STATE ASSOCIATES Versus FARBEN INDUSTRIAL DEVELOPMENT S.PA.

SALAHUDDIN MIRZA, J.‑‑‑ This appeal arises out of Execution Application No.73 of 1988 (PJ/s. State Associates Karachi v. M/s. Farhan Industrial Development Torino, Italy) filed by Appellant/Decree‑holder in which M/s. United Bank Respondent No.2 were listed as Garnishee No.2 and M/s. Haryana Asbestos, Karachi were fisted as Garnishee No.1. In the said execution application two miscellaneous applications were moved, first is C.MA. No.1493/88 moved by appellant decree‑holder/plaintiff for the grant of Garnishee Order against Respondent No.2 Garnishee No.2 for deposit and payment of Rs20,32,557 towards the satisfaction of the decree dated 4‑11‑1987 against Respondent No.1 judgment‑debtor in Suit No.6 of 1986 and the second is C.MA. No.713/89 moved by Respondent No.2/Garnishee No.2 for the discharge of Garnishee notice/order directing the bank to deposit the said amount in the Court, pending the final disposal of execution application. Both these miscellaneous applications were disposed of by impugned order dated 15‑1‑1991 whereby C.MA. No.1493/88 was dismissed and C.M.A. No. 713 was granted.

2. The brief facts of the case are that the Appellant‑firm is carrying on business, on commission basis, as indentors, commission and sale agents and sale‑promoters of foreign maufacturers of industrial plant and machinery. It executed an agreement with Respondent No.1/Judgment‑Debtor on 31‑1‑1983 whereby Appellant/decree‑holder was appointed local Agent of Respondent No.1 judgment‑debtor for the sale of its machinery etc. The Appellants, acting as such agents, arranged a deal with ht/s. Haryana Asbestos for the sale of some machinery of Respondent No.1 to M/s. Haryana Asbestor Cement' Industries Limited, Karachi and earned commission @ Rs.5% of sale‑price amounting to U.S. $ 1,50,000 which is equivalent to Rs.20,17,500. This commission having not been paid, the Appellant filed Suit No.6 of 1986 against Respondent No.1 and obtained a decree in the above amount plus costs of Rs.15,057. The entire decretal amount still remains unsatisfied. The Appellant filed Execution Application No.73 of 1988 on 31‑5‑1988 seeking attachment of judgment‑debtor's/Respondent No.1's amounts lying with M/s. Haryana Asbestos Cement Industries Limited and with Respondent No.2 as Garnishee. It is in the form of bills of exchange issued by Respondent No.2/Garnishee No.2 M/s. United Bank in favour of Garnishee No.1 (Respondent No.1/judgment debtor). According to learned Single Judge, the point at issue was as to whether any debt was payable by M/s. U.B.L., to the judgment debtors. Since the bills of exchange were endorsed to third parties, the last endorsee being National Bank of Pakistan London, learned Single Judge decided the above issue in the negative and dismissed C.M.A. Noy1493/88 whereunder the decree‑holder had sought attachment of the amounts of the bills of exchange to the extent of the decretal amount, and granted C.MA. No.71389 filed by Respondent No.2 for discharge of notice served upon Respondent No.2 for depositing the said amount in Court. Hence this appeal.

3. Respondent No.2 has filed cross‑objections under Order 41, Rule 22, C.P.C. in which it has raised the following points:‑

(1) The judgment and decree being ex parte and judgment‑debtor being a foreign company, notice of execution application to judgment‑debtor was statutory requirement without which notice to Respondent No.2 as garnishee could not be issued and, therefore, execution application was not maintainable.

(2) That the liability under the irrevocable and unconditional bank guarantee dated 27‑2‑1984 was not a debt but a loan which was not subject to attachment.

(3) No process can be issued to restrain the bank from making payment under the said bank guarantee except for fraud which is not even alleged here.

(4) M/s. Haryana Asbestos/Garnishee No.1 was a necessary party to the appeal but since it is not impleaded, the appeal is not maintainable.

4. Learned counsel of the parties have been heard.

5. Judgment‑debtor/Respondent No.1 did not contest execution proceedings or this appeal just as it had not contested the suit itself. Respondent No.2 (United Bank Limited) alone has contested these proceedings. In support of its application (C.MA. No.713/89) its Manger filed his affidavit in which he stated that the amount lying in the account of Garnishee No.1 (M/s. Haryana Asbestos) did not belong to Garnishee No.1 but was placed in its account by Bankers Equity Limited as an advance to be re‑paid by Respondent No.1 with mark‑up and that the Garnishee Bank had also executed the foreign guarantee for 85% deferred payment to be paid to the exporter (judgment‑debtor) and that the bank had already incurred a liability of Rs.4,88,74,990 for having paid in 8 instalments out of 16 instalments, the remaining 8 instalments still remaining to be paid. It was further claimed by Respondent No.2 that it had provided Rs.39,09,600 to Garnishee' No. 1 (M/s. Haryana Asbestos) as working capital which amount was also outstanding in full.

6. Annexure `F‑6' is the bank guarantee dated 27th February 1984 executed by Respondent No.2/Garnishee No.2 (United Bank Limited) on ‑behalf of Garnishee No.1 M/s. Haryana Asbestos (not a party to this appeal) and in favour of Respondent No.1 judgment‑debtor. The Bank Guarantee lays down the schedule of payment of the 16 instalments amounting to a total of 34,17,000 U.S. dollars.

7. The case of the appellant is that endorsements on the bills of exchange are fictitious or at any rate they have not been proved and that presumption under section 118 of Negotiable Instruments Act arises only after the execution of the endorsements is proved or is admitted by the person liable (i.e. by M/s. Haryana Asbestos). It was argued that burden to prove non‑genuineness of endorsements does not arise and that what arises is the burden to prove genuineness of the endorsements.

8. The simple question for determination in this appeal is whether Respondent No.2 owes any debt to judgment‑debtor or, as the learned Single Judge has put it "to whom the debt is owed by Garnishee No.2".

9. There is no denying the fact that all the bills of exchange bear various endorsements and the last endorsee is National Bank of Pakistan London but learned counsel of appellant says all endorsements are fictitious and, at any rate, unproved and repelled any presumption under section 118 of Negotiable Instruments Act by saying that such presumption arises only after the endorsements are proved or admitted by the person liable under them and he, further said that there is no such thing as `burden of proving the non- genuineness of the endorsements' because the burden lies the other way round and on the person who alleges that they are genuine and it is for him to prove that they are genuine. We are afraid we cannot subscribe to this proposition. A bare reading of section 118 of Negotiable Instruments Act, specially of its clauses (a), (e) and (g) is enough to repel the proposition propounded by learned counsel of the appellant. Another contention of learned counsel of the appellant, that section 118 is not applicable to the appellant, is equally untenable. He had relied on AIR 1965 SC 920 but the facts of this judgment are quite distinguishable. It was next contended that when onus of proof is placed upon Respondent No.2 which was asked by this Court vide order dated 31‑5‑1990 to first lead evidence, such party cannot take protection of section 118 of Negotiable Instruments Act and in support of this view reliance was placed upon the judgment in the case of Salar Abdur Raoof v. Mst. Barkat Bibi (1973 SCMR 332) wherein it is held that when a plaintiff undertakes to produce evidence to show that pro‑note is for consideration but fails, he cannot turn round and invoke presumption under section 118. Learned counsel of the Appellants also relied on the judgment in Chandan Lai Joura v. M/s. Amin Chand Mohan Lai (AIR 1960 Punjab 500) in which it is observed that a defendant may discharge burden of proof placed upon him under section 118(a) either by producing definite evidence showing that consideration had not passed, or, by relying upon facts and circumstances of the case, and also by referring to the flaws in the evidence of the plaintiff, and may then contend that the presumption has been rebutted. The next judgment in this regard is J.K. Shaha v. Dula Mian (AIR 1939 Rangoon 334) which is to the effect that production of promissory note itself, once the signature is proved or admitted, shifts the burden to the maker and that consideration is presumed in the case of Negotiable Instruments and need not be proved independently as in the case of an ordinary suit founded upon contract and, further, that circumstances may weaken the presumption that negotiable instrument has been executed for value received and when all the facts are before the Court then presumption raised under section 118 may be rebutted and burden of proof shifted back to the plaintiff but that it is plain contravention of the statute to ignore presumption raised in the first instance. Last judgment on the subject is A.N. Ran v. G. Vinkata Pay ya (AIR 1937 Mad. 182) which is to the effect that onus of proof under section 118 need not always be discharged by direct evidence by person sued on pro‑note as to want of receipt of consideration and that when evidence has been adduced on both sides, the question of onus is a material or deciding factor only in exceptional circumstances and that apart from relying on evidence on record, the Court may also draw an adverse inference against a party which being in a position to adduce better evidence deliberately abstains from doing so.

10. We have taken into consideration the law laid down in the above mentioned judgments but we are of the view that, under the peculiar circumstances of the case, it is not possible to say, on the basis of the evidence on record, that the endorsements on the bills of exchange are not for valuable consideration. As held in AIR 1939 Rang. 334, it is in plain contravention of the statute to ignore, in the first instance, the presumption raised under section, 118 of Negotiable Instruments Act that all endorsements were made in the order in which they are recorded on the instrument and are for valuable consideration. Respondent No.2/Garnishee No.2 examined two witnesses in furtherance of the order of this Court dated 31‑5‑1990. One of these witnesses is Aijaz Ali Zubari, Vice‑President of National Bank of Pakistan, Head Office Karachi, who proved that National Bank of Pakistan London Branch is the last endorsee for valuable consideration. Learned counsel of the appellant pointed out that Respondent No.2 had failed to lead any evidence to show that the first three endorsements were for consideration and even in the case of the last endorsee (National Bank (if Pakistan London Branch), it was incumbent upon respondent No.2 to examine some one from London Branch of National Bank of Pakistan. We are not impressed by this argument. Mr. Zubari, Vice -President .of National Bank of Pakistan, Head Office Karachi, who was examined by respondent No.2, had dealt with this transaction in the usual course of business and was specking on the basis of record. Notwithstanding the fact that learned Single Judge says that the evidence adduced by Respondent No.2 suffers from technical defects, it nevertheless supports an(.] augments the presumption under section 118 of Negotiable Instruments Act as to the last endorsement being for consideration. Under the circumstances, we are of the view that it was not necessary for respondent No.2 to examine some one from London Branch of National Bank of Pakistan. Besides, even if the evidence adduced by respondent No.2 is insufficient or inadequate or technically defective, what evidence was adduced by the appellant to rebut it and to prove its contention? The answer is "Nothing". If the appellant was so, keen for someone from National Bank of Pakistan London to be examined, it could have requested the Court to call someone from National Bank of Pakistan London either as its witness or as a Court witness to rebut the evidence of Mr. Aijaz Ali Zubari. And we would repeat that we would proceed with the initial presumption that National Bank of Pakistan London is endorsee for valuable consideration.

11. Yet another contention raised by learned counsel of the appellant is that in para. 6 of their C.M.A. No.713/89, Respondent No.2 admitted that "a sum of Rs.4,88,75,900 with mark up is due by Garnishee No.1 to it (Respondent No.2) uptil then and the bank was yet to incur further pecuniary liability in paying the balance of eight instalments under their said letter of guarantee and this assertion of Respondent No.2, which was repeated in para. 4 of supporting affidavit appended to C.M.A. No.713/89, amounted to an admission on the part of respondent No.2 and on its basis order for attachment and payment under Order 21, Rule 46, C.P.C. must follow. In this connection he also referred to Court order dated 10‑12‑1989 which shows that a similar statement was made by learned counsel of respondent No.2 before the Court In our view, there is no force in this argument. As was pointed out by learned counsel of respondent No.2, on the authority of AIR 1935 All. 946 (B.U. Singh v. Lakshmi Chand), an admission in pleadings must be taken as a whole and it cannot be directed so as to take a certain portion out of the pleadings and discarding or ignoring the rest and learned counsel also pointed out paras 1 and 2 of C M.A No.713/89 in which respondent No.2 had stated that the amount lying deposited with it is so lying under a special contract and respondent No.2 has no general lien over it and cannot appropriate it to clear its own large outstanding amount and that the amount lying deposited with it is part of Rs.73,16,920 which had been placed to the credit of Garnishee No.1, being advance granted by Bankers Equity to Garnishee No.1 for certain specific purpose. We are satisfied that when the pleadings of respondent No.2 are considered as a whole, no' such admission remains as claimed by learned counsel of the appellant.

12. We were also referred to Tannon's `Banking Law and Practice in India' wherein at page 575 two Indian Supreme Court authorities were quoted (U.P. Co‑operative Federation Limited v. Singh Consultants & ' Engineers (Private) Limited (1989) 65 Comp. Case 283 (SC) and United Commercial Bank v. Bank of India and others AIR 1981 SC 1426) to the effect that "an irrevocable commitment either in the form of a confirmed bank guarantee or an irrevocable letter of credit cannot be interfered with except in the case of fraud or where a case of apprehension of irretrievable injustice has been made out In order to restrain the operation either of an irrevocable letter of credit or of a confirmed letter of credit or of bank guarantee, there should be a serious dispute and there should be a good prima facie case of fraud, and special equities in the form of preventing irretrievable injustice between the parties. Otherwise, the very purpose of bank guarantees would be negatived and the fabric of trading operations would get jeopardised" and that the banker's obligation under an irrevocable letter of credit to pay is absolute and his buyer‑customer cannot instruct him not to pay and that the same principle applies to bank‑guarantee and that a letter of credit sometimes resembles and is analogous to a contract of guarantee and, on the basis of these observations it was contended that payment under the bills of exchange cannot be interfered with.

13. Learned counsel of respondent No.2 was also of the view that it was mandatory for the Court to serve notice of execution application upon Garnishee No.1 . (M/s. Haryana Asbestos) and upon respondent No.1/judgment‑debtor in terms of Order 21, Rule 22, C.P.C. but we find no merit in this objection because such notice is necessary only when execution application is moved more than one year after the date of decree whereas in the present case it was moved within this period, the date of decree being 4‑11‑1987 and date of moving execution application being 31‑5‑1988.

14. The upshot of the above discussion is that we hold that the burden to prove that the endorsements on the bills of exchange were not made for consideration or were fictitious lies on the appellants and the same has not been discharged to our satisfaction and, under the circumstances, respondent No.2 United Bank cannot be restrained from honouring the bills of exchange in the usual course of business. Otherwise, to quote Tannon from his `Banking Law & Practice in India', "the very purpose of bank guarantees would be negatived and the fabric of trading operations would be jeopardised". In short, we are in full agreement with the conclusions arrived at by learned Single Judge and find no merit in the appeal which is accordingly dismissed. The parties are left to bear their own costs.

A.A./S‑787/K Appeal dismissed.