IN THE HIGH COURT OF SINDH, KARACHI

Ist Appeal No. 09 of 2016

Sadiq Imam Rizvi.……..…………...……………………..……………….….Appellant

Versus

Muhammad Ibrahim…………………………………..…………………....Respondent

Date of Hearing:- 20.02.2017

Mr. Jan Muhammad Naich, advocate for the appellant

Syed Muhammad Haider, advocate for the respondent

J U D G M E N T

FAHIM AHMED SIDDIQUI, J: This appeal is directed against the judgment dated 29-03-2016 and decree dated 04-04-2016 passed by the learned Additional District Judge-III, Karachi East in Summary Suit No. 36 of 2015. Through the impugned judgment, the learned trial Court decreed the said suit filed by the respondent/plaintiff against the appellant/ defendant.

2. Succinctly, the effects of the case are that the respondent filed a summary suit before the learned trial Court against the appellant/defendant for recovery of Rs.18,83,500/-under Order XXXVII of CPC. In the said suit, respondent has alleged that both the parties knew each other very closely for the last many years. The appellant was doing a business of supply of Sun-land Crops Care under the name and style of Asian International Trading and having his office at Bungalow No. 1/1-8, Block-6, PECHS, Nursery, Shahrah-e-Faisal, Karachi. As alleged in the plaint, the appellant/defendant requested respondent for a friendly loan of Rs.10,00,000/-, which was arranged by respondent/plaintiff and paid to him through cheque No. 2416816 of JS Bank, Shah Faisal Colony Branch, Karachi. The appellant executed a loan agreement in which he undertook to repay the said amount before 18.05.2012 for which he also handed over to respondent a post-dated cheque No. 7363622 of JS Bank as security.

3. It is also alleged by the respondent that the appellant undertook that he would pay interest/profit of Rs.28,500/-per month to the respondent until the loan amount is paid off. But, the appellant only paid Rs.2,76,500/- towards monthly profit at the above-mentioned rate and thereafter neither he paid interest/profit nor refunded/repaid the loan amount to him. Under these circumstances, the respondent presented the cheque to the bank, but he could not negotiate the same, and the bank dishonoured it with remarks 'funds insufficient'. Thereafter, the respondents/plaintiff again approached the appellants/defendant, but he initially kept him on false hopes and then refused to pay neither interest/profit nor actual amount. The respondent filed the suit as mentioned earlier with the prayer of a decree in his favour regarding amount mentioned in the dishonoured cheque and accumulated interest/profit mentioned in agreement. The said suit was proceeded and ultimately decreed in favour of the respondent. The appellant now impugned the judgment and decree of the trial court before this Court.

4. I have heard the arguments advanced by the learned advocates of the parties and scanned the record place before me in the light of the arguments advanced by both the learned members of the bar.

5. The sequel of arguments of learned counsel for the appellant based on emphasizing that the impugned judgment is an ex-parte judgment. The appellant handed over the cheque to respondent as security and he unjustifiably presented the same for encashment. According to him, in these circumstances getting a decree behind the back of appellant is also not proper. The cheque was for an amount of Rs.1,000,000/- from which admittedly an amount of Rs. 2,76,500/- is paid to respondent. According to him for a cheque of Rs.1,000,000/-, a decree of Rs.18,83,500/- is also not justified. Per him, in the instant matter evidence is necessary as such the suit is required to be remanded back for proper trial.

6. Conversely, the arguments of learned counsel for the respondent are that after service, the appellant filed an application for leave to defend with a delay of 40 days and the same was also without any application under Article 5 of Limitation Act. According to him, he has to file an application for leave to defend within ten days, and after the dismissal of the said application there was no other option for the trial court but to proceed with the case as ex-parte. In response to a query, he frankly admitted that the respondent is not a licensed moneylender. He took reliance from a case reported as Farooque Ahmed v. Raza Muhammad (PLD 2007 Karachi 182).

7. The respondent filed suit against the appellant under the summary jurisdiction of the trial court based on a negotiable instrument (a cheque), and the same was proceeded and decided under Order XXXVII of CPC. It is an admitted position that after service, the appellant appeared before the trial Court with a request for leave to defend. The leave to defend was dismissed on certain technical or factual grounds, and such dismissal order was not challenged by preferring a revision. Even no submissions have been made by the learned counsel for the appellant regarding leave to defend during his arguments. In such a situation, the order for the dismissal of leave to defend became final, and the same cannot be reopened at this stage.

8. As far as the merit of the case is concerned, I would like to say something regarding the judgment of trial Court. In the impugned judgment, the trial Court has relied upon not only the negotiable instrument (dishonoured cheque) but also an agreement allegedly executed simultaneously regarding a monthly amount of interest/profit, which is chargeable until the final payment of loan amount. As per learned counsel for the respondent, the respondent is not a licensed moneylender, but it is mention in the alleged agreement that the respondent will charge an exuberant amount of interest/profit on the loan amount. The agreement is not a promissory note in its form. The cheque is a negotiable instrument, which can be encashed for the amount mentioned in it and it cannot fetch any interest.

9. The respondent has an alternative to file a suit for recovery of principal amount along with the rate of interest mention in the alleged agreement by filing a suit under the West Pakistan Money Lenders' Ordinance, 1960 which certainly met a fate of dismissal under section 10 of the said ordinance. He, therefore, filed suit under the summary jurisdiction with intention to get desired relief under Order XXXVII of CPC. The interest in a case under the Negotiable Instrument Act (hereinafter referred to as 'the Act’) can only be charged as per provision under Section 79 and 80 of the said Act. Section 79 of the Act deals with the situation when the rate of interest/mark-up is described within the body of the negotiable instrument, while Section 80 of the Act is about charging interest in a situation when the rate of interest/mark-up is not described in the negotiable instrument. In the instant matter, Section 80 of the Act attracts, which is reproduced as under:

"80. Interest when no rate specified.---When no rate of interest is specified in the instrument, interest on the amount due thereon shall, notwithstanding any agreement relating to interest between any parties to the instrument, be calculated at the rate of six per centum per annum, from the date at which the same ought to have been paid by the part charged, until tender or realization of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs.

Explanation. --- When the party charged is the endorser of an instrument dishonoured by non-payment, he is liable to pay interest only from time that he receives notice of the dishonour."

From the above provision of law, it is clear that the rate of interest/mark-up in the existing case cannot be beyond 6% per annum from the date when it was due. The trial court has overlooked this important provision of law while granting interest/mark-up. The trial court could have not relied upon the alleged agreement, as the same is an alien document for an action under the provision for the negotiable instrument.

10. It is also worth noting that it has been admitted by the respondent (plaintiff) within the plaint of the suit that he had received an amount of Rupees 2,76,500/- as such the said amount is deductible from the final payment to be made to the respondent in respect of dishonoured cheque. It is also revealed from the record that the cheque was presented to banker for negotiation on 13-11-2012 when it was dishonoured. As such the interest/mark-up 6% is to be charged from the date of presenting the cheque i.e. for a period of five years. In these circumstances, the total amount to be paid by the appellant to the respondent would be calculated as under: -

The amount of cheques : Rs.1,000,000/-

Mark-up (for five years) @ 6% x 5 : Rs. 3,00,000/-

Deduction for amount already paid : Rs. 2,76,500/-

Total payable : Rs. 10,23,500/-

11. In view of the above observation, the instant appeal is disposed of with modification of decree, whereby the decretal amount is reduced to Rs.10,23,500/-. There will be no order as to cost.

J U D G E