2019 PLP 489 (CLD)

SHAMS MEHMOOD MIRZA, J.

This regular first appeal is filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance) challenging judgment and decree dated 29.04.2014 passed by the banking court. This judgment shall also decide R.F.A. No.1561 of 2014 filed by the Bank of Punjab against the appellants. For the purpose of this judgment, the Bank of Punjab shall be referred to as the "respondent bank".

2. Brief facts of the case are that the respondent bank instituted a suit against the appellants seeking recovery of Rs.433,342,998.45 due under Running Finance-1 and Running Finance-II facilities. The appellants contested the suit by filing their application for leave to defend. The learned Banking Judge of this Court passed decree in favour of the respondent bank on 29.04.2014 in the sum of Rs.23,996,490/- by excluding certain amounts from the suit claim and in view of payment of Rs.292,396,000/- by the appellants during the pendency of the suit.

3. Learned counsel for the appellants submits that an amount of Rs.63,949,858/- was also liable to be excluded from the suit claim in as much as the said amount was charged and recovered as mark up after the expiry of the finance facilities.

4. Learned counsel for the respondent bank (appellant in R.F.A. No.1561 of 2014) submitted that the learned banking court while passing decree granted costs of funds from the date of filing of the suit whereas by the terms of section 3 of the Ordinance, the same ought to have been awarded from the date of default.

5. Arguments heard, record perused.

6. Perusal of statement of account of mark up for Running Finance-I facility reflects that only an amount of Rs.2,169,633/- was recovered after the expiry date i.e. 30.06.2009. The statement of account of mark up for Running Finance-II facility shows that no amount was recovered after the expiry of the finance facility. It is thus clear that the contention of the appellant regarding payment of Rs.63,949,858/- as mark up after the expiry of the finance facilities is not correct. However, the sum of Rs.2,169,633/- is liable to be deducted from the amount of the decree.

7. Section 3 of the Ordinance clearly stipulates that the customer who is in default of his obligations is liable to pay costs of funds for the period from the date of his default till realization. In identical circumstances, a learned Division Bench of this Court in a judgment reported as Habib Bank Limited v. Pak Poly Products (Pvt.) Limited 2013 CLD 1661 clearly held that the costs of funds was payable on the outstanding amount from the date of default till realization. A similar view was taken by learned Division Bench of the Sindh High Court in the case of Trycot Synthetic Fiber Company through Proprietor v. Habib Bank Limited 2012 CLD 1670. It is thus clear that the learned Banking Judge of this Court fell in error in awarding costs of funds in the decree from the date of filing of the suit.

8. In the result, the appeal filed by the appellant herein is partially allowed by deducting the amount of Rs.2,169,633/- from the decree. The appeal filed by the respondent bank (appellant in R.F.A. No.1561 of 2014) is allowed by holding that the costs of funds in the judgment and decree are to be granted from the date of default till the date of realization. Judgment and decree dated 29.04.2014 shall stand modified to the extent that it shall be deemed to have been passed for an amount of Rs.21,826,857/- together with costs of funds from the date of default till realization. Rest of terms and conditions of the judgment and decree shall remain intact. KMZ/D-2/L Order accordingly.