Suit for recovery of finances

Appellant / judgment debtor was aggrieved of dismissal of his objections regarding recovery of cost of funds prior to recovery of decretal amount

Validity

Execution of decree passed by Banking Court was governed by S.19 of Financial Institutions (Recovery of Finances) Ordinance, 2001, which contained no provision for applicability of explanation contained in S. 10(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001

No reference was made to application of such explanation in S.3 of Financial Institutions (Recovery of Finances) Ordinance, 2001, which prescribed duty of a customer to pay cost of funds of financial institution

Decree-holder bank erred in law in appropriating repayments made by judgment-debtors towards other amounts such as cost of funds instead of decretal debt on the pretext of applicability of explanation in S.10(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001

High Court set aside order passed by Banking Court as it was unlawfully approved

Appeal was allowed accordingly.

Bank filed a suit for recovery under S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 which was decreed

Decree stood converted into execution in terms of S. 19(1) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and proceedings for its satisfaction through auction of mortgaged property were initiated by the Banking Court

Appellant filed objection petition in terms of S. 19(7) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 with the averments that one-third of the mortgaged property belonged to her as per undertaking given by her ex-husband (mortgagor), who had concealed the same from the Banking Court, thus, the proceedings of auction were nullity in the eyes of law

Said objection petition was contested by the bank

Banking Court dismissed the objection petition vide impugned order

Validity

Admittedly, the mortgage by way of deposit of title deed(s) was effected in favour of the Bank, whereas, the appellant had asserted her rights on the basis of the undertaking, which was purportedly executed by the mortgagor about nine months after the creation of mortgage, therefore, appellant could not claim any right in the property free of encumbrance created through the mortgage

Rights of the appellant, if any, in the mortgaged property on the strength of the undertaking, was minus the interest that had been created by way of the mortgage in favour of the mortgagee/Bank

Banking Court had rightly proceeded with the auction of the mortgaged property for satisfaction of the decree passed in terms of the Financial Institutions (Recovery of Finances) Ordinance, 2001

Appeal was dismissed.

Plaintiff filed a suit for recovery of certain amount outstanding in respect of finance facilities availed by the defendant company

Validity

Defendant company, its directors and guarantor had admitted availing of the finance facilities

Contention of defendants regarding claim of markup made in the plaint by the bank had considerable force

With regard to the Letter of Credit facility, markup had been claimed

On the contrary, no such claim was raised in the plaint

What was due to the plaintiff was an amount of commission, which was fixed as flat 0.20% per quarter (LC pending only)

There was no basis for claiming an amount of markup on the facility of letter of credit

With respect to other finance facilities, any amount charged beyond the date of expiry of agreement was unlawful

No other issue was raised by the defendants which entitled them to the grant of leave to appeal

Application for leave to defend was dismissed

Suit was decreed against the defendant company, its directors and guarantor jointly and severally for a certain amount with costs of funds in terms of S. 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.

Defendants contended that the court lacked territorial jurisdiction for the reasons that finance facilities were extended to them at district 'H' and that the agreements pursuant thereto were also executed at 'ICT' and the district 'H', thus, the plaint was liable to be returned

Plaintiff contended that the registered office of the defendants fell within the territorial jurisdiction of the High Court

Validity

No doubt, the registered office of a defendant served as official address for legal and administrative purposes and determined the jurisdiction to which the firm was subject to but at the same time it is important to note that the registered office did not necessarily determine the sole basis for establishing jurisdiction, especially when the cause of action had arisen in a different city, such as the location of the contract execution

Finance facilities were extended to the defendants after execution of agreements at 'ICT' and district 'H', the defendants were residents of 'ICT' and district 'H', correspondence for applying and approving the finance facilities were made by the parties at 'ICT' and district 'H', mortgaged properties were situated at 'ICT' and district 'H', hence, the High Court had no territorial jurisdiction to pass any judgment and decree against the defendants

Plaint was returned to the defendants for presenting it before a Court of competent jurisdiction.

Simply by moving an application on the grounds of fraud and misrepresentation to cover his negligence to pursue the matter and to make an attempt to neutralize vires of judgment subsisting against borrowers would not protect them from the repercussion, which were bound to follow them

In absence of any convincing evidence, no misrepresentation or fraud could be alleged to have been contrived by respondent/Bank to obtain a decision in its favour, which came into being mainly due to failure of appellant/defendant to put up appearance before the Court in pursuance of the notices and summons issued to him

Banking Court considered material facts including settlement between the parties

Amount paid by appellant/defendant was deducted from the amount claimed by respondent/Bank

Nothing was available on the record, which could show that appellant/defendant while acting upon settlement reached between him and the Bank in year 2013 had either fulfilled terms of that settlement and/or had paid outstanding amount due against him to respondent/Bank

In absence of any proof in respect thereof, filing of application under S. 12(2) of C.P.C. lacked bona fide on the part of appellant/defendant

High Court declined to interfere in order passed by Banking Court as there was no concealment of facts and/or misrepresentation on the part of respondent/Bank as alleged by appellant/defendant

Appeal was dismissed, in circumstances.

Statement of account was duly verified under Bankers' Book Evidence Act, 1891 and entries therein were not consciously and lawfully disputed by defendants

Authority of person filing plaint on the strength of Power of Attorney was the question of doctrine of indoor management, that was concerned with authorization and was never considered as substantial question of law

Authorization from Power of Attorney was recognized in terms of S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 and on account of principle of Indoor Management, it was only the principal who could object to it

Defendants neither denied execution of agreement nor challenged authority to execute agreement with them on behalf of plaintiff bank

This was not a question of law that could form substantial question out of the pleadings in consideration of law of Financial Institutions (Recovery of Finances) Ordinance, 2001 and execution of documents in particular

Defendants availed two facilities i.e. Letter of Credit and Running Facility

High Court declined to grant leave to defendants and suit was decreed along with cost of funds in terms of S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Suit was decreed accordingly.

Plea raised by appellants / defendants was that charging of markup was not in accordance with Standard Banking Practice and Procedure as well as State Bank of Pakistan Regulations

Validity

Without appointment of competent and professional banker well conversant with banking practice and procedure and mode of charging of markup in accordance with terms and conditions of Sanction Advice/ Advices within the meaning of S. 5(8) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Controversy between parties could not be resolved merely on the basis of evidence so recorded before Banking Court

High Court set aside judgment and decree passed against appellants/defendants and remanded the matter to Banking Court for decision afresh after recording of evidence

Appeal allowed accordingly.

Recovery suit could be filed under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 against a borrower by Manager in his personal capacity as well and the same could not necessarily be accompanied by any power of attorney executed in his favour by Bank

Statement of accounts was system generated document and it was not to bear signature of attorneys of Bank

Such was a clear practice when such statements of accounts were prepared manually

Statement of accounts annexed with plaint was certified within the meaning of S. 4 of Bankers' Books Evidence Act, 1891, and was an authentic and valid document

Home loan was advanced to appellant/borrower and was secured through a memorandum of deposit of title deeds

For enforcing a suit of equitable mortgage, the time of limitation was 12 years from the time when a money sued for became due

Such was Art. 132 of Limitation Act, 1908 and recovery suit was filed well within time

High Court declined to interfere in judgment and decree passed by Banking Court, as there was no illegality, misreading or non-reading of record and evidence

Appeal was dismissed in circumstances.

Suit filed by Bank was decreed in its favour and defendants assailed the same on grounds that penalties awarded by Banking Court were illegal and were not agreed to be paid

Validity

Application for leave to defend filed by defendants and all objections/grounds urged therein by them were rejected by Banking Court

Banking Court was fully justified under S. 10(11) of Financial Institutions (Recovery of Finances) Ordinance, 2001, in proceeding forthwith passed judgment and decree in favour of Bank against defendants

Defendants failed in exporting goods on basis of subject finance facilities which were availed by them from the Bank

Provisions of State Bank of Pakistan PPRD Circular No. 44 dated 17-12-1998 in relation to export finance scheme specifically provided imposition of fine in case direct exporter who had obtained finance under Part IV of the Scheme failed to match his borrowing by his export performance

Bank was entitled only to purchase price agreed in agreement for financing; penalty or forced liability imposed by State Bank of Pakistan, markup on such penalty and cost of funds under S. 3(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001

High Court modified the judgment and decree passed by Banking Court

Appeal was allowed accordingly.

When copies of Bank statement or account were to be annexed with plaint those had to be properly certified by officer as required under Bankers' Books Evidence Act, 1891

Such was mandated for reasons that when same was presented before court in a recovery suit under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 it had attached to it some authenticity

Be it a computer printout or an extract or copy of an account was maintained manually by Bank, condition of its certification was mandatory in both situations

Nothing existed in Electronic Transactions Ordinance, 2002 which had dispensed with certification of document as required under Financial Institutions (Recovery of Finances) Ordinance, 2001, it only recognized that account/Bank statements could be maintained in an electronic form and condition of certification remained valid

Apparently statement of account filed along with plaint did not fulfil mandatory requirement as contemplated under S. 9(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Neither same were certified in manner as mandated nor it was brought on record that officers who signed same were competent to do so in law

Prima facie plaintiff Bank failed to meet such requirement at leave granting stage and same entitled defendants for grant of unconditional leave to defend suit as substantial question of fact and law was made out

Application was allowed in circumstances.

Application for leave to defend by the guarantor defendants was also dismissed in the circumstances.

Insurance company cannot be made party in a recovery suit.

Question of loss of pledged goods was not a dispute requiring recording of evidence if liability was otherwise not disputed or a serious and bona fide dispute in regard thereto was not raised by defending customer

If leave to defend was granted to defending customer on account of substantial dispute regarding liability claim of plaintiff Bank, the trial apart from determining the liability of parties would also be held in respect of loss of pledged goods

Defendants failed to raise any ground in their petition for leave to appear regarding liability claim set up by plaintiff Bank under different finance facilities warranting recording of evidence

Dispute regarding alleged loss of goods did not furnish a ground for grant of leave to defend which could be decided in execution proceedings

High Court declined to grant leave to defend the suit

Suit was dismissed in circumstances.

Defendant company filed application for grant of leave to appear and defend the suit and objected the maintainability of the suit on the plea that no resolution of the bank was filed with the plaint

Validity

Defendant which was a limited liability Company, it was all the more necessary for it to place with its petition for leave to appear and defend the suit, the current account statement or its accounts/audited accounts in order to meet requirements of S. 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001 particularly where it had denied availing the finance facility or disbursement of amounts thereunder

Plaintiff stated that plaint was filed through a person who was Branch Manager/Chief Manager which averment was not at all denied by defendants

Requirements of S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 were thus met with by plaintiff Bank and parties were not at issue on such fact

Defendants failed to raise any substantial question of fact requiring evidence, therefore, High Court declined to grant leave to appear and defend the suit

Suit was decreed in circumstances.

Defendant in his application to defend the suit, admitted that he made payment of 21 instalments and thereafter when Bank enhanced the rate of markup he stopped making payment to the Bank

Defendant made payment of his monthly instalments in pursuance to the schedule of repayment and thereafter committed default resultantly Bank filed a suit for recovery

Banking Court rightly declined leave to defend the suit and rightly disallowed amount of markup charged after the date of default

High Court declined to interfere in the order and decree passed by Banking Court

Appeal was dismissed in circumstances.

In application for leave to defend filed by defendants there was no rebuttal of statement of accounts and suit was maintainable

Certified statement of accounts was available on record and no entry of the same was challenged

Such statement of accounts appended with plaint was presumed to be correct

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

Appeal was dismissed in circumstances.

Application was filed on 26-8-2009 and was not accompanied by any application for condonation of delay, whereas application for condonation of delay was filed by defendant on 23-11-2010

Instead of giving plausible explanation or justification for delay, defendant insisted in his application for condonation of delay that his application for leave to defend the suit was not barred by time

Defendant sought condonation of 'alleged one day delay in filing of leave to defend application' by assuming that there was no delay of two days and by claiming that even delay of one day was an alleged delay

Validity

While seeking condonation of delay, defendant had to submit explanation for delay of each and every day

If each and every day's delay was not explained or justified in satisfactory and convincing manner, delay could not be condoned

For invoking discretionary power of High Court in order to condone delay, defendant had to show strong and solid grounds and also to explain delay of each and every day

Defendant did not attempt to explain or justify delay of two days

High Court declined to condone the delay

Allegations of fact in plaint disclosed subsisting cause of action against defendant and suit was maintained by all standards

Plaintiff was able to show that he was entitled to relief against defendant

If anyone of such conditions precedent for competent suit was lacking, plaintiff was not entitled to decree either under S. 10(1) and (11) of Financial Institutions (Recovery of Finances) Ordinance, 2001

Suit was decreed in circumstances.