2015 PLP 1089 (CLD)

M. SOHAIL IQBAL BHATTI, J.

Through this appeal, the appellant has challenged the order dated 26-4-2012 passed by learned Judge Banking Court-III, Lahore.

2. The facts of the case are that the appellant filed a Suit for Recovery of Rs.77,89,932.88 against the respondents Nos.2 to 7, which was firstly decreed through order dated 27-9-2005. The said order and decree was assailed before this Court and the appeal was allowed and the case was remanded back to the trial court for its decision afresh. The learned Judge Banking Court decreed the suit to the tune of Rs.12,54,203.04 along with cost and cost of funds under sections 3 and 17 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 through order dated 2-10-2010. The claim of the appellant/plaintiff-bank to the tune of Rs.18,35,729.84 in respect of mark up, fine and other charges were declined and an amount of Rs.47,00,000 recovered by auction of the mortgaged property was also deducted from the decretal amount. The learned Judge Banking Court during execution proceedings while passing the impugned order dated 26-4-2012 determined an amount of Rs.1,87,325 payable by the respondents Nos.2 to 7 as cost of funds from 27-9-2005 i.e. when the first decree was passed. Hence, this appeal.

3. Learned counsel for the appellant argued that the impugned order dated 26-4-2012 is against law and facts of the case. It has been further argued that the impugned order has been passed in violation to the mandatory provisions of law i.e. section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.

4. Learned counsel appearing on behalf of respondents Nos.5 to 7 raised objections regarding the competence of the person who had filed the present appeal and no other argument has been advanced by the learned counsel.

5. We have considered the arguments advanced by the learned counsel for the parties and have also examined the record.

6. We have observed that through order dated 10-2-2014 respondents Nos.2 to 4 were directed to be served through publication made in the newspaper. Publication was made in daily "The Jang" and "Dawn" but no one is present on behalf of the said respondents, therefore, they are proceeded against ex parte.

7. We would first resolve the question regarding maintainability of this appeal. The appellant-bank is governed by the Industrial Development Bank of Pakistan Ordinance, 1961 which under section 3(2) is a body corporate having perpetual succession and a common seal with power to acquire, own and dispose of any property and can sue and be sued by the name of Industrial Development Bank of Pakistan. Subsection (2) of section 3 of the Industrial Development Bank of Pakistan Ordinance, 1961 is reproduced below:- "The Bank shall be a body corporate by the name of the Industrial Development Bank of Pakistan, having perpetual succession and a common seal, with power, subject to the provisions of this Ordinance, to acquire, own and dispose of any property and shall, by the said name, sue and be sued."

8. According to section 12 of the Industrial Development Bank of Pakistan Ordinance, 1961 the general direction and superintendence of the affairs and business of the bank vests in a Board of Directors which is constituted under Section 13 of the Industrial Development Bank of Pakistan Ordinance, 1961. At this stage, it would be useful to reproduce section 42 of the Industrial Development Bank of Pakistan Ordinance, 1961"- "

42. Delegation of powers.

The Board may, for the purposes of ensuring efficient and smooth functioning of the Bank and facilitating transaction of its daily business, and for the exercise of all or any of rights, powers and duties specifically granted and vested under this Ordinance in the Board, delegate to the Managing Director or any other officer of the Bank, on such terms and conditions necessary from time to time." The plain reading of Section 42 provides that the Board may for the purposes of efficient and smooth functioning of the bank and facilitating transaction of its daily business and for the exercise of all and any of the rights, powers and duties specifically granted and vested under the Industrial Development Bank of Pakistan Ordinance, 1961 to the Managing Director or any other officer of the bank on such terms and conditions as it may think fit.

9. We have observed that initially in exercise of powers under section 42 of the Industrial Development Bank of Pakistan Ordinance, 1961 the Board in its meeting held on 12-6-1967 delegated certain powers to the Managing Director, Deputy Managing Director, Controller of the Branches, Controller of Inspection and Operations, Regional Controller, Chief Administrative Officer, Secretary, Chief Technical Advisor, Chief Officer, Chief Manager, Deputy Chief Manger, Manager and Officer on Special Duty in classification 'A'. Subsequently, the Board of Directors in its meeting held on 21st May, 1974 vide Resolution No.BD(34) approved the following additions to its previous Resolution No.BD (III) of 1967 as under:- "

1. The term "other confirmed officers Grade-II and above" may be added under Classification 'A'." This addition was published in the Official Gazette on 13-9-1974. The powers of the officials falling under Classification 'A' have been discussed in Clause-10(i) which reads as under:- "for and in the name and on behalf of the Bank to do and transact alone and singly and without joining any other attorney or officer of the Bank the following acts or any of them:- (i) to commence, prosecute, continue and defend all actions, suits, or legal proceedings, whether civil, criminal or revenue, including proceedings to procure or establish the bankruptcy or insolvency of any person or firm or liquidation or winding up of any company;" The bare reading of Clause 10(i) establishes that the present appeal has been commenced by an officer to whom powers have been delegated under statute by the Board of Directors of the bank. As far as the argument of the learned counsel for the respondents Nos.5 to 7 that official who filed the suit was not duly authorized by both the resolutions; there is no cavil to this proposition that when a suit is filed by a limited company the lis could not be initiated on behalf of the company without having due authority either in terms of his articles of association or the board resolution but in the present case Industrial Development Bank of Pakistan is a statutory body and in terms of section 42 of the Industrial Development Bank of Pakistan Ordinance, 1961 the powers have been delegated by the Board of Directors upon the official who has initiated the present proceedings, hence we hold that the present appeal has been validly commenced. We would now refer to Section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 which is reproduced below:- "

3. DUTY OF A CUSTOMER.

(1) it shall be the duty of a customer to fulfill his obligation to the financial institution. (2) Where the customer defaults in the discharge of his obligation, he shall be liable to pay, for the period from the date of his default till realization of the cost of funds of the financial institution as certified by the State Bank of Pakistan from time to time, apart form such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force. (3) For purposes of this section a judgment against a customer under this Ordinance, shall mean that he is in default of his duty under subsection (1), and the ensuing decree shall provide for payment of the cost of funds as determined under subsection (2)." The plain reading of Section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 makes it clear that the customer in case of default in discharging of his obligation shall be liable to pay from the date of his default till realization the cost of funds of the financial institutions as certified by State Bank of Pakistan from time to time. In the present case we have observed that the learned Judge Banking Court while passing the impugned order has not taken into account the rate of cost of funds as determined by the State Bank of Pakistan. Learned counsel for the appellant has drawn our attention to different circulars issued by State Bank of Pakistan through which the rate of cost of funds payable to Industrial Development Bank of Pakistan has been determined. We have failed to comprehend as to what parameters have been followed by the learned Judge Banking Court-III, Lahore and what rate of cost of funds has been applied upon the outstanding liability of the customer while holding that the amount of cost of funds payable is Rs.1,87,325 and thus the impugned order has been passed in contravention to mandatory provisions of section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.

10. For what has been discussed above, this appeal is allowed. The impugned order dated 26-4-2012 passed by learned Judge Banking Court-III, Lahore is set aside. The matter is remanded back to the Banking Court-III, Lahore with the direction to determine the amount of cost of funds strictly in accordance with the provisions of section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. The parties are directed to appear before the learned Judge Banking Court-III, Lahore on 15-12-2014. KMZ/I-3/L Case remanded.