IN THE HIGH COURT OF SINDH, KARACHI

Ist Appeal No.126 of 2025

[ Shahid Hussain Vs. Saifullah Saifee ]

PRESENT:

Mr. Justice Arshad Hussain Khan

Mr. Justice Amjad Ali Sahito

Appellant	Through Mr. Khalid Mahmood Siddiqui, Advocate
Respondent	Nemo
Date of Hearing:	11.08.2026
Date of Decision:	20.08.2026

JUDGMENT

ARSHAD HUSSAIN KHAN, J: The instant First Appeal, preferred under Section 96 read with Order XLI CPC, is directed against the Judgment and Decree dated 31.07.2025 passed by the learned Additional District Judge-IX, Karachi-South, in Summary Suit No.269 of 2024. The learned Trial Court, while decreeing the suit in favour of the Appellant for the principal sum of Rs.35,50,000/-, declined the claim for profit/mark-up/interest as well as costs. The Appellant has not challenged the decree insofar as it relates to the principal amount and has confined the present appeal to the refusal of profit/mark-up/interest and costs, seeking modification of the impugned Judgment and Decree to that extent.

2. The relevant facts leading to the present appeal are that the Appellant invested an amount of Rs.2,680,000/- with the Respondent pursuant to a profit-sharing partnership agreement dated 26.06.2018. Upon disputes arising between the parties and the Respondent's failure to fulfil his obligations, the accounts were subsequently settled, whereby the Respondent acknowledged a total liability of Rs.4,300,000/-. After adjustment of an amount of Rs.750,000/- already paid by the Respondent, the outstanding liability stood at Rs.3,550,000/-. In acknowledgment thereof, the Respondent executed a subsequent agreement dated 26.05.2022 and issued six post-dated cheques aggregating to Rs.3,550,000/-, drawn on Bank Al-Habib Limited, Khayaban-e-Rahat Branch, Karachi, in favour of the Appellant. Upon presentation, all six cheques were dishonoured with the remarks, “Payment Stopped by Drawer.” Consequently, after serving a legal notice dated 19.07.2023 and lodging FIR No.44 of 2024 under Section 489-F PPC, the Appellant instituted Summary Suit No.269 of 2024 under Order XXXVII Rule 2 read with Section 34 CPC for recovery of Rs.3,550,000/-, together with profit/mark-up at the rate of 20% per annum from the dates of the respective cheques until realization and costs of the suit. Upon issuance of summons, the Respondent failed to file an application for leave to appear and defend within the prescribed period and was consequently debarred from doing so vide order dated 11.02.2025. The Respondent thereafter moved an application under Section 34 of the Arbitration Act, 1940, which was also dismissed on 15.07.2025. The Appellant subsequently recorded ex-parte evidence and produced the relevant documentary evidence in support of his claim. Upon conclusion of the proceedings, the learned Trial Court, vide the impugned Judgment and Decree dated 31.07.2025, decreed the suit to the extent of the principal amount of Rs.3,550,000/-, but declined to award any profit/mark-up/interest and made no order as to costs, giving rise to the present appeal to that limited extent.

3. Learned counsel for the Appellant contended that the impugned judgment, to the extent of declining interest/mark-up and costs, is legally unsustainable and contrary to the settled principles governing monetary decrees. He submitted that the plaint contained a specific prayer for profit/mark-up at the rate of 20% per annum, together with costs of the suit, yet the learned Trial Court, while decreeing the principal amount, declined both reliefs without assigning any reason. He further argued that, in a summary suit founded upon negotiable instruments, particularly where the defendant has failed to obtain leave to defend, the Court is required to consider the claim for interest/mark-up and costs in terms of Order XXXVII Rule 2 read with Section 34 CPC. According to learned counsel, the Appellant remained deprived of the use of his money despite the Respondent’s acknowledged liability and issuance of dishonoured cheques, and denial of any compensatory return on the decretal amount has resulted in an unwarranted benefit to the Respondent. He, therefore, prayed that the impugned judgment and decree be modified by awarding appropriate interest/mark-up and costs in favour of the Appellant. He has relied upon the case of Syed Zaheer Hussain Naqvi v. Asif Raza Mir [2023 MLD 242], Muhammad Tariq v. Fazal Majid [R.F.A. No.102-M/2023, CM No.1450 of 2023 a judgment of the Peshawar High Court], Syed Aijaz Hussain v. Syed Abdul Azeem [2008 CLD 51], Muhammad Hanif Shaikhani v. Muhammad Khalid Shafi [2009 CLD 1129] and Abbas Ali and another Asif Abbas and 3 others [2016 CLD 555].

4. A perusal of the diary sheets/orders of this Court reflects that notices issued to the Respondent initially remained unserved through the ordinary modes of service. Thereafter, upon an application moved by the Appellant, substituted service through publication was ordered vide order dated 26.03.2026. Subsequently, on 05.05.2026, this Court, being satisfied that the Respondent had been served through all prescribed modes, including publication in the newspaper, held the service to be good. Despite such service, the Respondent chose not to appear or contest the present appeal. Consequently, the matter was heard and proceeded with ex-parte against the Respondent.

5. We have carefully examined the record, considered the submissions advanced by learned counsel for the Appellant, and perused the relevant statutory provisions and the precedents cited at the Bar. The sole question arising for determination in the present appeal is whether the learned Trial Court was justified in declining the Appellant’s claim for profit/mark-up/interest and costs while decreeing the summary suit in his favour for the principal amount.

6. It is an admitted position on record that the suit instituted by the Appellant was a summary suit under Order XXXVII CPC, founded upon six post-dated cheques aggregating to Rs.3,550,000/-, issued by the Respondent and subsequently dishonoured upon presentation. Despite due service, the Respondent failed to file an application for leave to appear and defend within the prescribed statutory period and was consequently debarred from defending the suit vide order dated 11.02.2025. As a result, the consequences contemplated under Order XXXVII Rule 2(2) CPC followed, whereby the allegations contained in the plaint were deemed to be admitted and the Appellant became entitled to a decree in accordance with law.

7. A perusal of the impugned Judgment dated 31.07.2025 shows that although the learned Trial Court decreed the principal amount of Rs.3,550,000/- in favour of the Appellant, it declined the specific claim for mark-up/interest without recording any reason, finding or justification. Such omission cannot be regarded as a proper exercise of judicial discretion. Where a specific relief has been claimed and the Court possesses discretion to grant or refuse the same, that discretion is required to be exercised consciously, judiciously and for reasons apparent from the judgment. The absence of any discussion whatsoever on the Appellant’s claim for mark-up/interest renders that part of the impugned judgment legally deficient and calls for appellate scrutiny.

8. As regards the claim for interest/mark-up in a suit founded upon negotiable instruments, Order XXXVII Rule 2 CPC, read with Section 34 thereof, empowers the Court, while passing a money decree, to award appropriate interest in accordance with law. Such an award, particularly in a commercial transaction, is compensatory rather than penal in nature and is intended to compensate the creditor for being deprived of the use and benefit of money lawfully due to him. Where cheques issued in discharge of an acknowledged liability are dishonoured and the amount remains unpaid, the debtor continues to retain and enjoy the benefit of funds which ought to have been paid to the creditor. In such circumstances, the claim for reasonable interest/mark-up warrants due consideration so that the debtor is not permitted to derive an undue financial advantage from the continued withholding of the amount legitimately payable to the creditor.

9. We have carefully examined the judicial precedents relied upon by learned counsel for the Appellant and find that the principles enunciated therein lend support to the Appellant’s case. The consistent view is that where a defendant fails to obtain leave to appear and defend in a summary suit under Order XXXVII CPC, the statutory consequences prescribed thereunder follow and the averments in the plaint are deemed to be admitted, subject, however, to the relief being otherwise permissible under law. A claim for interest and costs, when specifically made, therefore, cannot be declined mechanically or without recording reasons.

10. In commercial transactions founded upon dishonoured negotiable instruments, the award of reasonable interest under Section 34 CPC is essentially compensatory and not penal in character. A creditor who is unlawfully deprived of money legitimately due to him also suffers loss of its use and commercial utility during the period of default. Where the issuance and dishonour of the cheques remain uncontroverted, the statutory presumption available under Section 118 of the Negotiable Instruments Act, 1881 also operates in favour of the holder, unless rebutted in accordance with law. Thus, while the precise rate and period of interest remain matters for judicial determination, a duly pleaded claim for interest/mark-up and costs cannot be altogether ignored, particularly when the underlying monetary liability itself stands established and has been decreed by the learned Trial Court.

11. Consequently, although the Appellant claimed mark-up/interest at the rate of 20% per annum, no contractual stipulation prescribing such rate has been shown to exist between the parties. In these circumstances, the rate claimed cannot be awarded as a matter of course. Nevertheless, in exercise of the discretion vested in the Court under Section 34 CPC, and keeping in view the nature of the transaction and the period during which the Appellant remained deprived of the use of the amount lawfully due to him, we consider interest at the rate of 10% per annum from the date of institution of the suit until realization of the decretal amount to be just and reasonable. As regards costs, we are not persuaded to interfere with the discretion exercised by the learned Trial Court. Considering that the suit proceeded ex-parte and did not involve a prolonged contested trial, the prayer for costs is declined in exercise of discretion under Section 35 C.P.C.

12. In view of the foregoing discussion and reasons, the instant First Appeal is allowed. The impugned Judgment and Decree dated 31.07.2025, passed by the learned Additional District Judge-IX, Karachi-South, in Summary Suit No.269 of 2024, are modified to the extent that the Appellant shall be entitled, in addition to the principal decretal amount of Rs.3,550,000/- (Rupees Thirty-Five Lacs Fifty Thousand Only), to mark-up/interest at the rate of 10% per annum from the date of institution of the suit until full and final realization of the decretal amount. The remaining terms of the impugned Judgment and Decree shall remain intact.

The appeal stands disposed of in the above terms alongwith pending application(s).

JUDGE

Naveed PA