2002 PLP 426 (CLD)

As the learned counsel for respondent/Bank as well as attorney of the respondent were not present on the date of regular hearing although several calls were made for their appearance but none responded and ultimately after verifying the whole material and the R & P available in the appeal. We have arrived at the conclusion that the suit filed by the Bank was incompetent unless the attorney was so authorized by resolution passed by the Companies Board of Directors as provided under section 8(2) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, clearly provides that no suit under subsection (1) of section 8 shall be filed unless the Board of Directors, Banking Company is incorporated within Pakistan, has approved the filing of the suit. It will be advantageous to reproduce sections 8 and 9 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. S.8. Suit for recovery of written off loans etc.‑‑‑(1) Subject to subsection (2) and notwithstanding anything contained in the Limitation Act, 1908 (Act No.IX of 1908), or any other law, a Banking Company may, within three years from the date of coming into force of this Act, file a suit for the recovery of any amount written off, release or adjusted under any agreement, contract, or consent, including a compromise or withdrawal of any suit or legal proceedings or adjustment of a decree between a Banking Company and a borrower or customer on any day on or after the first day of January, 1990 and before the coming into force of this Act, if it can establish that the amount was written off, released or adjusted for political reasons or considerations other than bona fide business consideration. (2) No suit under subsection (1) shall be filed unless the Board of Directors, if the Banking Company is incorporated within Pakistan, or the Chief Executive (by whatever name called or designated) of the Banking Company in Pakistan, if the Banking Company is incorporated beyond Pakistan, has approved the filing of the suit. S.9. Procedure of Banking Courts.‑‑‑(1) Where a borrower or a customer or a Banking Company commits a default in fulfilling any obligation with regard to any loan or finance the Banking Company or, as the case may be, the borrower or customer, may institute a suit in the Banking Court by presenting a plaint duly supported by a statement of account which shall be verified on oath in the case of a Banking Company by the Branch Manager or such other officer as the Board of Directors of a Banking Company may authorize in this behalf. Copies of the plaint shall also be filed along therewith in sufficient numbers so that there is one copy for each defendant and one extra copy. We have gone through the cited case of Dumez Borie v. International Forwarders Limited NLR 1983 UC 184 wherein it has been held as under: "The argument of Mr. Rahimtoola was that Mr. Terras being the Principal Officer of the Dumez Company was entitled to sign the plaint on behalf of that company in terms of Order 29, rule 1, C.P.C. There is no doubt that the suit purports to have been brought on behalf of a partnership firm by one of the partners, namely Societe Dumez which is a Corporation. But the plaint reading of the provisions of Order 29, rule 1 and Order 30, rule 1 C.P.C. clearly makes out a distinction between signing and verification of pleadings on behalf a firm and a Corporation respectively and the authority to bring a suit on behalf of them. The provisions of Order 29, rule 1, C.P.C. deal only with the subscription and verification of pleadings in suits by and against the corporations. In other words, the rule merely authorized the persons mentioned therein to sign and verify pleadings on behalf of a corporation. The rule does not authorize such person to 'institute' suits on behalf of the Corporation. Substantial question in issue herein is whether Mr. Terras was authorized by Societe Dumez to institute the present suit. Therefore, merely because the person signing the plaint was Principal Officer of the Company is not sufficient to establish that he had authority to bring the suit on behalf of the Company. Learned counsel had, therefore, to fall back upon the power of attorney. As pointed out above it is doubtful in view of the language in which the powers were couched that the Attorney had authority to institute a suit before the Courts of law. Be that as it may, it seems to be settled that even a constituted Attorney must have express authority from the Board of Directors of the Company to institute a suit. The reason for the rule appears to be that in case of companies the initiative to institute an action at law must proceed from the Company or the Authority under the Articles of Association in whom the management of the Company vests." The authority reported as Punjab Livestock and Poultry Development Board v. Shaikh Muhammad Younas 1980 CLC 1932 wherein it has been observed as under:‑‑ "It is evident from the above referred provisions of law that the appellant Board is a Body Corporate under the aforesaid Provincial Statute consisting of Board of Directors including a Managing Director as the Chief Executive of the Board and can sue or be sued in its name. The Administration and Management of the affairs of the Board exclusively vested in the Board of Directors." In identical position, the Hon'ble Lahore High Court in the case of National Bank of Pakistan v. National Battery Industries and others 1984 CLC 2133 and it was held in the said authority that no evidence was produced by the plaintiff Bank' as to when it took possession through resolution to file suit against the borrowers. The Hon'ble apex Court while deciding several appeals of Khan Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Limited reported in P L D 1971 SC 550 based in the case of H.M. Ebrahim Sait v. South India Industrials Limited AIR 1938 Mad. 962 it has been held as under:‑‑ "In the case of H.M. Ebrahim Sait v. South India Industrials Limited it was held that in law a meeting of Directors is not duly convened unless due notice has been given to all the Directors. On the facts of the present case, I am satisfied that due notice of the meeting was not given to the deceased appellant and, therefore, the resolution passed in the meeting of 28th September, 1951, cannot be said to be a valid one. In my opinion, no valid authority was conferred on Mr. Khurshid Mahmood and, therefore, he was not competent to institute the suit. I would, therefore, hold that the learned trial Judge was perfectly justified in dismissing the suit on this ground." In view of the dicta laid down in the above authorities, there is no other option, therefore, we are of the view that the suit was filed without unlawful authority by the Attorney. There is no material on the record that any approval was accorded by the Board of Governors of the Banking Company to authorize plaintiff to file such suit against the appellant. Secondly the loan was written off during the months of March, 1993 and this position was suppressed by the Plaintiff/Bank. The attorney of the Bank had only power of attorney, dated 24th December, 1995. It was signed by the President in presence of Vice‑President (HRD) and Executive Vice‑President (HRD) of Muslim Commercial Bank Head Office, Karachi. In such power of attorney there is no any clause that Board of Governors have accorded permission to institute such suit in the Banking Court on behalf of the Bank, the attorney of Bank namely Syed Abdullah Ali Talat has also filed the counter‑affidavit and no where it was mentioned that any approval was accorded by the Board of Governors for granting permission for filing the suit in the Banking Court. The said attorney has not denied the documents dated 6‑4‑1993 wherein the State Bank of Pakistan had intimated Muslim Commercial Bank that they have credited a sum of Rs. 245,528 being amount of classified agricultural loan outstanding by suspending the interest against borrowers as per the list attached. The attorney of the bank has not disputed this fact in the suit that the loan was written off or it was allowed on any political consideration. Section 8 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 specifically specified in such provision that Banking Company, within 3 years from the date of coming into force of this Act, file a suit for the recovery of any amount written off, released or adjusted under any agreement, contract, or consent, including a compromise or withdrawal of any suit or legal proceedings or adjustment of a decree between a Banking Company and a borrower or customer on any day on or after the first day of January, 1990 and before the coming into force of this Act, if it can establish that the amount was written off, release or adjusted for political reasons or considerations other than bona fide business considerations. As per record available in the Court file the loan was written off in the year, March, 1993 and the suit was filed in September, 1997 beyond the prescribed period as provided under section 8 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. No sanction was obtained from the "Board of Directors" and no suit under clause (1) of section 8 of such Act, 1997, was competent by the plaintiff/respondent. While determining the competency of the person filing the suit, all that was to be seen by the Competent Court to see whether such person was duly authorized in this behalf as provided under section 8(2) of the Act. We are of the view that plaintiff/Bank has failed to prove that suit was initiated in the L said Court through duly authorized person. In our view Syed Abdullah Talat Attorney was not competent to file the suit against the appellant and the trial Court without examining the competency of the attorney decided the suit by passing the judgment and decree. The trial Court has not examined the legal position in respect of time‑barred claim, and competency of the plaintiff to file such suit without authority from the Board of Directors, therefore, on these two counts the judgment and decree have been passed without lawful authority. In view of the foregoing reasons the said judgment and decree of the Banking Court are set aside. The appeal is allowed with costs. Above are the reasons of our short order dated 8‑8‑2001. Q.M.H./M.A.K./H‑55/K Appeal allowed.