Suit for recovery of finance

Plaintiff / bank filed suit for recovery of finance but defendant / customer raised the plea of signing of blank documents

Validity

Where executant admis execution of an instrument, he cannot be allowed to plead that he in fact executed blank papers

Law of estoppel did not allow defendant / borrower to admit execution of finance documents and at the same time dispute its contents by stating that at the time of execution of the instruments, they were left blank and were later filled in

Defendant / borrower defaulted in discharge of principal sum

Such default not only incurred cost of funds under S. 3(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 rather was actionable under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Plaintiff / bank was entitled for cost of funds from pleaded date of default

Statement of accounts annexed with plaint were certified in accordance with law, which was prima facie evidence of entries contained there in under S. 4 of Bankers' Books Evidence Act, 1891

Application for leave to defend the suit was rejected

Suit was decreed in circumstances.

Powers of Banking Court to amend / re-frame issues under O. XIV, R.5, C.P.C. had not been denied or otherwise challenged, and even otherwise Court possessed the powers to amend/re-frame issues

Appeal filed against order of Banking Court was barred under Financial Institutions (Recovery of Finances) Ordinance 2001, as the same had been filed against an order which did not pass the criteria settled under S. 22 of Financial Institutions (Recovery of Finances) Ordinance 2001, to be considered as a "final order"

Division Bench of High Court declined to entertain the appeal as the same was barred by statute

Appeal was dismissed, in circumstances.

Defendants / guarantors executed guarantee for the benefit of defendant / principal debtor and had also executed memorandums for deposit of title deeds for the benefit of defendant / principal debtor

This was a sufficient consideration to defendants / guarantors for giving the guarantees

Liability under S. 128 of Contract Act, 1872 of defendants / guarantors was co-extensive with that of principal debtor

Defendant / debtor had defaulted in discharge of principal amount

Such default not only incurred cost of funds under S. 3(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001, rather was actionable under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001, rather was actionable under S.9 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Finance agreement expired on 31-03-2008, which was date of default

Plaintiff / bank was entitled for cost of funds from pleaded date of default

Defendant / debtor breached terms of sanctioned advices, finance agreement and guarantees

Suit was decreed accordingly.

Plaintiff/bank by provisions of O. II, R. 2, C.P.C. was precluded from splitting claim which had its foundation in joint cause of action against all defendants

Provision of Explanation to O. II, R. 2, C.P.C. supported case of plaintiff/bank in treating cause of action against all defendants as unified and joint

Plaintiff/bank proved its case against defendants for recovery of amounts under finance facilities in question and mark-up under Running Finance facility in addition to preliminary decree that was passed earlier

High Court decreed the suit in favour of plaintiff/bank and against defendants, jointly and severally

Suit was decreed accordingly.

Statement of account is simply the ledger maintained by bank reflecting outstanding amount of a finance facility but its entries are required to be proved by underlying documents by evidence led by the plaintiff.

Even if contract of guarantee by its terms makes guarantor not jointly liable and cause can be said to be separate, the creditor can bring an action by joining principal debtor and surety as defendants.

Dispute had arisen due to two different views taken by Judges in Chambers of High Court when one execution proceeding was kept pending before High Court despite the fact that amount decreed was less than Rs.100 million, whereas in another case reliance was placed on case titled Zarai Taraqiati Bank Limited v. Faran Maiz Industries (Pvt.) Ltd. (EFA No.1059/2016) and execution proceeding was sent to Banking Court

Held, that plaintiff is competent to fix value of suit for recovery under Financial Institutions (Recovery of Finances) Ordinance, 2001

If Banking Court disagrees with the value fixed by plaintiff, it determines and fixes the value of suit as per provisions of Suits Valuation Act, 1887 after holding appropriate inquiry and collecting material

After such determination of value, the matter is liable to be adjudicated by Court of competent jurisdiction

Pecuniary jurisdiction should be ascertained from the value assessed by plaintiff in the plaint and if Court alters the value in appeal etc., in that eventuality pecuniary jurisdiction remains the same as mentioned in plaint

High Court, as a Banking Court, has jurisdiction to execute judgment and decree passed by it, irrespective of the quantum of amount so decreed

Full Bench of High Court set aside the order passed by Judge in Chambers of High Court in which execution was sent to Banking Court for further proceedings

Furthermore, the judgment passed by Division Bench of High Court in E.F.A No.1059/2016 titled as Zarai Taraqiati Bank Limited v. Faran Maiz Industries (Pvt.) Limited [relied upon by one of the Judge in Chambers of High Court, while sending execution to Banking Court for proceedings], was declared to be passed in violation of S. 19 of Financial Institutions (Recovery of Finances) Ordinance, 2001, as well as settled principle of law and was a judgment per incuriam

Decrees passed by High Court under Banking jurisdiction were liable to be exclusively executed by High Court itself

Question was answered accordingly.

Dispute had arisen due to two different views taken by Judges in Chambers of High Court when one execution proceeding was kept pending before High Court despite the fact that amount decreed was less than Rs.100 million, whereas in another case reliance was placed on case titled Zarai Taraqiati Bank Limited v. Faran Maiz Industries (Pvt.) Ltd. (EFA No.1059/2016) and execution proceedings were sent to Banking Court

Held, that suit proceedings, under Financial Institutions (Recovery of Finances) Ordinance, 2001 stand converted into execution by operation of law, upon pronouncement of judgment and decree

Court which pronounces the judgment is obligated to act and exercise jurisdiction to execute the decree, without the necessity of re-visiting or re-determining its own pecuniary jurisdiction in the context of quantum of an adjudicated claim / decreed amount

Legislature, in its wisdom, has rightly absolved the Court executing decree to re-visit or re-determine its pecuniary jurisdiction while giving effect to decree under Financial Institutions (Recovery of Finances) Ordinance, 2001

Full Bench of High Court affirmed the order in which execution proceeding was retained in High Court and the order in which execution was sent to Banking Court for proceedings was set aside

Full Bench of High Court declared judgment passed in case of Faran Maiz Industries (Pvt.) Ltd. (E.F.A. 1059 / 2016) contrary to law, hence, per-incuriam

Reference was decided accordingly.

Plaintiff/bank by provisions of O. II, R. 2, C.P.C. was precluded from splitting claim which had its foundation in joint cause of action against all defendants

Provision of Explanation to O. II, R. 2, C.P.C. supported case of plaintiff/bank in treating cause of action against all defendants as unified and joint

Plaintiff/bank proved its case against defendants for recovery of amounts under finance facilities in question and mark-up under Running Finance facility in addition to preliminary decree that was passed earlier

High Court decreed the suit in favour of plaintiff/bank and against defendants, jointly and severally

Suit was decreed accordingly.

Even if contract of guarantee by its terms makes guarantor not jointly liable and cause can be said to be separate, the creditor can bring an action by joining principal debtor and surety as defendants.

Statement of account is simply the ledger maintained by bank reflecting outstanding amount of a finance facility but its entries are required to be proved by underlying documents by evidence led by the plaintiff.

Plaintiff / financial institution instead of appending complete statement of accounts appended only statement of balances and certificate of outstanding amount

Validity

Statement of account envisaged in S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 is a document reflecting debits and credits and dates thereof from the time of disbursement

Any statement only of balances or a certificate of outstanding amount is not such a statement of account

Statement appended to plaint was not certified as required by S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 as it did not bear the certificate prescribed by S. 2(8) of Bankers' Books Evidence Act, 1891 and could not be taken as prima facie evidence of existence of entries it had reflected

This recognition was otherwise provided to a certified copy by virtue of S. 4 of Bankers' Books Evidence Act, 1891

Print-out of such electronic document for the purposes of S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was required to be certified under Bankers' Books Evidence Act, 1891

Omission of statement of account with plaint was a defect that was rectified to avoid rejection of plaint but the same had deprived defendants of a defense on accounts, thereby raising a substantial question of fact for granting leave to defend

Defendants who were directors and officials of defendant company, were entitled to leave to contest, plaintiffs / financial institution's accounts in as much as those were produced for the first time with the replication

Application was allowed.

Application for leave to defend the suit was filed by appellants / defendants, reiterating the facts and disputing each and every assertion of bank, without raising any substantial question of law and facts with an aim to obfuscate claim of bank

Appellants / defendants attempted to make figures of amount outstanding against them as disputed, without presenting validly any evidence to rebut same

Such efforts of appellants / defendants were to make facts of the case unintelligent without offering any convincing alternate for a consideration

Appellants / defendants tried to dispute report of chartered accountant appointed with their consent by claiming unsuccessfully that the chartered accountant was biased in favor of bank, without pinpointing that his report was based on extraneous consideration or was an outcome of misunderstanding of facts

Division Bench of High Court declined to interfere in judgment and decree passed by Judge in Chambers of High Court as appellants / defendants failed to establish any material error in entries reflected in statement of accounts filed by bank nor could cite any excuse warranting their escape from fulfilling their obligation under agreements signed by them with the bank

Appeal was dismissed, in circumstances.

Banking Court has the power to determine the unsoundness of mind or mental infirmity of a person on an inquiry under Order XXXII of the C.P.C. based on the evidence and appoint a guardian for the suit for the limited purpose of representation before the court of law, without first seeking an appointment of a guardian under the Mental Health Ordinance, 2001.

Banking Court has the power to determine the unsoundness of mind or mental infirmity of a person on an inquiry under Order XXXII of the C.P.C. based on the evidence and appoint a guardian for the suit for the limited purpose of representation before the court of law, without first seeking an appointment of a guardian under the Mental Health Ordinance, 2001.

Appellant / borrower assailed judgment and decree passed by Banking Court on the plea that no process was ever served upon him

Validity

Report of bailiff and courier service regarding service upon appellant / borrower was silent

It was the prime duty of Banking Court to ascertain as to whether service of summons was duly served upon appellant / borrower or not

Report of bailiff and courier service acknowledgement were not available on record

Provision of S. 9(5) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was not complied with in letter and spirit and appellant / borrower was condemned unheard

High Court set aside judgment and decree passed against appellant / borrower and matter was remanded to Banking Court for trial afresh

High Court directed Banking Court to provide opportunity to appellant/borrower to file leave to defend application

Appeal was allowed accordingly.

Bald denial of execution of finance and security documents was not convincing when numerous documents were otherwise available on record to substantiate the claim

Board Resolution for seeking renewal of CF-Facility, loan application, acceptance of terms of facility offer letter, execution of documents, finance and security, registration of charge with SECP were sufficient to dismiss applications for grant of leave to defend

Mere institution of suit by appellants/customer, seeking various declarations and grant of unconditional leave to defend to respondent/financial institution did not entitle appellants/customers for grant of leave to defend in suit by respondent/financial institution, as rule of the thumb

High Court maintained judgment and decree passed against appellants/customers, as no illegality was found to justify interference in exercise of appellate jurisdiction

Appeal was dismissed in circumstances.

Plaintiff bank produced statements of accounts which were duly verified as required under S. 2(8) of Bankers' Books Evidence Act, 1891 and S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001

No counterstatement was filed by defendant company to controvert the statement of accounts

Validity

Mere bald allegations against statement of accounts without backing of law and documented proof had no basis

Statement of accounts of defendant company showed that penal interest was charged from time to time

Such penal interest had no backing of law

Plaintiff bank excluded amount of penal interest from the liability against defendant company

High Court excluded penal interest and markup was charged on the basis of finance agreement only till its expiry

Plaintiff bank was entitled for cost of funds after the date of markup

Claim of plaintiff bank was substantiated by agreement/statement of accounts as well as finance documents

Defendant company was unable to raise any substantial question of law or fact regarding requiring recording of evidence for its resolution

High Court declined to grant leave to appear to defendant company

Suit was decreased accordingly.

Suit filed under previous law i.e. Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 was decreed in favour of appellant bank without awarding cost of funds

Validity

In terms of S. 29(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001, no decree could lawfully be passed under Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 with respect to markup-based finance and only interest-bearing loans could be decreed under S. 15 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997

If at all decree had to be passed regarding markup-based finance, in all possibility, it had to be under Financial Institutions (Recovery of Finances) Ordinance, 2001

Provision of S. 29 was the bridge for dealing with adjudication of claims of markup-based finances under the provisions of Financial Institutions (Recovery of Finances) Ordinance 2001, notwithstanding institution of suits under provisions of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997

Banking Court committed error of law while declining cost of funds on erroneous assumption that S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001 had no application

High Court set aside judgment passed by Banking Court to the extent of denying of cost of funds as it was legally defective and result of misconstruction of law

High Court remanded the matter to Banking Court to determine cost of funds in accordance with the mandate of S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Appeal was allowed accordingly.

Appellant / Defendant sought condonation of delay in filing of application for leave to Defend on the plea of issue of process on wrong address

Validity

Service via registered post and courier directed to old, incorrect registered address instead of current registered office, constituted invalid service

Limitation period for filing application for leave to defend the suit had not commenced and application was filed within the prescribed timeframe

Calculating 30-day period for filing of leave to defend application from date of receiving notice through Court Bailiff on 24-7-2023, the application was well within the prescribed timeframe

Computing 30-day period for filing leave to defend application from date of newspaper publications i.e. 12-7-2023, there was delay of two days in filing the application on 15-8-2023

High Court condoned delay in terms of proviso to S. 10(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001

High Court treated application filed under S. 5 of Limitation Act, 1908 as application under S. 10(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 and allowed the same

As long as a court has jurisdiction to hear and decide an application or a case citing an incorrect legal provision does not impede its ability to exercise that authority

High Court allowed respondent/bank to file its replication if so required

Application was allowed accordingly.

Suit filed by respondent / bank for recovery of outstanding finance facility was decreed against appellants / borrowers by Judge in Chambers of High Court in exercise of Banking jurisdiction

Validity

Appellants / borrowers failed to prove that they did not utilize Term Finance Facility

Partial denial of availing Term Finance Facility in terms of leave application/affidavit-in-evidence was immaterial when in cross-examination witness admitted to have availed two finance facilities i.e. Running Finance Facilities and Term Finance Facilities which were sanctioned in their favour

Out of Term Finance Facility sanctioned for Rs. 18 million, a sum of Rs.4 million was paid to another bank for release of property documents

Property documents, after its release, were then mortgaged with respondent / bank for outstanding amounts, which amounts were disclosed in statement of account and were not subjected to any challenge

Surrender of respondent / bank to settle outstanding amount of Rs.30 million by way of 24 monthly installments also superseded unreliable statement made in leave to defend application as well as in affidavit-in-evidence

Division Bench of High Court declined to interfere in judgment and decree passed by Banking Court

Appeal was dismissed in circumstances.

After consuming amount, appellant / defendant came forward challenging KIBOR on the terms of which the finance facility was consciously availed, utilized and then defaults were made and recovery suit was filed

Appellant / defendant failed to point out that KIBOR was not applicable in terms of some circular of State Bank of Pakistan

Neither, when leave application was filed and granted nor at any stage of suit proceeding, nor when present appeal was filed, such circular of State Bank of Pakistan was presented to the Court

KIBOR was part of the agreed terms when loan was structured and financed and hence appellant / defendant could not blow hot and cold after utilization of amount

Cheques which bounced could not be adjusted in the execution proceedings and only the amount that was paid after decree was duly adjusted

High Court declined to interfere in judgment and decree passed by Trial Court

Appeal was dismissed, in circumstances.

Appellant / Judgment Debtors were aggrieved of orders passed by Executing Court regarding issuance of Sale Certificates to auction purchasers

Validity

Proceedings taken by Executing Court while accepting bid on 28-02-2022 based on evaluation report of properties of year 2015 / 2016 was unlawful and inequitable as value of properties for the auction held in year 2022

Claim of bank was multiplied regularly

Order of acceptance dated 28-02-2022 was in fact a short order and did not provide time for raising objections in terms of O. XXI, Rr.89 & 90, C.P.C. and Rr.347 to 351 of Sindh Chief Court Rules

Before such reasons could have been provided, the Executing Court ordered issuance of sale certificate and permission was granted to conclude sale by issuing sale certificate

Division Bench of High Court directed to put mortgaged / attached property / properties to fresh auction and set aside order passed by Executing Court

Division Bench of High Court gave directions to comply with the provisions of O.XXI, R.66, C.P.C.

Appeal was allowed accordingly.

Recovery procedure was adopted in terms of S. 15 of Financial Institutions (Recovery of Finances) Ordinance, 2001, as available at the relevant time which was only later declared ultra vires

Suit filed by respondent/financial institution was initiated once the matter was set at rest by Supreme Court for recovery under S. 15 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Validity

Suit filed by respondent/financial institution was in time and there was no ambiguity or error in findings of Banking Court's judgment

Two receipts could not form part of account of lease rentals

Definition of S. 2 of Financial Institutions (Recovery of Finances) Ordinance, 2001 included Leasing Companies for the purposes of defining Financial Institution to invoke jurisdiction of Banking Court

High Court declined to interfere in judgment and decree passed by Banking Court in favour of respondent/financial institution and against appellant/ borrowers

Appeal was dismissed accordingly.

Application for leave to defend the suit filed by appellant/defendant was dismissed due to non-prosecution resultantly Banking Court decreed the suit in favour of respondent/plaintiff

Validity

It was not mandatory for Banking Court to decree the suit in favour of respondent/plaintiff upon default of appellant/defendant due to his absence

Even if appellant/defendant failed to file application for leave to defend or had failed to file it in a timely manner leading to its dismissal unless delay was condoned, it was bounden duty of Banking Court to apply its mind to see if respondent/plaintiff had made out a case for decree of the matter

Appellant/defendant's leave application was dismissed by Banking Court simply on account of non-prosecution without considering whether any substantial question of law or fact had arisen therefrom

Banking Court failed to discharge its duty under the law and had adopted procedure alien to the one envisaged in S. 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001

It was the Banking Court which while considering petition for leave to appear and defend the suit should have considered and rendered its findings as to whether it was timely filed

High Court in appellate jurisdiction declined to determine whether petition for leave to appear and defend the suit was time barred or not, as Banking Court failed to consider petition filed by appellant/defendant

High Court set aside judgment and decree passed by Banking Court as it suffered from legal infirmity and the matter was remanded to Banking Court to decide petition for leave to appear and defend the suit afresh

Appeal was allowed accordingly.

Plaintiff Bank was aggrieved of order passed by Banking Court returning its plaint to be filed before proper forum on the basis of a clause in finance agreement pertaining to jurisdiction

Validity

Parties by their agreement or consent could not invest Court with a jurisdiction where it did not exist in law nor could the parties divest a Court of its jurisdiction by such methodology

Where more than one Courts had jurisdiction in the matter, the parties could make choice by their agreement or consent for conferment of jurisdiction upon one Court to the exclusion of other and agreement in such behalf in normal circumstances was binding upon parties thereto

Such choice of forum by agreement was not contrary to the mandate of S. 28 of Contract Act, 1872

Condition precedent to make a choice by parties through an agreement was that the Court or Tribunal so chosen had the jurisdiction under law

Nature of jurisdiction agreed to between parties was to be decided by Court on true interpretation of the contract on the facts and in circumstances of the case

Banking Court not only misconceived / ignored distinction between such categories of forum selection clauses but also straight away ordered return of plaint without deliberating upon the same and without making any effort to ascertain real intent of parties under non-exclusive jurisdiction clause in the agreement

High Court set aside the order returning plaint to plaintiff bank and matter was remanded to Banking Court to decide the suit in accordance with law

Appeal was allowed accordingly.

Appellant/judgment-debtor was aggrieved of order passed by Executing Court issuing warrants of arrest to recover decretal amount

Validity

Warrants of arrest of judgment-debtor could only be issued in cases where Court was satisfied that in order to obstruct or delay execution of decree, judgment-debtor was likely to abscond or leave limits of Court or had, after institution of suit in which decree was passed, dishonestly transferred, concealed or removed any part of his property, or committed any other act of bad faith in relation to his property, or judgment-debtor has, or had means to pay the amount of decree or some substantial part thereof and refuses or neglects or had refused or neglected to pay the same, or decree was for a sum for which judgment-debtor was bound in a fiduciary capacity to account for

Without satisfaction of such pre-conditions no mechanical order for detention in prison could be passed against appellant/judgment-debtor

Order whereby warrants of arrest of appellant/judgment-debtor were issued was not sustainable and serious attempt for sale of mortgaged property through open auction was required to be made so that outstanding decretal amount could be recovered from appellant/judgment-debtor without straightaway adopting process of issuance of warrants of arrest against him for execution of decree through arrest and detention

High Court set aside the order issuing warrants of arrest against appellant/judgment-debtor

High Court directed Executing Court to proceed further with execution proceedings by holding auction of mortgaged property, in accordance with law

Appeal was allowed, in circumstances.

If time was not granted by Banking Court for production of evidence at the instance of the party against whom order was required to be made, then penal provision of O. XVII, R. 3, C.P.C. would not be applied against such party though in default on next date

Banking Court could have adjourned the matter subject to deposit of cost before taking extreme measures of closing the right of evidence

Provision of law, regarding closing of right of evidence, required grater care on the part of the Court, as it would shut out one party to defend itself and virtually it would be at the mercy of other party to do justice between the parties

High Court set aside the order passed by Banking Court and restored the suit and provided one opportunity to appellant/Bank to produce its evidence

Appeal was allowed accordingly.

After the judgment and decree was maintained by High Court, on the application of respondent Bank, the Banking Court enhanced decretal amount

Validity

Judgment and decree passed by Banking Court under the theory of merger was merged in judgment and decree passed by High Court in exercise of appellant jurisdiction, in the earlier round of litigation and had become past and closed transaction

Respondent Bank, at its own will and whims could not assail before Banking Court, the judgment which had merged into final judgment passed by High Court, by moving a miscellaneous application

Banking Court had allowed application of respondent bank in violation of the provisions of S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Only remedy available to respondent bank was to assail judgment and decree passed by High Court by filing appeal before Supreme Court

When in an appeal/revision/writ, judgment of lower forum was reversed, varied, modified or affirmed, after recording reasons on the consideration of issues of law and/or fact, the judgment/order of the subordinate Court/forum merged into the decision of appellate Court, irrespective of the fact that such judgment had reversed, varied or affirmed the decision of subordinate Court/forum

Decision of appellate Court would be operative and capable of enforcement in such case on the principle of merger

Application for modification of decretal amount could only be moved before High Court

High Court set aside the order of Banking Court on the doctrine of merger and the same was also violative of S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Appeal was allowed, in circumstances.

When case was fixed for arguments on leave application, Banking Court could neither dismiss leave application for non-prosecution nor could it decide the suit unless leave application was decided

No limitation runs against void order

Question of limitation in respect of application seeking restoration of suit was not relevant as dismissal itself was not proper

High Court set aside order passed by Banking Court and suit was restored

Appeal was allowed accordingly.

Non-compliance of mandatory provisions entailed penal consequences, as provided under S. 10(6) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Execution of documents filed with plaint was not denied by defendants/customers in Petition for Leave to Appear and were not entitled for leave to defend in the suit

Defendants/customers did not discharge their obligations as per the agreements, therefore, suit was rightly instituted by plaintiff/Bank

Where defendant had not complied with mandatory requirement of law, the plaintiff was entitled to have the suit decreed in his favour as mandated under S. 10(12) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Defense set up in defendants' application for leave to defend the suit was evasive, improbable and no substantial questions of law or facts were raised in the leave application

Suit was decreed accordingly.

Issues were decided by Banking Court only on the basis of affidavit-in-evidence without giving own findings and recording own reasons before deciding the two issues in affirmative

Decision on three issues, having factually admitted position, was given accordingly, as such issues did not require any deliberation/decision on the part of Banking Court

For decision on remaining issues, Banking Court either reproduced facts of case, extracts from depositions, cross-examination, or contents of letters furnished during the course of arguments

Judgment, to some extent, lacked independent decision on the issues

Though Banking Court was justified in reproducing contents of affidavit-in-evidence, cross-examination, other depositions, contents of letters, etc. and other various documents produced before it but judgment should also carry reasons for deciding issues, which aspect was lacking in the matter

Though judgment was quite elaborate in nature but the same mainly contained reproductions, and aspects of giving reasoning of eleven issues framed in the matter were wanting

Banking Court did not properly adjudicate upon the matter which needed proper decision on the issues so framed in the suit

High Court set aside judgment and decree passed against appellant/Bank and matter was remanded to Banking Court for decision afresh

High Court directed Banking Court to give independent reasonings and decision on the issues except those which were factually admitted

Appeal was allowed accordingly.

Provision of S. 141 of Contract Act, 1872 had no implication as an entitlement was given to the surety to the benefit of every security which the creditor had against principal debtor at the time when contract of suretyship was entered into

Surety was discharged to the extent of value of security

Appellant/Bank did not try to make recoveries from the company as it was one of the petitioners in liquidation petition

Liability of directors who executed memoranda of deposit of title deeds would stand reduced to the extent of the amount recovered by appellant/Bank in the liquidation proceedings from the total amount of company owed to appellant/Bank

Directors of the company who executed memoranda of deposit of title deeds could not be totally absolved from their liability simply on the ground that the appellant/Bank/creditor was able to recover its debt partially in liquidation proceedings or that the liquidation Court had ordered that the decree obtained by the creditor could not be executed against assets of the company

Such partial recovery did not put at naught liability of directors who had executed memoranda of deposit of title deeds for securing repayment of company's debt to appellant/Bank

High Court set aside order passed by Banking Court and remanded the matter for decision afresh

Appeal was allowed accordingly.

Appellant/Bank itself did not perform its legal obligation as per settlement deed during proceedings of recovery suit before Banking Court

Neither appellant/Bank made request for sine die adjournment of suit at relevant time nor filed fresh suit on account of default in payment of installments of agreed amount by respondent/defendant

Rather appellant/Bank happily received settled amount during execution proceedings

Executing Court right turned down application of appellant/Bank for revival of original suit as Executing Court could not modify decree and go beyond the same

High Court declined to interfere in the order passed by Executing Court as the same did not suffer from any illegality, misreading or non-reading of record

Appeal was dismissed, in circumstances.

Appellant contended that the Bank had filed separate suits regarding various finance facilities which act was hit by the provisions of O. II, R. 2, C.P.C.

Validity

Each finance facility might give rise to an independent cause of action, therefore, the contention that separate suits could not be filed under S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, which was a special law, was misconceived

Such was primarily for the reason that default with reference to a particular facility could take place on different dates giving rise to an independent cause of action

Moreover, each facility might be backed by some common and different banking documents and even statement of accounts with respect to each facility was maintained separately

Objection of the appellant was turned down.

Appellant objected that the suit filed in Banking Court was not competent since it was filed under S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 read with Os. XXXIV & XXXVII of C.P.C.

Validity

Contention of the appellant was without force as mere mentioning of provisions of law in the title of the suit was immaterial

Even otherwise, provisions of the C.P.C. were applicable as far as the same were not expressly excluded by the provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and mentioning of related Orders of the C.P.C. did not amount to any illegality

Objection of the appellant was turned down.

Appellants assailed judgment and decree passed by Banking Court whereby the suit for recovery instituted by bank was decreed

Validity

Sanctioning and availing of the Letter of Credit Facility was not denied in the PLA (Petition for Leave to Appear)

Mere bald and general assertion that blank documents were executed by the appellants could not be accepted against the executed finance and security documents appended with the plaint

Partial payments made regarding the Letters of Credit in question by one of the appellants was admitted

Appellants, in their PLA, had not fulfilled the requirements of Ss. 10(4), 10(5) & 10(6) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 thereby entailing penal consequence by way of rejection of the PLA as stipulated in S. 10(7) of the Financial Institutions (Recovery of Finances) Ordinance, 2001

No substantial question of law and fact was raised in the PLA necessitating the grant of PLA and recording of evidence

Banking Court had lawfully and rightly passed the decree in favour of the bank

Appeal was dismissed.

Plea raised by appellants/defendants was that after their resignation from Board of Directors of the company, new management was responsible for finances availed from respondent/Bank

Validity

Condition precedent for maintaining a suit under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 by a financial institution was commission of default by a customer in fulfilment of any obligation with regard to a finance

Neither members of new management fell within the definition of 'customer' who would have committed any default nor any finance was extended by respondent /bank to members of new management nor they ever defaulted in fulfillment of any obligation

Members of new management never executed or replaced guarantees executed by appellants/defendants

Principal debtor company was separate juristic person and its liability could not be transferred to its shareholders

Members of new management were only shareholders and not guarantors

Banking Court rightly dismissed suit against new management

Mandate of law contained in provisions of Ss. 129, 133, 135 & 136 of Contract Act, 1872 created a right in favour of surety which was private in nature

Parties by fiction of law were allowed to surrender, relinquish or waive those rights by agreeing with each other

Members of new management did not fall within the definition of 'customer', therefore, their non-impleading was neither malicious nor unlawful

Resignations of appellants/defendants from directorship or selling project of principal debtor company to third party or transferring shares in their favour had not absolved appellants/defendants from their liability as guarantors' liability as the same was coextensive with that of principal debtor company and they were jointly and severally liable to pay decretal amount

No restructuring or rescheduling between respondent/Bank and new management, therefore, appellants' liability as guarantors never stood discharged

High Court declined to interfere in judgment and decree passed by Banking Court as there was no legal infirmity in it

Appeal was dismissed, in circumstances.

Suit filed by appellant/Bank was dismissed due to its absence on the date it was fixed for attendance of respondents/defendants

Validity

Suit could not be dismissed, if date was not for hearing

Such dismissal had no legal effect and there was no limitation to run against such order, which was void, a nullity and not permissible

Such order of dismissal could be set aside by invoking provision of S. 151 C.P.C.

No limitation provided elsewhere in Limitation Act, 1908 or under S. 151, C.P.C., therefore, in the light of Art. 181 of Limitation Act, 1908, period of three years was available for such type of applications

Appellant/Bank moved application for restoration of the suit and condonation of delay which was supported by affidavit and there was no reason for Banking Court to disbelieve that affidavit

Law favours adjudication on merits and dismissal for non-prosecution should be an exception and not a rule

Court was not to be very strict in such regard

Litigant was not to be deprived of hearing unless there has been something equivalent to misconduct or gross negligence on his part

High Court set aside the order passed by Banking Court as there was no such finding against appellant/ Bank and suit was restored

Appeal was allowed, in circumstances.

Appellant/House Building Finance Corporation was aggrieved of judgment and decree passed by Banking Court wherein insurance charges and future rent were declined

Validity

Claim of insurance charges were liable to be paid by respondent/borrower and was validly claimed by appellant/ Corporation

Banking Court had allowed costs of funds, therefore, appellant/Corporation was not entitled to claim future rent

Cost of funds were allowed from date of suit which was to be allowed from the date of default in terms of S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001

High Court modified judgment and decree passed by Banking Court

Appeal was allowed accordingly.

Appellant/House Building Finance Corporation was aggrieved of not awarding of markup beyond period of agreement and other charges

Validity

Banking Court rightly declined claim of appellant/company in respect of markup beyond period of agreement as well as other charges which were sought to be included in the claim

High Court modified judgment and decree passed by Banking Court

Appeal was allowed accordingly.

Appellant/borrower in his petition for leave to appear alleged repayments to respondent/plaintiff conceding availing of finance facility in question and execution of security documents

Instead of throwing potent challenge through relying upon counter accounts, not even a single entry contained in statement of accounts annexed with plaint was challenged

Statement of accounts filed by respondent/plaintiff was in conformity with requirement of S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001, bearing certification at the foot under Bankers' Books Evidence Act, 1891

Petition for leave to appear failed to identify a challenge to principal amount or that the mark-up was exaggeratedly charged or was charged beyond contractual period

High Court declined to interfere in judgment and decree passed by Banking Court and decreed the suit as the same did not suffer from any legal infirmity

Appeal was dismissed in circumstances.

During pendency of suit appellant/Bank filed application for amendment in plaint, which was dismissed by Single Judge of High Court by holding that since principal debtor-company had already been wound up by the order of High Court, therefore, appellant/Bank could not be allowed to enlarge its claim against more respondents

Parties could not be permitted to go beyond what they had set up in their pleadings

During judicial proceedings neither any party could be allowed to adduce evidence in support of a contention not pleaded by it nor could the decision of case rest on such evidence

It was discretion of Court to permit or refuse amendment in pleadings

Court was not bound to allow amendment in all cases

Division Bench of High Court declined to interfere in judgment and decree passed by Single Judge of High Court

Appeal was dismissed, in circumstances.

Appellant/borrower was aggrieved of order passed by Trial Court dismissing application for grant of leave to defend the case

Plea raised by appellant/borrower was that his business partner was not arrayed as co-defendant

Validity

Appellant/borrower and his business partner availed finance facility from respondent/Bank for which property of appellant/borrower was mortgaged as security

Any person who made payment of markup under finance facility and at the same time denied having no connection with it was not setting forth a genuine defence

High Court refused to accept version of facts made by appellant/borrower when record had contradicted the same

Appellant/borrower did not raise any substantial, genuine defence on facts necessitating recording of evidence as involvement of appellant/borrower in transaction of finance was substantiated by payment made by him for adjustment of markup

No genuine dispute of facts if record did not support a finding in favour of appellant/borrower

Defence raised by appellant/borrower was neither genuine nor bona fide

High Court declined to interfere in the order passed by Trial Court

Appeal was dismissed, in circumstances.

No relationship existed between appellant and respondent bank as of customer and financial institution under Financial Institutions (Recovery of Finances) Ordinance, 2001

Appellant did not execute any guarantee nor stood as a mortgager in respect of such finance facility

Banking Court passed judgment decree jointly and severally against appellant as well, which was contrary to the factual and legal position

Respondent Bank while extending short term finance facility to its customer, did not take due care to secure amount and its repayment by getting necessary legal documents including a guarantee and instead of recovering defaulting amount from its customer, roped appellant in suit while treating appellant as customer (guarantor) on the basis of some letters and correspondence between the parties

High Court set aside judgment and decree passed by Banking Court against appellant, as the same was wrongfully passed by treating appellant as a customer in terms of S. 2(c) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Appeal was allowed, in circumstances.

Defendant according to S. 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001 was required to make application for leave to defend suit within thirty days after publication

Defendant, despite lapse of a month and sixteen days after publication had not filed any application for leave to defend which was otherwise beyond prescribed period of thirty days

Bank had fulfilled all requirements of Ss. 9(2) & 9(3) of Financial Institutions (Recovery of Finances) Ordinance, 2001 as statement of account and all charged documents were annexed with plaint

Neither defendant had filed leave application as required by Financial Institutions (Recovery of Finances) Ordinance, 2001 nor showed sufficient cause regarding his absence as well as non-appearance of his counsel when suit was fixed before Banking Court

High Court declined to interfere in judgment and decree passed by Banking Court as there was no illegality or material irregularity

Appeal was dismissed, in circumstances.

Appellants assailed the judgment and decree passed by Banking Court on the ground that the finance agreement was renewable on year to year basis and after execution of initial agreement for a year, the same was only renewed for the next year, therefore, claim of respondent relating to the period beyond that was not sustainable

Validity

Agreement of finance showed that the finance was availed for a period of three years and not for a period of one year

Appellants had failed to point out any entry in the statements of account that was incorrect or not supported by any document

Appellants had not claimed that any amount deposited by them was not reflected in the statements of account

Entries in statements of account showed that the appellants had availed the finance facility for about three years

Application for leave to defend had failed to raise any substantial question of law or fact requiring grant of leave to defend

Banking Court had rightly decreed the suit

Appeal was dismissed.

Customers were aggrieved of judgment and decree passed by Banking Court in favour of Bank for recovery of money by dismissing their leave to defend suit

Validity

Banking Court solely relied on tables provided by Bank in order to calculate and determine sum payable by customers to Bank while such tables did not corroborate or correspond to statement of account relied by Bank

Customers showed that amount claimed by Bank was decreed as prayed for but actually Bank wrongly claimed some amount being beyond contract period

High Court, in circumstances, modified judgment and decree passed by Banking Court by deducting the amount accordingly.

Plaintiff Bank filed suit for recovery of finance against defendants but did not append certified copy of statement of accounts

Validity

Bank was required to file such document in support of its claim which according to S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 included but was not limited to statement of accounts duly certified under Bankers' Books Evidence Act, 1891 and also by all other documents relating to grant of finances

Grant of leave to defendant revolved around statement of accounts which could only be basis for claim as made by plaintiff in plaint

In absence of such statement of account, claim could hardly be construed as an amount outstanding as statement of account was a crucial document which went to root of case which was mentioned in plaint but not available on record

High Court granted unconditional leave to defend suit to defendants as plaintiff was unable to rebut contention raised by defendants

Application was allowed in circumstances.

Plaintiff Bank had opportunity to seek condonation of delay from Banking Court under S. 24(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 however, it demonstrably failed to do so

High Court declined to interfere in order passed by Banking Court as same was elaborative of reasoning relied upon to arrive at conclusion stipulated therein and plaintiff Bank was unable to demonstrate any infirmity

Appeal was dismissed in circumstances.