SINDH ENGINEERING & BANGLE WORKS HYDERABAD through 4 Partners vs HABIB BANK Ltd

1. ' This appeal is directed against judgment and decree dated 31-3-1971, passed by the 1st Addl.

2. District Judge, Hyderabad, in Suit No,24 of 1968, filed by the respondent against the appellant, whereby the amount claimed by the respondent was decreed with interest.

3. ' The respondent had granted a loan of Rs,30,000 to the appellant firm. It was stipulated that the aforesaid loan would be repaid in instalments and that in case of default in payment of one instalment, the entire balance of the loan amount would become due and payable. For repayment of the aforesaid loan, the appellant through their partner Haji Abdul Latif executed a promissory note on 7-5-1965 for himself and on behalf of all the partners in the sum of Rs,30,000 with interest from the date of execution of the said promissory note at the rate of Rs,2 per cent per annum over the existing State Bank of Pakistan rate with a minimum of 6 per cent per annum with monthly rests.

4. ' The defendants committed default in payment of instalments and in view of the aforesaid stipulations between the parties, the entire amount became due and payable. A final notice was served on the appellants claiming Rs,21,935 including interest up to 29-2-1967. On appellants' failure to pay the amount, the suit was filed. The appellants admitted the receipt of the loan execution of the promissory note. It was, however, contended that since the loan was against hypothecation of stock and machinery and as also a shop and a house was equitably mortgaged with the respondent, the suit on the basis of the promissory note was not maintainable. The liability to pay the interest with monthly rests was also denied. Plea was also raised with regard to maintainability of the suit under the Negotiable Instruments Act, 1881. The trial Court after recording the evidence, decreed the suit of the plaintiff allowing stipulated interest at the rate of 6% per annum with monthly rests till the date of filing of the suit and simple interest at the rate of 6% per annum was allowed from the date of institution of the suit till recovery thereof.

5. ' I have heard Mr. Kazi Qadir Bux, the learned Advocate for the appellants and Mr. Hakim All Siddiqui, the learned counsel "for the respondent.

6. ' The learned Advocate for the appellants contended that in view of the fact that the loan was secured by hypothecation of the stock and machinery and quitable mortgage of a house and a shop, the suit on the basis of promissory note was not maintainable and has been wrongly decreed by the Court. In support of his contention, he has relied on PLD 1962 Kar. 271 National Bank of Pakistan v. SA. Sattar and others. The above contention is without any substance. The promissory note by itself provides an independent cause of action. Merely the fact that the appellants had secured the repayment of the loan by mortgage in addition to promissory note, would not deprive the respondent to enforce the recovery of the loan on the basis of the promissory note. The only bar in this regard is contained under Order XXXIV, Rule 14, C.P.C. Which provides that where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, he shall not be entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage. Under such circumstances the creditor would be required to file a separate suit for recovery of the amount from the mortgaged property on the basis of the mortgage. The law thus provides dual protection to the creditor. The aforesaid authority also enunciates the same law and does not support the submission made by the learned counsel for the appellants.

7. It was next contended by the learned counsel that the promissory note was not presented for payment within the period prescribed in section 67 of the Negotiable Instruments Act, 1881 after the date fixed for payment of each instalment and, therefore, the non-payment of the instalment, would not have the effect to mature the aforesaid promissory note so that the entire amount could become due and payable. The above submission is also of no substance. Firstly, the promissory not does not by itself provide any instalments whatsoever. The stipulations with regard to payment of the amount borrowed by the appellant in instalments was provided by a separate document and so far as the promissory note is concerned, it provides that the amount mentioned therein together with the interest shall be payable on demand. Secondly, on the reading of section 67 of the Negotiable Instruments Act, 1881, it is clear that it would be applicable only if the instrument provided that the instalments shall be paid on the dates specified and did not contain any stipulation to the effect that on default of payment of any instalment, the entire amount or the remaining balance would become due. In the document of instalments executed between the parties, it was specifically stipulated that in case of default in payment of one instalment by the due date, the entire amount due under the promissory note, would immediately become due and payable. The consequence is that on such default having occurred, the stipulation with regard to payment of instalments also ceased to be operative and the entire unpaid amount became due and payable. Under such circumstances the aforesaid section 67 was not any more applicable. In this case on occurrence of the default, notice was given and the appellants were informed that the whole sum was due and demand of such payment was made, but the appellants failed to pay the amount on demand made, the promissory note being payable on demand and as such the decree has been rightly awarded by the Court below. No other point was urged.

8. ' This appeal is, therefore, dismissed with costs.