2014 PLP 763 (CLD)

MRS. AYESHA A. MALIK, J.

This is a suit for recovery of Rs.112.102 million as on 24-3-2006 under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (F.I.O. 2001) along with cost of funds, markup, liquidated damages and other charges till realization of whole amount, through sale of mortgaged properties and other assets of the defendants.

2. After service of notices, Preliminary Leave Application (P.L.A.) No.45-B of 2006 and PLA No.59-B of 2006 were filed by the defendants Nos.1-3 and defendants No.4 respectively. The defendant No.1 is a public limited company duly incorporated under the Companies Ordinance, 1984 with its registered office at Lahore. The defendants Nos.2 and 3 have issued personal guarantees in favour of the plaintiff for the liabilities of the defendant No.

1. The defendant No.4 is holding pari passu mortgage on the immovable property of the defendant No.1. The defendant No.4 has been arrayed as a pro forma defendant and no relief is being claimed against it.

3. The case of the plaintiff is that the plaintiff issued a facility letter dated 8-11-2003 sanctioning a finance facility in the amount of Rs. 150.00 million for setting up a new yarn dyeing unit. The defendant No.1 passed a resolution on 1-12-2003 to obtain the finance of Rs.150.00 million for the purchase of machinery for the yarn dyeing unit. The finance agreement was executed on 24-12-2003 by the defendant No.1 along with the security documents including Demand Promissory Note. On 29-12-2003 personal guarantees were executed by the defendants Nos.2 and 3 and the property of the defendant No.1 was mortgaged vide a Memorandum of Deposit of Title Deed (MDTD) dated 29-12-2003. Letter of Hypothecation and Deed of Floating Charge were issued with respect to the moveable assets of the defendant No.1 on 29-12-2003. The mortgage and charge was duly registered with the Securities and Exchange Commission of Pakistan (SECP) on 31-12-2003. Finance of Rs.48.840 million was disbursed to the defendant No.1 for execution of civil works. In this regard the loan account of the defendant No.1 was debited on 31-12-2003. The plaintiff paid Rs. 36.557 million to PICIC Commercial Bank Limited to meet the liabilities under the letters of credit established by the defendant No.1. Two Letters of Comfort dated 11-11-2004 for Rs.45.628 million and Rs. 13.464 million were issued by the plaintiff in favour of the defendant No.1 against the LCs opened by the defendant No.1 for import of machinery. At present the defendant No.1 is liable to pay Rs. 11.505 million and Rs. 11.839 million under the Letter of Comfort. Total amount due from the defendants Nos.1-3 is Rs. 112.102, Rs.108.742 million being finance availed and the balance being mark up, rebate and pre-payment premium.

4. The learned Counsel for the defendants Nos.1-3 argued that the defendants were entitled to unconditional leave to defend in the suit. The learned counsel raised an objection with respect to the statement of accounts (SOA). It is the case of the defendants that the SOA have not been certified by the competent authority as required under section 2(8) read with section 4 of the Banker's Book Evidence Act, 1891 (Act of 1891). The learned counsel argued that as per section 2(8) of the Act of 1891, the principal accountant or manager of the bank has to certify the SOA. In the instant case the SOA has been certified by the Senior Vice-President and the Assistant Vice-President of the plaintiff bank. Learned counsel argued that this is not in accordance with the mandate of section 2(8) read with section 4 of the Act of 1891 and they were not the officers contemplated under the section. He further argued that in terms of section 9(2) of the F.I.O. 2001, the certification of the SOA must be strictly in terms of the Act of 1891 otherwise it cannot be considered as a SOA under the Act of 1891. Learned counsel further argued that the SOA does not show any debit entries and therefore the SOA as filed with the plaint cannot be treated as a SOA contemplated under the Act of 1891 and the F.I.O., 2001. The second objection is with respect to the counter claim raised in the PLA. Learned counsel argued that the counter claim entitles the defendants to grant of leave as the defendants have a right to set off under Order VIII, Rule 6 of the Civil Procedure Code on account of the counter claim raised in the PLA against the plaintiff. Learned counsel further argued that leave has to be granted in this case because if the PLA of the defendants is dismissed, the counter claim of the defendants will be hit by the principle of res judicata. The third objection raised by the learned counsel is that the finance and security documents were novated on 26-10-2004 through a supplemental agreement which has not been appended with the plaint. Learned counsel argued that since the relevant documents have not been filed with the plaint, the defendants Nos.1 to 3 are entitled to leave to appeal. Defendants' counsel has relied upon the cases titled 'Mian Muhammad Shahbaz Sharif through Attorney v. Election Commission of Pakistan, Islamabad and 15 others' (PLD 2003 Lahore 646), 'Pakistan Kuwait Investment Company (Pvt.) Limited through Authorized Representative v. Messrs Active Apparels International and 6 others' (2012 CLD 1036), 'Messrs Soneri Bank Limited v. Messrs Compass Trading Corporation (Pvt.) Limited through Director/Chief Executive and 3 others' (2012 CLD 1302), 'Fine Textile Mills Ltd. v. Haji Umar' (PLD 1963 SC 163), 'Ali Khan & Co. v. Allied Bank of Pakistan' (PLD 1995 SC 362), 'Ravi Associate (Pvt.) Ltd. v. Industrial Development Bank of Pakistan' (2005 CLD 393), 'Bankers Equity Ltd. v. Betnonite Pakistan Ltd.' (2010 CLD 651), 'Suo Motu Case No.18 of 2010 dated 8-8-2011' (2012 PLC (C.S.) 394) and 'Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd.' (PLD 1966 SC 684).

5. I have heard the learned counsel for the parties and reviewed the record available on the file.

6. The first issue raised by the defendants' counsel is with respect to the certification of the SOA filed with the plaint. Learned counsel has relied on section 2(8) read with section 4 of the Act of 1891, which read as follows:-- "(8) Certified copy" means a copy of any entry in the books of a bank together with a certificate written at the foot of such copy that it is a true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the bank, such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title."

4. Mode of proof of entries in bankers' book. Subject to the provision of this Act, a certified copy of any entry in a bankers' books shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matter, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise". The SOA filed with the plaint has been certified by the Senior Vice-President, Accounts Department as well as the Senior Vice-President and the Assistant Vice-President of the Plaintiff bank. The objection is that the signatories of the SOA are neither the principal accountant nor the manager of the bank. Section 2(8) of the Act of 1891 requires that the certification be made by the principal accountant or the manager of the bank with his name and official title. The definition does not provide for the designation or title of the principal accountant or manager of the bank. It requires that a responsible officer of the bank certify the SOA. Such an officer would provide his official title in the certification meaning thereby that the official title does not have to be principal accountant or manager of the bank. The title of the persons maintaining the books of accounts may vary from bank to bank and may also change over time. The intent is to ensure that a responsible officer whose work relates to accounts or management sign the certificate. Hence in this case the certification has been issued by the Senior Vice-President, Accounts Department which is a certification by the principal accountant and the signature of the Senior Vice-President and Assistant Vice-President of the bank is a certification by the manager of the bank. The certification through the responsible officer means the bank owns the SOA and certifies that the SOA represent the true and correct statement, as maintained in its books of accounts. The certification enables the Court to consider the copies of the statement of accounts as admissible evidence in the suit. In this regard it has been held in the case titled 'Barthels and Luders GmbH v. M.V. Dominique' (AIR 1988 Bombay 380) that the requirements of section 2(8) of the Act of 1891 is not mandatory but directory and that sufficient compliance would depend upon the facts and circumstances of each case. The court was of the view that where the accounts were duly signed by the agent of the bank, it implied that it was a true copy maintained by the bank in its ordinary course of business and that such book was in the custody of the bank. In the case titled 'Barker v. Wilson' 1980 (2 All ER 81) at page 83 it has been held that for the purposes of Bankers' Books Evidence Act, 1879, the Bankers' Book would include a micro film. Lord Bridge LJ held that 'I agree that the Bankers' Books Evidence Act, 1879 was enacted with the practice of Bankers in 1979 in mind. It must be construed in 1980 in relation to the practice of Bankers as we now understand it. So construing definition of the Bankers Books and the phrase an entry in the Bankers Books it seems to be that clearly both phrases are apt to include any form of permanent record kept by the Bank of transactions relating to the Bank's business made by any of the methods which modern technology makes available including in particular micro film.' The Learned Counsel has also argued that leave has to be granted to ascertain that the signatories are that of the principal accountant and the manager of the bank. However in order for leave to be granted on this issue the defendants would have to raise an issue with respect to the authority of the persons signing the SOA. No such objection has been made in the PLA. Learned counsel has also argued that the SOA do not show debit credit entries. No particular date or entry has been questioned. It is a general objection raised against the SOA. A perusal of the SOA shows that the debit and credit entries are there and the learned Counsel was unable to point out a single entry on the basis of which this objection was made. Therefore, I find no merit in this argument and find that the SOA are compliant with section 2(8) of the Act of 1891.

7. The second objection is with respect to the counter claim raised by the defendant No.1 in the PLA. The counter claim is for Rs.617,389,000 on account of loss and damages for failure to disburse the finance in terms of the commitment between the plaintiff and the defendant No.1. Consequently, the defendant No.1 claims that it has suffered loss of profit, marginal loss and financial loss as detailed in para 16 of the PLA. The counter claim filed in the PLA is one for damages, which has no nexus with the suit of the plaintiff for recovery of amounts due to it. The counter claim is based on the failure to disburse the total facility amount in terms of a commitment made by the plaintiff, whereas the plaintiff has filed a suit for the recovery of amounts disbursed to the defendants and due from them. These are two separate and distinct issues where the suit of the plaintiff will not operate as res judicata against the claim of the defendants Nos.1 to

3. Section 9(3) of the F.I.O., 2001 clearly provides that the suit should specifically provide what finance has been availed, what amounts have been paid and what amounts are due from the defendants. Under section 10 of the F.I.O. the defendants in their PLA have to show the finance availed and the finance due from them. Therefore a recovery suit is with respect to finance availed and due to the plaintiff where the issues are not directly and substantially the same as in a counter claim for damages being claimed on account of the conduct of the bank. Therefore in the instant suit, any grievance that the defendants have with respect to amounts not disbursed will not operate as res judicata against the defendants. Furthermore I am of the opinion that such a counter claim cannot be included in the PLA as the leave to defend under section 10 of the F.I.O., 2001 is merely an application stating the grounds on the basis of which the defendant seeks leave from the court with respect to the questions of law and fact for which evidence needs to be recorded specifically with respect to finance availed and finance due. Hence a claim for damages cannot be included in the PLA as it does not give rise to the same questions of law or fact on the basis of which this Court will adjudicate to decide on the claim of the plaintiff. Reliance is placed on the case titled 'Siddique Woollen Mills and others v. Allied Bank of Pakistan and others' (2003 CLD 1033) wherein it was held by the Hon'ble Supreme Court that the plea of the borrowers neither constituted a defence in their favour independently nor it gave rise to a bona fide dispute between the parties because in such cases the court was required to examine the liability and acceptance by the borrowers. Question of sustaining losses by the borrowers on account of conduct of the bank could be sorted out in some other forum instead of claiming relief from the banking court. It has also been held in the case titled 'Messrs Razzaq & Company v. Messrs Riazeda (Pvt.) Ltd.' (1990 CLC 1243) that a counter claim related to damages was not germane to the issues raised for the purposes of grant of leave. Therefore in view of the aforesaid there is no merit in the objection raised.

8. The third objection raised by the learned Counsel for the defendants is with respect to the novation of the finance agreements. Learned counsel for the defendants has relied upon a date mentioned in the letter of hypothecation on the basis of which the entire argument of novation is built. To my mind, there is no merit in this argument. Nothing has been brought on the record to show that the agreement of finance was novated between the parties. The reliance of the date in the letter of hypothecation has not been connected with any other document of the plaintiff or relied upon by the plaintiff. Hence there is no merit in this objection.

9. The availing of the finance, creation of security in favour of the bank, mortgage deed and the execution of the documents have been duly established by the plaintiff. The liability is admitted in the balance sheet as at December 31, 2004. Disbursement of Rs.48,840,000 on 31-12-2003, Rs.700,000 dated 10-3-2005, Rs.2,204,460 dated 23-6-2005, Rs.809,566 dated 24-6-2005, Rs.3,604,833 dated 1-9-2005, Rs.8,511,932 dated 13-9-2005, Rs. 16,100,070 dated 18-2-2006 and Rs.4,627,213 dated 20-3-2006 are duly shown in the SOA. The total claim is for Rs. 108.741 plus Rs.23.344 million under the Letters of Comfort. The plaintiff also prays for mark-up of Rs.5.161 million and rebate of Rs.1.664 million and pre-payment premium of Rs.1.517. The plaintiff is not entitled to pre-payment premium of Rs.1.517 million.

10. Therefore, the suit of the plaintiff is decreed in favour of the plaintiff and against the defendants Nos.1, 2 and 3 under section 9 of the F.I.O., 2001 jointly as well as severally in the sum of Rs.110.585 million together with the cost of funds calculated from the date of default i.e. 24-3-2006 till realization of the decreetal amount. The plaintiff shall also be entitled to the costs of the suit.

11. The defendants Nos. 1, 2 and 3 shall have 30 days to pay the decreetal amount to the Decree Holder whereafter this decree shall automatically stand converted into execution proceedings without the need to file a separate application and no fresh notice shall be issued to the Judgment Debtors in this regard. Particulars of the mortgaged/hypothecated assets of the Judgment Debtors shall be filed by the Decree Holder for consideration of this Court on expiry of the afore-noted period of 30 days. KMZ/N-3/L Suit decreed.