2005 PLP 122 (CLD)

ANWAR ZAHEER JAMALI, J.

This appeal under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2'001 is directed against the judgment and decree dated 30-9-2002 and 26-10-2002 respectively passed by Banking Court No.1 at Karachi in Suit No.1 of 2002. By this judgment suit for recovery of Rs.1,73,00,595 filed by the respondent in the capacity of customer of the appellant financial institution was decreed in full with cost and cost of funds at 8% from the date of default i.e. 1-9-1999 till realization.

2. At the outset, learned counsel for the appellant contended that in this appeal appellants are not challenging the decree of Rs.1,73,00,595 passed against them by the Banking Court but their grievance is only in respect of awarding of costs of funds, which according to the learned counsel could not have been awarded by the Banking Court in favour of respondent/ customer. Dilating upon this legal aspect, learned counsel for the appellant placed reliance upon section 3 of the Financial Institutions (Recovery of Finances) Ordinance 2001 (hereinafter referred to as the Ordinance of 2001), which is reproduced as under:-- "

3. Duty of a customer:-- (1) It shall be the duty of a customer to fulfill his obligations to the financial institution. (2) Where the customer defaults in the discharge of his obligation, he shall be liable to pay, for the period from the date of his default till realization of the cost of funds of the financial institution as certified by the State Bank of Pakistan from time to time, apart from such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force. (3) For purposes of this section a judgment against a customer under this Ordinance shall mean that he is in default of his duty under subsection (1), and the ensuing decree shall provide for payment of the cost of funds as determined under subsection (2).

3. Learned counsel further contended that above provisions of law is the only provision under the Ordinance of 2001 which empowers the Banking Court to award cost of funds in favour of financial institutions and from its language it is clear that such privilege or benefit has not been conferred by the statute to the customer.

4. Mr. Sultan A. Allana, learned counsel for respondent was unable to controvert this position. However, he urged that in case the respondent/ customer is not entitled for awarding of costs of funds as awarded by the Banking Court then to meet the ends of justice they shall be awarded mark-up/interest at some reasonable rate to compensate the loss which they have suffered due .to the default of the appellant/ financial institution. In support of his submission learned counsel placed reliance on section 21 of the Ordinance of 2001 which reads as under:-- "

21. Application of fines and costs:

(1) Banking Court may direct that the whole or part of any fine or costs imposed under this Ordinance shall be applied in or towards:

(a) payment of costs of all or any proceedings under this Ordinance; and (b) payment of compensation to an aggrieved party. (2) An order under subsection (1) shall be deemed to be a decree passed under this Ordinance for purposes of execution."

5. We have carefully considered the arguments advanced by the learned counsel and also perused the relevant provisions of law relied by them in support of their respective contentions.

6. In the instant appeal, as conceded by Mr. Muhammad Rashid Khan, Advocate, passing of decree in the sum of Rs.1,73,00,595 and other material facts are not in dispute between the parties, therefore, the only moot point for consideration before us is that whether by virtue of section 3(2) of the Ordinance of 2001 the cost of funds could only be awarded in favour of a financial institution and not in favour of a customer.

7. From a plain reading of section 3(2) of the Ordinance of 2001, as reproduced above, it is evident that the benefit of awarding of cost of funds has only been extended in favour of financial institution and against the customer who commits default in the discharge of his obligation and not vice versa. This position further finds support from the language of section 17 of the Ordinance of 2001 which reads as under:-- "

17. Final Decree:-- (1) The final decree passed by a Banking Court shall provide for payment from the date of default of the amounts found to be payable on account of the default in fulfillment of the obligation, and for costs including, in the case of a suit filed by a financial institution cost of funds determined under section 3."

8. In view of the above, we find force in the submission of Mr. Muhammad Rasheed Khan, counsel for the appellant that the impugned judgment and decree to the extent of awarding of cost of funds in favour of respondent/ customer from 1-9-1999 till realization or decretal amount is liable to be set aside. Accordingly, this appeal against the impugned judgment and decree is allowed to that extent only and the cost of funds at 8% awarded by the Banking Court in favour of the respondent is set aside. However, to meet the ends of justice the case is remanded to the Banking Court to decide within sixty days, whether in addition to the money decree in the sum of Rs.1,73,00,595 and costs of suit, which decree is maintained, the respondents are also entitled for any further sums towards compensation/mark-up/interest from the date the appellant committed default in fulfillment of their obligation or for any other period. To avoid delay in the proceedings before the Banking Court No.1 at Karachi, parties shall appear before the said Court on 22-4-2004. H.B.T L-7/K Order accordingly