1999 PLP 64 (MLD)

This is an application under Order 1 Rule 10 read with section 151 C.P.C. praying that the name of defendants Nos.2 and 3 may be struck off from the list of defendants on the ground that these defendants are Benamidar partners of defendant No. 1 and that defendants Nos. 3 and 4 were the real beneficiary of the finance provided by the plaintiff, as alleged in para.4 of the plaint. On perusal of the plaint it appears that in para.14 of the plaint the plaintiff has asserted that defendants Nos.2 and 3 executed personal guarantees as security for repayment of the loan and have attached photo copies of the same as Annexures "E" to "E/3" with the plaint). This has not been denied by the defendants. Defendants Nos.2 and 3 are, therefore, necessary parties to the suit and their names cannot :be struck off from the list of defendants. The application is accordingly dismissed with costs of Rs.5,000 only. C.M.A. No. 5467 of 1998: This is an application under Order 1, Rule 10, C.P.C. for striking off the name of the defendant No.6 from the list of defendants on the ground that the Memorandum of Deposit of Title Deed was got signed from the said defendant by misrepresentation and thereafter, by fraud the Revenue Record was produced to support the same. The affidavit in support of the application refers to several letters attached with the affidavit but no document has been attached therewith. Learned counsel for defendants also asserted that as there is not privity contract between the plaintiff and defendant No.6 he cannot be made a party to the proceedings. In the affidavit in support of the application the deponent has not denied the execution of a personal guarantee by defendant No.6. The affidavit in support of the application has not been sworn by Haji Zar Ali, defendant No.6 but by Mohiuddin who is defendant No.2. He has not disclosed the source and basis of his allegations in the affidavit as required by law. Such allegation cannot be considered by the Court. However, assuming this to be true, the allegation of misrepresentation and fraud committed on defendant No.6 is a serious matter which cannot be decided in his absence. He is a necessary party to the proceedings and his name cannot be struck off from the list of defendants. The application is accordingly dismissed with costs of Rs.5,000 only. C.M.A. No. 5468 of 1998: This is an application under section 1, Rule 10, C.P.C. filed by the counsel for the defendants supported by an affidavit of Mohiuddin, defendant No.2 to strike off the names of defendants Nos.7 to 10 from the list of defendants on the ground that there is no privity of contract between the plaintiff and these defendants as they have not signed or executed any document which may give rise to a case of action against them. It is an admitted position that Haji 1 Zar Ali defendant No.6, as attorney of his four sons namely; defendants Nos. 7 to 10 executed a Memorandum of Deposit of Title Deed in respect of E agricultural property situated in Naushera and deposited an Extract of the said property and a copy of the Power of Attorney alongwith the Memorandum. The charge created by these defendants was recorded by the Revenue Authorities is evident from the noting on the Extract of Property of defendants Nos.7 to 10 filed with the plaint. The question whether or not the charge on the agricultural property has been properly created by the attorney of these defendants and is binding upon them cannot be decided in their absence. They are necessary parties to decide this issue. The application is not maintainable and is accordingly dismissed with costs of Rs.5,

000. C.M.A. No.4938 of 1998: Learned counsel does not press this application under section 10, C.P.C. for stay of proceedings which is accordingly dismissed as withdrawn with no order as to costs. C.M.A.No.4702 of 1998: This is an application filed by the plaintiff under section 11 of the Banking Act read with Order 12, Rule 6, C:P.C. asking the Court to pass an Interim Decree against the defendants in the sum of Rs.40 million as admitted by the defendants together with mark-up thereon from the date of the suit till payment. In :support of the application the plaintiff has filed a copy of a document dated 21-8-1997 titled "Settlement of Liabilities of M/s. Golden Eagle Enterprises, University Road Branch, Karachi" which are the minutes of a meeting held at the central office of the Bank at Karachi regarding adjustment of the liabilities of the aforesaid firm. The document contains the names of the officers of the plaintiff-Bank, Haji Zar Ali (defendant No.6) and Muhammad Faiz, Manager of Haji Zar Ali who attended the meeting. It is signed by Mr. Zahoor A. Siddiqui EVP o; plaintiff and Haji Zar Ali and states that after detailed discussion Haji Zar Ali committed-- "(i) that he will pay Rs.15,50.million, thus, reducing the total liabilities to Rs.30 million before 31-8-1997; (ii) that he will repay Rs.2 million against which the Bank will issue NOC for one mortgaged vehicle and (iii) that he will continue to repay Rs.2 million regularly against which each mortgage vehicle shall be released until all the IS vehicle a released latest by 28th February, 1998". Plaintiff has also produced a copy of letter dated 26-2-1998 written by Dr. A Basit, Advocate, apparently on behalf of the "Golden Eagle Enterprises (defendant No.l) and Mr. Mohy-ud-Din, one of its partners (defendant No.2) reiterating that the client was prepared to adhere to the terms of the settlement reflected in the meeting held on 18-8-1997 with suitable adjustment of the time of payment in view dormancy of his clients transport business. In response to the affidavit in support of the application Mr. Mohy-ud-Din, defendant No.2 filed a very formal counter-affidavit denying the plaintiff's allegation by simple use of the word 'denied': This is no way to deny a detailed assertion of fact made in an affidavit. If defendant No.2 truly wanted to deny the detailed assertions made in the" plaintiffs affidavit he should have' clearly stated the facts that he 'was denying e.g. the meeting with the Bank Officer on '18-8-1998, the agreement reached between the Bank and Haji Zar Ali and his signature on the minutes and the basis of his denial but this was not done. He simply said 'denied' This is an evasive denial and not acceptable in law. Further, the affidavit also does not conform to requirement of Order 19, Rule 3, (1) C.T.C. and Rule 57 of Sindh Chief Court Rules ('SCCR') and therefore cannot be relied upon--as enjoined by Rule'69 SCCR. It appears that the defendant No.2 chose this mode of denial because the assertions made by the plaintiff were true and .he did not want to commit perjury. Additionally, in view of Dr. Basit's letter dated 26-2-1998 it would have been very embarrassing for defendant No.2 or any body else to deny Haji Zar Ali's admission of liability and promise to liquide the same by 28-2-1998. It is interesting to note that the defendants through Dr. Basit's letter reduced the admission of liability from.Rs.45.50 million to Rs.40 million. The reason for doing so is not available from the record. Consequently, ail Interim Decree for this amount can be passed on the basis of this admission-alone. ,The plaintiff filed this suit on 3-3-1998 for recovery of Rs.58,029.000 but- the Statement of Account filed with the plaintiff shows an outstanding balance of Rs.43,825,348 only as on '28 2-1998. It is not stated as to how the amount of Rs.58,029,000 has been claimed. The smnmonses of this suit were served on the defendants, inter alia, .by publication in the Daily 'Nawa-i-Waqt' of 27-3-1997 and daily "Dawn" of 28-3-1998: Under section '11 of the Act the defendants were required to file an application for Leave to Defend the Suit within 21 days of service of summons. No application for Leave, to Defend has been filed so far. The argument advanced by the learned counsel for the defendants for not doing so is that if the defendants had filed the application under section 11 of the Act, it would have amounted to taking steps in the proceedings and their application under section 34 of the Arbitration Act would have been barred. I am not convinced by this reasoning. In my opinion if the defendants were serious about arbitration the proper procedure to adopt would have been to file both applications simultaneously or first file the application under section 34, Arbitration Act and thereafter, file the application for Leave to Defend but within 21 days of the service of the summons. As no Application of Leave to Defend the suit raising a serious and bona fide dispute as required under section 11 of the Act has been filed the claim of the plaintiff can be 'decreed as prayed: But as stated above, there is .a discrepancy between the amount claimed and the amount shown due to in the statement of account; it would therefore, not be just and proper to- decree the suit as prayed. However, as the defendants have admitted their liability do their lawyer's letter dated 26-2-1998 to the extent of Rs.40 million, I pass an Interim Decree on admission in the sum of Rs.40 million with mark up at the rate of 54 paisa per Rs.1,000 per day from the date--of

suit till the date of payment against all the defendants jointly and severally. The decree for the balance outstanding amount shall be passed after obtaining detailed accounts from the plaintiff. The plaintiff shall also be entitled to costs: C.M.A. No. 3231 of ,1998: Plaintiff has filed this, application under border-40, Rule1 read with Order 38, Rule 5, C.P.C. read with section 16 of the Banking Act, 1997 for appointment of a receiver to take over, possession of charge property i.e15 buses leased by the Bank to defendant No. 1 and attachment of the immovable property mortgaged by the defendants in favour of the Bank. Though the application refers to several provisions of C.P.C I think the most appropriate provision to grant relief in suits filed under the Banking Act, 1997 and in the circumstances of this case is section 16 of the Banking Act a which grants wider power to the Banking Court than those available under the provisions of C.P.C. The power under section 16 includes, among others, the power, at any stage of the proceedings to issue any kind of injunction or restraining, order-in-respect of the property Charged as security; attach such property or: appoint one or more Receivers of such property on, such-terms and-conditions as-it-may deem fit. The Agreements of Mortgage, Hypothecation and Charges etc., executed between Banks and their, customers often include a provision authorizing the Bank to take possession of the mortgaged or charged property and-sell -it'-without -intervention of Court in case of default in payment by the mortgagor or charger; however, such an authority to make possession, by virtue of, such agreement has apparently never been exercised by a mortgagee or a Bank in the past. It is also forbidden by Order 34, Rule 14, C.P.C. The prohibition has not been- removed and apparently for the first time in the history of Pakistan such an .authority has been explicitly given to banks under subsection (2) of section 16 of the Banking -Act to enable them to recover their loans expeditiously. In the present case the Bank entered into a Finance Lease- Agreement with defendant No: 1 whereby 15.buses were on terms and conditions stated in the Vehicle Lease Agreement.(Annexure 'C' to the plaint): ' Under, Article 15 of the said agreement, the Bank has the powers in case of default of payment by defendant No. 1 to take possession of the leased vehicles Without process of law. In the instant case the application for appointment of Receiver was filed alongwith the suit on 3377 1998 and by order-dated: 30-3-1989, this Court restrained the defendants from-.parting with the possession or creating any third party interest in the buses. On 3-4-1998 Mr. Wafi Khan filed his Vakalatnama and sought time to prepare the case. On 21-4-1998. Mr.Wafi Khan again requested for further time to file is counter-affidavit. At this juncture Mr. Khilji, learned counsel for defendants expressed his apprehension that the buses in question had been disposed of by the defendants and requested that inspection of the buses be allowed whereupon Mr. Wafi Khan requested for time to obtain instructions of his clients and the matter was adjourned to 22-4-1998. On the said date Mr. Waft Khan stated that his clients had no objection to the inspection of the vehicles by a representative of the plaintiff. However, he added that as the vehicles were playing between Lahore and Peshawar, bringing the buses to Karachi for the purpose of inspection would cause a great deal of inconvenience and accordingly by consent of the parties the defendants were directed to take each vehicle to the Provincial Head Office of plaintiff-Bank in Peshawar during office hours on any working day and cause it to be inspected by Mrs. Nuzhat Sherwani, the Manager of the plaintiff-Bank or any officer duly authorised by her. The buses were accordingly inspected on 16-5-1998 the plaintiff-Bank submitted a statement wherein, among others, it reported that: "(1) One bus bearing Reg. No: PRR-1840 having Engine No.44027, Chassis No.00443 was not purchased/brought for physical .inspection on the alleged pretext that the said bus is in Rawalpindi for repairing purpose. (2) The Engine of bus bearing Reg.No.2040 having Engine No.44031 has been replaced by another Engine No.FE-6-006420-B without consent/permission of the bank's authority, without even any intimation to the bank. (3) Comprehensive Insurance as required of all the 15 buses not yet arranged by the party. (4) All the buses are found plying between Peshawar and Lahore without route permit." No denial or objection to this report was filed by the defendants. The learned counsel for the defendants has argued that according to the Lease Agreement the' buses belong to the plaintiff and, therefore, a Receiver of plaintiff's property cannot be appointed in terms of section 16 of the Act and the provisions of Order 40, Rule 1, C.P.C. To test the validity of this argument it would be advantageous to reproduce section 16 of the Act who as stated above, in the most suitable provisions to deal with matters filed in the Banking Courts. The said section reads as follows: "

16. Attachment before judgment and appointment of receivers.--(1) Where the plaint under subsection (1) of section 9 is for recovery of any amount through the sale of any .property pledged, mortgaged, hypothecated, assigned or otherwise charged as security for the loan of finance, or for or in relation to a finance lease, the Banking Court may, at any stage of the proceedings- (a) restrain or injunction the sale, creation or transfer of an interest or charge or lease or disposal or disposition of such property by the borrower or customer; or (b) attach such property; or (c) appoint one or more receivers of such property of such terms and conditions as it may deem fit. (2) In cases where a borrower or customer has obtained property or financing through a finance lease, or has executed an agreement in connection with a mortgage, charge or pledge in terms whereof the banking company is authorised to recover or take over possession of the property without filing a suit it may, at its option:-- (a) directly recover the same if the property is movable; or (b) file a suit hereunder and the Court may pass an order at any time, after the passing of an interim decree either authorising the banking company to recover the property directly or with the assistance of the Court." It is therefore, apparent that in case of Finance Lease which, is the position in the present case, the Banking Court has the power at any stage of the proceedings to attach the leased property, appoint one or more Receiver of such property or after passing of Interim Decree authorise the Banking Company to recover the property directly or with the assistance of the Court. In this case it is clear from the Report submitted by the plaintiff Bank that one bus was not produced for inspection, the engine of another bus had been replaced without permission or even without intimation to the Bank which is a violation of the Lease Agreement and also casts doubt on the bona fide of the defendants. Further, all buses were found to be plying between Peshawar and Lahore without any Route Permit which scold result in heavy penalties or restraint order in respect of the buses by the relevant authority until regularisation of Route Permits and payment of penalties thereby adversely affecting the interests of the plaintiff-Bank. The apprehension of the plaintiff that the buses may be disposed of by the defendants gains strength from the non-production of one bus and change of engine of the other. The counter-affidavit filed by Mohiuddin defendant No.2 is vague, evasive and does not inspire confidence. In view of this position, as I have already passed in Interim Decree, I hereby appoint the Manager of the plaintiff-Bank as Receiver of the fifteen (15) buses with power to sell them, if necessary, and recover its dues or take such appropriate action in respect of the buses as the Bank may deem fit in the circumstances of the case. It will be open to the Bank to obtain any further clarification or facilitating Order if deemed necessary. The plaintiff shall also be entitled to costs of Rs.5,000 in respect of this application. Further proceedings in the suit are adjourned to 3l-8-1998. A.A./A-245/K Order accordingly.