs.65,000 with the present respondent No.l on 27‑10‑1986 informed :he Woollen Industries to receive their claim and enclosed a cheque No. 575144 dated 27‑10‑1986 drawn on National Bank of Pakistan, Main Branch, Karachi for Rs.65,000 in full and final settlement of the claim. The present respondent No.l then after serving a legal notice filed the said suit. In the suit an application was moved by the present appellants Nos.l and 3 for grant of leave to defendant and that application was allowed on 22‑12‑1987 whereby the leave was granted to defend the said suit subject to their furnishing security in the sum of Rs.65,000 with in two weeks. This security was not furnished within time allowed. However, on 11‑1‑1988 an application for extension of time was made and time was extended till 21‑1‑1988 and the matter was adjourned to 27‑1‑1988. However, even during this extended time security was not furnished and on 27‑1‑1988 the present appellants Nos.l and 3 were debarred from contesting the suit and the suit was decreed as prayed. mainly on the ground that the guarantee and execution of promissory note were admitted. Being aggrieved the present appellant have preferred this appeal.

2. I have heard Mr. S. Nasiruddin, Advocate for the appellant and Mr. Muhammad Shareef, Advocate for the respondent No.l. Advocate for the respondent No.2 is called absent through notice was sent to him through registered post A.D. on 17‑9‑1992.

3. Mr. S. Nasiruddin, Advocate for the appellants has referred to the order dated 3‑4‑1988 by which this appeal was admitted for regular hearing. Part of the said order reads as under:

4. "It has been contended that even if a decree was to be passed for the reason that the appellant had failed to furnish the security in terms of the order to grant leave to learned Court while passing decree should have taken into consideration the sum of Rs.31,875 which amount was not paid by the Purchaser.

5. The contention raised required consideration. Admit. Notice."

6. In view of the above, the contention of the learned counsel for the appellants is that the Court should have examined the record in the suit and adjusted the amount already received by the said Woollen Industries while passing the decree. The learned counsel has further submitted the terms and conditions of the guarantee which is at page 6 of the Paper Book read as under:

7. "On demand and without any reference to the contractor we will pay you a sum not exceeding Rs.65,000 (Rupees sixty‑five thousand only), less any amount, which may have been already adjusted by the Contractor to you through reduction from their running bills, provided that the sum demanded. by you, hereunder shall be final, binding and conclusive on us."

8. From this the learned counsel has submitted that the amount of above Rs.31,000 which was paid to the said Woollen Industries ought to have been reduced from the suit amount. A perusal of the record of the lower Court shows that in the case the defendants who are appellants were debarred from contesting the suit. In view of the fact that security was not furnished by them and, therefore, there is no evidence on record to show if such amounts, were paid nor any such evidence can be considered in the suit. Under the provisions of Order XXXVII, Rule 3 (2) the leave was granted subject to furnishing the security, and in case such security is not furnished the consequence is that the suit is to be decreed in terms of the contents of the plaint. In the case of Iftikhar Ahmed v. Muhammad Younas Khan (1982 CLC 2114)

9. Ajmal Mian. J.‑‑‑(as his Lordship then was) held as under:

10. "In the instant case it is an admitted position that the appellant did not avail of the matter in the leave which was granted by the consent of the respondent as he has failed to furnish surety acceptable to the Court. In this view of the matter the learned District Judge was entitled to pass a decree on the basis of the averments contained tin the plaint. A Court is required to give reasons under Order XX, rule 4 when the parties are at issue; which was not the case in the instant case."

11. Also in the case of Allied Bank of Pakistan v. V.C. Khilanani and 2 others (PLD 1984 Karachi 127). Saleem Akhtar, J: ‑‑(as his Lordship then was) has observed as under:

12. "Therefore, in a case where leave has been granted on certain conditions and defendant does not fulfil the conditions the leave granted to him will not be operative. In such circumstances, as well as where the defendant does not appear and apply for leave to defend, the Court is empowered to decree the suit taking the averments made in the plaint to be admitted."

13. Mr. S. Nasiruddin, Advocate for the appellant has submitted that the present appellant have already filed the suit against the Shaafi Woollen Industries for the amount received by them which is pending before this Court. It may be observed that the present appellants may continue with their above said suit and this judgment will not operate as res judicata or a bar in that suit.

14. In view of the above discussion this appeal is dismissed with no order as to costs.

15. H.B.T./I‑242/K Appeal dismissed.