Recovery of finance

Loan advanced by bank to its employee was finance falling within statutory definition of "finance" under Financial Institutions (Recovery of Finances) Ordinance, 2001

It was prerogative of Banking Court to determine whether or not heads of claims which defendant / employee alleged to fall outside the scope of finance, actually did

Such judicial determination of what heads of claim constituted "finance" had been mandated by the Legislature to be determined by Banking Court alone and not High Court exercising its original civil jurisdiction (under general civil law)

Division Bench of High Court retuned plaint to plaintiff / bank to enable it to avail jurisdiction of Banking Court under Financial Institutions (Recovery of Finances) Ordinance, 2001

Appeal was disposed of accordingly.

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.

Appellant/borrower was aggrieved of cost of funds determined by Banking Court and included in decree passed in favour of respondent/financial institution

Validity

Cost of funds of financial institution payable under S. 3(2) of Financial Institutions (Recovery of Finances) Ordinance, 2001 were as certified by State Bank of Pakistan from time to time

There was no need for Banking Court to exercise its discretion and apply its own formula of cost of funds and not those certified by State Bank of Pakistan

Division Bench of High Court declined to determine rate of cost of funds of commercial banks and there was no basis provided for bifurcating period for which cost of funds was due and payable

High Court set aside the criterion adopted by Banking Court for calculating cost of funds

High Court set aside cost of funds imposed against appellant/borrower and remanded the matter to Banking Court for calculation afresh

Appeal was allowed accordingly.

No document was appended with the PLA (Petition for Leave to Appear) to dislodge the presumption of truth attached to the statement of accounts

Bank, in its reply had duly explained each and every entry

Said entries were either charges which were initially incurred by the bank for and on behalf of the appellant company and later recovered on the strength of the financing documents such as, valuation charges paid to the evaluator, payment to Advocate for legal opinion and payment of fee to SECP for registration of charges, etc

Some of the payments were regarding markup unpaid by the appellant which were debited from the principal account and credited into the separate markup account

Appeal was dismissed.

Pledged goods were seized by government authorities on the allegation that the goods were stored without proper registration

Plea raised by appellants/judgment debtors was that Bank could not recover financial facility until Bank had returned the stocks

Validity

Stocks were in possession of appellants/judgment debtors from where it was taken into custody by authorities

Such was duty of appellants/ judgment debtors to provide necessary details with relevant documents to the authorities in order to get back the custody of stocks

Appellants/judgment debtors failed to perform their duties therefore, they could not get benefit of their own wrongs

Banking Court had rightly decided such issue against appellants/judgment debtors, as there was no illegality, irregularity, mis-reading and non-reading of evidence while rendering such findings

Appeal was dismissed, in circumstances.

Appellant/defendant was granted conditional leave to appear and defend the suit subject to deposit of Bank guarantee in excess of amount claimed by plaintiff Bank

Appellant/defendant failed to deposit Bank guarantee and suit was decreed in favour of Bank

Validity

Appellant/defendant denied relationship of financial institution and customer between parties

Such was a substantial question that required evidence

Banking Court was not justified in imposing condition of furnishing Bank guarantee for amount exceeding that claimed in suit

Discretion exercised by Banking Court was improper and such condition was harsh

Appellant/defendant had already mortgaged his agricultural land with respondent/plaintiff as security

Judgment and decree in question was passed only as a consequence of non-fulfillment of harsh condition

At the time of grant of leave to defend the suit, imposition of condition was discretion of Court but such discretion was to be exercised judiciously according to facts and circumstances of case and condition, if any, should not be harsh

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

Appeal was allowed, in circumstances.

Petitioner was limited liability company which was aggrieved of placement of its name on defaulter list of Electronic Credit Information Bureau (eCIB) of State Bank of Pakistan for nonpayment of outstanding dues

Plea raised by petitioner was that nature of relationship between petitioner and respondent was pending adjudication

Validity

Held, there were no financial agreement regarding relationship between parties as "customer" and "financial institution" within meaning of Financial Institutions (Recovery of Finance) Ordinance, 2001 or otherwise

No security documentation existed purporting to secure any obligation that might have accrued

Placement of name of petitioner by State Bank of Pakistan on its defaulter list/eCIB prior to determination of very agreement in respect whereof a default alleged was unwarranted

High Court directed the State Bank of Pakistan to remove name of petitioner company from its defaulter list/eCIB under advisement to all financial institutions concerned

Constitutional petition was accepted accordingly.

Defendant assailed judgment and decree passed against it by Banking Court on grounds that suit was filed by a person not duly authorized by Bank

Validity

Power of Attorney was issued on behalf of Credit Administration Department and Legal Department and was duly executed by Chief Executive Officer of Bank who had authorized two officers of Bank to file suits for recovery of money and other purposes

Words appearing in Power of Attorney in recitals, i.e., 'on behalf of Legal Department or Credit Administration Department' were merely explanatory, contention that powers of attorney were issued on behalf of the Credit Administration Department and the Legal Department and not by the Bank, thus was negated

Supreme Court declined to interfere in judgments and decrees passed by two courts below

Petition for leave to appeal was dismissed in circumstances.

Defendant assailed judgment and decree passed against it by Banking Court on grounds that suit was filed by a person not duly authorized by Bank

Validity

Power of Attorney was issued on behalf of Credit Administration Department and Legal Department and was duly executed by Chief Executive Officer of Bank who had authorized two officers of Bank to file suits for recovery of money and other purposes

Words appearing in Power of Attorney in recitals, i.e., 'on behalf of Legal Department or Credit Administration Department' were merely explanatory, contention that powers of attorney were issued on behalf of the Credit Administration Department and the Legal Department and not by the Bank, thus was negated

Supreme Court declined to interfere in judgments and decrees passed by two courts below

Petition for leave to appeal was dismissed in circumstances.

Entire finance and security documentation was executed between parties and same was not denied or dispelled by or on behalf of defendants

Schedule attached to finance agreement which required repayment of entire amount by September, 2011, however, same did not materialize

High Court declined to interfere in judgment and decree passed by Banking Court as defendants were unable to identify any infirmity in judgment and decree passed by Banking Court in favour of the Bank

Appeal was dismissed in circumstances.

Petitioners were customers of Microfinance Institutions and they apprehended coercive measures to be adopted for recovery of finance

Validity

Microfinance Institutions were not deemed to be banking companies

Recoveries of loans could not be obtained under Financial Institutions (Recovery of Finances) Ordinance, 2001, by Microfinance Institutions through Banking Courts

High Court declined to issue directions merely on the basis of apprehensions and presumptions of parties

Microfinance Institutions stated that recoveries would be made through summary suit under O. XXXVII, C.P.C. and they were not harassing petitioners rather they would adopt proper procedure prescribed under the law

Constitutional petition being not maintainable was dismissed.

Advantage of amendment to Financial Institutions (Recovery of Finances) Ordinance, 2001 to bring their cases in Banking Court in Pakistan on ground that defaulter of loan/finance for time being was resident in Pakistan was subject to law of limitation

High Court in exercise of appellate jurisdiction set aside judgment and decree passed by Banking Court

Appeal was allowed in circumstances.

Sponsors, undertaking was an integral part of agreement and the same had to be read in conjunction with agreement entered between principal borrower company and Bank

Sponsors could not absolve themselves from the liability accruing and arising on principal borrower company to be its liability only

Sponsors were co-extensively liable to payout liability of principal borrower company

Terms of sponsors' agreement duly signed had to be read in conjunction with main agreement entered between principal borrower company and Bank

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

Appeal was dismissed in circumstances.

Bid offered by third person before High Court in response to offer made by judgment debtor on first date of hearing when they were confronted with provisions of O. XXI, R. 90, C.P.C. regarding 20% mandatory deposit had no legal effect as third person had no locus standi to participate in matching bid

Even judgment debtors had no right to maintain appeal before High Court on such score alone

Mandatory deposit of 20% could not be dispensed with on the plea of arrangement of a matching bid by a third person

High Court declined to interfere in the order passed by Banking Court dismissing objections filed by judgment debtor

Appeal was dismissed in circumstances.

Application for leave to appear and defend the suit filed by defendant was dismissed by Banking Court without giving any reasons

Validity

Non-giving of cogent reasons was a material irregularity which vitiated the judgment

Court to accord fair and proper hearing to person sought to be affected by its order and give sufficiently clear and explicit reasons in support of orders made by it

Banking Court dismissed application for leave to defend the suit without giving any reason, therefore, it was not a proper judgment and showed dereliction of duty and complete failure of exercise of jurisdiction

High Court set aside judgment passed by Banking Court and remanded the matter to decide application for leave to defend the suit afresh

Appeal was allowed in circumstances.

Before the sale was confirmed in favour of applicant, decree was set aside by Supreme Court and matter was remanded to High Court for decision on application for leave to defend

Plea raised by applicant was that he was entitled to confirmation of sale and issuance of sale certificate in his favour

Validity

High Court observed that in order to retain faith in court sales, it was imperative that confirmation of sale should not be made contingent upon ultimate fate of decree and until then, sale be kept in nebulous state but path of court auctions be clearly mapped and spelt out

No bar was placed under Civil Procedure Code, 1908, on execution of decree till it was finally decided

Specific provisions existed, especially in many decrees, which eluded to the fact that appeal would not operate as stay of proceedings under decree appealed from (O.XLI, R. 5 C.P.C.)

Likewise, no provision in C.P.C. empowered Executing Court to set aside sale of property validly sold if decree was reversed

Matter of sale having passed through conductor of auction proceedings shaped into a right to vest in auction purchaser to have sale confirmed in terms of O. XXI, Rr. 89, 90 & 91, C.P.C.

Right comprised in O. XXI, R. 69, C.P.C., related to stage when immovable property was not sold in execution of decree and it had to be exercised before 'the lot was knocked down', such was the stage where sale could be stopped

Notwithstanding, setting aside of decree by Supreme Court, proceedings for confirmation of sale of immovable property in favour of applicant would continue subject to objection petitions filed in terms of O. XXI, Rr. 89, 90 & 91, C.P.C.

Application was allowed accordingly.

Application for leave to defend filed by defendants was dismissed and suit was decreed against defendants by Banking Court

Plea raised by defendants was that Bank sought signatures on blank documents

Validity

Even if the defendants put their signatures on blank documents, even then defendants could not legitimately challenge legality and validity of those documents in view of the provisions of S. 20 of Negotiable Instruments Act, 1881, more so when defendants admitted availing of finance facilities, disbursement thereof to them and non-adjustment thereof by them

Defendants failed in raising any substantial question of law or fact, therefore, Banking Court was fully justified in dismissing application for leave to defend and decreeing the suit against them

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

Appeal was dismissed in circumstances.

Defendant while seeking finance facility from plaintiff Bank pledged shares owned by him, in a company listed in Stock Exchange

Defendant alleged that Bank and stock broker had illegally and fraudulently sold his shares at lesser price causing loss to his property

Plea raised by defendant was that before selling the shares, bank was to issue notice to him

Validity

Giving notice to pawnor was a mandatory requirement of law that had to be fulfilled before selling his pledged property

Obligation stood complied with if pawnor was served with a letter telling him about sale of his shares by pawnee, in case of non-compliance of terms of pledge-agreement

Regarding contents of such notice no hard and fast rule could be laid down and it was not necessary that such letter would contain actual date and place of intended sale

Only prerequisite was to convey reasonable information to pawnor about ensuing action in case he failed to pay the due amount and to afford him a reasonable time to redeem his pledged property

Mere non-activity of a stock broker at times did not mean that his particular dealing during that era was dubious or against the law

It did not in any manner lead to assume that by conducting transactions in question, the stock broker violated either call of his duty or committed offence of fraud as alleged by defendant

High Court declined interference in order passed by Banking Court

Appeal was dismissed in circumstances.

Defendant while seeking finance facility from plaintiff Bank pledged shares owned by him, in a company listed in Stock Exchange

Defendant alleged that Bank and stock broker had illegally and fraudulently sold his shares at lesser price causing loss to his property

Plea raised by defendant was, that before selling the shares, bank was to issue notice to him

Giving notice to pawnor was a mandatory requirement of law that had to be fulfilled before selling his pledged property

Obligation stood complied with if pawnor was served with a letter telling him about sale of his shares by pawnee, in case of non-compliance of terms of pledge-agreement

Regarding contents of such notice no hard and fast rule could be laid down and it was not necessary that such letter would contain actual date and place of intended sale

Only prerequisite was to convey reasonable information to pawnor about ensuing action in case he failed to pay the due amount and to afford him a reasonable time to redeem his pledged property

Mere non-activity of a stock broker at times did not mean that his particular dealing during that era was dubious or against the law

It did not in any manner lead to assume that by conducting transactions in question, the stock broker violated either call of his duty or committed offence of fraud as alleged by defendant

High Court declined interference in order passed by Banking Court

Appeal was dismissed in circumstances.