Recovery of loan amount

Respondent / plaintiff sought specific performance of agreement to sell on the plea that petitioner / defendant failed to repay his loan

Both the Courts below concurrently passed judgments and decrees in favour of respondent / plaintiff

Validity

There was no evidence on record relating to market price of suit property

Such fact escaped attention of both the Courts below that they were dealing with specific performance of agreement which, prima facie, was vague in terms of market price of the property

Jurisdiction of Court to grant relief of specific performance as provided under S.22 of Specific Relief Act, 1877 is discretionary in nature and Court is not bound to grant such relief merely because it is lawful to do so

Court in appropriate circumstances can grant compensation as provided under S.19 of Specific Relief Act, 1877

High Court in exercise of revisional jurisdiction directed petitioner / defendant to repay to respondent / plaintiff the amount of actual loan obtained by him

High Court further directed petitioner / defendant to pay additional compensation of Rupees one million over and above the actual amount keeping in view inflation

High Court modified judgments and decrees passed by two Courts below

Revision was allowed accordingly.

Bank not required to show disbursement under re-scheduled agreement and not entitled to claim mark-up in absence of specific agreement

Defendant not entitled to raise objection to the power of attorney of Bank after admitting Bank's claim

High Court decreed the suit only to the extent of principal outstanding amount.

Defendant-company contended that Demand Finance facility had been created for the purpose of adjusting the Finance against Packing Credit FAPC (Finance against packing credit) facility and FAFB (finance against foreign bill) facility; and that the only amount due and payable was the amount against the Demand Finance facility, as according to the last entry in the statement of account, the liability with regard to the FAPC facility had been shown as Nil balance and in the statement of account, the Demand Finance facility had been shown as adjusted and no withdrawal had been shown; that the claim regarding FAPC facility and FAFB facility was therefore unlawful, and that no actual disbursement had taken place

Plaintiff-Bank contended that the FAPC facility and a portion of FAFB facility had been converted into the Demand Finance facility, and that said restructuring substantiated the Bank's claim with regard to the Demand Finance facility and FAFB facility separately, and that the last entry in the statement of accounts was marked as Nil for the reason that the amounts had been transferred to a new account, which was described as non-performing loan account

Validity

Facility offer letter with regard to the renewal and restructuring of certain finance facilities was already being availed by the defendant-company; some of those facilities were fresh facilities, whereas, the others were merely renewed or restructured so as to enable the defendant to repay the amounts already due from them, and which had not been paid in terms of the obligations cast upon them by way of the earlier finance agreements

Bank's claim with regard to its claim in respect of FAFB facility and FAPC facility was supported by the concise statement of account attached with the plaint, which had been validly and properly been explained by the plaintiff-Bank

Claim with regard to the Demand Finance facility was separate claim, which had been admitted by the defendant-company

Facility offer letter, the finance facilities had been renewed and restructured as a result of the arrangement reflected in said facility offer letter, which merely meant that in respect of existing entries certain adjustments had been made and for the purpose book entries had been made which were in contemplation of the contracting parties, and disbursement of facility was not necessary in said cases

Defendant, at the time of grant of renewal and restructuring of the facilities under the facility offer letter, were aware of the nature of the facilities being granted and also that for the purposes of the restructuring of those facilities, certain book entries would have to be made and adjustments of the earlier outstanding dues would also be part of the restructuring agreement

Chief Executive of the defendant-company had written a letter to the Bank, whereby, the defendant had admitted the finance facilities having been availed by them form the Bank and certain amount outstanding and due to the bank, and they also made a request to reschedule the credit line

Admission made by the defendant in the said letter was sufficient to hold them liable for the repayment of the amount mentioned in the letter

Defendant had failed to raise any substantial question of fact or law in their application for leave to defend

Suit for recovery was decreed in circumstances.

Statements of account along with certificate under S. 4 of Bankers' Books Evidence Act, 1891 was admissible per se, unless the same was objected or the account holder pointed out any discrepancy and rebutted the same

Statements of account in question were held to have been issued/certified validly.

Word 'Branch Manager' had been used in S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001, and if the plaint had been signed or instituted by the Branch Manager, no power of attorney was required

Plaintiff had mentioned in the suit that same was being filed through Branch Manager and in the verification of the plaint, the Assistant Vice President/Manager of the Bank had affixed her signatures

Assistant Vice President was a designation in Banks, and Assistance Vice President might be the Manager of any branch of the Bank

Said signatory of the plaint disclosed that she was Manager of the Main Branch of the Bank and her designation was Assistant Vice President

Plaint was held to have been filed signed/filed by authorized person.

Trial Court, disallowing the claim of mark-up, decreed the suit for the amounts of Running Finance Account and amount due on Letters of Credit

Validity

All Letters of Credit had been opened on the request of the company

Application for opening an irrevocable letter of credit had been duly signed by the Managing Director of the company

Defendants had also signed trust receipts, which had established beyond any shadow of doubt that the Letters of Credit had been opened for importing the goods

Defendants had requested the delivery of goods without making payment against the trust receipts when the goods had reached, and the Bank had delivered the goods imported under the Letter of Credit

Company had accepted the Bill of Exchange drawn under different Letters of Credit

Bank, after handing over the documents of title of the imported goods to the defendants against the trust receipts, had created Forced Finances (PAD)

Bank had allowed Export Re-finance to the defendants on their request, and the statement of account also showed disbursement of the amount of Export Re-finance to them

Defendants could not raise any legal or factual question, which could require recording of evidence

Appeal was dismissed in circumstances.

Question before the High Court was as to whether release of pledged stocks by the plaintiff-Bank to the defendants/ principal debtor had discharged the defendants/guarantors from their liability as guarantors

Guarantees executed by the defendants showed that permission had been granted to the Bank by the terms of the guarantees to deal with the securities of the principal debtor without reference to the guarantors

Deed of guarantee showed that the scope of liability of the guarantors had been defined in extremely broad and wide terms, the effect of which was not to discharge the guarantor of his obligations or liability, particularly, if there had been some material variation in the principal debtor's obligation or where the creditor had dealt with the securities offered by the principal debtor

Defendant/ principal debtor had approached the Bank with the request to release the pledged stocks as according to him the stock was losing its value and sought permission to sell the same for repayment to the Bank of the amount under the Case Finance (pledge) Facility, and the Bank had released the pledged stocks after the defendant had executed the trust receipt, after which the defendant had been paying amounts to the Bank for certain period

By releasing the pledged stocks and getting payments in return, the Bank could not be said to have lost or parted with the security, which could, in turn, affect discharge of the surety under S. 141 of Contract Act, 1872

Actions of the Bank in releasing the pledged stocks to the defendant and getting money in return was not inconsistent with or rendered nugatory to the rights of the surety in any manner whatsoever

By releasing the pledged stocks, the Bank had not impaired any of the rights or remedies of the defendants/guarantors against the principal debtor

Defendants/principal debtors had not pleaded in their applications for leave to defend that the transaction, through which the pledged stock had been released, was in any way mala fide or the stocks had been sold for a lesser value or the same was the result of fraud

In view of the express stipulations in the deeds of guarantee executed by the defendants/guarantors, any reliance on S. 141 of Contract Act, 1872 was entirely futile and of no avail to them

Defendants had not met the requirements of S. 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001, as they had not furnished the details of the availing and repayments of the amounts as alleged in their applications for leave to defend

Appeal was dismissed in circumstances.

Board of Directors of the plaintiff-Bank had passed resolution authorizing two of its officials to execute power of attorney in favour of different officers of the Bank

Said Bank officials had executed the power of attorney in favour of the Bank officials, who had signed plaint in the suit

Suit had, therefore, been competently filed by said authorized representatives of the Bank

Documents available on record contained all necessary details along with the amounts disbursed, amounts repaid and the balance amount recoverable from the defendants

Defendants had admitted to have availed the facility as alleged by the Bank and had not denied signing/execution of any of the documents

Only defence taken in the application for leave to defend was that the finance and security documents had been obtained by fraud, misrepresentation or deception

Defendants, however, continued to operate their accounts and utilized the facilities granted to them by the Bank during years from 2005 till 2010, but they had neither challenged any of the documents nor approached any court of law with the allegation that they had been adverted into signing or executing any of the documents in favour of the Bank

Defendants had mortgaged their property not only by way of deposit of original title documents of the property but also by executing registered mortgage for token amount in favour of the Bank, but the defendants had not agitated the matter before any court that the mortgage had been fraudulently created and the original title documents had fraudulently been obtained

Sum of Rs.195 Million allowed to the defendants by the Bank represented the principal limit of the facility which the defendants had been allowed to avail; however, the Bank had never promised, nor had the defendants attempted to withdraw the entire amount in one go

Essence of 'running finance facility' was that while remaining within principal limit of the facility, the customer was allowed to withdraw the amount according to his business requirements and repay the amount from time to time, of which the Bank maintained the record

Amount repaid could be utilized towards payment of the principal as well as mark up; for the same reason, the Bank maintained two different accounts, one for disbursement and recovery of the principal and the other for accrual and repayment of markup

Statement of account in question contained date-wise debit and credit entries, which had been maintained in the regular course of business

Statement of account had been duly verified in accordance with the provisions of Bankers' Books Evidence Act, 1891, and the same therefore, carried the presumption of truth

Amount of Rs.75 Million was agreed to be kept in the lien account, and the defendants were entitled to receive return on said amount at the agreed rates

However, the essence of the Bank's right on the lien account was that in case the customer defaulted, the Bank had the right to exercise its right of lien and adjust the amounts kept under its lien to recover its dues; the Bank had adjusted said amount in exercise of its right of lien

Petition for leave to defend raised no substantial question of law or fact, which could require recording of evidence

Averments made in the plaint were deemed to have been admitted

Suit was decreed in circumstances.

Defendant contended that failure to sell the shares resulted in the cumulative loss which needed to be set off against present claim of the Bank

Validity

Set off could not be claimed in the application for leave to defend, and the same could only be claimed in written statement filed under regular suit under S. 9, C.P.C.

Banking Court exercised its jurisdiction under the special law and special procedure had been prescribed regulating the suit filed under the law; normal and recognized mode of trial was not applicable to the suit filed under the special jurisdiction of Banking Court

Application for leave to defend had to be seen on its own merits and the substantial questions of law raised therein had to be weighed without recourse to any claim of set off set up by the defendant

However, whether the plaintiff-Bank had acted prudently and with commercial sense could legitimately be put forth as ground for the grant of leave to defend

¬-Defendant's plea, that under the Contract Act, 1872, he was entitled to the set off as the Bank had failed to fulfil its obligation to sell the shares, was misplaced and erroneous

Bank had been authorized to sell the pledged shares in terms of the agreement, but the same did not mean that there was corresponding duty of the Bank, either under the terms of the agreement or under the general law of contract to sell the pledged shares under certain conditions

Section 176 of Contract Act, 1872 conferred right on the Pawnee to bring suit against the pawnor upon the debt or price if the pawnor made default in payment of the debt or performance of the promise at the stipulated time; at the same time, the Pawnee might retain the goods pledged as collateral security

Section 176 of Contract Act, 1872 also gave right to the Bank to sell the goods pledged on giving the pawnor reasonable notice for the sale

Said rights gave alternate remedies which the Bank might exercise at its discretion

Goods which had been pledged with the Bank were shares and stocks, which were traded in the stock market

Shares had a value attached to them, and the value was not constant and the same fluctuated with the currents of the market

Shares, as a commodity, were susceptible to ebbs and flows in value and could not be equated with perishable goods

Value of the shares might be much higher at that point of time, as the shares might have recovered the value that had lost during the crash of year 2008; for the same reason, the Bank did not make the commercial decision of selling the shares at the time when the capital markets were at their lowest ebb

Defendant had not produced any correspondence with the Bank at the relevant time calling upon the Bank to off load the shares and sell the same in order to recover the debt owed to the Bank

No duty was cast upon the Bank to sell the shares at any cost under given circumstances, and the Bank had the option to bring the suit and to retain the pledged shares as security

Defendant failed to raise any substantial questions of law and fact

Application for leave to defend was dismissed and the suit decreed in circumstances.

Any lacuna left at time of filing of plaint could not be cured and/or rectified at time of filing of replication in answer to the leave to defend application, as in such situation the defendants would not have the opportunity to rebut the new built-up case and/or challenge other documents suitably if the same were brought on record through replication

Mandatory requirement of S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001, in no way, could be postponed or otherwise cured subsequently by way of replication

Opportunity provided to a Financial Institution, in terms of S. 10(7) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was a limited opportunity to the extent of reply only in answer to the leave to defend application.

Contract Act, 1872 and any other law did not provide anything which might prohibit the parties from varying and/or altering the terms of the original contract by executing a new contract on basis of mutually agreed terms and conditions

Novation/substitution of the old contract by new one for rescheduling, restructuring and/or renewal of facilities was permissible upon fresh terms and conditions if the same were mutually and voluntarily agreed upon between the parties

Financial security documents including the Musharaka Investment Agreement in question thus were not only valid but the same were also absolutely binding upon the parties thereto on basis of the promissory estoppel in terms of Art. 144 of Qanun-e-Shahadat, 1984.

Defendants raised the objection that present suit was based on blank documents, which had been later filled-up by the plaintiff-Institution at the time of filing of the suit

Validity

Musharaka Investment Agreement was not only coupled with Promissory Note, but the same was duly filled with dates and figures

Defendants had duly signed all other documents available on record besides duly filled-up dates and figures etc.

Defendants had failed to specifically deny their signatures on the documents annexed with the plaint

Defendants, at no earlier stage or at time of signing of the documents had recorded any protest, which ex-facie meant that all the documents annexed to the plaints had been duly filled-up with date/dates and figures

Defendants, having acted upon the documents and availed the financial facility, could not deny the document at present stage

Objection was repelled in the circumstances.

Defendants raised the objection that in presence of arbitration clause in Musharaka Agreement, the matter was to be decided by an Arbitrator exclusively and not by the Banking Court

Validity

Financial Institutions (Recovery of Finances) Ordinance, 2001 was special law and the provisions thereof had the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force

Under S. 7(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001, no court other than Banking Court would have or exercise any jurisdiction whatsoever with respect to any matter to which the jurisdiction of Banking Court had been extended under the Ordinance

Reading S. 7(4) in juxtaposition of S. 4 of the Ordinance, even a decision as to the existence or non-existence of finance also fell exclusively within the jurisdiction of Banking Court

Arbitrator under S. 7(4) of the Ordinance did not exercise colourful jurisdiction regarding existence and/or non-existence of finance

Word 'otherwise' in S. 7(4) of the Ordinance was to be given restricted meanings, the word not only extended to the existence, non-existence of loan or finance, but the same also embraced a decision in relation to the dispute regarding the Musharaka Investment Agreement and/or implementation thereof

Dispute in question, since pertained to the recovery of the outstanding amount on account of finance facility granted to and availed by the defendants, exclusively fell within the jurisdiction of Banking Court

None of the parties to the suit, at any stage, even otherwise, had tried to invoked the arbitration clause

Objection was repelled in the circumstances.

Defendant raised the objection that person who had signed and verified the plaint was not holding any proper Power of Attorney and/or any resolution of the Board of Directors of the plaintiff-financial institution

Validity

Under Ss. 196 & 197 of Contract Act, 1872, where acts were done by one person on behalf of another, but without his knowledge or authority, he might elect to ratify or to disown such acts; and if he ratified, then the same effect would follow as if all those acts had been performed by his authority

Such ratification might be expressed or implied in the conduct of the person on whose behalf the acts had been done

In case suit was filed by a person having no authority, the principal could later on ratify the defect

Authority of the agent was to be effectively challenged by the principal and not by anybody else

Under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001, the plaint, in case of a Financial Institution, was to be verified on oath by the Branch Manager or such other officer of the Financial Institution as might be duly authorized by Power of Attorney or otherwise

Word 'otherwise' referred to in S. 9(1) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was not to be given restrictive meanings

Word 'otherwise' embraced, apart from the 'Power of Attorney', any other documents that were Special Power of Attorney, and/or Letter of Authority/Board of Directors' Resolution, on the strength whereof, a person became competent to verify the plaint on oath and also to institute the same in Banking Court

Person, who had verified the plaint of the suit was duly constituted attorney of the plaintiff-institution

Objection was repelled in circumstances.

Defendants raised the objection that no cause of action had been accrued to the plaintiff-Institute to file present suit

Validity

Banking Court had observed that cause of action was bundle or totality of essential facts, which plaintiff prior to succeeding was required to prove

Plaint showed and established that cause of action for filing of present suit had arisen at place "K" on the dates referred in the plaint, when various finance and security documents were signed and executed by the defendants

Defendants' objection, being misconceived and misleading, was repelled in the circumstances.

Defendants, principal debtor and mortgagors, raised the objection that dismissal of the suit against the guarantor on statement of plaintiff-Institute on basis of compromise agreement had caused prejudice to them

Validity

Compromise Agreement in question, on basis of which the suit had been dismissed against the defendant-guarantor, had been executed between the plaintiff-Institute, defendant-mortgagor and said defendant-guarantor

Defendant-mortgagor, being not only the sole proprietor of the defendant-principal debtor/concern but the duly constituted attorney of the other defendant-mortgagor, could not raise any objections in relation to said tripartite compromise agreement

Order of dismissal of the suit in question having not been challenged by the defendants, the same had already attained finality

Objection was repelled in circumstances.

Defendants raised the objection that the suit was not maintainable as the same had not been filed in accordance with S. 9(3) of Financial Institutions (Recovery of Finances) Ordinance, 2001, and that the statement of account had not been prepared in accordance with Bankers' Books Evidence Act, 1891

Validity

Certified Statement of Account annexed with the plaint not only contained the dates but also debit, credit and balance entries therein

Statement of Account also bore the requisite certificate

Statement of Account had been duly signed by the Vice President and Chief Financial Officer of the Plaintiff-Institute, and rubber stamp had also been affixed thereon

Objections was repelled in circumstances.

Defendants raised the objection that present recovery suit was a counter-blast to the suit already filed by them against the plaintiff-Institution, and that the defendants were, therefore, entitled to the grant of leave to defend present suit

Validity

Plaintiff-Institution had the power to sell the mortgaged property in terms of the Musharaka Investment Agreement

Mere filing of suit against the right of the plaintiff-Institution to sell the mortgaged property, which belonged to the defendants, who had not only executed mortgage deed but also Memorandum of Deposit of Title Documents, could not be alleged to have been a counter blast

Defendant, by merely filing the suit, also did not become automatically entitled to the grant of the Leave to defend the suit

Under S. 9(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001, provision of S. 11, C.P.C. did not have application to and regarding the suits filed under Financial Institutions (Recovery of Finances) Ordinance, 2001

Objection was repelled in the circumstances.

Defendants raised the objection that after incorporation of Art. 10-A of the Constitution, fair trial and due process had become a fundamental right, which includes right to grant of leave to defend the suit

Validity

Under Art. 4 of the Constitution, no action, detrimental to the life, liberty, body, reputation or property of any person would be taken except in accordance with law

Article 10-A of the Constitution not only ensured fair trial but also due process but in accordance with law, which in the present case was Financial Institutions (Recovery of Finances) Ordinance, 2001

Articles 4 & 10-A of the Constitution were necessarily to be read in juxtaposition of each other

One provision of the Constitution could not be struck down and/or diluted on the basis of another provision of the Constitution

In the present case, not only due process, but also fair trial, had been provided to the defendants under Financial Institutions (Recovery of Finances) Ordinance, 2001

Objection, being misconceived and misleading was repelled, in circumstances.

Liability of the guarantors was co-extensive with that of the principal debtor, unless otherwise was provided in the letter of guarantee

Anything done or promise made for the benefit of the principal debtor was sufficient consideration

Letter of guarantee, in spirit, was a contract to perform the promise or discharge the liability of a third person, however, as and when default occurred

In an action initiated by a creditor against the principal borrower/customer, and guarantors, the creditor was only required to establish the liability of the principal debtor and occurrence of default as well

Defendants, under Ss. 126, 127 & 128 of Contract Act, 1872 and under the terms and conditions of the letter of guarantee, being guarantors, were liable to liquidate the liability/dues outstanding against the defendant/principal debtor, as their liability was co-extensive.

Defendants denied their liability to the claim filed by the plaintiff-Institute on ground that the same was false and frivolous, as the registered mortgage created by defendant in his capacity as duly constituted attorney was not enforceable under the law and the letters of guarantees had been signed in blank

Validity

Under S. 2(e) of Financial Institutions (Recovery of Finances) Ordinance, 2001, Bank's customers were not only under legal obligation and duty bound to perform and fulfil their undertakings and promises in relation to repayment of the outstanding amount of the finance facility granted to and availed by the defendant but also in respect of all other amount relating to mark-up charges etc.

Musharaka Finance Agreement in question was also coupled with promissory notes

Under S. 118 of Negotiable Instruments Act, 1881, presumption of truth was attached to the promissory note

Presumption attached to a negotiable instrument is not only statutory but also mandatory in nature

Such presumption ex-facie could not be dispelled in absence of any solid proof

Defendants had not specifically denied their signatures on the financial and security documents including the promissory note, and had only pleaded that the same had been obtained in blank and/or otherwise, the same were without consideration

Defendants were, therefore, liable to pay and liquidate the outstanding amounts as per Musharaka Finance Agreement

High Court, refusing leave to defend application and decreed the suit.