2013 PLP 534 (CLD)

AZIZ-UR-REHMAN, J.

This is suit filed by the plaintiff Bank against defendants for recovery of Rs.56,101,449 under section 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 [Ordinance No.XLVI of 2001] with the following prayers:-- (a) A decree for payment of sum of Rs.56,101,449 with cost of funds at the rate fixed by the State Bank of Pakistan from the date of default till realization; (b) Attachment and sale of the Hypothecated properties and Assets of the defendant No.1 as specified in paragraph 5 above and annexures "C" and "C-2". (c) Cost of suit may also be awarded; (d) Any other relief that this Hon'ble Court may deem fit and proper in the circumstances of the case.

2. The facts in the backgrounds are:

3. Per averments made in the plaint the plaintiff (Successor in interest of PICIC Commercial Bank Ltd.), a Company incorporated under the Corporate laws of the Islamic Republic of Pakistan, is a banking company within the meaning of Financial Institutions (Recovery of Finances) Ordinance, 2001 having it's registered office at Muhammadi House I.I. Chundrigar Road Karachi and one of its branches known as Abdali Road Branch at Multan.

4. The defendant No.1, per assertion, is the principle debtor and have availed various financial facilities from the plaintiff Bank. The defendants Nos.2, 3 and 4 are directors/guarantors and all of them are 'Customers' within the meaning of section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001.

5. The plaintiff Bank, at the request of defendant No.1, provided to and the defendant No.1 availed from the plaintiff Bank various Finances Facilities pursuant to their offer letter dated November 11, 2006 including Finance Against Packing Credit (FAPC-II) of Rs.40 Million, on the agreed terms and conditions as to securities, repayment, markup etc. Per averments in the plaint the offer letter has been duly acknowledged and accepted by the defendant No.l.

6. According to the plaintiff's averment, in consideration of the FAPC-II, the defendant No.1, inter alia executed the following financing documents:-- (i) Demand Promissory Note for Rs.60 Million dated 11-11-2006; (ii) Irrecoverable Authority to recover Accrued Mark-up; (iii) Letters of Hypothecation of receivables dated 11-11-2006; (iv) Packing Credit Letter dated 11-11-2006.

7. Per averments, in considering of aforesaid financial facility, allowed/agreed to be allowed, the defendant No.1, provided continuing collateral security on its moveable assets/receivables by executing a Letter of Hypothecation of Movables and Letter of Hypothecation of receivables respectively both dated 14-11-2006. Hypothecation charges were duly registered with the Securities and Exchange Commission of Pakistan (SECP).

8. Plaintiff Bank, at the request of defendant No.1, renewed the aforesaid Finance Facility and in consideration thereof, the defendant No.1 inter alia executed another set of documents as below:-- (i) Agreement of Financing dated 1-10-2007. (ii) Demand Promissory Note for Rs.48 Million dated 1-10-2007. (iii) Packing Credit Letter dated 1-10-2007.

9. On further request of defendant No.1, the facility granted to availed by the defendant No.l was again renewed and in consideration thereof, the defendant No.1, inter alia executed the following financing documents:-- (i) Agreement of Financing dated 18-1-2008. (ii) Demand Promissory Note for Rs.47,620,822 dated 18-1-2008; (iii) Irrecoverable Authority to recovered Accrued Mark-up dated 18-1-2008; (iv) Letter of Disbursement for Rs.40 Million dated 18-1-2008; (v) Letter of continuity for Rs.47,620,822 dated 18-1-2008; (vi) Confirmation and undertaking dated 18-1-2008; (vii) Packing Credit Letter dated 18-1-2008.

10. Defendant No.1, in further consideration of aforesaid financial facility(ies), also provided continuing collateral security by executing a Letter of Hypothecation of Movables and Letter of Hypothecation of Receivables dated 11-6-2008 creating first pari pussu charge over its present and future current assets, lying at plot measuring 5 acres, located at 10-A, industrial Estate, Multan or any other premises directly or indirectly belonging to the defendant No.1 along with book debts and receivables of the defendant No.1 fully described in the schedule to the joint Letter of Hypothecation. The said joint Letter of Hypothecation was duly registered with the Securities and Exchange Commission of Pakistan.

11. The plaintiff at the request of defendant No.1 renewed the aforesaid Financial Facilities and in consideration thereof, the following financing documents inter alia were executed by defendant No.1. (i) Agreement of Financing dated 13-4-2009. (ii) Demand Promissory Note for Rs.48,400,000 dated 13-4-2009; (iii) Irrecoverable Authority to recover Accrued Mark-up dated 13-4-2009; (iv) Letter of Disbursement for Rs.48,400,000 dated 13-4-2009; (v) Letter of Arrangement for Rs.40 Million dated 13-4-2009; (vi) Letter of Continuity for Rs.48,400,000 dated 13-4-2009; (vii) Confirmation and Undertaking dated 13-4-2009; (viii) Packing Credit Letter dated 13-4-2009.

12. Besides, defendants No.2 to 4 also executed their personal guarantees in favour of the plaintiff Bank undertaking and guaranteeing the repayment of all the outstanding dues payable to the plaintiff.

13. Per assertions of the plaintiff, the defendant No.1 have fully availed and utilized the Financial Facilities but failed and/or neglected to make payment of the outstanding dues and thus committed 'wilful default' despite of several requests and reminders by the Plaintiff to the Defendants from time to time.

14. Resultantly, a legal notice dated June 24th, 2009 was issued to defendants but no positive response and/or payment of the outstanding dues was made by the defendants to the plaintiff Bank.

15. The particulars of the Financial Facilities granted to and availed by the defendant No.1 and the outstanding principle and financial charges, as required under section 9(3) of the Financial Institutions (Recoveries of Finances) Ordinance, 2001 are as below:-- Amount outstanding and payable by the Defendants to the Plaintiff as on 31-12-2009 FAPC II (a) Principle amount availed : Rs. 40,000,000.00 (b) Principle amount repaid : Rs. Nil (c) Principle Outstanding : Rs. 40,000,000.00 (a-b) (d) Mark-up payable till [31-12-2009] : Rs. 6,751,207.81 (e) Amount of mark-up repaid : Rs. Nil (f) Mark-up outstanding : Rs. 6,751,207.81 (d-e) Outstanding Amount (c+f) : Rs. 46,751,207.81 Liquidated damages charged @ 20% On total outstanding as per Clause # 7 of Financial Agreement. : Rs. 9,350,241.56 Total Outstanding Amount for All Facilities. : Rs. 56,101,449.00 (rounded to a rupee)

16. Per averments the cause of action arose on various dates, when various documents were executed, financial facilities were availed, charges were created and finally when default in the repayment of the outstanding amounts/dues was committed by the defendants jointly and severally.

17. Upon filing of the above suit, on 15-2-2010, process under section 9(5) of the F.I.O., 2001 were issued to the defendants by all prescribed modes including publications in newspapers i.e. Daily "Dawn" English Karachi dated 17-3-2010 and Daily "Jang" Karachi dated 27-3-2010. In response of service, the defendants filed leave to defend application under section 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001with a prayer for grant of unconditional leave to defend the suit. This application for leave to defend was assigned C.M.A. No.4033 of 2010.

18. On 7-12-2010, when the leave to defend application bearing C.M.A. No.4033 of 2010 came up for hearing, none was present for the Defendants however, in the interest of justice, the matter was adjourned with direction to the office to issue fresh notice for the next date. According to office note, through TCS notice was issued for 18-1-2011. On 18-1-2011 however, request was made on behalf of the learned counsel for the defendants, on the ground that defendants counsel reportedly was busy before Hon'ble Supreme Court of Pakistan. Consequently, by consent, the case was adjourned to 11-2-2011 with a note of caution, that no further adjournment would be granted. On 11-2-2011 when again, the above application for leave to defend bearing C.M.A. No.4033 of 2010, came up for hearing, on account of nobody presence for and on behalf of the defendants, the following order was passed:-- "On the last date of hearing I have passed an order that no further adjournment would be granted, as a request for adjournment was made on behalf of the defendants. Since nobody has put in appearance on behalf of the defendants, nor a request for adjournment has been made, C.M.A. No.4033 of 2010 is dismissed for non-prosecution."

19. On dismissal of the leave to defend application, an application under Order IX, Rule 13, C.P.C. bearing C.M.A. No.2127 of 2011, was filed on 17-2-2011 with a prayer for restoration of the application for leave to defend bearing C.M.A. No.4033 of 2010. (PLA) and setting aside of order dated 11-2-2011. On 19-5-2011, the aforesaid application bearing C.M.A. No.2127 of 2011 [Application under Order IX, Rule 13, C.P.C.] was allowed and leave to defend application was restored to its original position and by consent, the case was adjourned to come up on 3-6-2011. Thereafter, and lastly leave to defend application bearing C.M.A. No.4033 of 2010, came up for hearing on 31-8-2012 when again no one bothered to appear and proceed with the leave to defendant application (C.M.A. No.4033 of 2010. Consequently the following order was passed:-- "Learned counsel pointed out that vide order dated 11-2-2011 the save application (C.M.A. No.4033 of 2010) was dismissed for non-prosecution, however, when the matter was fixed for final disposal, the plaintiff's counsel conceded his no objection and the application was restored, but again neither the defendant is present nor their counsel and nor any intimation is received. This application is dismissed for non-prosecution. Office is directed to fix this case for final disposal according to roster."

20. On 23-10-2012, when the case came up for final disposal I heard, Mr. Abdul Sattar Lakhani learned counsel for the Plaintiff Bank and also scanned the record available before me.

21. Mr. Abdul Sattar Lakhani, learned counsel for the plaintiff Bank in the first instance made a reference to the finance agreement dated 13-4-2009 [Annexure 'G' page 117] and submitted that per the said agreement, the sale price and purchase price fixed are 40.00 Million (Forty Million only) and Rs.48,400,000 (Rupees Forty eight million four hundred thousand only) respectively. The purchase price under this agreement for finance on mark-up basis, [Annexure 'G' page 117] is/was payable on or before 30-9-2009. Per learned counsel the mark-up amount comes to Rs.8,400,000 on subtracting the sale price from the purchase price [i.e. Rs.48,400,000 (-) Rs.40,000,000].

22. Contrary to this, as far as the amount of Mark-up is concerned, in the summary of statement of account available [Annexure 'J/4' page 179], the mark-up amount has been shown as Rs.6,751,207.81. For ready and convenience purposes the same is reproduced as under:-- SUMMARY OF STATEMENT OF ACCOUNTS BORROWER: THREE STAR HOSIERY MILLS (PVT) LTD TYPE OF FACILITY: FAPC-II CUSTOMER NO.: 414973 CLAIM AMOUNT AS ON: DECEMBER 31, 2009 DESCRIPTION Amount in Rupees Principle 40,000,000.00 Mark-up 6,751,207,81 Total Outstanding 56,101,449,37 Liquidated Damages charged @20% on total outstanding amount as per Article VIII of Finance Agreement dated. 13-4-2009 9,350,241,56 TOTAL CLAIM AMOUNT: 56,101,449,37

23. The difference in the mark-up thus comes to Rs.1,648,792.19 [i.e. Rs.8,400,000 - Rs.6,751,207.81]. Since both the 'AGREEMENT' FOR FINANCING ON MARK-UP BASIS' [Annexure 'G' page 117] and 'SUMMARY OF STATEMENT OF ACCOUNT' reproduced hereinabove have come on record from the plaintiff Bank itself, therefore, I extend the benefit of 'doubt' in favour of the Customers/Defendants and treat the amount of Rs.6,751,207.81 as shown in the 'SUMMARY OF STATEMENT OF ACCOUNT' as genuine, correct and binding upon the plaintiff Bank. Now if, this amount of mark-up of Rs.6,751,207.81 is added with sale price of Rs.40,000,000 then total comes to Rs.46,751,207.81 and this is the actual amount which in my view, remains truly and genuinely outstanding against the defendants jointly and severally plus cost of funds thereon in terms of section 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001 [Ordinance XLVI of 2001] from the date of default till realization.

24. In the Banking matters, it is worth to note that when defendant(s), despite service in terms of section 9(5), did not come forward and file leave to defend application or otherwise fails to obtain from Banking leave for defending the suit then in such eventuality, the allegations of, fact in the plaint are deemed to be admitted. Resultantly the Banking Court, may pass a decree in favour of the Bank. In this regard section 10(1) of F.I.O., 2001 being relevant is reproduced as under:-- "Leave to defend.

(1) In any case in which the summons has been served on the defendant as provided for in subsection (5) of section 9, the defendant shall not be entitled to defend the suit unless he obtains from the Banking Court as hereinafter provided to defend the same; and, in default of his doing so, the allegations of fact in the plaint shall be deemed to be admitted and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof or such other material as the Banking Court may require in the interests of justice."

25. Per Mr. Abdul Sattar Lakhani learned counsel for the plaintiff, in absence of leave to defend application, the assertions made in the plaint are deemed to be admitted and the plaintiff Bank, deserves to have a decree in its favour as prayed. Per learned counsel, Plaintiff Bank is entitled for cost of fund from the 'date of default till realization'. In my view, the Bank indeed, is entitled to claim 'cost of fund from the date of default till realization' but for such entitlement it is obligatory on the Bank to firstly establish the `date of default' from the 'repayment schedule' and/or from the Agreement of finance vis-a-vis statement of account. In my view the 'Repayment Schedule' is an inseparable part of the Finance Agreement. In the case in hand 'Clause 1.3' of the Finance Agreement [Exh.5/7] reads as under:-- "1.3. The purchase price shall be paid by the customer to the Bank in such installments and at such times (each a 30-9-2009) as the Bank prescribe."

26. Along with the Finance agreement dated 13-4-2009 [Annexure 'G' page 117] neither the 'Repayment Schedule' has been annexed nor in the Finance Agreement [Annexure 'G' page 117] itself there is any mention of the dates of installments on which it become due. Even the number of installments have not been mentioned. Under circumstances, I am of the considered opinion, that the Bank is only entitled to claim 'cost of fund' from 30-9-2009 being expiry date of finance agreement [Annexure 'G.' page 117] onwards till realization.

27. Mr. Abdul Sattar Lakhani learned counsel for the plaintiff Bank further submitted that in consideration of and in acknowledgment of availing of financial facilities and as security, apart from finance agreements, personal letter of guarantees, letters of Hypothecation, defendant(s) also signed and executed from time to time, Demand Promissory notes, letter of irrecoverable, authority to recovery accrued mark-up, packing credit letters, letter of Disbursement, letters of Continuity, Confirmation-cum-Undertakings in favour of the plaintiff Bank. All these documents, per learned counsel, have been duly signed and executed, indeed voluntarily and without any coercion therefore binding upon the defendants. He vehemently urged that it is obligatory upon the defendants not only to perform the undertakings but also to fulfill their promises regarding repayment of the outstanding dues. At this juncture being relevant it would be appropriate to reproduce herein clause (e) of section 2 of F.I.O., 2001:-- (a) ............................................ (b) ............................................ (c) ............................................ (d) ............................................ "(e) "obligation' includes:- (i) any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and (ii) any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representation, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise; and (iii) all duties imposed on the customer under this Ordinance; and (f) "rules" means rules made under this Ordinance. A bare perusal of the above shows that besides performance of undertakings and/or of promises it is the bounden duty of the defendants to fulfill their obligations strictly inter alia in accordance with clause (e) of section 2 of F.I.O., 2001 and/or under the terms and conditions of the documents executed by the customers.

28. Mr. Abdul Sattar Lakhani learned counsel for the plaintiff, further contended that defendants Nos.2, 3 and 4, in terms of letter of guarantees duly signed and executed by them, are also jointly and severally liable and/or under legal obligations to pay the outstanding amounts of plaintiff Bank. The letters of guarantees (i.e. Annexure 'H', 'FI/1' and 'H/2') besides being continuing guarantees also permit renewals, composition, variations and/or concessions given to the customer(s) or even to third party by the Bank. The guarantees are not dischargeable until all monies and liabilities due from and/or incurred by the customers, are fully repaid to the Bank. Learned counsel for the Plaintiff with vehemence contended the all letter of guarantees and all other documents are genuine and enforceable and have been executed without any coercion.

29. I have examined the contents of the letter of guarantees and have also gone through sections 126 and 128 of the Contract Act 1872 [IX of 1872] and have reached the un-escapable conclusion, that defendants Nos.2, 3 and 4 in their capacity as sureties, not only liable to discharge the outstanding liabilities based on authentic documents but their liabilities under law are also co-extensive with that of the principal debtor/Defendant No.1.

30. Mr. Abdul Sattar Lakhani, learned counsel for the defendants further contended that plaintiff Bank is also entitled for attachment and sale of the Hypothecated goods and assets/properties specified in Annexures 'C' & 'C/2' at pages 45 to 55 of the court file. In this regard he focused the court's attention towards page 53 of the court file and submitted that the brief particulars of the good/assets is available at column 9 of Form

10. Per learned counsel, the amount secured under Annexure 'C/1' at pages 45 is upto Rs.50.00 Million plus cost and service charges etc. Per charge Registration Certificate of 20-11-2006, the charge registered under section 127 of the Companies Ordinance, 1984 [XL VII of 1984], is for Rs.50.00 Million only. However, from perusal of Charge Registration Certificate dated 11-6-2008 [Annexure 'F' page 105], it appears that there are other Banks also whose charge to the extent of amounts mentioned therein have been registered under Charge Registration Certificate No.K-8312/2008/98277 dated 11-6-2008 issued by SECP. Since the Bank's charge is also registered in the sum of Rs.50.00 Million, the Plaintiff Bank in my view is thus' entitled to have a decree in its favour for sale of the hypothecated goods/assets.

31. Insofar as the claim of liquidated damages is concerned, under law the plaintiff Bank is not entitled for any liquidated damages in absence of any positive evidence. Liquidated damages in any event require evidence muchless to the effect of actual loss suffered. As a rule even fixed amount of liquidated damages cannot be awarded unless the quantum of actual loss is proved. Under the circumstances, the plaintiff's claim in the sum of Rs.9,350,241.56 is disallowed.

32. After having heard Mr. Abdul Sattar Lakhani learned counsel for the plaintiff Bank as above and having perused the record available before me, I am of the considered opinion that the Bank is entitled to have a decree in its favour. For and in view of the aforesaid circumstances, the above suit is decreed in the sum of Rs.46,751,207.81 [Four crore sixty seven lacs fifty one thousand two hundred seven, eighty one paisa only] against the defendants jointly and severally with cost of funds in terms of section 3(2) of F.I.O., 2001 from 30-9-2009 till realization of the decretal amount. Besides prayer clause (b), a final decree for sale of the hypothecated assets/goods as specified in annexures 'C' & 'C/2' and described in paragraph 5 of the plaint is also passed for recovery of the decretal amount including cost of fund and cost of the suit. The suit stands decreed. MH/N-32/K Suit decreed.