Raziq International VS Multan Exporte etc

Stereo. H C J D A 38.

Judgment Sheet

LAHORE HIGH COURT MULTAN BENCH

MULTAN

JUDICIAL DEPARTMENT

R.F.A No.117/2011

Raaziq International (Pvt) Ltd.

Versus Multan Export Company etc.

JUDGMENT

Date of Hearing: 08.09.2025 Appellant by: Mr. Shakeel Javaid Chaudhry, Advocate.

Respondents by: Malik Tariq Saeed, Advocate.

Anwaar Hussain J: Through this appeal, challenge is laid to judgment and decree dated 23.02.2011, passed by the Trial Court, whereby the suit instituted by the appellant, under Order XXXVII, Code of Civil Procedure, 1908 (“CPC”) for recovery of Rs.934,491.90, on the strength of five cheques issued by the deceased proprietor of the respondent business concern namely, M/s Multan Export Company, was dismissed.

2.By way of factual background, it has been noted that the appellant is involved in rendering services of customs clearing, freight forwarding and logistics etc. In the plaint of its suit, the appellant set up a case that the appellant rendered certain services to the respondent for export/shipment of mangoes to Dubai and Europe, during the years 2006–07, and for the said transactions, the respondent side issued five cheques of an aggregate sum of Rs.1,496,480/-. However,

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the appellant confined its claim to Rs.934,491.90, asserting that upon reconciliation of accounts this lesser sum remained outstanding and payable and despite repeated solicitations, the said balance was not cleared by the respondent. The suit was contested by the respondent through filing of leave to defend. An independent declaratory suit was also instituted by the respondent and it was pleaded that the cheques were handed over, merely, as security. The respondent set up the case that the relationship was governed by a written agreement dated 08.06.2007, which stipulated advance payment for all services; that during 2007 an amount of Rs.5,684,830/- was paid, by the respondent to the appellant, against a liability of Rs.5,200,000/-; and that a surplus of Rs.483,194/- stood in its favour. On such premises, it was claimed that the cheques were issued as security, without consideration. Leave to defend was granted and as many as nine consolidated issues were framed. The plaint of the suit instituted by the respondent was returned under Order VII, Rule 10, CPC for presentation before a Court of plenary jurisdiction whereas the suit instituted by the appellant was dismissed on merits, after recording of evidence holding that the cheques were given as security and that the appellant had failed to prove passing of consideration for their issuance.

3.Arguments heard. Record perused.

4.The core point of determination is to examine whether the cheques issued by the respondent were pursuant to payment due on account of services rendered by the appellant or were given as a security. The entire controversy was condensed in the following three issues:

“ISSUES

1.Whether the plaintiff has no cause of action and locus standi to file the suit as he is estopped by his words and conduct and the suit is not competent as declaratory suit for cancellation of impugned

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cheques is pending adjudication before the Civil Court? OPD

3.Whether a sum of Rs.9,34,491.90 was outstanding against the defendant, who issued cheques in favour of the plaintiff which were dishonoured and plaintiff is entitled to recover the same? OPP

4.Whether the Cheques on the basis of which Raziq International Pvt has filed the suit U/O 37 Rule 2 CPC were given as security and without consideration, therefore, they are liable to be cancelled? OPP”

5.It is an admitted fact that the business relationship existed between the parties. It is also admitted that the respondent instituted a declaratory suit wherein issuance of the cheques were acknowledged albeit that the same had been given as security. It is, therefore, not in dispute that the cheques were drawn by the respondent. Upon institution of the suit under Order XXXVII, CPC, the first aspect which ought to have engaged the attention of the Trial Court was whether, at the threshold, the suit was competent as one under Order XXXVII, CPC when the cheques issued aggregated to Rs.1,496,480/- whereas the claim was confined to Rs.934,491.90. In this regard, issue No.1 was framed. However, if the Trial Court considered this discrepancy fatal, it should have returned the plaint straightaway as incompetent under the summary procedure envisaged under Order XXXVII, CPC. However, the Trial Court allowed leave to defend to the respondent and thereby converted the matter into an ordinary suit. Once leave is granted, the suit loses its summary character and proceeds in form of a regular trial, where the Court must adjudicate on the basis of preponderance of evidence. A summary suit under Order XXXVII, CPC ordinarily has two phases: the first, being the stage of summary proceedings commencing from the institution of the suit and ending with the decision on leave to defend. If the plaint is returned on account of jurisdiction or leave is refused, the matter concludes at this stage. If the leave is granted, the second phase follows, in which

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the suit is treated as a regular/ordinary trial: issues are framed, parties adduce their evidence, the burden of proof is determined in the light of those issues, and the case is decided on merits, in accordance with the general procedure of the CPC and law of evidence.

6.The legal consequence of granting leave to defend and conversion of summary procedure into a regular trial has not been kept in sight by the Trial Court. The Trial Court decided the case as if it was still at the stage of summary proceedings and did not examine the issues in the manner in which a regular trial of a civil matter is to be concluded. The Trial Court erred by not appreciating that the issuance of the cheques was admitted and no allegation of fraud was attributed to the appellant/plaintiff side qua procurement of the cheques. The business relationship between the parties was also clearly admitted. It is imperative to note that the respondent took following stance in the leave to defend, which was allowed:

ے۔ نم دماعہیلع ےن وکیئ ہنیبم سمق، ے رست میلس ہن، رعدیض وعی طلغ5 ہی ہک رقفہ ربمن.5’’ وکایافراسناہمیھبرحتیرولیمکت08.06.2007ے۔امنیبفرنیقیومسہخ،دمیع ہرزگ ارا ہنرکین یک اینبر رپ لمع ںیم آےئAdvance Payment وہا اھت۔ سجںیم ہی ےط نانا اھت ہک امتماکسوناس ےک تحت ہی ےط نانا اھت ہک ارگ وکیئ5 یک الکز ربمن08.06.2007 اگ اوس افراس ناہم ومسہخ ہرزگ ناہر ہن وھجایئ اجےئ یگ۔ اس رطحShipment/ نایق سیہ وت دماعہیلع اک املPayment ء ںیم دمیع وک2007 ے۔ نم دم اعہیلع ےن اسل، ے اوساقب اخراج، روعی دمیع نا اقب رشیپتف ئ ری ےھت ہکبجPayment ایواسSecurity اکسوناس یک دم ںیم چ اہےئ دتم وعہی وطبس ے۔احالہکنالصتقیقح ہی،یکسوقمارادشهیلچآیتںیہاوسوکیئہنیبمسمقدمیعنایقہنShipment سوےپ دمیع وک ارا ےئک۔ احالہکن568848830 - ء ںیم نم دم اعہیلع ےن غلبم2007 ے ہک اسل، سوےپےکگلگھبےتنبےھت اوسنمدماعہیلعزادئارادشہ528008000/- ارایگیئسمقاکسوناسرقتبیا ے اوس اوسفس یک، سوےپ ازاں دمیع واسپ رکےن اک دقحاس الچ آنا48838194/-سمق رقتبیا گل گھب ئ ےہکدمیعےندنچسوزہراینویزدنیگیککمچرکمےساتمیروہرکرسوغوگیئرپینبمروعیرایرایک،نات ‘‘ے۔،ے اقباخراج،ےاوسرسوغوگیئرپینبم،ےوجاقبرشیپتفہرزگہن،

(Emphasis supplied)

The respondent asserted that the cheques were given merely as security and that in fact payments had been made in excess of

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liability. When the appellant discharged its initial burden by producing the cheques the issuance whereof was admittedly underpinned by business relation and rendering of services by the appellant, for shipment of mangoes of the respondent, the evidentiary onus then shifted to the respondent to substantiate its claims of advance/excess payments and to produce the written agreement allegedly governing the business relationship. The respondent, however, failed to discharge this burden. The alleged written agreement dated 08.06.2007 was never produced. No contemporaneous receipts, vouchers, ledger accounts or bank statements were produced to corroborate the claim of payments totalling Rs.5,684,830/-. In the absence of such material, the plea of excess payment remained a bald assertion particularly when the plaint of respondent’s suit was returned and, admittedly, the said suit was never filed before the Court of plenary jurisdiction. The Trial Court overlooked this deficiency and instead non-suited the appellant on peripheral grounds.

7.Equally untenable is the finding of the Trial Court that the cheques were issued as security. If the arrangement for rendering of services was strictly on advance payment as per the purported agreement dated 08.06.2007, issuance of security cheques was wholly inconsistent with such arrangement. Such a plea as woven by the respondent is clearly mutually destructive as, in the ordinary course of human business, it is not normal to give security cheque of an amount which, under the agreement, was to be paid in advance. Security instruments come into equation only where the services are to be performed prior to or contemporaneous with the payment. The very existence of the cheques negates the respondent’s stance of an advance-only arrangement. This contradiction was neither noticed nor resolved by the Trial Court. Therefore, the reliance placed by the Trial Court on the fact that the appellant sued for a lesser sum than the aggregate value of the cheques is misconceived. As observed above,

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once leave to defend was granted, the proceedings under Order XXXVII, CPC were converted into an ordinary suit and it was immaterial whether the plaintiff had confined its claim to a lesser amount. The correct inquiry was whether, on a balance of probabilities, the appellant had established its entitlement to the claimed amount. Similarly, the observation that the witnesses of the appellant were its own employees or that a criminal case in respect of one cheque had been cancelled cannot form the basis of dismissal of the suit. Testimony of employees is admissible evidence subject to appreciation of credit; and the fate of criminal proceedings has no determinative effect upon civil liability arising out of negotiable instruments.

8.Another dimension of the matter that has been altogether overlooked by the Trial Court is the effect of Exhibit P-7, a letter dated 06.10.2007, wherein the respondent side expressly admitted its liability and sought time to discharge the same in the following terms:

“We hereby confirm that your outstanding payment of airfreight is to the tune of Rs.1.76 (M) at the end of Mango Season of the year 2007. We explained the situation wherein at this stage we are unable to pay your said amount and hereby made a request that to please allow us sometime to settle the said amount through cash & post dated cheques.”

This document (Exhibit P-7) was brought on record without any objection by the respondent. Its veracity was neither challenged in cross-examination, nor was any contradictory evidence, receipt or voucher produced to displace it. The admission contained therein renders it evident, beyond cavil, that not only was the business relationship acknowledged, but the cheques in question could not have been issued merely as security; rather, they represented subsisting and admitted liability arising from services actually rendered. Significantly, the appellant, despite being entitled to claim the entire sum of approximately Rs.1.496 million covered by the cheques, or

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Rs.1.76 millions acknowledged through letter dated 06.10.2007/ Exhibit P-7, confined its suit only to Rs.934,491.90, a figure consistent with the reconciled balance after adjusting payments made by the respondent. This fortifies the bona fides of the appellant’s claim and demonstrates that the Trial Court failed to correctly appreciate the evidence on record.

9.This Court is of the opinion that on a proper appraisal of record, issues No.3 and 4, which are the core point of determination, should have been decided in favour of the appellant. The admitted issuance of cheques coupled with the established course of dealings sufficed to prove the appellant’s claim. The respondent failed to substantiate its defence, hence, the Trial Court’s conclusion is legally flawed.

10.For the reasons recorded above, this appeal is allowed. The impugned judgment and decree is set aside. The suit of the appellant stands decreed as prayed for. Parties shall bear their own costs.

(ANWAAR HUSSAIN)

JUDGE

Approved for reporting.

Judge

Order was announced in Open Court and was dictated on the same day, however, finalized/signed on 25.09.2025.

Akram