Law:

Section:

Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)-------S. 22---Contract Act (IX of 1872), S.133---Suit for recovery of bank loan---Mortgage not to be taken as security for repayment of second financial facility granted to principal debtor after death of mortgagee---Fresh documents executed at the back of surety without his consent---Effect---Plaintiff-Bank filed suit for recovery of certain sum against defendants including principal debtor and legal heirs of deceased mortgagor and guarantor--Defendants/legal heirs of deceased mortgagor and guarantor filed application for leave to defend but principal debtor did not file any such application---Banking Court decreed the suit--Defendants contended that memorandum of deposit of title deed was allegedly executed on 22-11-2000 for facility which was discharged on 30-11-2000 and their predecessor-in-interest died on 29-1-2001, therefore, said memorandum of deposit of title deed stood terminated and no fresh loan could be allowed on strength of alleged document: that subsequent to adjustment of first loan facility neither predecessor-in-interest of defendants nor they themselves executed any document to secure second finance facility which was allegedly availed by principal debtor on 3-3-2001 and that under S.133 of Contract Act, 1872, predecessor of defendants stood discharged from guarantee--Plaintiff-Bank submitted that continuing guarantee had been executed by predecessor of defendants and it was binding on legal heirs and that defendants informed the Bank about death of their predecessor when second facility had already been sanctioned---Validity---Mortgage allegedly created on 22-11-2000 could not be taken as security for repayment of second financial facility granted to principal debtor, after death of mortgagor-Plaintiff-Bank could not invoke bank guarantee dated 22-11-2000 as the same lost its efficacy after adjustment of first financial facility---Plaintiff-Bank had provided second financial facility to principal debtor, fresh documents and fresh agreement for financing were executed after death of guarantor/surety---Admittedly at the time of granting of second facility predecessor of…

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