Suit for recovery of finance facility

Respondent / bank did not implead all appellants / legal representatives of deceased borrower and Banking Court decreed the suit only to the extent of appellants / legal representatives

Validity

Suit was filed by respondent / bank against some and not all legal heirs of deceased borrower as per names of legal representatives disclosed by appellant / legal representative in power of attorney attached to appeal

Judgment and decree could not be enforced against those legal representative of deceased borrower who were not impleaded in suit before Banking Court and were not given opportunity of hearing notwithstanding that any claim of legal representatives on land of deceased borrower would be subject to the first lien (mortgage) of respondent / bank

High Court declined to interfere in judgment and decree passed by Banking Court in favour of respondent / bank, as the same was proper and based on facts and law which did not suffer from any illegality

Appeal was dismissed, in circumstances.

Appellant/judgment debtor was aggrieved of imposing cost of funds by Trial Court from the date of institution of the suit

Validity

When finance facility was for specified period and not only the finance facility but also due date of payment had expired then "date of default" would be the date when the facility and due date of payment had expired

No mark-up could be allowed after expiry of finance period and at best only cost of funds could be allowed

When finance facility and due date of payment of installments was still in field, then "date of default" was the date when financial institution triggered incident of default and had filed suit under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001, for customer "default" in fulfillment of financial obligations, provided the suit was decreed and not found to be premature

Last payment of installment in year 2016 against payment schedule valid till 2026 could not be treated as "date of default" for the purpose of cost of fund under S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Decree for cost of fund from institution of suit was not entirely adverse to appellant/judgment debtor

Finance facility was valid for period of 12 years and respondent/financial institution had the option to wait till expiry of said period and recover entire outstanding amount along with agreed mark-up

Respondent/financial institution filed suit earlier and had surrendered its claim of mark up from filing of suit till expiry of finance facility

Respondent/financial institution only claimed cost of funds as contemplated under S. 3 of Financial Institutions (Recovery of Finances) Ordinance, 2001, which was much less than rate of mark up in the house finance facility agreement

Appeal was dismissed, in circumstances.

Attorney holder was authorized through Special Power of Attorney executed in his favour by the President and Chief Executive of plaintiff Bank to institute the suit

Chairman of Board of Directors of plaintiff Bank appointed general power of attorney authorizing him to further delegate his powers authorizing him certain powers including the powers to take all requisite steps/actions in relation to legal proceedings of plaintiff Bank

Suit was instituted by competent person having requisite authority from President/CEO of plaintiff Bank under special power of attorney

Objection was rejected, in circumstances.

When a suit is filed under the Ordinance, the defendant, as provided by S. 10(1) of the Ordinance, shall not appear or defend the suit unless he obtains leave from the Court for this purpose

If the defendant does not apply within the period provided for filing an application for leave to defend, the allegations in the plaint shall be deemed to have been admitted and a decree shall follow

In the case of a suit for recovery instituted by a financial institution the application for leave to defend shall, under S. 10(4) of the Ordinance, also specifically state: (a) the amount of finance availed by the defendant from the financial institution; the amounts paid by the defendant to the financial institution and the dates of payments; (b) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit; (c) the amount if any which the defendant disputes as payable to the financial institution and facts

Under S. 10(8) of the Ordinance, the Court is empowered to grant the defendant leave to defend the suit, if on consideration of the contents of the plaint, the application for leave to defend and the reply thereto Court is of the view that substantial questions of law or fact have been raised in respect of which evidence needs to be recorded

Court, while granting leave, may impose conditions as it may deem appropriate in the circumstances of the case, including conditions as to deposit of cash or furnishing of security by virtue of S. 10(9) of the Ordinance.

Appellants had admitted the availing of finance facilities, execution of documents thereunder and renewal of finance facility

Appellants had failed to raise any substantial question of law and fact requiring grant of leave to defend enabling them to lead evidence in the matter

Appellants had not been able to show that the entries in the statements of account were incorrect and any payment made by appellants was not reflected in the statements

Petition for leave to appeal was rightly dismissed by the Single Judge of High Court

Appeal was dismissed.

Bank as per S. 9(3) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, while filing the suit was required to specify (a) the amount of finance availed by the respondents (b) amounts paid by the respondents with dates of payment and (c) the amount of finance and other amounts relating to finance payable by the respondents up to the date of institution of the suit but the plaint was silent relating to amount of finance

Bank had mentioned in the plaint only the due amount without mentioning that what was the actual principal amount and out of which how much payment had been made by the respondent and how the claimed amount was due and payable

Bank had not been able to show that the mandatory requirements of S. 9(3) had been properly followed and complied with, therefore, the suit filed by Bank failing to comply with the mandatory requirement of law was liable to be dismissed

Appeal was dismissed.

Section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 provided that plaint had to be supported by statement of accounts, duly certified under Bankers' Books Evidence Act, 1891

Statements of accounts initially appended with the plaint were prepared manually and although signatures of two officers were available on the same but certificate as required under S. 2(8) of Bankers' Books Evidence Act, 1891 was not appended

Said statements were not produced in evidence rather different statements of account which were neither relied upon nor appended with the plaint were produced in evidence, without seeking permission of the Court

Bank had not been able to show that the mandatory requirements of S. 9(2) had been properly followed and complied with, therefore, the suit filed by Bank failing to comply with the aforesaid mandatory requirement of law was liable to be dismissed

Appeal was dismissed.

Plaintiff, as per S. 9(3) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, while filing the suit is required to specify (a) the amount of finance availed by the defendant from the Financial Institution (b) amounts paid by the defendant to the Financial Institution with dates of payment and (c) the amount of finance and other amounts relating to finance payable by the defendant up to the date of institution of the suit.

Appellants challenged the validity of judgment and decree passed by Banking Court whereby suit for recovery filed by the Bank was decreed

Appellants appeared and filed application for leave to defend the suit with the stance that the Bank had illegally charged the mark-up in violation of terms and conditions of sanctioned advice

Validity

Appellants in their application for leave to defend had admitted the availing of finance facility from the Bank but the application for leave to defend was not as per S. 10(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001

Penal clause of S. 10(6), Financial Institutions (Recovery of Finances) Ordinance, 2001 came into play and the applicant's leave to defend was rejected when they failed to comply with the requirements of S. 10(4), Financial Institutions (Recovery of Finances) Ordinance, 2001

Bank had appended the agreement of financing, demand promissory note, letter of hypothecation, letter of guarantee and memorandum of deposit of title deeds with the suit and said documents were not rebutted by the applicants through any evidence, rather they admitted the availing of the finance facility

No document was produced by the applicants which showed any repayment of the amount due against the availed facility from the Bank

Banking Court had rightly passed the impugned judgment and decree while invoking the jurisdiction as envisaged in penal clause of subsection (6) of S. 10, Financial Institutions (Recovery of Finances) Ordinance, 2001 and dismissed the application for leave to defend

Order accordingly.

Single Judge of High Court had properly appreciated the controversy and rightly dismissed their applications for leave to defend as no substantial question of law and facts requiring recording of evidence was raised and application for leave to defend was not in consonance with the provisions of S. 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001 and was rightly refused

Single Judge of High Court had rightly relied upon the statement of accounts excluding a certain sum of amount as markup charged beyond the expiry period and decreed the suit against two of the appellants jointly and severally

Findings of Single Judge of High Court were in consonance with the material available on record and were well founded, warranting no interference

Appeal was dismissed to the extent of said appellants.

Appellants assailed judgment and decree passed by Single Judge of High Court and contended that although Single Judge of High Court held that guarantees executed by two of the appellants were continuing guarantees but failed to take into consideration that the finance agreements were subsequently renewed time and again; that the subsequent finance agreements did not mention the guarantees executed by said two appellants; that said two appellants were discharged from payment of the amount of finance as guarantors on account of novation of contract and that said appellants were entitled at least for grant of leave to defend the suit

Validity

Single Judge of High Court had referred to the continuing guarantees of said appellants but the judgment was silent as to the effect of renewal agreements, which only referred to continuing guarantee of another appellant but not of said appellants

Even the plaint was silent to that effect, which only referred to personal guarantees of said appellants up to the renewal agreement

Effect of the non-mentioning of the personal guarantees of said appellants was required to be determined while passing the impugned judgment

Said appellants were at least entitled for grant of leave to defend to establish that their guarantees were discharged

Division Bench of High Court allowed the appeal and applications for leave to defend to the extent of said appellants and remanded the matter to the Single Judge of High Court for further proceedings.

No illegality, irregularity, mis-reading or non-reading of evidence had been pointed out in the impugned judgment and decree passed by the Court below

Appeal was dismissed, in circumstances.

Plea raised by borrowers was that suit was not competently filed by plaintiff Bank, as there was no resolution of Board of Directors to file the suit

Validity

Any officer on behalf of financial institution who held a power-of-attorney could file a suit on its behalf, provided the power to file a suit was contained in the power-of-attorney

Borrowers failed to raise any factual dispute qua their liability requiring recording of evidence, therefore, High Court declined to grant leave to appear and defend the suit

Claim of plaintiff was fully established from documents and statements of account available on record

Suit was decreed in circumstances.

Suit was resisted by borrowers on the plea that bank had misappropriated pledge stock and claimed adjustment of misappropriated pledge goods

Banking Court decreed the suit in favour of bank with direction to return excess stock to borrowers

Plea raised by bank was that borrowers committed fraud with bank at the time of creation of pledge in its favour and borrowers had misappropriated pledged stocks

Validity

Where pawnee sued for recovery of debt allowed against security of pawned goods, the creditor was required to keep goods intact for returning the same to the pawner subject to natural wear and tear, who retained the right to redeem pledged goods unless sold after reasonable notice

Creditor could maintain its suit subject to adjustment of sale proceeds of the goods

Knowingly the Bank did not claim any shortage or replacement of pledged stock by borrowers

Bank filed plaint and did not mention facts alleging replacement or loss of pledged goods, when in reply to application for permission to defend the suit, Bank claimed that borrowers had replaced and removed pledged stock

Bank was duty bound to prove that they were the borrowers who misappropriated and replaced pledged goods of inferior quality which bank failed to prove

High Court declined to interfere in judgment and decree passed by Banking Court as the said court had thoroughly discussed evidence produced by parties

Appeal was dismissed in circumstances.

Plea raised by defendant company was that finance facility was secured against facility of hypothecation of stocks and not against pledge and if pledgor could not account for goods, it could not ask for return of money

Validity

Executing Court under S. 47, C.P.C. was fully empowered and competent to decide all questions regarding execution, discharge or satisfaction of decree

All objections by defendant regarding security of pledge could be adjudged at the time of execution of decree by Executing Court

Questions of accounting for and tracing of security of pledged stocks could also take place before Executing Court

Defendant company in its petition for leave to appear and defend the suit had nowhere specifically asserted that plaintiff bank mis-appropriated pledged stocks or that it failed to take care of pledged stocks as were required by it in terms of S. 151 of Contract Act, 1872

Petition for leave to appear and defend the suit was dismissed

Suit was decreed in circumstances.

Suit was resisted by borrowers on the plea that bank had misappropriated pledged stock and claimed adjustment of misappropriated pledged goods

Banking Court decreed the suit in favour of Bank with direction to return excess stock to borrowers

Plea raised by Bank was that borrowers committed fraud with Bank at the time of creation of pledge in its favour and borrowers had misappropriated pledged stocks

Validity

Where pawnee sued for recovery of debt allowed against security of pawned goods, the creditor was required to keep goods intact for returning the same to the pawner subject to natural wear and tear, who retained the right to redeem pledged goods unless sold after reasonable notice

Creditor could maintain its suit subject to adjustment of sale proceeds of the goods

Knowingly, the Bank did not claim any shortage or replacement of pledged stock by borrowers

Bank filed plaint and did not mention facts alleging replacement or loss of pledged goods, when in reply to application for permission to defend the suit, Bank claimed that borrowers had replaced and removed pledged stock

Bank was duty bound to prove that they were the borrowers who misappropriated and replaced pledged goods of inferior quality which bank failed to prove

High Court declined to interfere in judgment and decree passed by Banking Court as the said Court had thoroughly discussed evidence produced by parties

Appeal was dismissed, in circumstances.

Insurance company was impleaded as defendant along with borrowers by financial institution in suit for recovery of finance facility

Banking Court decreed the suit against all defendants including insurance company

Validity

Insurance company was not a customer of "financial institution" within the meaning of S. 2(c) of Financial Institutions (Recovery of Finances) Ordinance, 2001, in relation to any finance as defined in S. 2(d) of Financial Institutions (Recovery of Finances) Ordinance, 2001

No relationship of 'financial institution' and 'customer' existed between financial institution and insurance company, therefore, Banking Court had no jurisdiction to entertain or adjudicate upon suit against insurance company

Judgment and decree passed by Banking Court against insurance company was coram non judice, and the same was set aside

Appeal allowed in circumstances.