2006 PLP 793 (CLD)

NASIR-UL-MULK, J.

State Bank of Pakistan has, by leave of the Court, filed this appeal against the judgment of the Lahore High Court, Multan Bench, Multan dated 3-12-1999 whereby the Writ Petition filed by Messrs Fatima Enterprises Ltd. (hereinafter referred to as the Company) was allowed and it was held that the appellant was not entitled to debit to Allied Bank Ltd. a sum of Rs.18,312,595.35 by way of interest in respect of a guarantee furnished by the Bank on behalf of the Company to cover the differential amount regarding which a dispute had arisen between the appellant and the Company.

2. The facts relevant for the disposal of this appeal are that the Company had imported machinery from a Japanese Company on supplier credit through its Bank, the Allied Bank Ltd. The Company applied to the appellant for cover of Foreign Exchange Risk on the amount payable to the Japanese Company in Japanese Yen, which was granted. Subsequently, a dispute arose between the Company and the State Bank of Pakistan regarding the rate of exchange of Japanese Yen for covering the risk. The dispute eventually landed in this Court in C.P.L.A. No.95 of 1994 in which leave was granted and the appeal was finally decided on 19-3-1999. The appellant was directed to calculate the amount payable by the Company and to recover the same from the Bank guarantee furnished by the Company in compliance with the orders of the Court dated 14-1-1999. The present controversy revolves around the terms of the guarantee so furnished in the light of the orders passed by this Court. It will be appropriate to reproduce the order, dated 14-1-1999: -- "Ajmal Mian, C.J. In terms of the leave granting order, dated 26-4-1994 the Bank guarantee was to cover differential amount which is the subject-matter of the appeal. The relevant portion of the leave granting order reads as under:-- "With the consent of the parties this order will continue till the final disposal of the appeal and it is clarified that in the event of losing the case the petitioner will reimburse the differential amount to the State Bank of Pakistan contributed by it. Any differential amount due will be reimbursed out of guarantee of Rs.11 crores furnished by the petitioner." It seems that the Bank guarantee which was originally furnished by Messrs Allied Bank Limited was not furnished in the High Court (though it was accepted in the writ petition) but was furnished to the State Bank of Pakistan directly. It is the case of Messrs Allied Bank of Pakistan as contended by Mr. Haris Ahmad learned counsel for the respondents, that "since we have paid all the instalments of the due amount in respect of the foreign exchange, we have discharged our obligation under the above guarantee." The appellant is directed to validate the above expired guarantee which will cover the above risk referred to in the above quoted portion of the leave granting order or to furnish a fresh bank guarantee within a period of three weeks."

3. The original Bank guarantee was furnished by Allied Bank on 4-2-1999 and revalidated on 26-12-1998. By the later guarantee the Bank undertook to pay to the appellant a sum of Rs. 106,739,245.57 being the exchange rate differential amount in the event of adverse decision by the Supreme Court of Pakistan against the Company in Civil Appeal No.374 of 1994. Upon the adverse decision of the Supreme Court the said amount was paid, but the appellant raised a claim of Rs.18,312,595.35 as interest on the differential amount and debited the same in the account of the Allied Bank maintained with the appellant. Since the Allied Bank pressed the Company for payment of this amount the latter filed Writ Petition in the High Court, which resulted in the decision aforestated.

4. Mr. M. Bilal, Senior Advocate Supreme Court appearing for the appellant submitted that the interest/mark-up was payable to the appellant in terms of the original guarantee of 19-10-1992 furnished by the Allied Bank but was, inadvertently or intentionally, omitted from the revalidation guarantee of 4-2-1999. He argued that even otherwise the State Bank of Pakistan is entitled to mark-up on the amount which the appellant was ultimately held by this Court to receive.

5. Mr. Rafiq Rajwana, Advocate Supreme Court appearing for the Company read out both the guarantees and contended that under the terms of neither of them the State Bank was entitled to any interest and that the interest referred to in the original guarantee was only on the principal amount by the Company to the Japanese Company on the credit supplied to it. Raja Muhammad Akram, Senior Advocate Supreme Court representing the Allied Bank, however, prayed for interest/mark-up on the amount debited by the appellant in the Bank's account maintained by the appellant.

6. We are not concerned as to whether or not the appellant is entitled to recover interest/mark-up on the differential amount from the company under the normal Banking practice as even the High Court had held that the appellant has the remedy of establishing its claim in a Civil suit. The issue before us is whether the Allied Bank was obliged to pay interest/mark?up to the appellant on the differential amount in terms of the Bank guarantees. Perusal of the original guarantee shows that the learned counsel for the Company was right in saying that the interest mentioned therein relates to the interest that is payable by the Company to the Japanese credit supplier on the principal amount and not on the facility provided by the appellant. The second guarantee, which had revalidated the early one on the orders of this Court, does not mention the payment of any interest/mark-up. We also find that the order of this Court in compliance with which Bank guarantee was furnished is silent regarding payment of interest/mark-up. The judgment of this Court in the State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244 relied upon by the learned counsel for the appellant and mentioned in the leave granting order is distinguishable as there the order for deposit of an amount, while granting stay during the pendency of the appeal, expressly directed that in the event the appeals fails the amount deposited shall be refunded along with mark-up at the rate of Rs. 14% per annum.

7. For the reasons stated above we find ourselves in agreement with the conclusion drawn by the High Court and therefore, dismiss the appeal with no order as to costs. M.B.A./C-9/SC?????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.