2024 PLP 852 (CLD)

ABID AZIZ SHEIKH, J.

This suit has been filed under section 9 of the Financial Institution (Recovery of Finances) Ordinance, 2001 (Ordinance) for recovery of amount of Rs.145,518,797/-, together with profit, costs of the suit and cost of fund from the defendants on account of finance facility granted to defendant No.1 and defaulted by him on its payment obligation.

2. Brief facts as per averments of the plaint are that in September, 2007, the defendant No.1 approached the plaintiff-bank through defendant No.2 for sanctioning of finance facility under "Islamic Mode of Financing" in order to finance a housing project in Lahore. The plaintiff-bank acceded the said request and allowed "Musharakah Finance Facility" of Rs.200,000,000/- (Rupees Two Hundred Million) in favour of the defendant No.1 for a period of three years. The defendants Nos.2 to 8 also executed personal guarantees to secure the loan. In December, 2007, the defendant No.1 once again approached the plaintiff-bank for sanctioning of more finance facility, which was allowed by way of Inland LC to the tune of Rs.100,000,000/- (Rupees One Hundred Million) and "Murabaha Finance Facility" (Interchangeable with Inland LC Facility) to the pane of Rs. 100,000,000/- (Rupees One Hundred Million) for the retirement of Inland LCs. Beside the charged documents including "Master Murabaha Finance Agreement" dated 27.12.2007, the defendants Nos.2 to 8 executed their personal guarantees. "Murabaha Finance Facility" was further extended for Rs.60,000,000/- (Rupees Sixty Million) on 05.04.2010 and Rs.100,000,000/- (Rupees One Hundred Million) on 04.05.2010 respectively, which were renewed on 30.07.2011 through finance agreements dated 23.09.2011 and 21.05.2013. In the year 2014, the defendant No.1 again approached the plaintiff-bank for renewal of "Murabaha Finance Facility" of Rs.85,500,000/- (Rupees Eighty Five Million Five Hundred Thousand), which was allowed through "Murabaha Finance Agreement" dated 18.03.2014 and thereafter on 25.03.2015. Finally, in the year 2016, the defendant No.1 through defendant No.2 approached the plaintiff-bank for restructuring of outstanding "Murabaha Finance Facility" through request letter dated 23.09.2016, which was allowed through finance agreement dated 14.11.2016, however, the defendants have failed to perform their contractual obligation to repay the finance facility, hence, this suit.

3. In pursuant to the summons issued by this Court, the petition for leave to defend (PLA) No.243679/2018 has been filed on behalf of the defendants, however, perusal of PLA shows that the same has only been signed by the defendants Nos.3, 6 and 8 who have also appended their affidavits with the PLA and no other defendant has filed PLA.

4. Learned counsel for the defendants Nos.3, 6 and 8 (defendants) submits that signature of defendant No.3 on PLA may also be treated on behalf of the defendant No.1 (Company). He submits that there are different Murabaha transactions claimed in the suit but disbursement of each separate transaction is not placed on record, therefore, liability is not established. He submits that amount of Rs.65,716,498/- as late payment charges is not recoverable. Finally submits that defendants Nos.2.A to 2.D are impleaded as legal heirs of the defendant No.2 and their liability is only to the extent of the property, inherited by them through the defendant No.2. He placed reliance on "Nazeer Ahmad v. House Building Finance Corporation Karachi through Managing Director and 2 others" (2005 CLD 668).

5. Learned counsel for the plaintiff-bank, on the other hand, submits that no entry is specifically challenged in the statement of account, therefore, mere evasive denial will amount to admission on the part of the defendants. He placed reliance on "Ghulam Rasool through L.Rs v. Muhammad Hussain and others" (PLD 2011 SC 119) and "Mst. Asma Hassan and another v. Askari Bank Limited" (2019 SCMR 1873). Further submits that restructuring/renewal of previous finance being admitted, no fresh disbursement was required to be proved. He placed reliance on "Syed Abbas Ali v. Bank of Punjab through Manager and others" (2015 CLD 1409), "Habib Bank Ltd. v. Taj Textile Mills through Chief Executive and 5 others" (2009 CLD 1143) and "Pak Oman Investment Company Limited v. Cresox (Pvt.) Limited" (2017 CLD 1659). Finally submits that late payment charges/charity are covered under Clause 6.5 of the "Master Murabaha Finance Agreement" dated 14.11.2016, hence, justified.

6. Arguments heard. Record perused. Careful perusal of PLA shows that the same has only been filed by the defendants Nos.3, 6 and 8 as not only said defendants have signed the PLA but also filed their affidavits in personal capacity. No PLA has been filed on behalf of the defendants Nos.1, 2, 4, 5 and

7. As per provision of Section 10(1) read with Section 9(5) of the Ordinance, where the defendant failed to file PLA and obtain leave from the Court to defend the suit, the allegation of facts in the plaint shall be deemed to be admitted and the Court may pass a decree in favour of the plaintiff on the basis of plaint or other material. Being no PLA filed by the defendants Nos.1, 2, 4, 5 and 7, the allegations of fact including availing of loan facility by the defendant No.1 is deemed to be admitted.

7. The argument of the learned counsel for the defendant No.3 that signature of defendant No.3 on PLA may also be treated on behalf of the defendant No.1/Company is misconceived. No Board of Director Resolution, authority letter or Memorandum and Articles of Association of defendant No.1/Company, has been placed on record authorizing the defendant No.3 to represent the Company in this suit and file PLA on its behalf. Therefore, said PLA cannot be treated on behalf of the defendant No.1.

8. Even otherwise, the record shows that availing of finance facility from time to time till its restructuring on 14.11.2016 is not in dispute. The only claim of the defendants is that disbursement of different transactions has not been placed on record. This arguments has no basis when the complete statement of account showing outstanding balance of Rs.79,802,298.67/- (Page 602 of the plaint) has been placed on record, which is also supported by other charged documents, executed from time to time including last "Master Murabaha Finance Agreement" dated 14.11.2016. The case law relied upon by the learned counsel for the plaintiff also supports the above legal position.

9. However, I find substance in the arguments of the learned counsel for the defendants that amount of Rs.65,716,498/- as late payment charges till 05.04.2018 is not recoverable. In this regard perusal of Clause 6.5 of the "Master Murabaha Finance Agreement" dated 14.11.2016, (relied upon by the learned counsel for the plaintiff-bank to justify late payment charges), shows that where amount payable by the customer under the principal documents is not paid by specific date or within one week of the demand, the said amount be paid by the customer as charity @ 18% to the bank for donation by the bank on behalf of the customer for charity purposes The Division Bench of this Court in "Dr. Faiz Rasool and others v. The Askari Bank Limited through Branch Manager/Authorized Attorney" (2015 CLD 1710) regarding similar charges held that amount on account of charity claimed by the bank is not covered under the finance facility under Section 2(d) of the Ordinance. It is further held that even otherwise, this charity amount is merely a penalty, which is not permissible under the law. The Court also held that charity or gift is something the doner gives or grants with his free will and cannot recovered as compulsion. The relevant part of the aforesaid judgment is reproduced hereunder:- "The learned Single Judge/Banking Court while passing the impugned order and decree has disallowed the amount of Rs.7.400 Million on account of charity claimed by the respondent-bank while observing that this amount has been waived of by the respondent/plaintiff-bank. Even otherwise, we are unable to convince ourselves as to under what provision of law the charity is claimed by the respondent/plaintiff-bank. There are various types of finance facilities that can be granted by the financial institutions to the customer and all type of finance facilities have been defined in Section 2(d) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Any facility or accommodation which is not covered by or defined in Section 2(d) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 shall not be deemed to be or called as 'finance" and as such the same cannot be claimed under the Ordinance, 2001. Charity also does not fall within the definition of "obligation" contained in Section 2(e) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. We have observed that in terms of Clause 7.4 of the Musharakah Agreement, the respondent/plaintiff-bank had demanded from the appellants/defendants an amount at a fixed rate in the name of charity in case of delay in payment or default, therefore, Clause 7.4 of the agreement is nothing but a penal clause and the amount claimed thereunder is a penalty and not charity. It is now a settled law that penalty or penal charges in any form cannot be claimed by the financial institution. The charity amount charged/claimed on the contract price is nothing but mark up under the guise of charity. According to Clause 7.4, the respondent /plaintiff-bank would use the amount so charged for charitable and religious purposes at its sole discretion. We are of the considered view that charity or gift is something, a doner gives/grants with his free will, at his own discretion and according to his own choice, and not under compulsion or under the dictates of other. We, therefore, hold that the respondent/plaintiff-bank in any eventuality is not entitled to claim any amount on account of charity. It is further declared that the clause in the Musharikah Agreement relating to charity is void and is in conflict with the Financial Institutions (Recovery of Finances) Ordinance, 2001. In view of above discussion and the case law, the claim of late payment charges/charity of Rs.65,716,498/- is declined.

10. There is also no cavil with the arguments of the defendants and the settled proposition that liability of legal heirs of defendant No.2 (i.e. defendants Nos.2.A to 2.D) shall be only to the extent of the property inherited by them from the deceased defendant No.2.

11. For the reasons recorded above, no substantial question of law and fact has been raised in PLA filed by defendants, which requires recording of evidence for its resolution, therefore, PLA filed by defendants is dismissed. Accordingly, after excluding the amount of late payment charges of Rs.65,716,498/-, the suit is decreed for an amount of Rs.79,802,299/- in favour of plaintiff-bank and against defendants jointly and severally together with costs and cost of funds as contemplated by Section 3 of the Ordinance. The decretal amount shall be recoverable through sale of mortgage properties and other charge assets as prayed for in the suit. Decree sheet shall be prepared accordingly. The decree is now converted into execution proceedings under Section 19 of the Ordinance. The decree holder will submit Fard Taleeqa/list of assets of the judgment debtors. MQ/A-20/L Suit decreed.