P L D 1985 Lahore 188 (PLP)

It was also urged that although a complete' statement of accounts has been filed with the plaint no specific entry therefrom has been referred to in the above context. The learned counsel submitted that from the contents of the plaint of the suit of the defendants the plaintiff Bank has found that the reference presumably is to four cheques of Rs. 15,000 each but the allegation is wholly baseless inasmuch as those cheques were encashed by defendant No. 2. himself which is apparent from the photstats of the cheques which are being placed on record today. With reference to para. 4 of the application the learned counsel for the plaintiff Bank submitted that it contains a bald allegation only that the amounts were drawn unauthorizedly and paid to a favourite party of the Bank Management but neither any party has been named nor particulars or dates on which the alleged unauthorized withdrawal was made has been given. The learned counsel with reference to para. 6 of the application submitted that insurance charges in a consolidated form amounting to Rs. 1,21,000 have been claimed as wrongly debited, whereas today at the bar, while making submissions the amounts given under this head of insurance totalled Rs. 1,39,495 which by itself shows the hollowness of the claim, especially when there is neither any debit entry in the account of the defendants amounting to Rs. 1,21,000 nor of Rs. 1,39,

495. With reference to the same para. of the application the learned counsel for the plaintiff submitted that a sum of Rs. 40;000 has been claimed as "wrongly debited", but again no particulars and details have been given. The learned counsel next submitted that in para. 9 of the application it has been alleged that a sum of Rs. 1,00,090 has been debited to the account of the defendants whilst this amount was paid to some other party but again neither any particulars of the party nor the date when this amount was drawn and reversed have been given. The learned counsel in the context of the above submissions argued that as against the claim of the plaintiff-Bank amounting to Rs. 21,25,560 the applicants-defendants have only baldly denied their liability for an amount of Rs. 4,21,000 and this denial being without any valid basis would obviously not give rise to any triable issue ; Secondly, that the contentions raised by the learned counsel for the applicants-defendants today are also not tenable. The learned counsel for the plaintiff-Bank submitted that it .has been alleged that. on account' of non-co-operation of the plaintiff-Bank loss was caused to the defendants in the sale of stock of cotton but no particulars of such loss have been given. He urged that no loss whatsoever was caused to the defendants by the plaintiff-Bank on account of the stoppage of the limit facility which was clamped with justification and could be lawfully done as provided by clause (ii) of the Agreement of Cash Credit ; Thirdly, that it has been wrongly contended that the suit for rendition of accounts had been filed by the applicants-defendants before the institution of the suit by the plaintiff-Bank. It was urged that the position is vice versa in that the suit of the plaintiff Bank is earlier in time than the suit of the defendants ; Fourthly, that without conceding the contention of the applicants defendants about the value of the mortgaged property it was submitted that the mere factum of the property having been mortgaged with the plaintiff-Bank would not entitle the applicants-defendants to claim leave to defend the suit inasmuch as the mortgaged property is in possession of the applicants-defendants and the plaintiff-Bank is getting no benefit out of the mortgage whilst, on the contrary, the amount of loan would be continuously increasing and if leave is granted may result in non-realization of some amount as the recoverable amount would then go on accumulating and is likely to become more than the value of the- mortgaged property ; Fifthly, that insurance charges have been correctly debited to the account of the applicants-defendants as due insurance of the stocks had been obtained by the plaintiff and only such amounts have been debited which were paid as premium from time to time as is apparent from the statement of accounts submitted with due certification under the Bankers Books Evidence Act. The learned counsel referred to para. 4.of the Pledge of Goods Agreement which gives power to the plaintiff-Bank to obtain insurance of the stocks against which facility of loan was allowed ; Sixthly, that the applicants-defendants having not at all denied the execution of the documents, all of which have been filed in original with the plaint, nor the factum of obtaining loan facility cannot be granted leave to defend the suit as the loan stands established against them ; Seventhly, that in para. 7 of the application it has been asserted by the defendants that whole of the loan amount has been adjusted and clearance certificate' was issued by the plaintiff but not only this ground has not been urged today at the bar but neither any certificate has been filed with the application nor with the suit of the plaintiff which shows the falsity of the assertion. In the same context the learned counsel for the plaintiff submitted that para, 12 of the application itself contradicts the above assertion as it has been stated therein that re-payment could not be made on account of non-co-operation of the plaintiff-Bank. The fact emerging from para. 12 being that payment has not been made admittedly, the assertion in para. 7 of the application about the clearance of the loan stands belied ; and Lastly; that the limit of Cash Credit allowed to the applicants in 1978-79 was required to be cleared by 30-4-1979 but it was not so done by the defendants up to the end of 1979 when on their request the amount outstanding as on 1F-12-1979 was transferred to a Fixed Loan Account but then even after this transfer no payment was made. The learned counsel also submitted that the defendants have been confirming the balances from time to time and their confirmation together with the Letter of Request for transferring the amount as on 16-12-1979 to a Fixed Loan Account have been filed alongwith the plaint and that execution and issuance of none of these documents has been denied by the defendants. The learned counsel further contended that the authorities cited by the learned counsel for the applicants-defendants have no bearing on or relevance to the facts of the present case and that the application of the defendants is liable to be rejected since it does not disclose any defence whatsoever.

13. Before dealing with the case on merits it appears appropriate to examine the nature of proceedings in suits under Order XXXVII, C. P. C., especially in relation to suits arising under the Banking Company (Recovery of Loans) Ordinance,, 1179. Order XXXVII of the Code o Civil Procedure provides a summary procedure for disposal of suits o negotiable instruments such as bills of exchange, hundis or promissory notes. When a suit is filed under Order XXXVII, C. P. C. the defendant, as provided by sub-rule (2) of rule 2.of the Order aforesaid ,shall not appear or defend the suit unless he obtains leave from the Court as provided in the following rule 3 to appear and defend.' It may also. be observed that in case the defendant does not apply within the period provided for filing an application for leave to defend, the allegations in the plaint shall be deemed to have been admitted and a decree shall follow.

14. Rule 3 of Order XXXVII, C. P. C. gives power to the Court to grant leave to appear and defend the suit upon affidavits of the defendant which disclose such facts. as would make it incumbent on the holder to prove consideration or such other facts as the Court may deem sufficient to support the application. The Court may grant leave to defend unconditionally or subject to such terms as to payment into Court, giving security, framing and recording of issues or otherwise as the Court may think fit. If leave is granted .to defend the suit then as provided by rule 7 the procedure in suits shall be the same as the procedure in suits instituted in the ordinary manner.

15. From the above provisions it emerges that the grant of leave toy defend a suit filed under Order XXXVII, C. P. C. is not a matter of course or a matter of right. In order to be eligible for this benefit the defendant will have to show such facts which may warrant the proving of the consideration by the plaintiff or disclose a plausible defence which may . give rise to triable issues. This necessarily implies that granting of permission to defend the suit or refusal thereof shall be dependent on the attendant circumstances of each case and as such no bard and fast rule could be laid for the purpose. However, some broad principles which could be a guide line for the Courts while considering an application for leave to defend can be and have, in fact, been laid down in judicial precedents and lie scattered therein. In this Judgment I propose to succinctly bring out those guidelines in the light of the aforementioned provisions and the judgment of the Supreme Court on the subject.

16. Before so doing, it also seems proper that the provisions of the Banking Companies (Recovery of Loans) Ordinance, 1979 and the history and purpose of this legislation be gone into and kept in view. The first legislation on this subject is the Banking Companies (Recovery of Loans) Ordinance (XXIII of 1978). The preamble of this Ordinance reads as under; "Whereas it is expedient to provide for a summary procedure for recovery of loans of Banking companies and for matters connected therewith or incidental thereto ; And whereas the President is satisfied that circumstances exist which render it necessary to take immediate action ; Now, therefore the President is pleased to make and promulgate the following Ordinance."

17. This Ordinance was repealed and re-enacted, with certain modifications, by the Banking Companies (Recovery of Loans) Ordinance, 1979. The further amendment in this legislation was made by the Banking Companies (Recovery of Loans) (Amendment) Ordinance, 1983 (Order II of 1983) which essentially was meant to create two types of Special Courts in the first place Courts which may deal with cases involving disputes of the value of less than rupees one million, and in the second category comes the High Court in exercise of original civil jurisdiction as the Special Court in respect of other cases.

18. Section 6 (1) (a) of the Banking `Companies (Recovery of Loans) Ordinance, 1979 reads as under "A Special Court shall (a) in exercise of its civil jurisdiction, have in respect of a claim file by a Banking company against a borrower or by a borrower against a Banking company to respect of, or arising out of a loan, all the , powers vested in a civil Court under the Code of Civil Procedure, 1908."

19. Again section 7 provides the procedure of the. Special Court and is to the effect that suits before the Special Court shall come up for regular hearing 'as expeditiously as possible and except in extraordinary circumstances and on the grounds to be recorded a Special Court shall in all suit before it, including suits based on mortgages of all kinds on statements o accounts for recovery of money paid to or to the order of the defendant, follow the summary procedure provided for in Order XXXVII in the Firs Schedule to the Code of Civil Procedure, 1908.

20. A perusal of section 7 ibid shows that apart from suits ordinarily trible under Order XXXVII, C. P. C. viz. suits on bills of exchange, hundi and promissory notes, suits in relation to Bans loans even on mortgages oil all kinds or on statements of accounts have been made triable under the procedure provided for by Order XXXVII, C. P. C .

21. The aforementioned provisions and the background of enacting the Banking Companies (Recovery of Loans) Ordinance, 1979 shows that the Legislature intended to have expeditious and summary disposal of suits arising out of loans by Banks. The inclusion of suits for recovery of loans on mortgages of all kinds in the category of suits triable in a summary manner shows the real intention of the legislator to ensure a very expeditious recovery of loans by the Banks. In view of the presumption of correctness attached to the statements of accounts maintained and prepared by the Banks when certified under the Bankers Books Evidence Act, 1981 which, of course, is a rebuttable presumption it follows that in a case instituted under the Banking Companies (Recovery of Loans) Ordinance, 1979 the defendant for seeking leave to defend and showing his entitlement thereto shall have to show at least a plausible defence which could give rise to triable issues and not merely illusory or misconceived or imaginary defence without any basis advanced merely as a dilatory tactic.

22. In this connection reference may usefully be made to Fine Textile Mills Ltd. Karachi v. Haji Omar (PLD1963SC163) in which the question of entitlement or otherwise of a defendant to obtain permission to appear and defend a suit filed under order XXXVII, C. P. C. fell for consideration. Although the cited case relates to the period prior to promulgation of the Banking Companies (Recovery of Loans) Ordinance, 1979, the principles laid down therein are fully applicable to a case under the said Ordinance since Order XXXVII is expressly extended to proceedings thereunder. Having regard to the said principles and the dicta contained in Kodak v. Alpha Film Corporation ((1930) 2 K B 340), Pow Szchny Bank Zwia Zkowy W. Poisce v. Paros ((1932) 2 K B 353) and Millard v. Baddeley (1884 W N 96), the following broad principles may be enunciated for determining the controversy regarding grant or refusal of leave to defend suits under Order XXXVII, C. P. C. and more particularly in cases under the Banking Companies (Recovery of Loans) Ordinance, 1979. (a) Leave shall be refused if no defence worth the name is made out on facts or in law in the application for leave to defend, (b) leave shall also be refused if the defence disclosed on affidavits is sham or colurable or illusory/imaginary and may not give rise to triable issues. Needless to add that in both the above events, a decree shall follow in the suit, (c) if a defence is disclosed on affidavits which may warrant putting the plaintiff to prove consideration, leave shall be granted, (d) where the defendant discloses upon his affidavits a case which may constitute a plausible defence or shows that there is some substantial D question of fact or law which needs to be tried or investigated into, then also the defendant shall be entitled to leave to defend. The permission to appear and defend a suit in any of the cases falling under sub-paras. (c) and (d) above may be unconditional or subject to such conditions terms as may be imposed by the Court. (e) If the defence set up is found to be vague or unsatisfactory or ingenuine on cursory perusal, leave may not be refused altogether, and if it be felt that there may be prima facie triable issues arising out of the defence disclosed, leave may be granted but on terms as may be considered necessary by the Court. It may also be pertinently observed that the mere fact that loan is secured by a mortgage would also not entitle a defendant to obtain leave to defend the suit inasmuch as a contrary view would defeat the very purpose underlying section 7 of the Banking Companies (Recovery of Loans) Ordinance, 1979 making suits based on all kinds of mortgages triable under Order XXXVII, C. P. C. The existence of a mortgage as security for re-payment of loan may become relevant when in the attendant circumstances of a case the Court comes to a conclusion that a case for leave to defend has been made out by the defendants and the next question of terms if any to be imposed for such grant falls for determination.

23. Applying the above principles to the facts of the case in hand it would be seen that no case is made out by the applicants-defendants for grant of leave to defend the suit.

24. The availing of the loan facility and its non-liquidation has no at all been denied by the applicants-defendants. It therefore establishes the consideration. They have also not denied any of the documents filed by the plaintiff-Bank with the plaint nor have they specifically objected to any entry in the statement of accounts annexed with the plaint. Now the documents filed in original by the plaintiff-Bank with the plaint, inter aria, are : (i) Statement of accounts giving details of each entry, (ii) original letter of request dated 16-12-1979 by the defendant for transferring the loan outstanding against the defendants to Fixed Loan Account, (iii) confirmation of amounts outstanding as at 31-10-1979, 16-12-1979, 31-12-1980, 31-12-1982 and 31-12-1983 duly signed by the defendants, (iv) letters dated 20-9-1981 and 26-9-1983 from the defendants to the plaintiff-Bank confirming that as on those dates Rs. 14,81,540 and Rs. 19,49,742 were outstanding and that they should be given sortie facilities to liquidate the liability, (v) demand promissory note, letter of continuity, letter of pledge of goods, agreement for cash credit, security for all advances and loans (general form), letter in form No. 89, letter in form No. 90, and undertaking for re-payment, all dated 18-10-1978, duly executed and signed by the defendants, (vi) registered deed of mortgage of the Factory and Machinery of defendants dated 19-10-1978, (vii) general power-of-attorney executed by defendants Nos. 3, 4 and 5 in favour of defendant No. 2, (viii) demand promissory note, delivery letter of demand promissory note, letter of waiver, letter of partnership, security for all advances and loans (general form), letters of guarantee executed by defendants Nos. 2 and 3, undertaking for re-payment and contract form, all dated 16-12-1979, duly signed by the defendants. (These documents were executed at (he time of transfer of the loan outstanding in the cash credit facility loan account to Fixed Loan Account). (ix) registered mortgage-deed of mortgage of property viz. land bearing plot No. 16 and the bungalow thereon executed by defendant No. 2 in favour of the plaintiff-Bank, (x) sale-deed executed by the Municipal Committee, Bahawalpur regarding the plot of land mentioned above in favour of defendant No. 2, and (xi) general irrevocable power-of-attorney executed by defendant No. 2 in favour of the plaintiff-Bank empowering the latter to sell the immovable property beating plot No. 16, Model Town, Bahawalpur together with construction and structures thereon.

25. As already observed above, neither execution nor signatures on any of the above-mentioned documents have been denied by any of the! applicants-defendants. That being so, the obvious inference that can be F drawn is that not only the initial consideration but also the entire cumulative amount claimed by the plaintiff-Bank from the defendants stand established as payable. .As such there is nothing for which the plaintiff could be called upon to prove its claim based on the said consideration.'

26. The only thing therefore left to be examined is whether there is any plausible defence or even a prima facie defence disclosed by the defendants which could give rise to triable issues.

27. I am afraid neither the contentions raised by the learned counsel for the applicants-defendants nor the grounds taken in the application/ affidavit disclose such a defence.

28. The contentions raised by the learned counsel for the applicants defendants are dealt with hereunder seriatim

29. It has been urged that since there exists mortgage of properties of the value of more than the claim of the plaintiff-Bank, if leave to defend is granted no loss would be caused to the plaintiff-Bank.

30. As already indicated above, the mere existence of a mortgage would not afford a valid ground for granting leave to defend a suit. The provisions of law. governing the trial of a suit based on mortgage of property as one which could be summarily tried, as provided by Order XXXVII, C. P. C. clearly show that such a plea by itself is no ground which could be made the basis for grant of leave. The factor to me appears to be relevant when in a given case it has been found that a case for leave to defend has been made out and the question as to whether permission to appear and defend the suit should be conditional or not has to be determined. In the case in hand, 1 have already observed that no case has been made out by the applicants-defendants for grant of leave to defend an therefore the existence of a mortgage would be of no help to them.

31. As regards contention (ii) of the learned counsel for the defendants that the amount of Rs. 11,31,947 was transferred to a Fixed Loan Account on 16-12-1979 unauthorizedly, I suffice by observing that the plaintiff-Bank bas filed alongwith the plaint the original letter containing express and positive request of the defendants for effecting transfer of the aforesaid amount to the Fixed Loan Account.

32. It may also be pertinently mentioned here that there is no denial of the signatures on this letter. Not only that but also the defendants themselves had transferred a sum of Rs. 50,000 from their other account to this account as part payment for its liquidation.

33. The contention of the learned counsel for the defendants about the insurance charges again has no valid premises. The amount of insurance premiums alleged to have been wrongly debited as asserted by the defendants is far in excess of the entries pertaining to this head as reflected in the statement of accounts which factor alone establishes the hollowness and falsity of the assertion of the defendants in this regard.

34. The contention (iv) of the learned counsel for the defendants is only a bald assertion unsubstantiated in any manner whatsoever. It obviously cannot be given any weight.

35. The contention (v) of the learned counsel for the defendants is again devoid of any merit in 'that it is borne on record that the suit of the plaintiff Bank is prior in time to the suit of the defendants which fact had to be conceded by the learned .counsel for the defendants when he was confronted with the dates of institution of the two suits as appearing on the Court record. 36. 1 now propose to examine the pleas raised in the application for leave to defend but not pressed during the course of arguments by the learned counsel for the defendants.

37. In para. 3 of the application, some vague allegations have been levelled about the alleged corruption of the Bank Officers and about misappropriation of proceeds of four cheques by the zonal head. To meet this allegation the learned counsel for the plaintiff‑Bank has today produced phtostats of cheques for Rs. 15,000 each which have been encashed by defendant No. 2 himself who at the time of receiving cash bad affixed his signatures on the reverse of the cheques as well. . The production of photostats of the cheques clearly belies the allegations of the defendants against the Bank officials, especially when nothing has been urged on behalf of the defendants to controvert the contention of the plaintiff Bank that the cheques were encashed by defendant No. 2 himself.

38. In paras. 4 and 9 of the application, there is again a vague assertion of unauthorized withdrawals of some amounts from the defendants' account and credit thereof to some favourite party of the Bank officials. This wild assertion of the defendants stands contradicted by the statement of accounts annexed with the plaint duly certified under the Bankers Books Evidence Act, 1891. The aforementioned statement of accounts gives details of each entry made therein but the learned counsel for the applicants‑defendants has not been able to point out any entry which could lend even prima facie support to the contention of the alleged unauthorized withdrawals.

39. In para. 7, it has been asserted that whatever amount was due from the defendants to the plaintiff‑Bank has since been adjusted and that a clearance certificate had also been issued. There is no certificate filed with the application nor any has been produced today despite my having asked the learned counsel for the defendants to produce it. This assertion which is completely unsubstantiated and manifestly false as the defendants have failed to prove it despite my having asked them to do so shows the conduct of the defendants in making crude attempts to keep in abeyance the culmination of these proceedings by raising such pleas as to their knowledge are incorrect.

40. It may also be observed that it has been rightly pointed out by the learned counsel for the plaintiff that this assertion is otherwise contradictory to the contents of para. 12 of the application of the defendants wherein they have stated that the loan could not be re‑paid on account of non‑co‑operation of the Bank officials.

41. Before parting with the discussion I may also observe that the defendants have neither filed with the application for leave to defend the present suit nor with the plaint of their own suit against the plaintiff‑Bank for rendition of accounts any document whatsoever which could be of assistance to them or which could persuade me to grant them leave to appear and defend this suit.

42. Resultantly I find that no plausible or even prima facie defence has been shown by the defendants which could warrant the grant of permission to appear and defend the suit. No triable issue having been raised by the defendants in their application for leave to defend or, today during the arguments, there is no escape from dismissing the application of the defendants filed under Order XXXVII, rule 3, C. P. C. Order accordingly.

43. The application for leave to defend filed by the defendants (C. M. No. 1447/C‑84) having been dismissed, the contents of the plaint stand established and accordingly the suit is decreed in favour of the plaintiff Bank and against the defendants for recovery of Rs. 21,26,650 with interest at the rate of 14 per cent per annum with quarterly rests from the date of institution of the suit till realization of the total amount. The plaintiff Bank shall also be entitled to costs.

44. The defendants are allowed a period of six months to pay the decretal amount to the plaintiff‑Bank failing which the mortgaged property shall be sold in execution of the decree. In case the proceeds of sale of the mortgaged property . are found to be insufficient to satisfy the decretal amount the plaintiff‑Bank shall be at liberty to apply to the Court for a decree against the defendants for recovery of the balance amount otherwise from them in accordance with law. M. Z. M. Suit decreed.