Order 37 case law on guarantee cheque .

**کورٹ کے ریمارکس:**

1. **ضمانت دار کی ذمہ داری:** عدالت نے قرار دیا کہ اپیل کنندہ کی ضمانت دار کی حیثیت سے ذمہ داری اُس کی خودمختار حیثیت میں ہے، اور اس کو پرنسپل ڈیٹر کے مقدمے کا پہلے تصفیہ کیے بغیر بھی نافذ کیا جا سکتا ہے۔ اس اصول کی تائید معاہدہ قانون کی دفعہ 128 اور مختلف عدالتی نظیریں کرتی ہیں۔

2. **معاہدے کی شرائط:** عدالت نے پہلی اور دوسری معاہدہ کے تجزیے کے بعد یہ پایا کہ دوسرے معاہدے نے اپیل کنندہ کو اس کی ذمہ داری سے مستثنیٰ نہیں کیا۔ معاہدے میں موجود شرائط کی روشنی میں، اپیل کنندہ کا ذمہ داری برقرار رہی۔

3. **چیک کی قانونی حیثیت:** اپیل کنندہ کے ذریعہ جاری کردہ چیک کی قانونی حیثیت کو تسلیم کیا گیا اور چیک کی بے وقعت ہونے کی تصدیق کی گئی۔

4. **پہلے پرنسپل ڈیٹر کو مقدمے میں شامل کرنے کی ضرورت:** عدالت نے اس بات کو مسترد کر دیا کہ پہلے پرنسپل ڈیٹر کو مقدمے میں شامل کرنا ضروری ہے، اور یہ کہ پرنسپل ڈیٹر کے خلاف کارروائی کے بغیر مقدمہ دائر کیا جا سکتا ہے۔

**فیصلہ:**

- **رعایت رقم:** اپیل نمبر 676 آف 2021 مسترد کر دی گئی اور اپیل کنندہ کو 15,00,000 روپے اور 2,50,000 روپے اضافی اخراجات ادا کرنے کا حکم دیا گیا۔

- **دوسری اپیل:** اپیل نمبر 63163-2020 بھی مسترد کر دی گئی، کیونکہ مدعی نے سود کا دعویٰ واپس لے لیا اور اضافی اخراجات پر اطمینان ظاہر کیا۔

یہ ریمارکس عدالت کی طرف سے معاہدے اور ضمانت داری کے اصولوں کی وضاحت کرتے ہیں اور چیک کی قانونی حیثیت پر زور دیتے ہیں۔

HCJD A-3 8

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, LAHORE

JUDICIAL DEPARTMENT

R. F. A. No. 676 of 2021

Muhammad Altaf

versus

Rana Shakeel Ahmad

JUDGMENT

Dates of hearing

14-05-2024 & 24-06-2024

Appellant by:

Malik Shahid Iqbal Babbar

and Malik Ali Muhammad,

learned Advocates.

Respondent by:

Mr. Haroon Mehboob Butt,

Barrister Muhammad Azaz

and Mr. Tahir Habib,

learned Advocates.

Sultan Tanvir Ahmad, J:–Through this single

judgment, I intend to decide the titled appeal as well as

regular first appeal No. 63163 of 2020, being outcome

of same judgment and decree dated 22.09.2020 passed

by the learned Additional District Judge, Lahore.

Hereinafter, Muhammad Altaf shall be called as the

‘Appellant’ and Rana Muhammad Shakeel shall be

called as the ‘Respondent’.

Brief facts of the case are that on 24.05.2016

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

the Respondent instituted suit for recovery of

Rs.15,00,000/- (the ‘suit’), under Order XXXVII of the

Civil Procedure Code, 1908 (the ‘Code’), with the

averments that the Appellant and his partner namely Ali

Adnan (the ‘principal-debtor’) being importer of

Japanese cars offered the Respondent to purchase a

Honda Vezel 1500-CC, model 2010 (the ‘vehicle’) for

which initially an agreement dated 11.10.2014 (the

‘first agreement’) was executed and the Appellant

stood surety to the extent of Rs. 15,00,000-; that the

Appellant also placed his thumb impressions and signed

the first agreement with a note that he stood guarantor

on behalf of principal-debtor and issued a cheque No.

131052122 dated 11.10.2014, the Bank of Punjab, for

an amount of Rs.15,00,000/- (the ‘cheque’); that

Rs.22,50,000/- were paid as consideration of the

vehicle. It is further pleaded in the suit that the

principal-debtor failed to fulfill the terms of the first

agreement or deliver the vehicle within the stipulated

time period, upon which another agreement dated

16.12.2014 (the ‘second agreement’) was executed,

which was again signed by the Appellant and as per the

terms of the said agreement another amount of

Rs.7,50,000/- was received by the Respondent; that

despite receiving the entire amount the vehicle could

not be delivered. The Respondent filed the suit upon

dishonouring of the cheque on its presentation before

relevant branch of the bank. The learned trial Court

allowed the Respondent to defend the case and

accordingly he filed his written statement. Out of

divergent pleadings, the following issues were framed:-

1. Whether plaintiff is entitled for the decree

and recovery of Rs.15,00,000/- on the basis of

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

dishonour cheque No. 131052122 or not?

OPP

2. Whether the agreement No.740 dated

11.10.2014 and agreement No.1120 dated

16.12.2014 were executed in favour of

plaintiff on behalf of Ali Adnan with regard to

the give and take of sale amount of vehicle in

presence of witnesses or not? OPP

3. Whether plaintiff has come to the court with

unclean hands and suit is barred by law not

maintainable after obtaining decree against

Ali Adnan for same amount in dispute from

competent court of law? OPD

4. Whether the suit is liable to be dismissed due

to mis-joinder and non- joinder of parties and

based on mala fide intention to blackmail and

harass the defendant? OPD

5. Relief.

After framing of issues, the parties produced

their respective evidence. The learned trial Court gave

issue-wise findings and granted the following relief to

the Respondent, vide judgment and decree dated

22.09.2020: -

“..In view of my findings on issue No.1,

the suit of the plaintiff is decreed with

costs. The plaintiff is held entitled to

recover principal amount of

Rs.15,00,000/- from the defendant.

Decree sheet be drawn accordingly…”

Being aggrieved from the above both sides

have filed their appeals.

Malik Shahid Iqbal Babbar, learned counsel

for the Appellant, has submitted that the Appellant has

issued the cheque merely as a surety and the valid legal

course for the Respondent was to get the liability of the

principal-debtor to be first adjudged and only then the

suit against the Appellant could have been filed. He has

further submitted that the principal-debtor even

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

otherwise, was a necessary party and in his absence no

relief could be granted to the Respondent, which is

ignored by the learned trial Court.

Conversely, Mr. Haroon Mehboob Butt,

learned counsel for the Respondent has opposed the

above argument and he has stated that the Appellant has

clearly undertaken the liability as well as issued an

independent instrument i.e. the cheque, requiring no

liability to be adjudged against any other person; that

the cheque being negotiable instrument carries

presumption as to its correctness and valid

consideration under section 118 of the Negotiable

Instruments Act, 1881 (‘N.I.A., 1881’). He has added

that the Respondent is entitled to interest in view of

sections 79 and 80 of N.I.A., 1881.

I have heard the arguments of the learned

counsel for the parties and perused the record with their

able assistance.

The first agreement is on record as Ex.P-1.

The second page (backside of the stamp paper) contains

a note / Ex. P-2 (the ‘Note’), comprising of following

term(s):-

“ںیم دمحم ااطلف ودل رونباز انشیتخ اکرڈ ربمن36203-0836260-5

ہنکس اچہ اوعان علض اخوپنر لیصحت ولدرھاں وپرے وہش و وحاس ںیم

اانپ کیچ 1500000)دنپرہ الھک( As a guarantee راان لیکش

اصبح وک دے راہ وہں )یلع دعانن ےک behalf رپ( اور رہ رطح ےس

راان لیکش اصبح ےک دنپرہ الھک اک ذ ہم دار وہں۔ ”

Beneath the Note, the signatures as well as

thumb impressions of the Appellant are available. It is

significant that the first agreement and execution of the

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

Note are not denied. The principal-debtor has also

placed his thumb impressions and signatures on the

Note.

From the reading of the Note it is evident that

the Appellant has undertaken to pay Rs.15,00,000/- and

he acknowledged issuance of the cheque. In his written

statement (paragraphs No. 1 and 3, on merits) the

Appellant has again admitted issuing of the cheque in

favour of the Respondent, however, denied being

partner of the principal-debtor and adopted the stance

that he is just a surety. To wriggle out of the liability

undertaken by the Appellant, it is much emphasized by

the learned counsel for the Appellant that it is inevitable

to first get the liability adjudged against the principaldebtor or have him in the array of parties as a

defendant.

Section 128 of the Contract Act, 1872 (the

‘Contract Act’) provides that the liability of the surety

is co-extensive with that of the principal debtor, unless

it is otherwise provided by the contract. The Note

reflects that the Appellant undertook to pay

Rs.15,00,000/-, apparently without requirement of any

reference to the principal-debtor. There is nothing on

record suggesting that anything contrary was settled

between the parties. In case titled “Sukur Pradhan and

others v. Orissa State Financial Corporation and

others” (AIR 1992 ORISSA 281) the Court after

referring the entire case law from 1917 to 1992, reached

to the conclusion that surety can be held liable to

creditor irrespective of remedy which the creditor may

have against principal-debtor and the creditor can

proceed against the surety without exhausting his

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

remedy against the principal-debtor. The general law as

also stated in section 128 of the Contract Act is subject

to the stipulations of the contract and if anything

different is provided in the contract then the same is to

be given effect. Same conclusion was drawn by the

Supreme Court of India in case titled “The Bank of

Bihar Ltd. v. Dr. Damodar Prasad and another” (AIR

1969 Supreme Court 297).

10.

In cases titled “Pakistan Industrial Credit and

Investment Corporation Ltd., Karachi versus Fazal

Vanaspati Limited, Karachi” (PLD 1993 Karachi 90)

and “National Bank of Pakistan versus F. S.

Aitzazuddin and 2 others” (PLD 1982 Karachi 577),

the Sindh High Court, facing the situation as in present

case, made reference to section 137 of the Contract Act,

which provides that mere forbearance on the part of the

creditor to sue the principal debtor or to enforce any

other remedy against him does not, in the absence of

any provision in the guarantee to the contrary,

discharge the surety. It has been gathered by the

learned Sindh High Court that a creditor cannot be

compelled to first exhaust his remedy against a

principal-debtor, when the contract does not provide

anything contrary and mere forbearance to assert claim

or pursue remedy against principal debtor, cannot

discharge the surety. It will be beneficial to reproduce

the following extract of National Bank of Pakistan case

(supra): -

“…The liability of the surety arises

immediately on the failure of the principal

debtor and unless otherwise provided in the

Contract a creditor cannot be compelled to

first exhaust his remedy against the principal

debtor before initiating any action against the

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

surety. The liabilities of the principal debtor

and the surety are separate and distinct. Even

in cases where the liabilities of both the

parties arise from the same transaction of the

same document, the liabilities are distinct.

Reference can be made to the case PLD 1975

Kar. 504. The surely is liable under his

contract which he executes in favour of the

creditor. In terms of the letter of guarantee

the defendants have agreed that their liability

to the plaintiff shall be that of principal

debtor and at plaintiff's option the defendants

may be treated as primarily liable for the

amount due from the borrower. There is

nothing to suggest that the plaintiff should

first exhaust its remedy against the

borrower/principal debtor. This view finds

support from the provision of section 137 of

the Contract Act, which provides that a mere

forbearance to sue the principal debtor or to

enforce any other remedy against him does

not in the absence of any provision to the

contrary discharge the surety. In these

circumstances the fact that the creditor has

not sued or joined the principal debtor can

hardly be a defence in a suit against the

surety. This principal is so well settled that it

is not necessary to discuss the authorities on

the point. Suffice to mention, AIR 1927 Lah.

396 AIR 1932 Lah. 419 AIR 1935 Mad. 748

and AIR 1957 Pat 256. In Mahanth Singh v.

U. Ba. YI. (1), it was held that failure to sue

the principal debtor until recovery was barred

by the Statute of Limitation did not operate as

discharge of the surety.

The creditor's right to proceed against the

surety is not accessory to the right to proceed

against the principal debtor personally. A

surety in the absence of a contract to the

contrary cannot compel the creditor to first

exhaust his remedy against the principal

debtor. In view of the above discussion as in

the present case liability of the surety is based

on a letter of guarantee, which is distinct from

the liability of the principal debtor, the suit is

maintainable.”

(Underlining is added)

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

11.

In case titled “Suresh Narain Sinha v. Akhauri

Balbhadra Prasad and others” (AIR 1957 PATNA

256), the arguments of learned advocate for surety that

the suit cannot succeed unless the plaintiff has

exhausted his remedies against the principal debtor,

were repelled while concluding that failure to sue the

principal debtor, until recovery was barred by the

statutes of limitation, did not operate as discharge of the

surety. The following extract from the above judgment

is relevant:-

“(4) It was then contended on behalf of

the appellant that even if there was a

contract of guarantee between the

parties, the suit cannot succeed unless

the plaintiff has exhausted his remedies

against the principal debtor, namely, the

Modern Bank of India, Ltd. defendant

No. 5, with its registered Head Office at

Dacca. We do not think there is any

substance in this argument. It is

provided by S. 128 of the Indian

Contract Act that the liability of the

surety is co extensive with that of the

principal debtor, unless it is otherwise

provided by the contract. There is high

authority in support of this view in

Mahanth Singh V. U. Ba YI, AIR 1939

PC 110 (G). It was held by the Privy

Council in that case that failure to sue

the principal debtor until recovery was

barred by the statutes of limitation did

not operate as discharge of the

surety….”

12.

In view of the above discussed provisions of

the Contract Act and referred decisions, the argument

of Malik Shahid Iqbal Babbar (learned ASC) that the

principal-debtor was required to be proceeded against

before institution of the suit against surety is found

incorrect, therefore, the said argument stands rejected.

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

13.

Now coming to the next contention regarding

the second agreement and the stance that this agreement

resulted into rescinding the first agreement or release

the Appellant from his liability. This contention stand

negated from the simple reading of the second

agreement as a whole and in particular the following

clause contained therein:-

"۔۔۔زمدی ہی ہک اعمدہہ ذہا وجہک اسہقب اعمدہہ ومرہخ

2014۔10۔

یک وتعیس اور اتزہ رحتری وہےن یک اینبد رپ الص اور

اسہقب ااٹشم یک تشپ رپ ذموکرہ رشاطئ ڈنکنشی اگڑی دبوتسرانذف

المعل وہیگن۔۔۔"

The thumb print and signatures of the

Appellant are again available on the second agreement.

The above clause is essentially making reference to the

Note, besides other clauses, contained in the first

agreement. Though the thumb print and signatures of

the Appellant on the second agreement are placed as

identifier but it precludes possibility of keeping

anything hidden from the Appellant as well as it reveals

the clear intention of the parties to keep the surety intact

and the fact that the Appellant was never relieved from

his liability.

14.

The Respondent entered in the witness box

and stood by the averments in the suit. The cheque is

also brought on the record as Ex. P-6. In support of his

stance, Majid Rasheed appeared as PW-2 who deposed

that the principal-debtor was approached by the

Respondent, who refused to return the amount that he

received. He verified the contents of the first agreement

(Ex.P-1) and the second agreement (Ex.P-3). Almost

same was deposed by Muhammad Suleman (PW-3).

(1) R.F.A. No. 676 of 2021

(2) R.F.A. No.63163-2020

The three witnesses were cross-examined in length but

nothing adverse or sufficient to rebut the presumption

arising under section 118 of the N.I.A., 1881 is noticed.

The Appellant appeared as DW-1 and in response to a

question, he admitted signing the second agreement

(Ex.P-3). He has not denied issuance, presentation and

dishonor of the cheque. After hearing the arguments

and reading the record, I am of the firm opinion that the

learned trial Court has reached to the correct

conclusion. The titled appeal being meritless is

dismissed, with further cost of Rs. 2,50,000/-.

15.

As far as the appeal No. 63163 of 2020 is

concerned, the learned counsel for the Respondent

though initially claimed interest in terms of the relevant

provisions of N.I.A., 1881, however, he stated that he

has instructions not to press the claim of interest if this

Court is convinced to allow reasonable cost in favour of

the Respondent and against the Appellant. In view of

the same, appeal of the Respondent is dismissed being

not pressed.

(Sultan Tanvir Ahmad)

Judge

Approved for reporting

Judge

Announced in open Court on ____________.

Judge

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