2005 PLP 1787 (CLD)

SYED HAM1D ALI SHAH, J.

Brief facts giving rise to this appeal are that appellant No. 1, approached the respondent-Bank for the financial assistance for setting up a textile weaving unit. The respondent allowed the appellants financial assistance under locally manufactured machinery scheme of State Bank of Pakistan (LMM Loan) of Rs. 19.900 million vide sanction advice dated 28-3-1992. The parties signed and executed various documents including the finance agreement (IB-6) dated 26-9-1992. and other charge documents. The respondent instituted the suit in the Banking Tribunal Lahore, for recovery of Rs.8,726,143 plus liquidated damages of Rs. 1,745,228.60 making a total claim of the respondent to the tune of Rs. 10,471,371.60. The appellants in response to the notice, filed within the stipulated period, the replies to the show-cause notice. It was asserted in the reply that the sanctioned amount was not disbursed and the facility was recalled on 9-5-1995. The appellants have neither received the amount of finance in cash nor the machinery for which the loan was sanctioned, was delivered. The learned Banking Court dismissed both the applications (originally filed as reply to show cause and subsequently converted into application for leave to defend suit) and decreed the suit for an amount of Rs.8,726,143 with cost and mark-up from the date of filing the suit till the date of realization, vide judgment and decree dated 12-1-2000. Hence this appeal.

2. Learned counsel for the appellants has contended that the original agreement between the banker and the appellants, was a sale purchase agreement but no such transaction took place. The bank advanced Rs.4,825,750 to Messrs Fine Engineering Company as partial payment towards the supply of machinery to the appellants. It was further argued that no supply contract was filed with the plaint, therefore, the transaction for supply of machinery has not been proved. He has referred to letter dated 16-1-1994, available on the suit file, which reveals the admission of the respondent-Bank that machinery was not supplied despite the lapse of 14-months of the supply order. The letter showed further that there was no possibility of supply of machinery in near future. It was next contended that in the absence of the delivery of the machinery, the appellants were under no obligation to pay the sanctioned amount of loan, as the same was not disbursed to them. The learned trial Court has granted the respondent the commitment fee and project monitoring fee which do not form part of the finance. Since the sale and purchase of the machinery has not taken place thus there was no obligation on the part of the appellant to pay. He lastly argued that the contract of guarantee is to be construed strictly and surety is liable only when there is a transaction.

3. Learned counsel for the respondent, on the other hand, has submitted that the claim of the respondent-Bank is based on various agreements including IB-6 dated 26-9-1992, promissory note 26-9-1992, guarantee letter dated 26-9-1992 and a mortgage by deposit of title deeds. The execution of the documents has not been denied and the amount of loan was disbursed to the manufacturer through a pay order. The statement of account shows the amounts having been disbursed to the appellants and the impugned decree has been passed rightly in favour of respondent.

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

5. Admittedly the total sanctioned loan was not disbursed and the respondent unilaterally reduced the finance of Rs. 19.900 million to Rs. 5.99 million. The undisbursed amount was recalled. The respondent invited quotations for supply and manufacturer of the machinery, the quotation of Messrs Fine Engineering was accepted by the respondent and the amount was directly disbursed to the manufacturer. The contentions raised by the learned counsel for the appellants carry weight that the relationship of the lender and borrower is governed by financing agreement and the mark-up etc, can only be claimed when there is actual sale and purchase. There is nothing on record to prove as to who was responsible for non-delivery of the machinery. The delay, caused in manufacturer of the machinery, was attributed to the respondent-Bank's non-disbursement, or the appellant's neglect. Whether any actual transaction took place between the parties or not? The learned Banking Court while passing the impugned decree has failed to attend to all these questions.

6. The commitment charges can be claimed only when a party fails to honour its commitment under a contract. In the present case, the appellants were willing to avail the finance and perform their contractual obligations but the respondent recalled its undisbursed finance. The partial disbursement to manufacturer who had not delivered the machinery to the appellants, cannot make the appellants liable to pay, unless it is proved that the appellants were responsible, due to their non-performance of contractual obligation, for non-delivery of machinery. These questions are sufficient for the grant of leave to defend the suit, as the controversy between the parties needs to be resolved, after proper trial. The learned trial Court while passing the impugned decree has not discussed these questions at all. Having given consideration to the controversies, we are of the view that in the attending circumstances narrated above, leave has to be granted to the appellants, to defend the suit.

7. For the foregoing reasons, the instant appeal is allowed, the impugned decree dated 12-1-2000 is set aside. The leave to defend the suit is granted to the, appellants, subject to the condition that a sum of Rs.8,00,000 (rupees eight lac only) already deposited by the appellants, shall remain as security. The trial Court is directed to decide the suit within a period of three months positively. Parties to bear their own costs. M.B.A./M-1243/L Case remanded.