Statement of accounts

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.

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.

Appellant / defendant was aggrieved of judgment and decree passed by Banking Court on the plea that statement of accounts produced by respondent / bank was not in compliance of S. 2(8) of Bankers' Books Evidence Act, 1891

Validity

Statement of accounts on the basis of which suit was decreed was disputed and could not be relied upon as it had become a case of evidence

Where defects in statement of accounts were pointed out, even on such score alone leave should have been granted by virtue of requirement of S.9 of Financial Institutions (Recovery of Finances) Ordinance, 2001

High Court set aside judgment and decree passed by Banking Court as the same was passed without looking at applicability of statement of accounts in that form

High Court granted leave to defend the suit and remanded the matter to Banking Court for trial in accordance with law

Appeal was allowed accordingly.

Scope-Defendant impugned order of Banking Court whereby its application for leave to defend was rejected and suit was decreed in favour of plaintiff Bank

Contention of defendant, inter alia, was that statement of account annexed by plaintiff Bank had various defects, which were pointed out in application for leave to defend, therefore the same ought to have been adjudicated upon

Validity

Statement of account furnished by plaintiff Bank had been properly bifurcated in two parts, showing withdrawals by defendant from time of first sanction of finance, and with some deposits as well and entries therein showed markup that had been charged from time to time, and recovery of the same had been made regular intervals

Such statement of account was prepared in accordance with banking practice and procedure, and certified per S. 4 of Bankers' Books Evidence Act, 1891

Challenge to such statement of account by defendant was merely perfunctory in nature and therefore leave to defend had rightly been rejected by Banking Court

Appeal was dismissed, in circumstances.

Scope-Defendant impugned order of Banking Court whereby his application for leave to defend was rejected and suit was decreed - Contention of defendant, inter alia, was that statement of account annexed by plaintiff Bank was defective and therefore impugned order was wrongly passed

Validity

Defendant could not point out any specific entry in statement of account which had been either wrongly entered therein or any markup which had been excessively charged and said statement of account was duly certified also

High Court observed that while suit was rightly decreed by Banking Court however, three specific debit entries in statement of account, which were charged by plaintiff Bank after expiry of finance, ought to have been deleted from decretal amount as same were made in disregard to standard banking practice and procedure

High Court modified the decree to extent of said entries

Appeal was partially allowed, accordingly.

Use of the words "the plaint shall be supported" preceding the words "duly certified statement of account" rendered the compliance of S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 as mandatory and non-compliance of essential requirements of the same would put the plaintiff liable to face consequences

For a Banking Court to assume jurisdiction, it must be established at the very outset that a relationship of customer and financial institution existed between the parties and "default" in respect of finance had been committed

Both "Financial Institution" and "customer" under Ss. 9(3) & 10(5) of Financial Institutions (Recovery of Finances) Ordinance, 2001 had identical statutory obligations not only to plead but to clearly state information regarding "finances availed" by a defendant, "repayments" made by him, dates thereof and amount of finance yet to be repaid

Scope of a suit under the Financial Institutions (Recovery of Finances) Ordinance, 2001 had been well-defined and controversies in a matter had been confined to matters of finance "availed", "claimed" and "disputed" amounts and facts in support thereof and trial before Banking Court had been restricted to "quantum of amounts" claimed and disputed

Banking Suit was therefore a suit for accounts and based on credit, debit and balances entries in books of accounts.

Application for leave to defend was not about mere denial of claim of (plaintiff) Financial Institution/Bank by raising routine and perfunctory objections vis-à-vis non-disbursement of finances and allegation of markup upon markup, but instead, accrual of excessive markup, if any

Held, such accrual of excessive markup should be clearly pinpointed and identified by the defendant/customer in the application for leave to defend.

Presumption vis-a-vis correctness of entries made in statement of accounts certified under S. 4 of the Banker's Books Evidence Act, 1891

Liability of customer

Scope

Presumption vis-a-vis correctness of entries made in statement of accounts which were duly certified under S. 4 of the Banker's Books Evidence Act, 1891, in absence of any opposition, challenge or denial; was not only attached to it, but amount due per said statement of account was deemed to be the correct liability of a customer in a suit for recovery under the Financial Institutions (Recovery of Finances) Ordinance, 2001.

Test for existence or otherwise, of a corresponding duty, either in contact (by way of implied term) or in tort, owed by a customer to check his monthly (or other periodic) Bank statements so as to notify the Bank of any items which were not authorized by him

Properly-worded clause in the finance agreement between a financial institution and customer could serve the purpose of a conclusive evidence clause and establish an estoppel in respect of a customer notwithstanding that there was no implied duty to check Bank statements by a customer.

Application for leave to defend by the defendants was allowed partially, and suit for recovery was decreed partially against the defendants, who were successors-in-interest of the original defendant (now deceased)

Contention of the defendants' inter alia was that the plaintiff Bank, while filing the suit, did not fulfil requirements of S. 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and that the statement of accounts issued by Bank was not according to law

Validity

Perusal of record revealed that predecessor-in-interest of the defendants had denied the availing of the loan but admitted the execution of documents by seeking exclusion of certain entries from the statement of accounts

Plaintiff Bank could not explain a discrepancy in the statement of account regarding charging of excess markup

Held, that the defendants were entitled for exclusion and deduction of said amount, and the same was deducted from the decretal amount

Appeal was allowed, accordingly.

Contention of defendants, inter alia was that the statement of accounts submitted by the plaintiff Bank contained incorrect entries

Validity

Perusal of record revealed that the statement of accounts, in the present case, was correct and that the plaintiff Bank had explained all objected entries and therefore the same did not suffer from any irregularity

Defendants were estopped from challenging the said statement of accounts after having received the same regularly from the time the account was opened by the defendants with the plaintiff Bank

Defendants had knowledge of the entries in the said statement throughout, which were never objected to by them before, therefore the defendants were estopped from now objecting to the same

Under normal banking practice, statement of accounts were mandatory for customers to receive and examine, and if there existed any discrepancy in the same, the Bank was to be informed

Under the Banker's Books Evidence Act, 1891 a statement of accounts had presumption of truth and under the law, said statements had to be presumed to be correct if not challenged by the customer after receiving the same regularly

Minor discrepancies in statement of accounts would not disentitle the plaintiff Bank to claim such amount

Suit was therefore, rightly decreed by Banking Court

Appeal was dismissed, in circumstances.

Statement of accounts signed by Vice-President (Finance) of plaintiff Bank are validly "certified" and is in compliance with the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001.

Statement of accounts is necessary to support claim of customer, either it is attached with plaint or embodied in body of plaint for a suit by a customer to be maintainable before Banking Court.

Despite service of process through all mode prescribed under law, defendants remained unrepresented and nobody filed application to seek leave to defend the suit

Plea raised by bank was that suit be decreed in terms of amount reflected in statement of accounts along with cost of funds, miscellaneous and EDS charges

Validity

Presumption of correctness was attached to entries made in certified statement of accounts but such presumption attached to statement of accounts was only to the extent that entries/figures made in statement of accounts were true per books of accounts

Merely on the basis of such presumption, bank's suit could not be straight away decreed as prayed

Bank, per break-up of liabilities given in certified statement of accounts also claimed/debited other charges and EDS charges but the same were declined for want of requisite documents and proof, as in absence of materials, vouchers etc. the same could not be granted

Payment of 'penalty' in the event of delay in payment of agreed purchase price was prohibited in Islamic System of Finance read with in juxtaposition of State Bank of Pakistan BCD Circular No.32, dated 26-11-1984

High Court declined markup beyond the date of expiry of finance agreements, as it could not be allowed

Even in absence of leave to defend application in terms of S.10(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001, courts were supposed to do justice and not perpetuate injustice

Jurisdiction vested in courts was to advance cause of justice instead of causing miscarriage of justice

High Court decreed the suit in favour of plaintiff bank and against defendants including cost of funds in terms of S.3(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Suit was decreed accordingly.