2007 C L D 435

[Lahore]

Before Mian Saqib Nisar and Fazal-e-Miran Chauhan, JJ

UNITED BANK LIMITED---Appellant

Versus

Messrs USMAN TEXTILES and 6 others---Respondents

R.F.A. No. 186 of 2003, heard on 20th November, 2006.

(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

---S.9---Suit for recovery of loan amount---Charging of markup/interest on principal

amount beyond contract-agreement period---Entitlement---Mark-up/interest could only
be charged under agreement between parties or if permissible under law, but not
otherwise--Mark-up could not be charged beyond contract period.

(b) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

----S.9---Suit by Bank for recovery of amount paid as penalty imposed upon borrower by
State Bank for not exporting goods for which finance was awarded---Validity---State
Bank under the rule and Scheme had authority to impose such penalty---Borrower had to
incur burden of such penalty---Bank was well within right to claim and recover such
amount.

(c) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

----Ss.9 & 10---Contract Act (IX of 1872), Ss.133 & 135---Suit for recovery of loan
amount---Application by guarantor for leave to defend suit--Questions requiring
consideration were: whether documents on basis of which guarantor was sued were
executed by him with regard to loan facility for recovery of which suit was filed: whether
in finance for which defendant stood surety had been adjusted, and thus he was
discharged as guarantor---Leave to defend suit was granted to guarantor in circumstances.

Mian Aftab A. Sheikh and 2 others v. Messrs Trust Leasing Corporation Limited and
others 2003 CLD 702 rel.

Syed Ali Zafar for Appellant.

Muhammad Khalid Sajjad Khan for Respondent.

Date of hearing: 20th November, 2006.

JUDGMENT

MIAN SAQIB NISAR, J.---The suit filed by the appellant-Bank against the respondent.
No.1, as the principal borrower, a partnership concern; respondents Nos.2 to 4, as the
partners of the said firm .and respondents Nos.5 and 6 as mortgagors/ guarantors of the
finance, has been partly allowed by the learned Banking Court vide judgment and decree
dated 20-2-2003.

2. Brief facts of the case are that on 14-11-2002, the appellant brought a suit for the
recovery of Rs.66,80,300 against the respondents and except respondent No.3, who did
not file the leave application and was proceeded ex parte, all the other respondents moved
such applications, which were dismissed. Yet, the learned Banking Court has awarded a
decree for an amount of Rs.37,71,984.83; the decree for the remaining suit amount has
been refused for the reason that after the expiry of the finance agreement, the appellant-
Bank could not charge the mark-up, which amount was added in the suit, but excluded by
the Banking Court. Besides, the Banking Court, has also refused the decree for an amount
of Rs.1,32,460, which was claimed in the suit, but was not an amount towards the
finance, rather was imposed upon the principal borrower as penalty by the State Bank of
Pakistan, for lack of exports of the goods, for which the finance was awarded;
furthermore, the Banking Court has also refused to grant the decree, against respondent
No.6, the guarantor/mortgagor, on the ground that there had been some variation in the
original agreements between the plaintiff-Bank and the principal borrower, therefore, the
said respondent has been discharged as a surety in terms of sections 133 and 135 of the
Contract Act.

3. Learned counsel for the appellant has argued that as the respondents/defendants had
been availing the finance even after the terminal date of the agreements, therefore, they
are required under the law to pay the mark-up on the principal amount even thereafter.

4. We are not convinced to subscribe to the above plea, as in number of precedents, it has
been held that the markup/interest can only be charged under the agreement between the
parties or if permissible under the law and not otherwise. From the record, it transpires
that there is no such agreement and the learned counsel for the appellant has failed to cite
any law before us, under which the mark-up beyond the contract period can be charged.
Therefore, the decree of the Banking Court in this behalf is valid and needs .no
interference.

5. As regards the amount of penalty is concerned, obviously, the principal borrower has
failed to export the goods, on the basis of the FAPE finance, which it had availed from
the plaintiff, the Stale Bank under the rule and scheme had the authority to impose the
penalty upon the borrower. This has been so done by the State Bank and it is the
borrower, who has to incur the burden of the penalty and therefore, the bank is well
within its right to claim and recovery the said amount. Therefore, the decree of the
Banking Court refusing the amount is set aside and the plaintiff is granted the -decree of
the above amount as well.

6. The argument of the learned counsel for the appellant that the learned Banking Court
has wrongly calculated the amount, while granting the decree, because two FAPE
facilities were given to the borrower, one for an amount of Rs.2 Million and while
charging the mark-up upon this amount, till the agreed period i.e. 30-6-1999, it comes to
Rs.17,77,747; under the second facility for Rs.3 Million, by charging of the mark-up for
the period under the agreement, the amount comes to Rs.26,84,500; this total amount due
to the appellant-Bank was Rs.44,62,247, resultantly short grant of decree to the tune of
Rs.37.78 Million is illegal and wrong.

7. Confronted with the above, the learned counsel for the respondents except respondents
Nos.6 and 7, by defending the decree states that under the agreement only 8% per annum
could have been charged by the bank and the Banking Court while applying the said
percentage upon the mark-up, has granted the above decree to the appellant.

8. As far as the refusal of the decree against respondent No.6 is concerned, this appeal
was admitted to consider the point that while refusing leave to the defendants, the learned
Court could not have reduced the suit amount or` discharged respondent No.6, and at the
most, leave could have been granted to the respondents. Today, reliance has been placed
upon the judgment reported as Mian Aftab A. Sheikh and 2 others v. Messrs Trust
Leasing Corporation Limited and others 2003 CLD 702 and the same submission has
been made; besides, it is argued that the said respondent has never refused or
controverted the execution of being surety, in the execution of the guaranteed documents,
therefore, in such circumstances, the provision of sections 133 and 135, were inapplicable
and the said respondent could not be discharged.

9. We have heard learned counsel for the appellants. Respondent No.6 is not present,
therefore, ex pane proceedings were initiated against her. The learned Court below about
respondent No.6, has held "Admittedly, the defendant No.6, executed surety for the
facility allowed by the plaintiff for a specific limit, which was adjusted accordingly. The
plaintiff was under legal obligation to fix the liabilities against the surety with frequent
express consent from defendant No.6 for further successive period. I feel it proper and
appropriate that the present suit against defendant No.6 is not under the Contract Act and
as such surety tendered by her stands discharged".
In the above situation, the learned Banking Court should have granted the leave to the
respondent No.6, and should have ascertained, whether the documents on the basis of
which, she was sued by the plaintiff and was claimed to be the surety/guarantor were/are
executed by her with regard to the loan facility for the recovery of which, the suit was
brought by the appellant; the Court also should have determined in positive and
unequivocal manner, if the limit, for which respondent No.6 was a surety had been
adjusted, and thus she was discharged as the guarantor. But the Court has not decided
these propositions and has dismissed the suit qua her. To this extent, we find that the
judgment and decree of the Court below cannot sustain; which is hereby set aside; the
matter is remanded to the Banking Court, Faisalabad with the direction to summon
respondent No.6, her application for leave to appear shall be deemed pending; it shall be
re-considered by the Court in view of 'the latest pronouncement of this Court. made in the
above referred judgment i.e. 2003 CLD 702 and if the Court finds that there are
substauitial questions of law or facts in respect of which evidence needs to be recorded,
shall grant the relief and decide the suit in accordance with law.

S.A.K./U-13/L Order accordingly.

2004 C L D 631

[Karachi]

Before Anwar Zaheer Jamali, J

NATIONAL BANK OF PAKISTAN--Plaintiff

Versus

Messrs SHOAIB CORPORATION and others-- -Defendants

Suit No. B-226 of 2000, heard on 24th October, 2003.

Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)-----

-----S.10---Contract Act (IX of 1872), Ss.133, 139 & 141--Suit for recovery of loan
amount---Application by guarantor for leave to defend suit---Plea of guarantor was that
General Power of Attorney, Memo. of Deposit of Title Deed and guarantee documents
had been fraudulently managed by the Bank in collusion with borrower; that goods
pledged with the Bank had been removed without his knowledge in collusion with the
Bank and borrower, thus, his liability stood discharged as per law and that terms of
original contract of finance facility between the Bank and borrower had been altered
without his knowledge and consent, thus, his liability stood discharged by virtue of S.133
of Contract Act, 1872---Guarantor had made out a plausible case for grant of leave to
defend suit---Statement of guarantor's counsel that till final decision of suit, guarantor
would not sell/encumber alleged mortgaged land, would be binding on the
guarantor---Application for leave to defend was allowed unconditionally.

PLD 1986 SC 83; PLD 1966 Lah. 1; PLD 1984 Kar. 211; 2000 CLC 819; AIR 1967 SC
1105; AIR 1944 Lah. 482; AIR 1938 Mad. 422 and Messrs Huffaz Seamlen Pipe
Industries Ltd. and 2 others v. Messrs Security Leasing Corporation Ltd. 2002 SCMR
14,19 ref.

Zubair Qureshi for Plaintiff.

Muhammad Shafi Siddiqui for Defendant No.3.

Date of hearing: 24th October, 2002.

ORDER

By this order I propose to dispose of C.M.A. No.7618 of 2001, which is an application

for leave to defend under section 10 of the Ordinance XLVI of 2001, submitted on behalf
of defendant No.3.

Case of the defendant No. 3, as disclosed in this application, is that he had not executed
the purported documents viz. General Power of Attorney dated 19-11-1998,
memorandum of Deposit of Title Deeds dated 18-1 1-1998 and the guarantee document
dated 18-11-1998 but the same were fraudulently managed by plaintiff in collusion with
defendants Nos.1 and 2. Further plea raised in the application is that scrap valuing
Rs.855,00,000 pledged by defendants Nos.1 and 2 with the Bank was removed in
collusion with the staff of plaintiff-Bank and defendants Nos.1 and 2 with mala fide
intention and thus the liability of defendant No.3 stands discharged as per law. The
application is accompanied with bunch of documents which have been marked as
Annexures D/ 1 to D/24.

On notice of this application, replication has been filed on behalf of plaintiff-Bank

wherein it has been asserted that the documents attributed to defendant No.3 have been
executed by him, therefore, this fact was not denied by defendant No.3 during exchange
of notices which have been brought on record by defendant No.3 himself alongwith his
application for leave to defend. It has further been averred in the replication that no
serious or bona fide dispute has been raised by defendant No.3 which may entitle him for
grant of his application for leave to defend, therefore, said application be dismissed and
consequently suit be decreed. The fact with regard to removal of pledged stocks (ship
scrap) and initiation of proceedings in this context by the plaintiff-Bank has however, not
been denied by the plaintiff.

Perusal of case record reveals that this suit was instituted on 16-11-2000 against four
defendants. After service of notice, defendants Nos. 1, 2 and 4 did not move any
application for leave to defend, thus, vide order dated 17-5-2001 suit was decreed
against them in the terms incorporated in the said order and decree was accordingly
drawn on 31-5-2001.

Mr. Muhammad Shafi Siddiqui, learned counsel for defendant No.3 besides disputing the
execution of above referred three documents by defendant No.3 asserted that vide pledge
letter dated 6-2-1999 ship scrap valuing Rs.85,500,000 was admittedly pledged with the
plaintiff Bank but subsequently without the knowledge of defendant No.3 same was
unlawfully removed in collusion with plaintiff and defendant No.2 for which initially a
complaint was lodged by the plaintiff Bank with F.I.A. on 25-10-2000 and thereafter an
F.I.R. has also been lodged. In such circumstances, relying on sections 139 and 141 of the
Contract Act 1872, he contended that the present suit for recovery of Rs.7,57,52,367
cannot be maintained against defendant No.3, who was simply surety/guarantor in the
matter and stood relieved of his liability due to such misappropriation of scrap. He next
referred the letter dated 2nd December 1999 and urged that without the knowledge and
consent of defendant No.3 the terms of original contract of finance facility between
plaintiff and defendants Nos.1 and 2 were altered and in such circumstances by virtue of
section 133 of Contract Act, liability of defendant No.3 stood discharged. In support of
his arguments, learned counsel placed reliance on the following cases:--

PLD 1986 SC 83; PLD 1966 Lahore 1; PLD 1984 Karachi 211; 2000 CLC 819; AIR
1967 SC 1105; A I R 1944 Lahore 482 and AIR 1938 Madras 422.

On the strength of above contentions learned counsel contended that not only on facts but
legally also defendant No.3 has succeeded to bring before the Court genuine defence
against the claim of plaintiff and thus his leave to defend application may be allowed
unconditionally.

In reply to the above arguments, Mr. Zubair Qureshi referred various documents filed by
the plaintiff and defendant No.3 and contended that in his statement before F.I.A.
(Annexure D/24 to the application for leave to defend) the defendant No.3 has not denied
the execution of various documents in favour of bank on the basis of which the present
suit for recovery has been instituted against him and in such circumstances the whole
defence setup by defendant No.3 falls on the ground. Placing his reliance on a recent
decision of Honourable Supreme Court of Pakistan in the case of Messrs Huffaz Seamlen
Pipe Industries Ltd. and 2 others v. Messrs Security Leasing Corporation Ltd. 2002
SCMR 1419 he contended that unless some genuine and strong case was made out by
defendant No.3 to dispute the claim of plaintiff his leave to defend application is liable to
be dismissed. He specifically referred paragraphs 5 and 6 of the plaint to show the claim
of plaintiff-Bank against defendant No.3 and contended that the original registered
irrevocable general power of attorney dated 31-10-1998 and lease agreement dated
28-11-1994 are in possession of plaintiff which prima facie prove the genuineness of the
claim of the plaintiff against defendant No.3. He also referred the contents of letter of
guarantee executed by defendant No.3 in favour of plaintiff and contended that such
guarantee executed by defendant No.3 is unqualified and unconditional to other
eventualities, therefore, on the basis of this document alone suit against defendant No.3
can be decreed.

I have carefully considered the arguments advanced by the learned counsel for the parties
and perused the relevant record available before me. From the submissions made by the
counsel for defendant No.3, as noted above, and on perusal of material available on case
record and the cases cited at the bar, I am convinced that defendant No.3 has succeeded to
make out a plausible case for grant of his leave to defend application in the present suit.

At this stage Mr. M. Shafi Siddiqui learned counsel for defendant No. 3 makes a
statement on behalf of defendant No.3 that till final disposal of this suit, allegedly
mortgaged land viz. 15 acres of Industrial/ Commercial land from Naclas No.24, City
Survey 285, Deh Dih Tapo Ibrahim Haideri Taluka and District Malir Karachi will not be
sold or encumbered by defendant No.3 in any manner whatsoever.

In view of the above statement of learned counsel for defendant for defendant No. 3,
which shall be binding on E defendant No. 3 leave to defend application is allowed
unconditionally.

S.A.K./N-8/K Leave to defend granted.

P L D 2003 Supreme Court 215

Present: Nazim Hussain Siddiqui, Hamid Ali Mirza and Tanvir Ahmed Khan, JJ

SAUDI-PAK INDUSTRIAL AND AGRICULTURAL INVESTMENT COMPANY

(PVT.) LTD., ISLAMABAD ---Appellant

Versus

Messrs ALLIED BANK OF PAKISTAN and another----Respondents

Civil Appeals Nos. 185 and 186 of 2002, decided on 27th November, 2002.

(On appeal from the judgment, dated 21-12-2001 of Lahore High Court, Lahore passed in
R.F.A. No. 83 of 1996).

(a) Contract Act (IX of 1872)---

--S. 126---Bank guarantee---Default---Liquidated damages ---Interest--Rights and

liabilities of the parties---Determination---Guarantee rights and liabilities of the parties,
are determined with reference to the terms and conditions of the guarantee and a contract
of guarantee is to be strictly construed in terms of the guarantee---Guarantee, in the
present case, unequivocally postulated that the total responsibility of the Bank was
restricted to a specified amount---Bank irrevocably and unconditionally undertook to pay
the said amount to the plaintiff on demand---Nothing was brought on record to show that
the plaintiff had sustained damages on the ground of default---Effect---Liquidated
damages, as a rule, required the positive evidence to show that the actual loss was
suffered by the party claiming the damages and even fixed amount stipulated for
liquidated", damages could not be recovered if the quantum of actual loss was not
proved---Plaintiff, in circumstances, was neither entitled to any interest nor to any
amount as liquidated damages.

(b) Interpretation of document---

---Fundamental --Fundamental principle.

It is a fundamental principle of interpretation of documents and statutes that they are to

be interpreted in their entire context following a full Consideration of all provisions of the
document or statute, as the case may that every attempt shall be made to save the
document and for tai purpose a difference between general statements and particular
statements of the document be differentiated properly to save the document rather to
nullify it, that no provision of the document be read in isolation or in bits and pieces, but
the entire document is to be read as a whole to gather the intention of the parties, that the
Court for this purpose can resort to the correspondence exchanged between the parties,
that the Court shall lean to the interpretation, which will effectuate rather than one, which
will invalidate an instrument.

Allah Bakhsh and another v. Muhammad Ishaque and another PLD 1984 SC 47; Societe
Generale De Surveillance S.A. v. Pakistan 2002 SCMR 1694; Messrs Pakistan State Oil
Company Limited v. Muhammad Tapir Khan and others PLD 2001 SC 980; Sandoz
Limited and another v Federation of Pakistan and others 1995 SCMR 1431; House
Building Finance Corporation v. Shahinshah Hamayun Corporative House Building
Society and others 1992 SCMR 19; Ghazanfar Hussain v. Rahmat Bibi 1981 CLC 310;
Habib Bank Limited v. Malik Atta Muhammad and 4 others 2000 CLC 451; Haji Adam
Ali Agaria v. Asif Hussain and 2 others 1996 MLD 322; Mst. Iqbal Begum v. Abdul
Ghaffar and others 1995 CLC 105; Saeed Mahmood v. Halima Bai 1990 MLD 1789 and
Najmul Hassan Farooqui v. Messrs United Carpets Limited 1990 ALD 412 ref.

(c) Contract Act (IX of 1872)-

----S. 126---Contract of guarantee---Principles of construction. The principles of

construction governing contracts in general apply equally to contracts of guarantee.
Dealing with a guarantee as a mercantile contract, the Court does not apply to it merely
technical rules, but construes it so as to reflect what may fairly be inferred to have been
the parties, real intention and understanding as expressed by them in writing, so as to give
effect to it.

Halsbury's Laws of England 4th Edn., Vol. 20, para. 143 ref.

(d) Contract Act (IX of 1872)---

---S. 126---Bank guarantee---Contention of the Bank was that the conduct of the plaintiff
was mala fide, inasmuch as for about six years the plaintiff did not take any step towards
recovery of decretal amount and that the plaintiff held 33% shares in the company---
Validity---Responsibility of the Bank, in terms of the guarantee, would not become
inoperative and it was the right of the plaintiff to seek remedy against the respondent,
irrespective of its share, if any, in the company.

Dr. Parvaiz Hasan, Advocate Supreme Court, Umar Ata. Bandial, Advocate Supreme
Court, Zakaullah, Advocate Supreme Court, M.S. Khattak, Advocate-on-Record for
Appellants (Respondents in C.A. No. 186 of 2002).

Raja Muhammad Akram, Advocate Supreme Court, Ejaz Muhammad Khan, Advocate-
on-Record for Respondents (Appellant in C.A. No. 186 of 2002).

Dates of hearing: 19th and 20th September, 2002.

JUDGMENT

NAZIM HUSSAIN SIDDIQUI, J.---This judgment will dispose of Civil Appeals Nos.
185 and 186 of 2002. In these matters common questions of facts and law are involved
and both arise from the same judgment, dated 21-12-2001 of a learned Division Bench,
Lahore High Court, Rawalpindi Bench, delivered in R.F.A. No. 83 of 1996, whereby the
judgment and decree, dated 19-6-1996 of Chairman, Banking Tribunal, Rawalpindi was
modified, holding that respondent No.1, Allied Bank of Pakistan (in C.A. No. 185 of
2002), was jointly and severally liable with respondent No.1 Saudi Kalabagh Livestock
Company Ltd. (respondent No.2 in C.As. Nos. 185 and 186 of 2002) to the extent of an
amount of Rs.45,600,00 million.

2. Civil Appeal No. 185 of 2002 has been filed by Saudi-Pak Industrial and Agricultural
Investment Company Pvt. Ltd. (SAPICO), showing Allied Bank of Pakistan and Saudi
Pak Kalabagh Livestock Company Ltd., as the respondents Nos. 1 and 2 respectively. In
Appeal No. 186 of 2002 filed by Allied Bank, Saudi-Pak Industrial and Agricultural
Investment Company Pvt. Ltd. (SAPICO) and Saudi-Pak Kalabagh Livestock Company
Ltd. have been arrayed, as the respondents Nos. 1 and 2 respectively.

3. For convenience SAPICO is referred to in this judgment, as "plaintiff", Allied Bank, as

"respondent No.1" and Saudi-Pak Kalabagh Livestock Company, as "respondent No.2."

4. The plaintiff filed the Suit No. 12 of 1994 against the respondents for recovery of Rs.
62,400,000 and also claimed mark-up at the rate of Rs.5,600,000 per annum from the
date of suit till its payment or in the alternative liquidity damages in terms of the
Guarantee.

5. Learned trial Judge viz. Chairman, Banking Tribunal, Rawalpindi, vide judgment,
dated 19-6-1996, decreed the suit of the plaintiff against respondent No.2 only for 4s.
45,600,000 with costs, Suit against respondent No. 1 was dismissed. It appears that trial
Court later on passed an order and decree against respondent No.2, was recalled on an
order passed in review petition. Against said order, an appeal was preferred before High
Court and the decree against respondent No.2 was, restored.

6. The plaintiff also filed appeal against judgment and decree, dated 19-6-1996 of trial
Court on which the order was passed, which has been impugned in these appeals.

7. The case of the parties rests upon Bank Guarantee No. 90 of 2002, dated 18-3-1991 for
amount of Rs.40,000,000, which was valid up to 18-3-1991 and was executed by
respondent No. 1 in favour of the plaintiff. Since the entire case revolves on interpretation
of the bank guarantee, it would be advantageous to reproduce it, which is as follows:--

"Bank Guarantee No.90 of 2002,

Dated 18-3-1990,

Amount Rs. 40,000,000

Validity until 18-3-1991

Messrs Saudi-Pak Industrial and

Agricultural Investment Co. Limited,
Islamabad.

Dear Sirs,

In consideration of SAPICO having agreed to provide finance Rs.40,000,000

(Rupees forty million only) (hereinafter called the FINANCE) to Messrs Saudi-Pak
Kalabagh Livestock Company Limited (hereinafter called the CUSTOMER) repayable in
one year from the date hereof, we Allied Bank of Pakistan Limited, Civic Centre Branch,
Islamabad, a banking company incorporated under the Laws of Companies Act, 1913 and
having our principal place of business in Pakistan at Karachi, do hereby irrevocably and
unconditionally undertake and guarantee to SAPICO the payment of Rs.40,000,000
(Rupees forty million only) and Rs.5,600,000 (Rupees five million six hundred thousand
only) being mark-up total being Rs. 45,600,000 (Rupees forty-five million and six
hundred thousand only) on demand in writing being made to us by SAPICO of the
finance payable by the customer to the SAPICO and we further agree with SAPICO as
follows:

1. That the finance will be utilized in non-interest based modes of financing on mark-up
basis as per agreement signed between the Bank and the Customer, pro forma attached
mark-up is payable on six months basis.

2. That our liability to SAPICA hereunder shall be that of principal debtor and shall not
be in any way abrogated or affected by SAPICO taking or releasing any other security
from the Customer in respect of the finance provided that the security which SAPICO
tray now or hereafter hold in respect of the finance will be duly assigned and transferred
to us at the time of SAPICO making the demand.

3. That a letter signed by the General Manager/Chief Executive or authorized officer of

SAPICO stating that the Customer has not paid the Finance within the aforesaid period of
12 (twelve) months shall be conclusive evidence that the Customer has not paid and we
shall thereupon be bound to fulfil our obligations under this Guarantee without question
or reference to the Customer.

4. This Guarantee is irrevocable and shall continue to remain in force as long as the
FINANCE remains outstanding against the Customer subject to the validity of the
Guarantee, we shall he discharged from all liabilities under this Guarantee only after the
entire finance of Rs.45,600,000 (Rupees forty-five million and six hundred thousand
only) is paid to SAPICO.

We further agree and undertake that any payment due to SAPICO from us hereunder shall
be paid to SAPICO by us on demand and in the event of our failure to make such
payment within seven days of such demand we shall be liable to pay SAPICO as and by
way of liquidated damages a further sum of 20% of the amount so demanded by
SAPICO.

Our total liability under this Guarantee is restricted to a sum of Rs.45,600,000 (Rupees
forty-five million and six hundred thousand only). All claims under this Guarantee must
be lodged in writing with Allied Bank of Pakistan Limited, Civic Centre Branch,
Islamabad on or before 10th March, 1991 failing which we shall be discharged of all our
liabilities under this Guarantee.
 Yours faithfully

For Allied Bank of Pakistan Limited.

Issued at Islamabad

Dated 18-3-1990".

8. Learned High Court in the impugned judgment, having taken into consideration all the
pleas raised before it observed as follows:--

"From the nature of the transaction and contents of the guarantee it was not
difficult for us to conclude that the validity period of guarantee was agreed to
between the parties was one year and therefore, it was rightly mentioned as period
expiring on 18-3-1990. The view taken by the Tribunal that the claim was required to be
filed by 10-3-1991 and thereafter no claim was entertainable was based on an erroneous
assumption that the validity period of guarantee was up to 10-3-1991. There could not be
any contradiction between the validity period and the period for filing of the claim. Even
if any date prior to the validity period is mentioned in the guarantee that would not
discharge the liability of the bank under the guarantee before expiry of the period of
validity. Filing of the claim was merely a mode of convenience it could not be construed
as abridging the period of validity from the nature of transaction and the other clauses
contained in the bank guarantee. It is clearly discernible that the guarantee was for a
period of 12 months and the liability of the bank could not be discharged before 18-3-
1991. Admittedly, claim was lodged by the appellant with the bank on 9-3-1991.
Therefore, the claim which was filed within a period of validity was proper and
tenable."

9. Dr. Pervaiz Hassan, Advocate Supreme Court appearing on behalf of the plaintiff
contends that it is a financial institution and its business is to invest its funds in the
financing provided to the customers and High Court erred in not granting interest/profit
to the plaintiff for the entire period from the date of default till realization of the funds.
Learned counsel also argued that High Court without any justification refused to grant
liquidated damages as was stipulated in the guarantee. It is also urged that right from the
very beginning in money suits, if decreed, the interest is granted to the petitioner. In
support of his contention, he referred to section 1 of Interest Act, 1839, sections 79 and
80 of Negotiable Instruments Act, 1881, sections 34 and 34-B of C.P.C. 1908, section
8(2) of Banking Companies (Recovery of Loans) Ordinance, 1979, sections 5(1)(d), 6(4)
and 11(4) of Banking Tribunals Ordinance, 1984 section 15 of Banking Companies
(Recovery of Loans, Advances, Credits and Finances) Act, 1997, sections 3 and 7 of
Financial Institutions (Recovery of Finances) Ordinance, 2001 and sections 73 and 74 of
the Contract Act, 1872.

10. Above-referred provisions speak about granting interest to the creditors. Suffice it to
say that above provisions are not attracted to this case, which is exclusively governed by
the law relating to guarantee. In such cases, the guarantee rights and liabilities of the
parties, are determined with reference to the terms and conditions of the guarantee and a
contract of guarantee is to be strictly construed in terms of the guarantee. The guarantee
referred to above unequivocally postulates that the total responsibility of the respondent
No.1 was restricted to Rs.45,600,000. The Bank/respondent No.1 irrevocably and
unconditionally undertook to pay said amount to the plaintiff on demand. As regards the
damages, learned trial Court refused the same on the ground that nothing was brought on
record to show that the plaintiff had sustained damages on the ground of default.

11. We asked learned counsel for the plaintiff as to what evidence was brought on record
to substantiate the claim of damages, he frankly conceded that no such evidence was
available. Liquidated damages, as a rule, require the positive evidence to show the actual
loss was suffered by the party claiming the damages. Even fixed amount stipulated for
liquidated damages cannot be recovered if the quantum of actual loss is not proved.
Under the circumstances, the plaintiff is neither entitled to any interest nor to any amount
as liquidated damages.
12. Raja Muhammad Akram, learned Advocate Supreme Court appearing for the
respondent No. 1 strenuously argued that in the guarantee furnished by the respondent
No. 1 it has been expressly provided that notice for encashment of the same was to be
given by the plaintiff to respondent No. 1 by 10-3-1991. He argued that after 10-3-1991,
the claim of the' plaintiff became time-barred. He also contended that, under the
circumstance, no decree could be passed against the respondent No. 1. It is also urged
that the plaintiff did not assign and transfer the securities to the respondent No.1, which
were held by it in respect of the finance in. question. Referring to section 141 of the
Contract Act, 1987, he submitted that all the securities, which were held by the plaintiff
from respondent No.2 were for the benefit of the respondent No. 1, and since the plaintiff
failed to discharge its obligations in respect of the securities, the respondent No. 1 stood
discharged of its liability to the extent of value of the securities.

13. Keeping in view of contentions, the point for consideration is that whether the
plaintiff could encash guarantee up to 18-3-1991 or so could be done only on or before
10-3-1991.

14. The record reveals that on 4-4-1990, the plaintiff had written a letter to the respondent
No. 1 asking for amending the bank guarantee with respect to validity date and the date
of payment as 7-4-1990 and 7-4-1991 respectively. It also shows that funds were not
released by the plaintiff on the validity date of guarantee i.e. 18-3-1990, but the same
were released on 7-4-1990. The correspondence exchanged between the parties,
particularly the letters at pages 75, 76, 77, 78 and 79 of the paper book of Civil Appeal
No. 186 of 2002 clearly demonstrate that the parties were assuming and acting as if the
guarantee was to expire on 18-3-1991.

15. Learned counsel for the plaintiff cited the cases reported as Allah Bakhsh and another
v. Muhammad Ishaque and another (PLD 1984 SC 47), Societe Generale De Surveillance
S.A. v. Pakistan (2002 SCMR 1694 at page 1722), Messrs Pakistan State Oil Company
Limited v: Muhammad Tahir Khan and others (PLD 2001 SC 980 at page 1007), Sandoz
Limited and another v. Federation of Pakistan and others (1995 SCMR 1431 at page
1447), House Building Finance Corporation v. Shahinshah Hamayun Corporative House
Building Society and others (1992 SCMR 19 at page 29), Ghazanfar Hussain v. Rahmat
Bibi (1989 CLC 310 (SC AJ&K) at page 320), Habib Bank Limited v. Malik Atta
Muhammad and 4 others (2000 CLC 451 Lahore at page 459), Haji Adam Ali Agaria v.
Asif Hussain and 2 others (1996 MLD 322 Karachi at. page 328), Mst. Iqbal Begum v.
Abdul Ghaffar and others (1995 CLC 105 Lahore at page 108), Saeed Mahmood v.
Halima Bai (1990 MLD 1789 Karachi at page 1791)., Najmul Hassan Farooqui v. Messrs
United Carpets Limited (1990 PLD 412 at page 413) to contend that it is a fundamental
principle of interpretation of documents and statutes that they are to be interpreted in their
entire context following a full consideration of all provisions of the document or statute,
as the case may` be, that every attempt shall be made to save the document and for this
purpose a difference between general statements and particular statements of the
document be differentiated properly, to save the document rather to nullify it, that no
provision of the document be read in isolation or in bits and pieces, but the entire
document is to be read as a whole to gather the intention of the parties, that the Court for
this purpose can resort to the correspondence exchanged between the parties, that the
Court shall lean to an interpretation, which will effectuate rather than one, which will
invalidate an instrument.

16. On this point he also referred to Halsbury's Law of England (4th Edition), Volume 20,
para. 143. which is as follows:--

"143. Principles of construction.---The principles of construction governing

contracts in general apply equally to contracts of guarantee. Dealing with a guarantee as a
mercantile contract, the Court does not apply to it merely technical rules, but construes it
so as to reflect what may fairly be inferred to have been the parties real intention and
understanding as expressed by them in writing, and so as to give effect to it rather than
not. "

17. In the light of above arguments and the case-law referred to above, it is to be seen if
the guarantee was encashable up to 18-3-1991 or not. The guarantee in question is a
composite document without any recital. In the fourth line of the guarantee it is clearly
mentioned that SAPICO had agreed to provide Finance "repayable from the date of
guarantee" i.e. 18-3-1990 as shown at the top at left hand corner of the guarantee. Thus
the finance was repayable on or before 18-3-1991. In clause 3 of the guarantee, the
SAPICO was required to produce a letter stating that "the customer has not paid the
finance within the aforesaid period of 12 months" and Allied Bank Limited was only
thereupon bound to fulfil the obligations under the guarantee.

18. In view of above, SAPICO could not issue letter on 10-3-1991, as required by clause
3 of the guarantee. It thus becomes clear that repayment was due on 18-3-1991 and not
on 10-3-1991 as the finance was given for 12 months from 18-3-1990 and the respondent
No.2 was entitled to use it for the full 12 months, which were completed on 17-3-1991.
The date of 10-3-1991, as mentioned in the last, paragraph of the guarantee, ex facie,
appears to be a typographical mistake. High Court took it as an error and rightly so.
Besides, if the guarantee was valid up to 18-3-1991 then how it could be asserted that the
claim by the plaintiff was to be filed on or before 10-3-1991. As regards, the plea of
securities under section 141 of the Contract Act, it is noted that Mr. Faridullah Khan,
Executive Vice-President of plaintiff has filed an affidavit saying that the plaintiff did not
receive nor does it presently hold any collateral /security in respect of finance of the
guarantee. The contents of this affidavit have not been controverted by the respondent
No.1. It being so, it is not established that provisions of section 141 ibid were violated by
the plaintiff. Learned counsel for the respondent No.1 submitted that the conduct of the
plaintiff is mala fide, inasmuch as for about six years the plaintiff did not take any step
towards recovery of decretal amount from respondent No.2. He also stated that the
plaintiff holds 33% shares in the company of respondent No.2. Suffice it to say that the
responsibility of respondent No.1, in terms of the guarantee, does not become
inoperative. It is the right of the plaintiff to seek remedy against respondent No.1,
irrespective of its share, if any, in the company of respondent No.2.

19. In consequence, both the appeals are dismissed with no order as to costs.

M.B.A./S-258/S Appeals dismissed.