Ayaz Ahmed Paracha Vs Dost Muhammad Khan

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

(Judicial Department)

RFA No. 109-P/2025

Ayaz Ahmed Paracha Vs Dost Muhammad Khan

JUDGMENT

Date of hearing: 22.06.2026

Appellant by: Mr. Ghulam Muhammad Faleh, Advocate.

Respondent by: Mr. Muhammad Haroon, Advocate.

SAHIBZADA ASADULLAH, J.- Through

the instant appeal, the appellant has assailed the judgment and decree passed by the learned Additional District Judge-VII, Nowshera whereby the suit instituted by the respondent/plaintiff under Order XXXVII CPC was decreed.

2.Facts giving rise to the present litigation are that the parties remained engaged in business transactions over a considerable period of time, during which, according to the

respondent/plaintiff, different amounts were advanced to the appellant in the course of their business dealings; that the relationship, however, did not retain its earlier harmony and differences gradually surfaced, confidence eroded, and the business understanding eventually broke down, giving rise to disputes regarding the outstanding financial liability;

that in order to resolve the dispute amicably, the matter was taken to a local forum (jirga), where the appellant acknowledged his outstanding liability in the sum of Rs.7,000,000/- and agreed to liquidate the same in a structured manner; that in furtherance of the said arrangement, a written deed was drafted embodying the terms of settlement and the appellant also issued negotiable instruments in the shape of two cheques bearing No. 1601412427 and 1601412428 amounting to Rs. Rs. 35,00,000/- lac each towards discharge of the admitted liability; that the respondent asserts that despite such acknowledgment and issuance of negotiable instruments, the appellant failed to

honour his commitments, thereby compelling him to institute a suit under Order XXXVII

CPC.

3.Upon service, the appellant

entered appearance and sought leave to defend the suit. In the written statement as well as in the application seeking leave to defend, he denied the enforceability of the claim principally on two grounds: firstly, that the cheques had merely been issued as security instruments and did not represent an existing liability; and secondly, that the respondent had failed to establish the source of the alleged amount of Rs.7,000,000/- or the precise manner and dates on which such amount was allegedly advanced. It was further contended that the controversy involved disputed questions of fact requiring recording of evidence and, therefore, the matter was not amenable to summary jurisdiction under Order XXXVII CPC. The material brought on record, however, indicates that the financial relationship between the parties was not a single isolated transaction but rather a

continuing course of dealings wherein amounts were allegedly advanced in different instalments over time and, according to the stance of the appellant, certain amounts were also periodically received, adjusted or treated as profit during the subsistence of the business arrangement. The version of the respondent, however, remained consistent that such intermittent payments or receipts were never intended to discharge the principal liability of Rs.7,000,000/- but were merely ancillary adjustments within an ongoing commercial arrangement which ultimately culminated in a final settlement. It is significant that despite such alleged partial adjustments or fragmented financial movements, the liability was ultimately reduced into a quantified acknowledged figure through a written deed and thereafter operationalized through issuance of negotiable instruments. Thus, whatever may have been the internal accounting between the parties during the currency of their business relations, the same stood superseded by a crystallized acknowledgment of liability

forming the foundation of the present suit.

From the divergent pleadings of the parties, the learned trial court framed the relevant issues.

Thereafter, the learned trial Court was pleased to provide full and adequate opportunity to the parties to substantiate their respective stands.

In pursuance thereof, the plaintiff, now respondent, not only entered the witness box in support of his claim but also produced independent witnesses to establish the business relationship between the parties, the financial transactions carried out during the course of such dealings, the subsequent acknowledgment of liability, and the issuance of negotiable instruments in furtherance thereof. Equally, the defendant, now appellant, was afforded complete opportunity to cross-examine the respondent and his witnesses on all material and essential aspects of the case. However, quite significantly, despite such exhaustive opportunity, nothing detrimental could be elicited from their testimony so as to cast doubt upon the genuineness of the transaction, to establish malafide on the part of the

respondent/plaintiff, or to show that the claim was false, fabricated, or otherwise lacking bonafide rather, the evidence, when read as a whole, consistently established the inter-se relationship of the parties, their engagement in business activities, the advancement of money during the subsistence of such relationship, the eventual acknowledgment of liability through a written deed, and thereafter the issuance of negotiable instruments in favour of the respondent as a means of securing and discharging the admitted obligation. When these circumstances are viewed collectively, coupled with the statements of the independent witnesses and the documentary record placed on file, this Court finds itself in agreement with the conclusion reached by the learned trial Court that the respondent/plaintiff had successfully discharged the burden cast upon him and had established his claim through reliable, consistent and confidence-inspiring evidence. The learned trial Court, while handing down the impugned judgment and decree, appreciated the available record in its

true perspective and assigned cogent reasons for accepting the case of the respondent.

4.Arguments head and available

scanned through.

5.This court is conscious of the fact that certain irregularities and alleged legal infirmities have been pointed out by the learned counsel for the appellant; however, upon careful examination, none of them can be elevated to the status of a jurisdictional defect or such illegality as would vitiate the proceedings in their entirety rather, the learned trial Court remained focused on the essential features of the controversy and rightly concluded that the respondent/plaintiff had succeeded in proving his claim to the required standard. It was also highlighted before this Court that the proper course available to the respondent/plaintiff was to institute a regular civil suit or a suit for rendition of accounts and that resort to summary proceedings under Order XXXVII CPC was misconceived. This contention, however, does not impress this Court. Such a course may perhaps have been

relevant had the controversy rested merely upon disputed accounts or unascertained business dealings without any written acknowledgment or legally enforceable instruments. The situation, however, stands on an altogether different footing where the liability has not only been acknowledged through a written deed but has further been reinforced by issuance of negotiable instruments specifying and affirming the obligation undertaken by the appellant. Once the claim is founded upon such documentary liability, duly acknowledged and translated into negotiable instruments, the law itself provides a special and expeditious remedy under Order XXXVII CPC. The appellant, therefore, cannot be permitted to contend that despite existence of such documents, the respondent should have been relegated to a long-drawn and cumbersome process of ordinary civil litigation. Indeed, the very philosophy underlying the summary procedure is to avoid unnecessary complications and to prevent parties, particularly in commercial and

financial transactions, from being dragged into prolonged litigation where liability has already been crystallized through written instruments.

The legislature, being mindful of the practical realities of commercial dealings and the need for certainty in financial transactions, consciously enacted the provisions of Order XXXVII CPC, so that obligations evidenced through written acknowledgments and negotiable instruments may be enforced with promptitude and the agonies of protracted litigation may come to an end at the earliest possible stage.

6.Learned counsel for the appellant further argued before this Court that the learned trial Court travelled beyond the limits of its jurisdiction while decreeing the suit summarily. According to him, unless the respondent established, through independent and unimpeachable evidence, the exact source of the amount of Rs.7,000,000/-, the dates of advancement thereof, and the manner in which the funds were arranged and transferred, no legally enforceable liability could be said to

have been established. It is urged that the documentary instruments relied upon by the respondent cannot, by themselves, cure the deficiencies in proof of the underlying transaction and, therefore, the suit ought not to have been decreed under the summary procedure prescribed by Order XXXVII CPC.

Conversely, learned counsel for the respondent has supported the impugned judgment with equal vehemence and has contended that once liability stood acknowledged in writing and was further reinforced through issuance of negotiable instruments, the learned trial Court rightly exercised jurisdiction under Order XXXVII CPC. It is argued that the appellant cannot be permitted to avoid the consequences of his own acknowledgment by raising vague pleas regarding source of funds or by describing the cheques as mere security instruments, particularly when no cogent evidence has been produced to rebut the documentary record forming the foundation of the suit. These rival submissions give rise to the principal question: whether, in the presence

of a written acknowledgment of liability supported by negotiable instruments, the Court exercising summary jurisdiction under Order XXXVII CPC is required to embark upon an elaborate inquiry into the source of funds and internal financial arrangements between the parties, or whether the documentary liability itself furnishes a sufficient basis for enforcement. It may further be observed, in the context of the objection raised regarding jurisdiction, that the argument premised upon alleged partial payments or periodic receipts in the nature of profit does not, by itself, detract from the maintainability of proceedings under Order XXXVII CPC. The essence of

jurisdiction under this provision is not defeated merely because, during the subsistence of commercial dealings, certain amounts were received, adjusted, or accounted for inter se the parties. What is legally material, is whether the liability, as finally crystallized, stands acknowledged in a definite quantified form through written acknowledgment and is further reinforced by issuance of negotiable

instruments. Even if it is assumed that some payments were made from time to time either as profit or partial adjustment, such receipts do not constitute a denial of the principal liability but, at best, relate to its mode of partial discharge and accounting reconciliation. These issues fall within the domain of merits and adjustment and do not travel to the threshold question of jurisdiction under Order XXXVII CPC. The learned counsel for the appellant, with utmost respect, appears to have conflated the question of accounting adjustments with the existence of liability itself. Once the liability is crystallized into a definite amount of Rs.7,000,000/- through written

acknowledgment and is further reinforced by negotiable instruments, the jurisdiction of the Court under Order XXXVII CPC remains fully attracted. The Court is not required, at this stage, to embark upon a roving inquiry into intermittent payments or alleged profit-based transactions, as such exercise pertains purely to adjustment on merits and not to the maintainability or competence of the Court to

proceed summarily. Order XXXVII CPC is a special and self-contained procedure devised by the legislature for expeditious enforcement of obligations arising out of written contracts, bills of exchange, hundis, promissory notes, and negotiable instruments. The object behind this special procedure is to prevent sham and illusory defences from delaying enforcement of obligations already crystallized in documentary form. The Indian Supreme Court in case titled “Mechelec Engineers & Manufacturers v.

Basic Equipment Corporation” (1977 AIR 577), has held that leave to defend should be granted only where the defence raises a fair, bonafide and reasonable issue. If the defence is illusory, sham, or practically moonshine, the plaintiff is entitled to summary judgment. The principle was revisited and elaborately restated in “IDBI Trusteeship Services Ltd. v.

Hubtown Ltd.” (2017) 1 SCC 568), where the Supreme Court of India emphasized that the very purpose of summary procedure is to prevent delay in enforcement of commercial obligations supported by documents and to

ensure that defendants do not defeat clear claims through ingenious but unsubstantial defences. The ratio emerging from the above authorities is unmistakable: once liability stands acknowledged in writing and is supported by negotiable instruments, the Court is not required to reopen the entire financial history of the parties or undertake a forensic reconstruction of their business accounts. The inquiry remains confined to the enforceability of the obligation and to the existence or otherwise of a bonafide defence. When the present case is examined in the light of the foregoing principles, this Court finds that the defence raised by the appellant does not disclose any bonafide or substantial triable issue warranting interference with the impugned judgment. The insistence that the respondent was required to prove the exact source of funds, the dates of each individual advancement, or the precise financial trail by which the amount of Rs.7,000,000/- was allegedly arranged and delivered, is wholly misconceived in the facts and circumstances of

the present case. The controversy before the Court did not arise in a vacuum nor did it rest upon an isolated or disputed cash transaction rather, it emanated from an admitted business relationship extending over a period of time, during which financial dealings admittedly took place between the parties. The record reveals that after differences arose, the parties consciously chose to settle their disputes through a mutually accepted arrangement, where the appellant acknowledged his liability in a quantified amount and agreed to discharge the same. This acknowledgment was not left in the realm of oral understanding alone; rather, it was reduced into writing through a deed embodying the terms of settlement, and was thereafter reinforced through issuance of negotiable instruments in favour of the respondent. In such circumstances, the legal character of the dispute underwent a significant transformation. The case ceased to be one of open, running, or unsettled accounts and assumed the complexion of a crystallized and acknowledged liability. The written

acknowledgment constituted a conscious admission by the appellant regarding the existence and extent of his obligation, while the cheques issued in pursuance thereof furnished an additional and independent documentary basis for enforcement. Once these documents came into existence, the controversy could no longer be treated as a mere dispute regarding accounts inter se the parties. The attempt made by the appellant to invite this Court into a roving inquiry regarding the source of funds, internal accounting arrangements, or the manner in which the respondent allegedly arranged the amount, cannot be accepted. The jurisdiction under Order XXXVII CPC is not intended to convert the Court into an accounting forum charged with reconstructing the financial history of parties engaged in commercial dealings. Such an exercise would not only be contrary to the spirit of summary procedure but would defeat the legislative object behind its enactment. Equally devoid of substance is the plea that the cheques in question were issued

merely as security instruments. The mere nomenclature attached to a negotiable instrument does not determine its legal effect.

The law has consistently looked beyond labels and examined the substance of the transaction.

Where a cheque is issued pursuant to a written acknowledgment of liability, the presumption attached to such instrument cannot be displaced by a bald assertion that it was intended merely as security. It is a settled principle of law that the adjudication of claims based on negotiable instruments is governed by the special rules of evidence and statutory presumptions provided under the Negotiable Instruments Act, 1881. In the present case, the controversy essentially hinges upon the statutory mandate of Section 118 of the said Act, which provides that “Until the contrary is proved, the following presumptions shall be made: (a) of consideration; that every negotiable instrument was made or drawn for consideration...”. This provision creates a mandatory legal presumption that once the execution of a negotiable instrument is

admitted or proved, it is deemed to have been issued for valid consideration. The appellant’s primary defense that the cheques were issued merely as “security” and that the respondent failed to prove the specific source or dates of the advancement of funds must be tested against this statutory backdrop. As held in the cases of Mehr Noor Muhammad v. Nazir Ahmed (PLD 2024 SC 45); Haji Karim And Another v. Zikar Abdullah (1973 SCMR 100), Muhammad Azizur Rehman v. Liaquat Ali (2007 SCMR 1820); Najaf Iqbal v.

Shahzad Rafique (2020 SCMR 1621); Malik Allah Ditta Malik Allah Was Aya (PKD 1956 Lahore 521); Haider Aabdi v. Javetl Aabdi (1986 MLD 2298); Muhammad Ali v. Mian Maqbool Ahmed (2022 CLC 2115); and Syed Muhammad Zahir v. Mrs. Shahnaz Akhtar (PLD 2024 Balochistan 106), when a suit is based on a negotiable instrument, the initial burden on the plaintiff is discharged the moment the execution of the instrument is established. Thereafter, the “onus probandi” shifts heavily onto the defendant to rebut the

presumption under Section 118. Such rebuttal requires more than a mere ‘bald assertion’ or a ‘moonshine’ defense; it necessitates the production of ‘independent and convincing evidence’ to show the absence of

consideration. In the instant matter, since the appellant admitted to the business relationship and the issuance of the cheques following a written acknowledgment (jirga deed), the statutory presumption under Section 118(a) is fully attracted. The failure of the appellant to provide any evidence to the contrary means the presumption remains unrebutted, and the Court is legally bound to treat the cheques as instruments issued for a crystallized liability.

Furthermore, such a plea, unsupported by independent and convincing evidence, remains a mere assertion incapable of rebutting the statutory presumption of liability. This Court is mindful that in commercial transactions parties often make periodic payments, receive profits, adjust accounts, or settle part of their liabilities from time to time however, such adjustments do not necessarily

obliterate the principal liability where the parties themselves subsequently reduce their obligations into a written and quantified acknowledgment. Once the parties have consciously crystallized their rights and liabilities into a definite figure and have further translated such liability into negotiable instruments, earlier fluctuations in accounts recede into the background and lose their significance for purposes of maintainability under Order XXXVII CPC. The appellant has been unable to point out any material contradiction in the evidence of the respondent, any circumstance suggestive of malafide, or any infirmity in the acknowledgment deed or the negotiable instruments. The independent witnesses examined by the respondent remained firm in their account of the business relationship, the settlement arrived at between the parties, and the execution of the relevant documents. Their testimony could not be shaken in cross-examination, nor could any motive be attributed to them for falsely supporting the case of the respondent. This

Court has carefully gone through the entire evidence and the reasons assigned by the learned trial Court. The appreciation of evidence undertaken by the learned trial Court is neither arbitrary nor capricious. On the contrary, it reflects a balanced and judicious examination of both oral and documentary evidence. The findings recorded are firmly rooted in the material available on record and do not suffer from misreading, non-reading, or arbitrary exercise of jurisdiction. The learned counsel for the appellant has repeatedly emphasized that a regular civil suit or a suit for rendition of accounts would have been the appropriate remedy in the circumstances of the case. This argument overlooks a significant distinction recognized by law. Where the rights and liabilities of parties remain uncertain and accounts are yet to be settled, an ordinary civil action may indeed be necessary however, where the liability has already been acknowledged in writing and reinforced by negotiable instruments, the law itself provides a special remedy under Order XXXVII CPC,

enabling the creditor to seek prompt enforcement of his rights. To compel such a litigant to undergo the rigours of a protracted trial despite existence of acknowledged documentary liability would amount to defeating the very purpose for which the legislature enacted the summary procedure.

Indeed, the legislative philosophy behind Order XXXVII CPC is founded upon the necessity of commercial certainty. Trade and commerce depend upon confidence in written commitments and negotiable instruments. If persons who have consciously acknowledged their liabilities and issued negotiable instruments are permitted to evade their obligations by raising vague pleas regarding source of funds or by characterizing admitted instruments as mere securities, the sanctity of commercial dealings would stand seriously damaged. It is precisely to prevent such uncertainty and to ensure expeditious enforcement of clear obligations that the legislature devised the special procedure embodied in Order XXXVII CPC. Viewed

from any angle, therefore, the defence raised by the appellant neither creates a substantial triable issue nor undermines the documentary foundation of the claim of the respondent. The learned trial Court rightly exercised jurisdiction vested in it by law, correctly appreciated the evidence available on record, and properly decreed the suit in favour of the respondent. Thus, when the entire sequence of events is viewed in its proper perspective, beginning from the commercial relationship between the parties, followed by the advancement of amounts, the emergence of disputes, the acknowledgment of liability through a written deed, and finally the issuance of negotiable instruments, it becomes abundantly clear that the liability had crystallized into an enforceable legal obligation. The impugned judgment and decree, therefore, suffer from no legal infirmity, jurisdictional defect, or misapplication of settled principles of law.

Consequently, finding no merit in the instant

appeal, the same is hereby dismissed, leaving the parties to bear their own costs.

Announced

JUDGE

*Muhammad Fiaz* (SB) Hon’ble Mr. Justice Sahibzada Asadullah, J