IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE MUSHIR ALAM 
MR. JUSTICE FAISAL ARAB 
MR. JUSTICE MUNIB AKHTAR 
 
CIVIL APPEAL NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
(On appeal against the judgment dated 04.10.2016 
passed by the High Court of Sindh, Karachi in First 
Appeal No. 50/2000) 
 
Abdul Ghaffar Adamjee and others 
… Petitioners 
VERSUS 
National Investment Trust Limited and another 
… Respondents 
 
For the Petitioners: 
Mr. Arshad Mohsin Tayebaly, ASC 
 
 
 
 
Mr. K.A. Wahab, AOR 
 
 
 
 
 
 
For the Respondents: 
Mr. Muhammad Masood Khan, ASC 
 
Date of Hearing:  
31.12.2018 
 
JUDGMENT 
 
CMA NO. 1865-K/2018 
 
 
For the reasons stated, this application is allowed and 
the order dated 24.12.2018 dismissing the main appeal for non-
prosecution is recalled, which stands restored to its original 
number. We now proceed to hear the main appeal. 
 
CIVIL APPEAL NO. 157-K/2016 
 
 
 
Faisal Arab, J.- National Investment Trust, the 
respondent No.1 herein, was one of the two major financial 
institutions which provided finance to Adamjee Polycrafts Limited, 
hereinafter referred to as ‘the company’, for setting up of its 
Polypropylene Film Manufacturing Plant in Hub Industrial Trading 
Estate, Lesbela, Balouchistan. The other financial institution was 
PICIC, which provided a long-term finance of Rs.95,000,000/-. 
Respondent No.1 provided a markup based short-term financial 
facility of Rs.22,500,000/- under an agreement of finance executed 
on 23.02.1988 repayable by 30.06.1990. The company made 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
2
certain repayments to respondent No.1 between 1990 and 1993 
but failed to settle its account and a sum of Rs.18,500,000/- 
remained outstanding. After giving ample opportunities to the 
company to pay off its dues the respondent No.1 filed recovery suit 
in the banking court in the year 1996. Alongwith the company its 
sponsor directors were also sued as defendants No.2 to 4, who are 
appellants in this case. The manner in which recovery was sought 
from them was described in prayer clause ‘D’ of the plaint which 
reads “Judgment and Decree, jointly and severally, against 
Defendants No.2, 3 and 4, for the amount which is left unsatisfied 
after the sale of all the hypothecated machinery as well as the 
mortgaged land and buildings, described in para 8 above.”  
 
2. 
 
The respondent No.1’s suit was decreed in the sum of 
Rs.18,500,000/- alongwith markup at the rate of 15% per annum 
on the basis of banking law then prevailing. Apart from the 
company, the decree was executable also against the appellants, 
who were treated as guarantors under Sponsors’ Undertaking 
executed contemporaneously with the agreement of finance. The 
appellants appealed before the Division Bench of the Sindh High 
Court which failed vide impugned judgment dated 04.10.2016. As 
the defence put forward by the appellants was not accepted by the 
appellate court as well, the appellants preferred this appeal with 
the leave of the court.  
 
 
 
3. 
 
Learned counsel for the appellants argued that the 
impugned judgment is bad in law and facts as the courts below 
erred in treating appellants as guarantors on the basis of 
undertaking as their liability was that of indemnifiers and that too 
confined to what has been set out in clauses 1 to 4 and nothing 
more. He submitted that as the appellants neither committed any 
breach of clauses 1 to 4 of the undertaking nor it can be read as a 
guarantee towards financial obligation of the company under the 
agreement of finance dated 23.02.1988, therefore, both the courts 
below erred in ordering recovery of decretal amount from them.   
 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
3
4. 
 
Learned counsel for the respondent on the other hand 
argued that when the second recital and clauses 6 and 7 of the 
Sponsors’ Undertaking furnished by the appellants in their 
capacity as company’s sponsor directors is read in the context of 
Section 126 and Section 128 of the Contract Act, 1872 it comes 
out as a contract of guarantee, making the liability of the 
appellants co-extensive with that of the company.  
 
5. 
 
It may be mentioned here that while recovery 
proceedings were pending, the company went into liquidation and 
as PICIC also had its substantial claim against the company, there 
is no likelihood that respondent No.1 could recover the decretal 
amount from the company. The respondent No.1 has, therefore, 
turned to the appellants for recovery in their capacity as 
guarantors under Sponsors’ Undertaking which they had executed. 
The appellants are resisting the recovery against them on the 
ground that their undertaking does not make them personally 
liable to pay any defaulted sum owed by the company. The crux of 
the matter revolves around the controversy as to whether the 
Sponsors’ Undertaking furnished by the appellants is a contract of 
guarantee and make them personally liable to settle the decretal 
amount on account of inability of the liquidated company to 
discharge its financial obligation under the Agreement of Finance 
dated 23.02.1988. The Sponsors’ Undertaking (portions of which 
considered relevant have been highlighted) reads as follows:- 
 
“SPONSORS’ UNDERTAKING 
 
 
We (1) Abdul Ghaffar Adamjee son of Late Zakaria 
Adamjee, residing at 9, Fatima Jinnah Road, Karachi. (2) Ms. 
Salma Adamjee wife of Abdul Gaffar Adamjee, residing at 9, 
Fatima Jinnah Road, Karachi and (3) Akbar Adamjee son of 
Abdul Gaffar Adamjee residing at 9, Fatima Jinnah Road, 
Karachi are sponsoring Directors of ADAMJEE POLYCRAFTS 
LIMITED, having its registered office at Adamjee House, 
I.I.Chundrigar Road, Karachi (hereinafter referred to as the 
“Company”); 
 
AND 
WHEREAS 
you 
have, 
on 
terms 
and 
conditions contained in the Investment Agreement 
dated 23-02-1988 made between yourselves and the 
Company, agreed to invest a sum of Rs.22.5 million 
(Rupees Twenty two point Five million) with the 
Company; 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
4
 
AND WHEREAS you have agreed to make the 
above investment on the condition, inter alia, that we 
furnish you this guarantee; 
 
NOW, THEREFORE, WE DO hereby agree, undertake 
and guarantee as follows: 
1. 
The funds so made available to the company by us 
and such other funds as may be made available by 
the NIT shall be fully and honestly invested in the 
project as required by you. 
2. 
The Company shall, to your satisfaction, implement 
the project within the prescribed time-table or within 
such time as may be fixed by you and keep you fully 
posted/informed of the progress of the project as may 
be required by you. We also agree not to change the 
nature/score/capacity of the project without your 
prior written permission. 
3. 
We shall engage a cause the Company to engage 
suitable technical personnel and consultants/advisers 
for the erection of its plant and machinery and employ 
professionals, 
technicians, 
financial 
and 
sales 
executives of the Company for carrying out its 
business. 
4. 
We 
shall 
not 
sell/transfer/dispose 
of 
our 
shareholdings in the Company and/or transfer the 
management of the Company/Project without your 
prior written consent. 
5. 
Any breach of this undertaking shall be deemed 
to be an event of default under the aforesaid 
Agreement and we shall be personally liable to 
all the monetary obligations, detriments, losses 
that may be sustained by you due to any breach 
of the covenants herein. 
6. 
We shall indemnify and keep you always safe, 
harmless and indemnified. 
7. 
Our obligations hereunder are joint and several 
and the same shall be binding on us until the 
investment made by you in the Company is fully 
satisfied and you notify the same to us. 
 
 
 
6. 
 
The first recital of Sponsors’ Undertaking refers to the 
investment made by respondent No.1 in the company under the 
agreement of finance dated 23.02.1998 and the second recital 
states that respondent No.1 has agreed to make the investment on 
the condition that the appellants furnish this guarantee. Clause 6 
of the undertaking stipulates that the appellants shall indemnify 
and keep respondent No.1 always safe, harmless and indemnified 
and clause 7 stipulates that appellants’ obligations hereunder are 
joint and several and binding on them until the investment made 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
5
by respondent No.1 in the company is fully satisfied. Reading 
clauses 6 and 7 of the Sponsors’ Undertaking together with its 
recitals what comes out is this: ‘respondent No.1 has agreed to 
make investment in the company under Investment Agreement 
dated 23.02.1988 on the condition that the sponsor directors of the 
company have jointly and severally committed themselves to keep 
respondent No.1 always safe, harmless and indemnified until the 
investment made by respondent No.1 in the company is fully 
satisfied’. From the text of the undertaking, it is clearly apparent 
that it was intended to further secure the finance by seeking 
personal undertaking from the appellants in case it no more 
remains possible for respondent No.1 to recover it from the 
company. It was for this reason that the appellants in terms of 
clauses 6 and 7 undertook that they would keep respondent No.1 
indemnified until investment made in the company is fully satisfied. 
This very object which emerges from clauses 6 and 7 of the 
Sponsors’ Undertaking cannot be ignored by confining its scope 
only to the appellants’ commitments made in clauses 1 to 4. Hence 
it cannot be said that the appellants did not give personally 
assurance to respondent No.1 that in the event it becomes 
impossible for it to recover from the company, it can have recourse 
against them for the loss so incurred. We don’t see any other way 
respondent No.1 could remain safe, harmless and indemnified as 
committed under clauses 6 and 7 of the Sponsors’ Undertaking.  
 
7. 
 
Sponsors’ Undertaking was executed by the appellants 
contemporaneously 
with 
the 
agreement 
of 
finance 
dated 
23.02.1988 so it can be conveniently said that both the documents 
were part of the same scheme under which respondent No.1 
provided finance to the company. Should the object emerging from 
clauses 6 and 7 of the Sponsors’ Undertaking be allowed to be 
frustrated merely because it contains certain other commitments 
in the form of clauses 1 to 4 which relate only to proper 
management and running of the company by the appellants? 
Parties draft agreements in many ways. While interpreting 
covenants of a document it is to be seen what was the main 
purpose and object which brought them to the table to sign it. 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
6
When the real purpose of executing a document becomes evident, 
then in what order various covenants are arranged cannot be made 
basis to frustrate it by excluding such covenants from its scope 
that matter the most. So only that interpretation is to be adopted 
that serves and not vitiates the main purpose with which the 
document was executed. The respondent No.1 had no interest of 
its own in the company other than recovery of its financial 
investment along-with markup and this was the main object 
behind incorporating clauses 6 and 7 in the Sponsor’s Undertaking 
so as to make the appellants personally liable in case the company 
is unable to settle the account under the Investment Agreement 
dated 23.02.1998. When the Sponsors’ Undertaking is read in it’s 
entirely, the principal object to seek its execution from the 
appellants, in their capacity as sponsor directors of the company 
could only be this and nothing else. 
 
8. 
 
As to the question whether the Sponsors’ Undertaking 
is a contract of guarantee or indemnity, a guarantor under a 
contract of guarantee takes upon himself the responsibility to fulfill 
a promise or discharge a liability of a third person and by virtue of 
Section 128 of the Contract Act his liability becomes co-extensive 
with that of third person unless the parties provide otherwise. 
Section 124 of the Contract Act defines contract of indemnity as “A 
contract by which one party promises to save the other from loss 
caused to him by the conduct of the promisor himself or by the 
conduct of any other person…” Hence in a contract of indemnity the 
indemnifier undertakes to save a party from the loss caused to it 
either by his own conduct or by the conduct of a third party who 
has made certain commitments to the other party, hence he 
becomes liable only when the loss caused to the other party is 
finally determined and all possible recoveries have been effected 
from the party that caused the loss. The obligation of an 
indemnifier is therefore not co-extensive with that of the principal 
debtor and comes into existence only when it no more remains 
legally possible to recover from the principal debtor. From the 
contents of clauses 6 and 7 of Sponsors’ Undertaking also it is 
evident that the liability of the appellants was not made co-
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
7
extensive with the company, hence it is a contract of indemnity. 
This is exactly what the respondent No.1 considered the appellants 
to be when in the prayer clause ‘D’ of the plaint it was stated 
“Judgment and Decree, jointly and severally, against Defendants 
No.2, 3 and 4, for the amount which is left unsatisfied after the sale 
of all the hypothecated machinery as well as the mortgaged land 
and buildings….” Clearly the appellants were sued in their capacity 
as indemnifiers and in such capacity recovery against them had to 
wait until all assets of the liquidated company were sold, which 
has already happened in the liquidation proceedings. In liquidation 
proceedings, the company has been wound-up and the sale 
proceeds of all its assets have apparently gone to settle PICIC’s 
claim and respondent No.1’s decree remains unsatisfied. The 
proper stage to initiate recovery against the appellants in their 
personal 
capacity 
as 
indemnifiers 
under 
the 
Sponsors’ 
Undertaking has thus matured. The learned counsel for the 
appellants too has considered Sponsors’ Undertaking to be a 
contract of indemnity but wants to confine its scope to clauses 1 to 
4 only whereas the document does not stop there as it has three 
more clauses i.e. 5 to 7. The only avenue left for respondent No. 1 
is to recover the loss from the appellants in their capacity as 
indemnifiers under Sponsors’ Undertaking. This the respondent 
No.1 can now do by seeking execution of its decree. This appeal, 
therefore, fails and is hereby dismissed.  
 
 
JUDGE 
 
JUDGE 
 
 
 
JUDGE 
(For the reasons given in my judgment, I respectfully dissent) 
 
Karachi, the 
Announced on ______________ at _______________.  
 
Approved For Reporting 
Khurram 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
8
 
Munib Akhtar, J.- I have had the advantage of reading in draft the judgment 
proposed to be delivered by my learned brother, Faisal Arab, J., with whom my 
learned brother Mushir Alam, J. is in agreement. It is with regret that I find myself 
unable to take the view as finds favor with the majority. For the reasons given 
below, I would have allowed this appeal. 
 
2. 
The appellants are aggrieved by the dismissal of their appeal by a learned 
Division Bench of the High Court. The impugned judgment is reported as 
Adamjee Polycraft Ltd. and others v. National Investment Trust Ltd. 2017 CLD 
380. That appeal arose out of judgment and decree of the learned Banking Court 
made in favor of the present respondent, in a banking suit filed by the latter under 
the finances/loans recovery law. The defendants in the suit were the company to 
which the finance was provided (in terms of an investment agreement dated 
23.02.1988; herein after “the Agreement”) and the present appellants, who were 
its directors. The company defaulted in repaying the finance (there being only part 
payment), which led to the filing of the banking suit. (The capacity in which the 
appellants were sued will be stated shortly.) Two issues were framed and found 
against the defendants; the suit was accordingly decreed. Both the company and 
the present appellants appealed against the judgment and decree, which was 
dismissed by means of the impugned judgment. The company has gone into 
liquidation, and is not an appellant before us. It is on the record only as a pro 
forma respondent, and the matter has attained finality against it. The appellants 
contend that the suit against them ought to have been dismissed, as their liability 
was only on the basis of a “Sponsors’ Undertaking” (“Undertaking”) executed by 
them. It is their case that no occasion arose for the respondent to make a claim in 
terms thereof, which according to them was only in the nature of an indemnity. 
The respondent’s case is that the Undertaking, on its true interpretation and 
application, was a guarantee by which, inter alia, the appellants guaranteed 
repayment of all unpaid amounts due from the company. Since there was a default 
in payment the appellants were liable in terms of the Undertaking. The suit was 
rightly decreed against them (along with the company). Leave to appeal was 
granted in this Court vide order dated 13.12.2016 to, inter alia, consider whether 
the Undertaking was in the nature of a guarantee or otherwise. 
 
3. 
The Undertaking has already been set out in full in the majority judgment 
and therefore need not be reproduced here. It was in form addressed to the 
respondent (the “you” therein). It may be noted that the Undertaking was 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
9
executed by the appellants in their individual capacities as sponsor directors. It 
then went on to state as follows: 
 
“We, ADAMJEE POLYCRAFTS LIMITED shall, to your satisfaction 
perform our part of the obligation as envisaged herein above.” 
 
 
This statement was followed by an execution for and on behalf of the 
company. 
 
4. 
The learned Banking Court framed an issue specifically with regard to the 
appellants’ liability, and held them liable for the outstanding and unpaid amount 
of the finance by reason of clause 6 of the Undertaking. 
 
5. 
The learned High Court took a different approach. In the judgment, the 
learned Division Bench reproduced various clauses from the Agreement and also 
from the Undertaking (pp. 386-389). However (and pertinently), clauses 1 to 4 of 
the Undertaking were not reproduced. Reference was made to ss. 126 and 128 of 
the Contract Act, 1872. It was observed that the appellants had become sureties, 
while the company was the principal debtor and the respondent a creditor (pg. 389, 
para 11). The learned Division Bench held that “it is an undeniable fact that the 
Sponsors’ Agreement is a part and parcel of the Investment Agreement dated 
23.2.1988 since it was a mandatory condition as per the agreement entered into 
between the [company] and the respondent that the company has to furnish an 
undertaking from all the directors of the company with regard to providing of the 
funds in the project and for other necessary formalities” (pg. 390, para 13; 
emphasis supplied). It is clear that for the learned Division Bench its conclusion 
that the Undertaking was an integral part of the Agreement was vital for holding 
the appellants liable to the respondent. Thus, it was observed as follows (pg. 391; 
emphasis supplied): 
 
“14. A perusal of the Sponsor Undertaking clearly stipulates that the 
investment by the respondent would only become effective when the 
sponsors furnish[] guarantee to the company in the shape of Sponsors 
Undertaking. In the said agreement it has also been provided that the said 
sponsors/guarantors in view of the specific condition imposed by the 
respondent with regard to the investment made by them have agreed, 
undertaken and thereafter given the guarantee with regard to the various 
clauses of the Sponsors Undertaking. Now if the company has defaulted a 
question would arise who will bear the liability of the respondent to clear 
out the same? In our view, in case of default made by the company which 
was the principal debtor definitely the sponsors/guarantors becoming 
sureties due to the implication of the agreement have to payout those 
liabilities of the principal debtor in accordance with the terms of the 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
10
contract entered between them and the respondent. We are fully conscious 
of the fact that in determining the liability, so far as sponsors/guarantors 
are concerned, the terms of the contract entered between the parties is of 
prime importance and each case is to be adjudged by looking to the 
peculiar facts and circumstances of the agreement entered between the 
parties. In the present case, as noted above, in our view since the Sponsor 
Undertaking being an integral part of the main agreement could not be 
read in isolation or it could be said that the terms of the Sponsor 
Undertaking entered between the parties is limited to the extent of the 
clauses of the said undertaking only. In view of the facts and 
circumstances of the case and after reading the agreement and the sponsor 
agreement this argument is not found to be plausible. 
 
15. In our view the Sponsor Undertaking, being an integral part of the 
agreement, has to be read in conjunction with the agreement entered 
between the Appellant No.1 and the respondent and the Appellants Nos.2 
to 4 cannot absolve themselves from the liability accruing and arising on 
the Appellant No.1 to be the liability of Appellant No.1 only as the 
Appellants Nos.2 to 4 in our view are co-extensively liable to payout the 
liability of the Appellant No.1….” 
 
6. 
Learned counsel for the appellants submitted that both the learned 
Banking Court and the learned High Court erred materially in concluding that the 
appellants were liable to the respondent. It was submitted that the appellants’ 
liability was only as set out in the Undertaking, and not otherwise. That liability 
was limited to the obligations set out in clauses 1 to 4. Learned counsel submitted 
that no evidence was led before the learned Banking Court that the appellants had 
been in breach of those obligations. Thus, no occasion had ever arisen for the 
respondent to invoke the Undertaking. The appellants had been wrongly sued, and 
the suit erroneously decreed against them. As to the nature of the Undertaking, 
learned counsel submitted that it was, on the face of it, an indemnity and not a 
guarantee. Reference was made to clause 6. Insofar as the recitals of the 
Undertaking were concerned, where the term “guarantee” was used, learned 
counsel submitted that in terms of well settled principles of interpretation of deeds 
and contracts, the recitals could not override the substantive clauses nor used to 
interpret or supplement the latter when there was no ambiguity or uncertainty 
regarding them. That, it was submitted, was the position with the Undertaking. 
The appellants’ liability was spelt out in clear and categorical terms. Reliance was 
placed on State Bank of India v. Mula Sahakari Sakhar Karkhana Ltd. AIR 2007 
SC 2361, both to show the distinction between an indemnity and a guarantee and 
the relevant rules regarding interpretation of contracts. It was prayed that the 
appeal be allowed. 
 
7. 
Learned counsel for the respondent strongly opposed the appeal and 
prayed for its dismissal. It was submitted that the appellants’ liability to make 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
11
payment on the company’s default was clear. A proper reading of the Undertaking 
established unequivocally that it was a contract of guarantee and not, as claimed, 
an indemnity. In this regard, it was submitted that reliance could be placed on the 
recitals, where the obligation was clearly stated to be a “guarantee”. Without 
prejudice to this submission, learned counsel submitted that clause 6 was in any 
case sufficient to establish the appellants’ liability. Reliance was also placed on 
clause 7 and it was emphasized that it expressly provided for the continuing joint 
and several liability of the appellants till such time as the respondent was repaid in 
full. In support of his submissions learned counsel also relied on certain case law, 
being the following decisions of this Court: State Engineering Corporation Ltd. v. 
National Development Finance Corporation 2006 SCMR 619 (leave refusing 
order), Rafique Hazquel Masih v. Bank Alfalah Ltd. and others 2005 SCMR 72 
(leave refusing order), Shipyard K. Damen International v. Karachi Shipyard 
Engineering Works Ltd. PLD 2003 SC 191 (leave refusing order) and United 
Bank Ltd. v. Pakistan Industrial Credit and Investment Corporation Ltd. and 
another 2002 CLD 1781. A judgment of the Lahore High Court, Ch. Muhammad 
Sadiq v. Small Business Finance Corporation and others 2005 CLD 1680, was 
also relied upon. 
 
8. 
We heard learned counsel as above and considered the record and case law 
relied upon. The rules of interpretation in relation to contracts, as presently 
relevant, are well established. For a conspectus reference may be conveniently be 
made to House Building Finance Corporation v. Shahinshah Hamayun 
Cooperative House Building Society and others 1992 SCMR 19, where it was 
held as follows (pp. 27-29): 
 
“9. While interpreting the terms of contract the Court has to first ascertain 
the intention of the parties…. 
 
10. The contract has to be construed strictly and literally without deviating 
or implying anything which is not supported by the intention of the parties 
and the language of the document. It is a sultry principle of consideration 
of document that nothing can be implied in a contract which is 
inconsistent with its expressed terms. In West Pakistan Industrial 
Development Corporation, Karachi, v. Aziz Qureshi PLD 1973 SC 222, it 
was held that a stipulation not expressed in a written contract should not 
be implied merely because the Court thinks that it would be a reasonable 
thing to imply it. Such an implication can be made only on consideration 
of the terms of the contract in a reasonable manner and if the Court is 
satisfied that it should necessarily have been intended by the parties when 
the contract was made…. 
 
11. The main purpose of construction of terms of a written agreement is to 
find out the intention of the parties to the agreement. By looking to the 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
12
words used one has to construe the intention which has persuaded the 
parties to enter into the agreement….  
 
In construing the deeds the words are to be taken in their literal plain and 
ordinary meaning. Where the plain and ordinary meaning may lead to 
inconsistency with other expressions used in the document or absurdity 
then such plain and ordinary meaning can be modified to avoid absurdity 
and inconsistency because the law favours to save a deed, if possible. In 
order to avoid inconsistency and absurdity resulting from plain and 
ordinary construction the Courts are always anxious to adopt a reasonable 
construction by which the intention of the parties can be spelt out…. 
 
… [I]t is clear that the intention of the parties has to be collected from the 
document as a whole and every part of the deed should be examined and 
read together….”  
 
 
In addition to the above, there is another rule that must be kept in mind, 
which is that a contract is to be read contra proferentem, i.e., when there is any 
doubt or ambiguity as regards the meaning of it or any words used therein, it will 
be construed against the person who puts it forward.  
 
9. 
In my view, when the Undertaking is read in light of the foregoing 
principles, it is clear that the principal obligation was as set out in clause 5 thereof. 
That clause can be regarded as having two parts. The first part made any breach of 
the Undertaking an event of default under the Agreement. Now, the appellants 
were not party to the Agreement. However, as noted, the company also executed 
the Undertaking, thereby agreeing to perform its obligation “as envisaged herein 
above”. Thus, the first part of clause 5 became an additional event of default 
under the Agreement and any breach thereof entitled the respondent (under clause 
6.01 of the latter) to, inter alia, demand immediate payment of the finance 
provided. This was of course without derogation of the events of default already 
specified in the Agreement. This was the consequence insofar as the company 
was concerned. As regards the appellants, their obligation was contained in the 
second part of clause 5. That made them “personally liable to all the monetary 
obligations, detriments, losses that may be sustained by you due to any breach of 
the covenants herein” (emphasis supplied). The plain meaning of these words is 
that the liability of the appellants as regards the monetary losses etc. suffered by 
the respondent was conditional upon, and limited to, such being sustained on 
account of any breach of the covenants contained in the Undertaking. Those 
covenants were contained in clauses 1 to 4. None of these clauses contained any 
obligation to make payment to the respondent if the company failed to repay the 
finance or any part thereof. As correctly submitted by learned counsel for the 
appellants, the evidence led at the trial did not show any breach at all of the said 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
13
clauses. It follows that insofar as both the appellants and the company were 
concerned, their obligation and liability under clause 5 was never actualized. 
There was no (deemed) event of default under the Undertaking as would, under 
the Agreement, have allowed the respondent to demand immediate repayment of 
the finance from the company, nor were there any monetary obligations, 
detriments etc incurred or suffered by the respondent (on account of the breach of 
clauses 1 to 4) as would make the appellants liable to it. 
 
10. 
It is important to keep in mind that clause 5 had two distinct consequences, 
one for the company and the other for the appellants. While both were linked to 
clauses 1 to 4, they were separate from each other. For the company a breach of 
any of the said obligations resulted in there being an event of default entitling the 
respondent to demand immediate repayment of the finance. For the appellants 
such breach would make them liable to the respondent for detriments, losses etc 
sustained by it on account thereof. However, there was no intermingling of the 
consequences. More precisely, a nonpayment of any amount due from the 
company to the respondent did not make the appellants liable for the same in 
terms of clause 5. Thus, on the facts as established at the trial, clause 5 could not 
have been invoked against the appellants, either directly or even indirectly by way 
of an event of default (deemed or otherwise) by the company under the 
Agreement. 
 
11. 
Clause 5 being found inapplicable, it is necessary to consider clause 6. The 
obligation contained therein was, in my view, an indemnity. This was what the 
clause said, on the face of it. But, and this is the crucial question, an indemnity 
against what? Clause 6 was itself silent on this: it simply said that the appellants 
would keep the company indemnified. Section 124 of the Contract Act speaks of 
the promise to indemnify saving the indemnity-holder (here the respondent) “from 
loss caused to him by the conduct of the promisor himself, or by the conduct of 
any other person”. Thus, clause 6 could have applied in relation to either the 
appellants’ conduct or that of the company (or both). However, neither this aspect, 
nor the conduct against which the respondent was indemnified, were specified 
therein. In other words, the clause was ambiguous and uncertain. Learned counsel 
for the appellants submitted that the clause indemnified the respondent against 
any loss suffered by it on account of any breach by the appellants of their 
obligations under clauses 1 to 4, and no more. With respect, I am unable to agree. 
That would reduce the clause to redundancy and mere surplusage since clause 5 
already expressly secured the respondent as regards the first four clauses. The 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
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indemnity granted in terms of clause 6 had to cover contingencies, situations, acts 
and/or omissions (i.e., conduct) beyond those identified in clauses 1 to 4. The 
question is: what were those contingencies and situations? 
 
12. 
The answer that learned counsel for the respondent would undoubtedly 
give to the question just posed is that, regardless of whatever the full scope of the 
indemnity was, it certainly covered the defaulted amount due from the company. 
That was the conclusion that, in effect, found favor with the learned Banking 
Court. In support of such a conclusion could be marshaled the recitals contained 
in the Undertaking to which, arguably, resort could be had to resolve the 
uncertainty and ambiguity regarding clause 6. In this regard the third recital 
would be relevant, which provided that the finance was being granted the 
company on condition that the appellants gave “this guarantee”. Now clearly the 
recital could not affect the legal nature of the substantive provision and, as it were, 
“convert” the indemnity contained in clause 6 into a guarantee. However, it could 
resolve the uncertainty and ambiguity, and assist in establishing that the scope of 
the indemnity did indeed cover any defaulted amount due from the company. 
Would this be a proper reading and application of clause 6? It must be kept in 
mind that since the clause was uncertain and ambiguous the contra proferentem 
rule would also be applicable here. As was confirmed by learned counsel for the 
respondent on a specific query from the Court, the Undertaking was in form and 
language as determined by the respondent itself. The clause would therefore have 
to be read against the respondent. During the course of his submissions learned 
counsel for the appellants drew attention to the invariable practice adopted by 
financial institutions when giving finance, of taking what are known as “personal 
guarantees” from the directors or partners of the concern. Such guarantees clearly 
and expressly provide for the directors’ liability for any unpaid or defaulted 
amount. Learned counsel submitted that had that been the intent of the parties, the 
respondent could easily have obtained such guarantees from the appellants. 
Alternatively, such a liability could have been expressly spelt out in the manner of 
clauses 1 to 4. However, the respondent chose not to adopt any such course. It 
was content to provide for, and obtain, an indemnity as given in clause 6. The 
respondent could not thereafter be allowed to improve its position and bring 
within the scope of the said clause what would, in effect, be a guarantee. 
 
13. 
The competing positions just noted are not easy to resolve. The principles 
of interpretation relevant for present purposes have been set out above. After a 
careful consideration of the record, in my view the balance must tilt in favor of 
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C.M.A. NO. 1865-K OF 2018 
 
15
the appellants and against the respondent. In the end, the contra proferentem rule 
ought to be regarded as prevailing. As was said in the Supreme Court of Canada 
in Co-operators Life Insurance Co. v. Gibbons 2009 SCC 59: “Whoever holds the 
pen creates the ambiguity and must live with the consequences” (para 25). And in 
Tam Wing Chuen v. Bank of Credit and Commerce Hong Kong Ltd [1996] UKPC 
69, the Privy Council said as follows: 
 
“…the basis of the contra proferentem principle is that the person who 
puts forward the wording of a proposed agreement may be assumed to 
have looked after his own interests, so that if words leave room for doubt 
about whether he is intended to have a particular benefit there is reason to 
suppose that he is not.” 
 
 
Clause 6 was ambiguous and uncertain. That was a consequence of the 
respondent’s own drafting. It must now live with that. If it had wanted to impose a 
liability on the appellants regarding payment of any amount defaulted by the 
company it could easily have done so, either by inserting appropriate language in 
the Undertaking or by obtaining personal guarantees from them. Neither course 
was adopted. The parties must be held to the bargain as struck. It would be 
inappropriate for the Court to intervene and alter that bargain, and read into clause 
6 an obligation simply because it would be convenient, reasonable or 
commercially sensible to do so. This is all the more so when the terms of the 
Undertaking were determined and settled by the respondent. As noted by this 
Court in the aforementioned judgment (see para 8 above), something ought not to 
be read or implied into a contract simply because it appears to be reasonable to do 
so. In the Privy Council decision cited above, the Board also had this to say: 
“Consistency with a liability which could have been expressed is no ground for 
imposing a liability which was not expressed”. Clause 6 was ambiguous, and that 
uncertainty left its scope indeterminate. It is not for the Court to find ways to 
breathe life into the provision so as to enable the respondent to look to the 
appellants in addition to the company for payment of any amounts defaulted by 
the latter. All that can safely be said of the clause is that it indemnified the 
respondent against any loss suffered by it that could be directly attributable to 
conduct on the part of the appellants, over and above the contingencies and 
situations particularized in clauses 1 to 4. But that is not the situation with regard 
to the defaulted amount. Certainly, as a bare perusal of the plaint shows, the 
respondent did not plead its case against the appellants in such terms. Clause 6 
could not therefore be invoked and applied in the manner as sought. With respect, 
the learned Banking Court erred materially in finding liability in terms thereof, 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
16
and the submissions made with regard thereto by learned counsel for the 
respondent cannot also, with respect, be accepted. 
 
14. 
I turn to consider clause 7, on which also reliance was placed by learned 
counsel for the respondent. With respect, the reliance was misconceived. Clause 7 
created no independent or substantive obligation. Its effect was procedural: it 
made clear that the liability of the appellants was joint and several. As is well 
known, when there is joint liability, each of the parties is liable for the full amount 
of the claim. Where the liability is several each bears only his own share of the 
burden of the claim, and is liable accordingly. As here relevant, the effect of joint 
and several liability is the same as liability that is joint. Thus, clause 7 enabled the 
respondent to (at its option) sue any one, some or all of the appellants, as it chose, 
for the full amount of its claim. However, that claim had to arise in terms of the 
other clauses of the Undertaking. Clause 7 did not create or add to that liability. 
Indeed, this is made clear by the opening words of the clause, which tied the joint 
and several liability to the appellants’ obligations “hereunder”. Furthermore, the 
reference at the end of the clause, to the appellants remaining liable till such time 
as the respondent received full satisfaction of its claims against the company, was 
only as regards the inter-se nature of their liability, i.e., that it would remain joint 
and several. 
 
15. 
This brings me to the impugned judgment. As noted above, the learned 
Division Bench reached two conclusions. Firstly, it held that the Undertaking was 
a contract of guarantee and the appellants were liable as sureties. Secondly, the 
Undertaking was regarded as “part and parcel” or an “integral part” of the 
Agreement. With respect, I am unable to agree with either conclusion. The 
Undertaking and the Agreement were obviously part of the same transaction, but 
only in the sense of relating to the finance that the respondent proposed to give to 
the company. The Undertaking was not in any legal sense (and certainly none as 
presently relevant) “part” of the Agreement. Equally, the Undertaking had to be 
construed and applied on its own terms. It was not a guarantee within the meaning 
of s. 126 and, with respect, the learned Division Bench erred materially in so 
concluding. In this context, the learned High Court appears to have been swayed 
by the fact that the Agreement contained an express requirement that the sponsors 
give an undertaking. However, there is a clear distinction between the obligation 
to give an undertaking, and the terms thereof. The respondent’s obligation to 
disburse the finance under the Agreement was, inter alia, conditional upon the 
appellants giving the undertaking. But that did not make the Undertaking a part of 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
17
the Agreement, nor could it affect the legal nature and the proper construction and 
application of the former. That depended on the actual terms of, and language 
used in, the Undertaking itself. The approach taken by the learned High Court 
cannot therefore be sustained. 
 
16. 
The cases relied upon by learned counsel for the respondent do not require 
detailed consideration since they all involved instruments that were admittedly 
guarantees. No question of the nature as raised here was in issue in the cited 
judgments. They are clearly distinguishable. 
 
17. 
For the foregoing reasons, I would have allowed this appeal and, insofar as 
it relates to the appellants, have set aside the impugned judgment. I would have, 
likewise, varied the judgment and decree of the learned Banking Court and 
dismissed the respondent’s suit against the appellants. 
 
 
 
Judge 
 
CIVIL PETITION NO. 157-K OF 2016 & 
C.M.A. NO. 1865-K OF 2018 
 
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ORDER OF THE COURT 
 
 
 
By majority of 2 to 1 (Munib Akhtar, J dissenting), this 
appeal is dismissed and it is held that the Sponsors’ Undertaking 
is clearly a contract of indemnity and the sponsor directors are 
liable for any amount that is not recoverable from the company 
under agreement of finance dated 23.02.1988. 
 
 
JUDGE 
 
 
JUDGE 
 
 
JUDGE 
 
Announced on 03rd of April, 2019 at Islamabad. 
