Suit dismissed under order 7 rule 11

Present: Syed Mansoor Ali Shah, J.

MUHAMMAD NAWAZ--Petitioner

versus

MUHAMMAD AKRAM and another--Respondents

C.R. No. 1687 of 2009, heard on 26.9.2011.

Civil Procedure Code, 1908 (V of 1908)--

----S. 115 & O. VII, R. 11--Rejection of plaint--Second agreement--Right margin of agreement for cancellation of mortgage suit for recovery against petitioner on basis of a note claimed to be guarantee given by petitioner--Suit was dismissed--Appeal was accepted by First Appellate Court--Challenge to--Second agreement was inconsistent with agreement--Validity--Second agreement had no bearing on liability of the petitioner as he was not privy to second agreement--Note in margin of agreement did not constitute a valid agreement and was, therefore, not enforceable in law, hence respondent had no cause of action to maintain the suit--Courts below had failed to consider these legal aspects of the cases--Suit was rejected under O. VII, R. 11 of CPC for being devoid of any cause of action--Judgments and decrees of Courts below were set aside except finding of trial Court regarding issue which was upheld--Revision was allowed.    [P. 308] A & B

Mr. Moiz Tariq, Advocate for Petitioner.

Mr. Assad Majeed, Advocate for Respondent No. 2.

Nemo for Respondent No. 1.

Date of hearing: 26.9.2011.

Judgment

Brief facts of the case are that Respondent No. 1 filed a suit for recovery against the petitioner on the basis of a note (claimed to be a Guarantee given by the Petitioner to Respondent No. 1) recorded in the right margin of Agreement for the Cancellation of Mortgage ("Agreement") dated 2-1-2001 entered between Respondents No. 1 and 2 and placed on the record as Ex-P/I. Respondent No. 1 claimed that the Petitioner was under an obligation to recover four gold bangles and a sum of Rs. 34,000/- from Respondent No. 2. The suit also mentions another agreement (second agreement) dated 8-2-2001 (Ex-P/II) wherein Respondent No. 2 has undertaken to pay Respondent No. 1 Rs. 34,000/- @, Rs. 1500/- per month.

2.  The suit was dismissed vide judgment and decree dated 14.2.2007 passed by learned Civil Judge, Gojra. Feeling aggrieved Respondent No. 1 preferred an appeal before the learned Additional District Judge, Gojra who vide judgment and decree dated 11.5.2009 accepted the appeal and decreed the suit filed by Respondent No. 1. Hence this revision.

3.  Respondent No. 1 was earlier proceeded ex-parte on 8-3-2010 which was set aside on 10-3-2010 as the said respondent joined the proceedings. Then again on 21-9-2011 Respondent No. 1 was proceeded ex-parte and the case was fixed for ex-parte arguments for today. Inspite of notice no one has tendered on behalf of Respondent No. 1 hence this ex-parte judgment.

4.  Counsel for the petitioner argued that the note recorded in the right margin of the Agreement for the Cancellation of Mortgage only states that an amount of Rs. 100,000/- (settlement amount of the Agreement) was paid by the Petitioner and had to be deducted from the price to be paid for the shop by the Petitioner to Respondent No. 1. The rest of the note is forged and was never executed by the petitioner. Counsel for Respondent No. 2 supports the contention of the petitioner.

5.  Arguments heard, record perused.

6.  Respondent No. 1 had obtained a loan from Respondent No. 2 and in return mortgaged his shop with Respondent No. 2. Later on when Respondent No. 1 entered into an Agreement to Sell of the same shop with the petitioner, Respondent No. 2 filed a suit against Respondent No. 1 and obtained a stay order. However, finally, respondents arrived at a settlement between themselves through Agreement dated 2-1-2001 (Ex P/I) which cancels the Agreement of Mortgage of the said shop dated 29-4-1998.

7.  The Agreement clearly states that Respondent No. 1 had borrowed money against the said shop from Respondent No. 2 in the sum of Rs. 100,000/- and Rs. 34,000/- and had promised to pay Rs. 3000/- as a monthly return and therefore a total of Rs. 1,90,000/- outstands against Respondent No. 1. However, in order to arrive at a settlement, Respondent No. 2 agreed to cancel the Mortgage dated 29-4-1998 against a total consideration of Rs. 100,000/- to be paid by Respondent No. 1 to Respondent No. 2. It also made clear that no further payment was to be made by either parties.

8.  The right margin (second page) of the Agreement carries a note allegedly signed by the petitioner. It states that the petitioner has paid Rs. 100,000/- on behalf of Respondent No. 1 and the said amount shall be adjusted against the price of the shop (under the Agreement to Sell between the petitioner and Respondent No. 1). The second part of the note rather incoherently states that the petitioner undertakes to recover four gold bangles from Respondent No. 2 and mentions a sum of Rs. 34,000/- at the end of the note, leaving it unclear as to what is to be done with the said amount.

9.  Additionally, the suit of Respondent No. 1 refers to another agreement (second agreement) dated 8-2-2001 which states that Respondent No. 2 has agreed to pay back Rs. 34,000/- to Respondent No. 1 @ Rs. 1500/- per month.

10.  Petitioner appearing as DW-1 has stated that he never recorded the portion of the note that is being claimed by Respondent No. 1 to be a guarantee resulting in maintaining a suit against the petitioner. However, the evidence on the record shows that the said note was executed. Be that as it may, even if the note is taken to have been executed it suffers from the following legal infirmities:--

a.         The Note/Guarantee recorded in the margin to the Agreement dated 2-1-2001 lacks offer and acceptance between the parties to constitute a guarantee. Respondents No. 1 and 2 are not signatories to the said Guarantee.

b.         There is no consideration for the petitioner in the said guarantee.

c.         The note/guarantee is not clear and does not spell out the name of the creditor in the guarantee and is, therefore, void for being vague and unclear.

d.         There is no relationship between Respondent No. 2 and the Petitioner and there is no plausible explanation or reason why the petitioner should stand as a guarantor to Respondent No. 2.

e.         The Note/Guarantee is inconsistent with the Agreement dated 2-1-2001 which states that entire amount have been paid and there is nothing outstanding between the parties.

11.  Once the main parties have finally settled the matter at
Rs. 100,000/- with a clear recital that no further amount is due from either of the parties, there appears to be no consideration for the so called guarantee. Secondly, the guarantee is vague and does not clearly provide the name of the beneficiary. Thirdly, for a valid guarantee there ought to be three parties namely creditor, principal debtor and the guarantor. Two main actors are missing. The second agreement dated 8-2-2001 or 7-2-2001 is inconsistent with the Agreement dated 2-1-2001. Besides it is misconceived as it states that Respondent No. 2 has to pay Respondent No. 1 Rs. 34,000/- which is incorrect and against the facts of the  case,  as  well  as,  Agreement dated 2-1-2001. Respondent No. 1 had borrowed money (Rs. 1,34,000/-) from Respondent No. 2 and it was Respondent No. 1 who had to return the same, while, the second Agreement states that Respondent No. 2 has to pay Respondent No. 1 which is incorrect and inconsistent with Agreement dated 2.1.2001. In any case the second agreement has no bearing on the liability of the petitioner as he is not privy to the second agreement. The note in the margin of the Agreement dated 2.1.2001 does not constitute a valid agreement and is, therefore, not enforceable in law, hence Respondent No. 1 has no cause of action to maintain the suit.

12.  Learned Courts below have failed to consider these legal aspects of the cases. The suit of Respondent No. 1 is, therefore, rejected under Order 7, Rule 11 CPC for being devoid of any cause of action. Judgments and decrees of the Courts below dated 11.5.2009 and 14.2.2007 are hereby set aside except the finding of the learned trial Court regarding Issue No. 2 which is upheld and the instant civil revision is allowed.

(R.A.)  Revision allowed