2023 PLP 1092 (CLD)

Judgment and decree dated 11.04.2022 passed by Judge Banking Court-I, Multan/respondent No.3 is assailed through this appeal. Operative part of the judgment is reproduced hereunder:- "

9. I have also gone through the citations referred by the counsel for the plaintiff bank with care and caution. I am of the view that the circumstances and facts reported in the citations referred are altogether different. In the reported cases the decree was passed and the bank was held entitled to claim the cost of funds but in present case yet the decree has not been passed. Statement of account itself speaks that same is totally against the letter No.ROM.RBC/22 dated 15.02.2020. In the light of above submissions and discussion, this Court is arrived at the conclusion that the principal amount and markup has already been paid by the defendants. Under section 3, subsection (2) of the F.I.O., 2001, the bank is entitled to claim mark-up upto the date of default/expiry whereas the cost of funds will only follow after the date of default. In this case, the principal loan amount and markup has already been fully satisfied before the decree. Yet the date of default has not been determined by the Court, hence in the light of principal laid down by the August Supreme Court of Pakistan in case titled "Najam Qureshi v. Chase Manhattan Bank now MCB Bank Ltd and others: reported as 2015 SCMR 1461, PLD-2000 Supreme Court 225, PLD 1992 FSC-1 and in case titled Habib Bank AG Zurich v. Mustafa Shamas-ud-Din Ghatilla and 2 others reported as 2003 CLD 658, I am of the view that the period of default would only occur when a judgment had been rendered against a Customer and it was upon said judgment that a decree to be passed had to provide for payment of Cost of Funds. Section 3(10 and (2) of the F.I.O., 2001, will come into force after passing the judgment/decree against the Customer. In this case, the principal amount along with markup has already been paid before filing the suit in hand, so there remains no question about the payment of Cost of Funds. The payment of principal and markup is not disputed. Resultantly, this Court is of the view that the defendants are no more liable or responsible to pay the Cost of Funds as claimed by the bank. Consequently, the suit in hand is no more proceedable as being infructuous as plaintiff bank has remains no more cause of action. Defendants may move for the NOC and redemption as per law..." (emphasis supplied)

2. Learned counsel for the appellant has not denied that a settlement was arrived at between the parties during pendency of suit and payments were made accordingly. However, submits that markup, till the date of maturity of Financing Agreement i.e., 15.02.2022, was required to be paid by the respondents, which has not been decreed.

3. In response, learned counsel for the respondents has read Annex-B along with letter dated 15.02.2022, (which was wrongly noted as 15.02.2020). The contents of the letter shows that in response to letter dated 26.01.2022 the settlement was approved in the stated terms. This letter, as per learned counsel for the respondents' contention, is not disclosing any payable markup under the settlement. Contends that outstanding amount, as per the settlement, has been paid, therefore, no markup is required to be paid. Learned counsel for the appellant, in response, has referred to letter dated 15.02.2022 and pointed out that 50% of cost of funds form 02.07.2008 to 25.07.2021 at Rs.0.615 was required to be paid, which should be taken as payable markup instead of cost of funds.

4. Heard, record perused.

5. Perusal of the impugned judgment shows that learned trial court has decided the legal point that cost of funds is payable only if date of default is determined by the court, with the observation that markup has already been charged. Undeniably, settlement was arrived at between the parties during pendency of suit. Terms of the settlement, eclipse the Financing Agreement and normally suit is decreed in terms of the settlement. The cost of fund, mentioned in the settlement, is declined, by holding it against the law. In this Court's opinion, payment of Rs.0.615, as cost of funds, was part of the settlement and could not lightly be ignored by the trial court. If this amount could be recovered as markup, then mere writing of the cost of funds might be a mistake. However, observing judicial restraint no final verdict/decision on this fact is being given, which is the primarily duty of the trial court. The impugned judgment and decree is set aside. The trial court shall re-interpret the settlement agreement and would see whether the cost of funds payable under the settlement is infact markup or not. Appeal if disposed of accordingly. SA/N-13/L Case remanded.