2001 PLP 1904 (CLC)

10. Mr. Habibur Rehman, learned counsel for defendant No.2, inter alia, submitted as follows:‑‑ (i) That the plaintiff made allegations of payment of commission for the first time when he wrote to the President of U.B.L. at Karachi by his letter, dated 21‑5‑1995; however, he withdrew his complaint by letter dated 31‑12‑1996 addressed to the President. The plaintiff having withdrawn the complaint the present suit is patently mala fide and he is not entitled to any relief in equity. (11) The dispute between the plaintiff and defendant No.2 culminated in amicable settlement by a consent order pursuant to Which the plaintiff paid Pounds 5,000 to Aisha Moazam Khan' wife of defendant No.2 and in proof he produced a copy of the agreed consent order and a cheque, dated 13‑10‑1997 issued by the plaintiff in favour of the Solicitors of Aisha Moazam Khan. This fact clearly proves that the allegations made by the plaintiff against defendant No.2 in the plaint are mala fide.

11. Exercising their right of reply, Mr. Khan and later Mr. Akram Shaikh submitted as follows:‑‑ (i) With regard to the objection that the Court did not have jurisdiction to entertain the suit he urged that under section 20, C.P.C. plaintiff had the option to file the suit within the local limits of the jurisdiction of this Court as‑the Head Office of defendant No.1 was situated in Karachi where it was also carrying on business and referred to the case of Value Gold Ltd. v. U.B.L. PLD 1999 Kar.

1. He further submitted that defendants Nos.2 and 3 the agents of defendant No.1 and principal characters of the unlawful exercise of economic duress had been transferred to Karachi where they were residing and working. The entire evidence of the improper conduct was in Karachi and the doctrine Forum Non‑conveniens could not be applied in the present circumstances. (ii) In reply to objection that the plaintiff had claimed damages and therefore, a mandatory or temporary injunction could not be granted, he submitted that the plaintiff had sought damages for the injury already caused by the defendants and accordingly the relief sought was proper and allowable by the Court and referred to 1994 CLC 726 at 732‑A in support of his submission. (iii) When a Court has statutory jurisdiction (as in the present case under the Banking Act, 1997) the statutory forum should not relinquish its jurisdiction in favour of the arbitral forum agreed to by the parties in an agreement and referred to PLD 1989 Quetta 1. 1982 CLC 1777 and 1983 CLC 1592 in this connection.

12. I have considered the arguments of Mr. Anwar Mansoor Khan, learned counsel for the plaintiffs for confirmation of the ad interim injunction dated 28‑9‑1999 and Mr. Sajid Zahid, learned counsel for defendant No.1 (U.B.L.) and Mr. Habibur Rehman, Advocate for defendant No.2 (Muhammad. Moazzam Khan) for discharging and setting aside the ex parte ad interim injunction.

13. From a perusal of the pleadings, the documents filed therewith and the submissions made by the learned counsel the following factual position emerges which is not disputed by any one. (i) In July, 1999, U.B.L. commenced proceedings against the plaintiff, inter alia, for possession of latter's legally charged property. U.B.L. took peaceable possession of the Lea Valley Estate Property on 6‑7 1999 and changed the locks of its two doors. (ii) On 27‑9‑1999 the plaintiff filed this suit against three defendants, inter alia, for declaration, for recovery of Pound Sterling 1,200,000 for causing loss in business Pound Sterling 300,000 for mental stress due to coercive approach and perpetual injunction restraining U.B.L. from proceeding to recover any money or from attaching or selling ‑any property mortgaged by him. The basic controversy at present revolves around the action initiated by U.B.L. in relation to the property mortgaged by the plaintiff in London to obtain financial facilities from the bank. (iii) The plaintiff is carrying on business in England where he is subject to the English Law and all his dealings with U.B.L. are also subject to English Law. (iv) Defendants Nos.2 and 3 who are alleged to have caused loss to the plaintiff by their improper conduct are now residing and working in Karachi where the Head Office of United Bank is also situated. (v) The immovable property mortgaged by the plaintiff are located in London. All acts, transactions and dealings between the parties took place in London. (vi) In the claim filed by U.B.L. in the High Court of Justice, Chancery Division, several orders have been passed by the English Court in relation to the proceedings including order, dated 20‑9‑1999 passed after hearing the Counsel of both parties whereby plaintiff herein is required to give possession of Property No. 1,2, Skillion Commercial Centre, Edmonton, London to U.B.L. within 28 days of service of the order on the Solicitor of the plaintiff. U.B.L. is in possession of the L ca Valley Trading Estate Property through their agents. (vii) The plaintiff filed an application under Order 39, Rules 1 and 2 read with section 151, C.P.C: in the present suit to restrain the defendants from taking any coercive action against the plaintiff for recovery of money or acting in any manner whatsoever in the proceedings to attach or sell or to take possession of the mortgaged properties mentioned in the plaint till the disposal of the suit. On 28‑9‑1999 the plaintiff obtained an ad interim order without notice restraining U.B.L. not to adopt any coercive method for recovery of its outstanding amount which order is still in force. (viii) The claim filed by Aisha Moazzam wife of defendant No.2 against the plaintiff for recovery of Pound Sterling 76,331.96 plus interest in the Central London County Court has been settled by consent in proof whereof defendant No.2 has produced cheque, dated 13‑11 1997 for St. Pound 5,000 issued by plaintiff favouring Aisha Moazzam's Solicitor. The plaintiff has not denied this fact.

14. The first point which arises for consideration is whether this Court has the jurisdiction to entertain the suit filed by the plaintiff in respect of business dealings between the parties and the cause of action which arose in England. The relevant provisions for the purpose of decision of this question are given in sections 16 and 20 of the Code of Civil Procedure, which read as follows:‑‑ "Section

16. Suits to be instituted where subject‑matter situate.‑‑‑ Subject to the pecuniary or other limitations prescribed by any law, suits (a) for the recovery of immovable property with or without rent of profits. (b)

(c) for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property. (d) for the determination of any other right to or interest in immovable property. (e)

(f) for the recovery of movable property actually under distraint or attachment. shall be instituted in the Court within the local limits of whose jurisdiction the property is situate or in the case of suits referred to in clause (c) at the place where the cause of action has wholly or partly arisen. Provided that a suit to obtain relief respecting or compensation for wrong to, immovable property held by or on behalf of the defendant may, where the relief sought can be entirely obtained through his personal obedience, be instituted either in the Court within the local limits of whose jurisdiction the property is situate or, in case of suits referred to in clause (c) at the place where the cause of action has wholly or partly arisen, or in the Court within the local limits of whose jurisdiction the defendant actually and voluntarily resides, of carries on business, or personally works for gain. Explanation. In this section Property' means property situate in Pakistan. Section

20. Other suits to be instituted where defendants reside or cause of action arises.‑‑‑ Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction‑‑‑ (a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises. Explanation II.‑‑‑ A corporation shall be deemed to carry on business at its sole or principal office in Pakistan or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place." The explanation appended to section 16 clearly states that the "property" referred to in the section means property situated in Pakistan. As the property in the present suit is situated in England, section 16 is not applicable in the circumstances of the case. However, under section 20 a suit can be instituted in a Court within whose jurisdiction the cause of action arises or where the defendant carries on business or works for gain. As the Head Office/Principal Office of U.B.L. (defendant No.1) is situated in Karachi and defendants Nos.2 and 3 reside and work for gain with defendant No.1 in Karachi, this Court would have jurisdiction to try the suit.

15. However, the objection of Mr. Sajid Zahid, learned counsel for defendant No. 1, was that because the defendants have been residing and carrying on business in England, the mortgaged property is situated in United Kingdom, all transactions and business dealings between the plaintiff and the defendants according to plaintiff's own showing took place in England, this Court may not exercise jurisdiction in respect of the property situated outside Pakistan on the basis of the principles of Private International Law which clearly state that a domestic Court does not have jurisdiction to entertain actions concerned with the title to or interest in immovable property situated outside the territorial limits of the Court as it is covered by the principle of lex situs. In this respect he referred to the judgment of Value Gold Limited v. U.B.L. PLD 1999 Kar.

1. I am afraid that the case of Value Gold does not directly support the argument of the learned counsel. However; there are other aspects of the matter which are discussed below.

16. The plaintiff has filed with the plaint a copy of the Statement of Z. Jamil Aali submitted by U.B.L. in the High Court of Justice Queens Bench Division in Cause 1995 K. No. 396 between Aisha Moazam Khan and Muhammad Nadeem Ghani para.6 of which reads as follows:‑‑ "In my presence, Mr. Nadeem Ghori wrote an apology letter addressed to the President, U.B.L. whereby stating that his earlier complaint, dated 21‑5‑1995 against Moazam Khan is deeply regretted and he wishes to withdraw the same." In view of the above document filed by the plaintiff himself it is difficult to believe the story set up by him in the plaint.

17. In the plaint, the plaintiffs have basically made allegation of fraud, misrepresentation, coercion and improper conduct on the part of defendants Nos.2 and 3 only. In the Interlocutory Application the plaintiff is seeking injunction against U.B.L. to restrain the bank from selling or taking possession of the mortgaged property mentioned in the plaint till the disposal of the suit. As stated above U.B.L. has already taken possession of the mortgaged property pursuant to the agreement between the parties. The plaintiff has nowhere specifically alleged any fraud, coercion or misrepresentation or misconduct on the part of U.B.L. to respect of the property mortgaged by him with the bank or given the particulars of any fraud, misrepresentation, breach of trust, undue influence or other mala fide conduct in respect of the mortgaged properties as required by Order 6, Rule 4, C. P. C. Such allegations. therefore, cannot be considered by the Court and especially for the purpose of restraining U.B.L. from proceeding with the matter of the sale of the mortgaged property under the supervision of the English Court.

18. With its application under section 10 of the Banking Act, 1997 for leave to defend the suit, U.B.L. has filed a copy of the "deed of charge by way of legal mortgage" dated 9th August, 1993 executed by the plaintiff and his wife Romana Ghani as mortgagors in respect of leasehold property being "Unit 12, Cecil Wharf, Lea Valley Trading Estate, London N9" and another copy of a similar document executed on the same day by the same parties in respect of freehold property known as "461 Montagu Road, Edmonton London N9". Clause (24) of both the‑two deeds of Charge read as follows:‑‑ "This legal charge shall be construed in accordance with and governed in all respect by English Law and the Principal Debtor and the Mortgagor submit to the jurisdiction of the English Courts without prejudice to the Banks' right to institute proceedings in Courts any other competent jurisdiction."

19. It is evident from the above clause that the plaintiff who was one of the mortgagors alongwith his wife, had agreed to submit to the jurisdiction of the English Court. Consequently, U.B.L. had correctly commenced proceedings as described above against the plaintiff and for sale of the charged property in accordance with the agreement between the parties. According to the terms of the said clause only U.B.L. has the choice to institute proceedings in Courts of any other jurisdiction besides the English Court. The plaintiff does not enjoy such freedom. The plaintiff, therefore, cannot ask this Court to restrain U.B.L. from proceeding with its claim before the High Court of Justice. Chancery Division to which he had voluntarily, willingly and without any undue influence or coercion agreed. Further, U.B.L., commenced the Court proceedings in respect of the property on or about 21st July, 1999 after their agents had allegedly taken possession of the Lea Valley Trading Estate property on 6‑7‑1999 at about 3‑00 p.m. and changed the locks to both the front and back doors of the said property exercising their power under clause (6) of the deed of charge by way of legal mortgage. On 20‑9‑1999 the High Court of Justice, Chancery Division directed the plaintiff to hand over possession of Property No.12 Skillion Commercial Centre to U.B.L., where after the plaintiff filed the present suit on 29‑9‑1999 i.e. 9 days after the order of the English Court, These facts have not been disputed by the plaintiff. In view of the clear agreement between the parties and the fact that no allegation of fraud has been alleged in respect of the deed of charge by way of legal mortgage of the immovable property by the plaintiff, the latter's request to stay the proceedings pending before the English Court is not bona fide and it would not be proper for this Court to pass an order which would have the effect of Staying judicial proceedings initiated earlier in time in accordance with law before a Court of competent jurisdiction prior to the filing of this suit which would also not be proper in view of the provisions of section 56 of the Specific Relief Act, 1877.

20. The plaintiff has, inter alia, filed a suit for refund of Pounds 174,629.45 being the alleged commission recovered by the defendants Nos.2 and

3. Pounds 1.2 million for loss suffered in business and for permanent injunction against the defendants from proceeding to recover money from the plaintiff in England or from selling the mortgaged property and taking possession thereof till the decision of the suit. It is an admitted position that possession of the property has already been taken by U.B.L. and that only its sale remains to be completed under the supervision of the English Court. The plaintiff has already claimed damages for loss in business which would be subject to proof. In case the English Court orders sale of the mortgaged property in accordance with the agreement between the parties under the English Law and the plaintiff suffers any loss or injury on account of the sale of the mortgaged property he would be free to claim from U.B.L. any loss suffered by him on account of the malfeasance or misfeasance of the bank and/or breach of any agreement between the parties. Compensation in terms of money in such event would be an adequate relief for the plaintiff; consequently relief by way of injunction would not be proper in the circumstances of the case. 21 The Banking Companies (Recovery of Loves, Advances, Credits and Finances) Act, 1997 was promulgated to provide exclusively to the banking companies operating in Pakistan a speedy procedure for recovery of the loans and finances extended by them to their borrowers and customers. The Banking Courts established under the Act, in addition to the powers available to them under the Civil Procedure Code, 1908, are permitted to follow or use any other manner as they may deem fit for the purpose of expeditious recovery of the loans or finances. This special law was enacted to meet the alarming economic situation which had arisen in the country on account of the defaults in payment of the loans and finances by the borrowers and customers of the domestic banking companies. Consequently the jurisdiction of the Banking Courts is limited to cases where default is committed by a banking company or a customer in fulfilling their obligations arising out of the loan or finance agreements executed by them i.e. the special law applies to agreements executed and transactions entered into in Pakistan primarily under the non‑interest banking system barring a few exceptions relating to transactions involving foreign exchange and interest payable thereon. The following provisions are relevant for the purpose of appreciating the powers and jurisdiction of the Banking Courts established under the Act and their territorial limits. They are:‑‑ "Section 1(2). It extends to the whole of Pakistan. Section 2(a)(i) 'Banking Company', means‑‑ any company whether incorporated within or beyond Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan and includes a Government savings bank; Section 2(b)(i) 'Banking Court' means‑‑‑ in respect of a case in which the outstanding amount of claim based on a loan or finance does not exceed thirty million rupees or the trial of offences under this Act, the Court established under section 4; and (ii) in respect of any other case the High Court; Section 2(c) 'borrower' means‑‑‑ a person who has obtained a loan under a system based on interest from a banking company and includes a surety or an indemnifier; Section 2(d) 'customer' means a person who has obtained finance under a system which is not based on interest from a banking company or is the real beneficiary of such finance, and includes a surety or an indemnifier: (e) 'Finance' includes an accommodation or facility under a system which is not based on interest but provided on the basis of participation in profit and loss, mark‑up or mark‑down in price, hire‑purchase, equity support, lease, rent‑sharing, licensing, charge or fee of any kind, purchase and sale of any profit, including commodities, patents, designs, trade marks and copy‑rights, bills of exchange, promissory notes or other instruments with or without buy‑back arrangement by a seller, participation term certificate, musharika, or modaraba, certificate, term finance certificate or any other mode other than an accommodation or facility based on interest and also include credit or charge cards, guarantees, indemnities letters of credit and any other obligation, whether fund based or non‑fund based any accommodation or facility the real beneficiary whereof is a person other than the person to whom or, in whose name it was provided.

22. It is universally accepted that according to the comity of nations all legislation of a country is territorial, all exercise of jurisdiction is territorial in nature and the laws of a country apply to all its subjects, things and acts within its territory. Section. 1(2) of the Banking Act, 1997, clearly states that its provisions extend to Pakistani territory and, prima facie, the Act does not envisage extra‑territorial application. Therefore, the provisions of the Act would not apply to banking transactions conducted beyond the territories of Pakistan in another country under the laws of that country where the branch of a banking company incorporated or operating in Pakistan may be doing business. To understand it properly, let us take an example. Suppose A.B.C. Bank which is incorporated in New York also has a branch among others in Karachi and Tokyo. It enters into a loan transaction in New York or Tokyo with its customer who commits a default in payment of the debt, leaves New York or Tokyo and settles in Karachi, A.B. C. Bank can file the suit against its customer in Karachi because the defendant resides in Karachi as permitted by section.20, C.P.C. but the question is whether A.B.C. Bank can file a claim in the Banking Court established under section 4 of the Banking Act, 1997, which provides a speedy remedy or would it have to file the claim in the ordinary Court of civil jurisdiction. The answer is simple; even though A.B.C. Bank has a branch in Karachi, it cannot file the above‑referred claim in the Banking Court because the transaction did not take place under the terms and conditions enforced by the State Bank of Pakistan for the business of banking in Pakistan but under the laws of New York or Tokyo and does not come within the definition of finance as defined in the Banking Act, 1997. However, it can file the claim in the ordinary Court exercising civil jurisdiction in accordance with the provisions of C.P.C. In the present case, the transaction between the parties, took place beyond the territories of Pakistan i.e. in England where it was subject to English Law and not subject to Pakistan Law or the present banking system enforced by the State Bank of Pakistan. It is, therefore, apparent 4hat the transaction between the parties cannot be said to be covered under the provisions of the Banking Act, 1997. After reading the provisions of the said Act which is a special law enacted to meet the special situation prevailing in the country and the fact that the transaction in dispute took place in England under English Law between parties who were domiciled in England at the time of the transaction, I am of the opinion that the dispute between the parties is not covered by the provisions of the Banking Companies (Recovery of Loans Advances, Credits and Finances) Act, 1997. Consequently, exercising the power under section 7(4) of the said Act. I hold that the plaintiffs' claim is not a loan or finance as defined in the Banking Act, 1997 and the High Court exercising jurisdiction under section 5 of the Banking Act, 1997 does not have jurisdiction to decide the said dispute between the plaintiff and the defendants herein and accordingly under Order VII, Rule 10, C.P.C. the plaint is ordered to be returned to the plaintiff for presentation in the competent Court of ordinary civil jurisdiction. However, as the Head Office of U.B.L. is in Karachi and respondents Nos.2 and 3 are residing and working with U.B.L. in Karachi and the plaintiff's claim which is in excess of Rs.500,000 will be adjudicated in the original civil jurisdiction of this High Court; the Superintendent of the "D" Branch is directed to treat this suit as an ordinary suit filed in the original civil jurisdiction of the High Court.

23. As I have held that the Banking Court does not have jurisdiction to decide the dispute between the parties, the arguments of Mr. Muhammad Akram Shaikh that this Court cannot and should not relinquish its special jurisdiction in favour of the arbitral forum become irrelevant in the circumstances of the case.

24. It would not be out of place to mention here that in the case of Value Gold which was cited by both counsel, the learned Court in spite of coming to the conclusion that the Pakistani Court had jurisdiction to try the matter did not grant the relief of temporary injunction to the plaintiff as the equities were not in his favour. In the present case also it would not be proper exercise of discretion if the Court proceedings pending in the English Court are stayed as the plaintiff has come to this Court with unclean hands and has abused the process of the Court by invoking the jurisdiction of this Court by filing the application for temporary injunction when neither the law nor equities were in his favour.

25. Having reached the conclusion that the proceedings commenced by U.B.L. in the High Court of Justice, Chancery Division in respect of the mortgaged property should not be stayed, it is not necessary to discuss the other arguments advanced by the learned counsel of the respective parties.

26. In view of the above discussion, it is apparent that the plaintiff does not have a prima facie case for injunction, the balance of convenience is not in his favour and he would not suffer irreparable loss if the proceedings in the English Court are not stayed. Accordingly the application under Order, 39, Rules 1 and 2 filed by the plaintiff (C.M.A. 8015 of 1999) is dismissed and the application filed by defendant him under Order 39, Rule 4 read with section 151, C.P.C. (C.M.A. 9830 of 1999) is allowed and the ad interim injunction granted on 28‑9‑1999 is hereby recalled.

27. For reasons stated above, 4 is clear that the plaintiff had no case for temporary injunction either in law or in equity and yet he filed such an application with ulterior motives anti to delay the outcome of the proceedings in London. The application for temporary injunction was patently vexatious to the knowledge of the plaintiff, he would, therefore, pay to defendant No.1 special costs of Rs.15,000 only. Q.M.H./M.A.K./N‑54/K Order accordingly.