2003 PLP 848 (CLD)

PARVEZ AHMAD, J.

Messrs Mian Fakhar & Co. and another, the appellants, have assailed the judgment and decree dated 10-4-2002 of the Banking Court, Lahore, by virtue of which the application for leave to defend, filed by the present, appellants /defendants, in the suit for recovery of Rs.82,59,547.20 inclusive of mark-up instituted by the Union Bank Limited, was dismissed and consequently the suit of the Bank/present respondent was decreed in its favour to the tune of Rs.82,59,547.20 with costs and mark-up at the agreed rate of paisa 61 per thousand per day.

2. Briefly stated the facts .are that Union Bank Limited had filed a suit for recovery of money with the averments that the defendant/ present appellant was allowed certain finance facility in the shape of Bank Guarantees, the details of which have been given in para. No.6 of the plaint. In, lieu of the bank guarantees the present appellant had executed certain documents with regard to mortgage of the properties, mentioned in para. No.7 of the plaint, alongwith Promissory Note and counter-guarantees. It was further alleged that the- beneficiary of these guarantees was the Communication and Works Department, Government of Punjab, Lahore and that on account of certain lapses on the, part of the present appellant the beneficiary of, the guarantees thereby demanded for their encashment. However, this lodgment of claim was challenged by the present appellant before the Civil Court alongwith 'an application for temporary injunction, in which although ad interim injunction was granted in favour of the present appellant but at a later stage the interim injunction and the suit of the present appellant was dismissed on 18-12-1997. The respondent-Bank in this eventuality had made payment of Rs.7.113 Million to the beneficiaries in discharge of these guarantees and then requested the appellants to pay the liability in terms of their counter guarantees and on their failure had filed the civil suit claiming costs, mark-up and the entire amount due and in the event of failure had prayed for the sale of the mortgage property etc. The present appellants had moved an application under section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 with the averments that the litigation in between him and the Communication and Works Department is pending adjudication before the Court and that the petitioners had filed an application under section 20 of the Arbitration Act against the Communication and Works Department and even then the bank proceeded to en cash the guarantees, the validity period of which had expired. It was further alleged that at the time of encashment of the guarantees no reference to the appellant or consent or their concurrence was obtained, as the guarantees were for a specified period. The suit of the bank was mala fide. The documents on the basis of which the above-said civil suit for recovery of money was filed were fake. It was also alleged that the memo. of deposit of title deed was not stamped, verified and registered. The suit of the plaintiff was also violative of the instructions of State Bank of Pakistan. This application for leave to defend was resisted by the Bank and the Banking Court after having given an opportunity of hearing to' both the parties had come to the conclusion that the application for leave to defend submitted by the present appellant did not raise substantial question of law and, facts and call for no evidence, hence dismissed it and consequently passed the above said judgment and decree dated 10-4-2002 in favour of the bank. The. present appellants feeling themselves aggrieved and dissatisfied with the orders/judgment and decree of the trial Court refusing their application for leave to defend and then passing of the judgment and decree against them, filed the present RFA.

3. We have heard the learned counsel for both the parties and perused the material made available before this Court.

4. The controversy in between the parties relates as to whether the Bank had any legal right to encash the guarantees furnished/ executed by the present appellants after the period of their validity and expiration, although the claim for encashment of the bank guarantees by the Communication and Works Department had been lodged before the expiration of the' period of the above-said guarantees. The record also reveals that the appellants had agitated the matter before the Court where it was pending at the time when the bank had proceeded to encash these guarantees. The claim of the parties being whether the bank could or could not encash the bank guarantees, the period of validity of which had expired, although the validity period of these guarantees had been extended from time to time and that too at the request of the present appellants. What was the effect of lodgment of the claims by the Communication Department with the bank for the encashment of these guarantees within their validity period the encashment of which had remained suspended due to the litigation by the present appellants before the Civil Court? All these questions need determination and consideration by the Trial Court and for this purpose the appellants had moved their application for leave to defend their suit.

5. In view of the above discussion, we allow this appeal, set aside the impugned judgment and decree dated 10-4-2002, also set aside the order of refusal to allow leave to defend to the present appellants, and allow leave to defend the suit to the appellants, subject to deposit of principal amount of all the bank guarantees within a period of three months from the date of this order and remand the case to the trial Court for its decision in accordance with law. In the event of failure of the appellants to deposit this amount the law will have its own course. The parties are directed to appear before the trial Court on 6-1-2003. The record of the trial Court be remitted back immediately. Q.M.H./M-1639/L Case remanded.