2009 PLP 845 (CLD)

SYED HAMID ALI SHAH, J.

Through filing the instant appeal, the appellant has called in question, the judgment and decree of learned Banking Court No.IV Lahore dated 19-2-2003.

2. It is contended by learned counsel for the appellant that learned Banking Court while passing the impugned decree, has determined the principal amount and mark up levied thereon, erroneously. Learned counsel has submitted that learned Banking Court has observed that principal amount disbursed to the respondent was Rs.8,00,000 and after deducting an amount of Rs.2,98,000 statedly paid by the borrower, balance amount remains Rs.7,92,

134. Learned counsel observed that total period for which mark up can be charged is 575 days, which include period for which the loan was disbursed and cushion period. Mark-up for transactional period and for cushion period was calculated at Rs.1,02,

252. Learned Court added both the amounts sale price and, mark up and decreed the suit for Rs.8,94,

386. Learned counsel has submitted that in the Running Finance Facility, principal amount is the amount, which the borrower withdraws from such account. The respondents have withdrawn, an amount of Rs. 10,58,981 and the respondents have paid in the said account various amounts to the tune of Rs.2,67,

047. The mark-up is being charged on daily product basis, at the agreed rate. He contended further that a sum of Rs.10,252 was payable on the date of expiry of the facility i.e. 31-5-2002. The Court has failed to appreciate that buy back price is not recoverable but principal amount and mark up on products basis, is recoverable, in such facility.

3. Learned counsel for the respondents, on the other hand, has submitted that paramount document in finance, according to Islamic mode of banking, is buy back agreement 1B-6. The rights and liabilities of the parties are determined, under this agreement. Court has rightly worked out, sale price and purchase price, as stipulated in the agreement of Finance. Learned Court deducted payments made by the respondents from purchase price buy back price and then decreed the suit for the balance amount. Learned counsel has contended that learned Court has rightly passed the impugned decree and the same is unexceptionable.

4. Heard learned counsel for the parties and record perused.

5. The sanction advice RP/SH/CAD/316 dated 6-6-2001 reflects that the financial assistance extended to the respondents, is Running Finance Facility. Facility Letter dated 16-6-2001, signed by the respondents further transpires the nature of facility, availed by the respondents, is Running Finance. Respondents admitted availing of financial assistance and undertook to repay amounts of Rs.10,30,

000. Letter of personal guarantee IB-29, Letter of hypothecation dated 16-6-2001 IB-25 and Promissory Note IB-30A show that credit limit, was Rs.10,00,

000. These documents read with the entries in the statement of account, transpire that principal amount disbursed and availed by the appellant, was Rs.10,58,

981. Learned Banking Court has erroneously held that principal amount disbursed to the respondents were Rs.800,000.

6. Running Finance Facility, is the form of lending, where customer is allowed to borrow money from a Banker upto a certain limit either at once or as and when it is required. If it is availed and withdrawn at different intervals and paid back on various occasions, then the mark up levied thereon is worked out on daily product basis. The formula to work out mark up on "daily product basis", in respect of Running Finance, according to recognized Banking practice is: 'Balance Outstanding X Number of days X Rate 365 days in a calendar year"

7. The mark up in running finance facility, is a revolving credit. It renews until exhaustion of amount of credit, the customer has the facility to draw it again when limit is reached. Credit is automatically reinstated after each drawing, within the limit. The limit is renewable credit, until it's full utilization. "Revolving Credit" as defined in Dictionary of Banking and Finance by "P. H. Collin", is a system where someone can borrow money at any time up to an agreed amount, and continue to borrow while still paying off the original loan. Revolving Credit Account, according to Dictionary of Banking by Jaffrey L. Seglin, is the loan that allows customer to pay less than the total amount due every month. Whatever balance is carried forward into the following month is subject to, an agreed upon finance charge. There is typically no charge for the line of credit when it is not in use. A similar definition appears in the Dictionary of "Banking by F E Perry and G Klein".

8. From the above-recognized definitions of the terms "Roll Over" and "Running Finance" it is observed that when a loan, in the shape of running finance, is sanctioned up to a limit, the customer can withdraw amounts according to his own choice and there is no charge amount. There are frequent transactions in such accounts as, to the payment and withdrawals, therefore, mark up on such transactions is leviable on daily product basis. Learned Banking Court has fallen into error in working out the liability of the respondents on the basis of buy back price ignoring the recognized mode of financing and levy of mark up on such transaction.

9. The impugned judgment: and decree of the Banking Court, ignoring the recognized mode of charging of mark up on Running Finance and decreeing the suit on the basis of buy back price, without determining the actual amount disbursed, is not legally sustainable and is set aside. The case is remanded to the Banking Court, with the result, the suit is deemed to be pending in the Banking Court. Trial Court will decree the suit afresh, after determining the actual amount disbursed and by applying mark-up on daily product basis. The respondents have not challenged the refusal of leave to defend the suit and as such the matter has attained finality. M.H./H-5/L Case remanded.