IN THE HIGH COURT OF SINDH KARACHI
First Appeal No. 99 of 2018
Mr. Justice Nadeem Akhtar
Justice Mrs. Kausar Sultana Hussain
Appellant : Ayub Raza
through Malik Muhammad Riaz Advocate.
Respondent No.1 : M/S Bank Al-Falah Limited
through Mr. Harchand Rai Advocate.
Respondent No.2 : Banking Court No.II, Karachi.
Date of hearing : 06.12.2018
J U D G M E N T
NADEEM AKHTAR, J. – Through this appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, (‘the Ordinance’) the appellant has impugned order dated 29.08.2018 passed by learned Banking Court No.II at Karachi in Suit No.580/2016, whereby the application filed by him under Section 12 of the Ordinance for setting aside the ex-parte decree passed against him in the said Suit filed by respondent No.1, was dismissed.
2. Relevant facts of the case are that the above Suit was filed by respondent No.1 on 30.05.2016 against the appellant under Section 9 of the Ordinance for recovery of Rs.1,277,478.94. It was the case of respondent No.1 that the appellant had committed breach of his obligations in relation to a house finance facility granted to him by respondent No.1. Summons were issued through all modes and since the appellant did not file any application for leave to defend, the Suit was ordered to be proceeded ex-parte against him vide order dated 22.08.2016, and eventually vide impugned judgment and decree dated 11.01.2017 and 27.01.2017, respectively, the Suit was decreed against him in the sum of Rs.1,277,478.00 along with cost of funds thereon from the date of filing of the Suit till realization. Costs of the Suit and a decree for sale of the mortgaged property were also granted to respondent No.1. Thereafter, Execution Application No.58/2017 was filed by respondent No.1 for execution of the above decree, which execution is stated to be pending before the learned Banking Court. In August 2017, the appellant filed an application under Section 12 of the Ordinance praying that the above ex-parte decree passed against him be set aside and the Suit be decided on merits. In his above application, it was pleaded by the appellant that at the time of filing of the Suit he was not residing at the address disclosed in the plaint ; his correct / current / latest address was not disclosed in the plaint by respondent No.1 despite the fact that respondent No.1 was fully aware of his correct and latest address ; before filing the Suit with his old and incorrect address, respondent No.1 itself had sent several letters to him at his new and correct address ; he was never served in the Suit ; and, he came to know about the ex-parte decree through the recovery officers of respondent No.1 when they started harassing him with the help of local police. The above application filed by the appellant was contested by respondent No.1 by filing counter affidavit. Through the impugned order dated 29.08.2018, the said application was dismissed by the learned Banking Court.
3. It was contended by learned counsel for the appellant that the appellant was an employee of the respondent No.1-bank since 11.04.2004 and during his employment he obtained a house loan of Rs.2,295,100.00 from respondent No.1 on 01.10.2012 ; he was removed from service on 12.02.2015 in an illegal manner without due process of law ; in view of such illegal removal from service, a Grievance Notice dated 08.05.2015 was sent by him to respondent No.1 which was replied to by respondent No.1 vide its reply dated 22.05.2015 ; and thereafter, on 29.05.2015 he filed an application under Sections 33(1) and (4) of the Industrial Relations Act, 2012, before NIRC against respondent No.1 which was contested by respondent No.1. It was pointed out by the learned counsel that in his above mentioned Grievance Notice and application before NIRC, the appellant had mentioned his current and latest address which was very much within the knowledge of respondent No.1 as reply dated 22.05.2015 to the Grievance Notice was sent by respondent No.1 at the same address, and his application before NIRC with the said current and latest address was also contested by respondent No.1. It was contended by him that despite having knowledge of the appellant’s said current and latest address, Suit was filed by respondent No.1 on 30.05.2016 wherein instead of disclosing the said current and latest address of the appellant, his old address was deliberately mentioned so that an ex-parte decree can be obtained against him in his absence. In support of his above contentions, our attention was drawn by learned counsel to the above mentioned Grievance Notice issued by the appellant, its reply by respondent No.1 and the application filed by the appellant before NIRC.
4. In order to justify the disclosure of the appellant’s old address in the Suit, it was contended by learned counsel for respondent No.1 that the said old address was given in the Suit as the same was provided by the appellant himself at the time of execution of the finance agreement and other documents, and he never intimated any change therein to respondent No.1. It was further contended by him that the Credit Department of respondent No.1, which had the old address of the appellant in its record, was/is responsible for maintaining the record of all the finance facilities granted by respondent No.1 ; whereas, it was/is the responsibility of the Recovery Department of respondent No.1 to initiate recovery proceedings against defaulters and to ensure recovery from them, and this department had communicated with the appellant at his new address and had also contested the appellant’s application before NIRC. He attempted to argue that both the above departments of respondent No.1 are separate and distinct entities, therefore, respondent No.1 was fully justified in disclosing the old address of the appellant in the Suit. He supported the impugned order and prayed for dismissal of this appeal.
5. We have heard learned counsel for the parties at length and have examined the material available on record with their assistance. It may be noted that it has not been denied on behalf of respondent No.1 that prior to the filing of the Suit, the appellant had communicated with respondent No.1 from his new address by sending a Grievance Notice dated 08.05.2015 therefrom and had also filed an application before NIRC on 29.05.2015 against respondent No.1 wherein the said new address was given in the title. It has also not been denied by respondent No.1 that the appellant’s above Grievance Notice was responded to by respondent No.1 vide its reply dated 22.05.2015 which was sent at the new address of the appellant, and the application before NIRC was also contested by respondent No.1. In addition to the above, a copy of letter / notice dated 03.04.2015 is available on record which was issued by respondent No.1 to the appellant at his new address calling upon him to pay the amount claimed therein. This letter / notice and the contents thereof have also not been disputed by respondent No.1. It is also not disputed that the Suit was instituted by respondent No.1 on 30.05.2016 i.e. after about one year from communicating with the appellant at his new address. Therefore, it is clear that at the time of filing of the Suit respondent No.1 was fully aware of the change in the address of the appellant, but instead of mentioning his new address in the title of the Suit, his old address was mentioned. Due to this reason, summons were issued at the old address of the appellant. We do not agree with the contention of learned counsel for respondent No.1 that the above mentioned two departments of respondent No.1 are separate and distinct entities, or respondent No.1 was not obliged to disclose in its Suit the new and latest address of the appellant. Respondent No.1, being a limited company and juristic person, is a single legal entity and is fully responsible and accountable for the actions, acts and omissions of all its departments and officers. After acquiring knowledge about the change in the appellant’s address and communicating with him at his new address, respondent No.1 was duty-bound to disclose his correct / new / latest address in the Suit, and particularly after issuing notice of demand dated 22.05.2015 at the new address of the appellant as noted above, respondent No.1 was not justified in filing the Suit against him with his old address. We are of the view that the above aspect of the case, which was vital for deciding the appellant’s application under Section 12 of the Ordinance, has not been appreciated by the learned Banking Court.
6. Section 9(5) of the Ordinance provides the procedure and modes of service of summons in a Suit filed under Section 9 of the Ordinance. It provides that on a plaint being presented to the Banking Court, summons in Form No.4 in Appendix ‘B’ to the Code of Civil Procedure or in such other form as may be prescribed from time to time, shall be served on the defendant (i) through the bailiff or process-server of the Banking Court, (ii) by registered post acknowledgement due, (iii) by courier, and (iv) by publication in one English language and one Urdu language daily newspaper. It is significant to note that except for publication in newspapers, all the first three modes have one distinctive and common feature that a written report / confirmation must come on record before the Banking Court to ascertain service or non-service of summons on the defendant, either through the bailiff and courier service or by acknowledgement due of the registered post. From the above, the intention of the lawmakers is clear that before proceeding further in the Suit, there must be sufficient and reliable evidence before the Banking Court in order to ascertain as to whether the summons were duly served upon the defendant or not, or if he had refused to receive the same. This opinion formed by us is fortified by the case of Mubarak Ali V/S First Prudential Modaraba, 2011 SCMR 1496, wherein the Hon’ble Supreme Court was pleased to hold that “It is only when the summons are duly served and service is held to be satisfactory by the Court, further proceedings in the suit could be taken, but in the instant case in our view the service upon the petitioner was not at all duly effected, therefore all the proceedings initiated or taken thereafter cannot have sanction of law hence are liable to be struck down / set-aside”. The case of Mubarak Ali supra decided on 04.01.2007 was followed by the Hon’ble Supreme Court in Civil Petition No.19-K/2009 (M/S Axle Products Limited V/S M/S Allied Bank of Pakistan Ltd.) decided on 10.02.2009.
7. Having already held that it was the duty of respondent No.1 to disclose in its Suit the correct and latest address of the appellant, we are also of the view that compliance of Sub-Section (5) ibid was not made in the Suit as the correct and latest address of the appellant was not mentioned in the summons nor were the summons issued at his said correct and latest address. We are also of the view that the principle that service duly effected through any of the four modes prescribed in Section 9(5) ibid is deemed to be valid service for the purposes of the Ordinance, can be applied only in cases where strict compliance of Section 9(5) ibid is made as provided therein and not where all the prescribed modes are not adopted simultaneously or where any one or more of them is found to be defective or incomplete. Therefore, service on the appellant in the instant case could not be deemed to be proper service in terms of Section 9(5) ibid merely on the basis of publication of summons in newspapers. Since the mandatory requirements of Section 9(5) ibid of issuing the summons at the correct and latest address of the appellant were not fulfilled, we are of the considered view that summons in the instant matter were not issued in the modes and manner prescribed in Section 9(5) ibid, and thus service on the appellant was not effected in a valid and proper manner as provided therein.
8. The impugned order was passed by the learned Banking Court on an application filed by the appellant under Section 12 of the Ordinance which provides that where a decree is passed against a defendant under Sub-Section (1) of Section 10 of the Ordinance, he may, within twenty one (21) days of the date of the decree or where the summons was not duly served when he acquires knowledge of the decree, apply to the Banking Court for an order to set it aside ; and, if he satisfies the Banking Court that he was prevented by sufficient cause from making an application under Section 10 or that the summons was not duly served, the Banking Court shall make an order setting aside the decree against him upon such terms as to costs, deposit in cash or furnishing of surety or otherwise as it thinks fit, and allow him to make the application within ten (10) days of the order. It was specifically pleaded by the appellant in his application under Section 12 of the Ordinance that his correct and latest address was not disclosed in the plaint and as such he was never served with the summons. Perusal of the impugned order shows that while dismissing the said application it was observed by the learned Banking Court that execution of charge documents and availing of finance facility was not denied by the appellant. The above observation was unjustified and uncalled for as it was not only irrelevant for the purposes of Section 12 of the Ordinance, but was also beyond the scope thereof. It may be observed that for deciding an application under Section 12 of the Ordinance, merits of the case or admission by the defendant cannot be looked into as the criteria for deciding such application is limited and has been specifically defined in Section 12 ibid. The learned Banking Court was required only to see whether the grounds urged by the appellant for setting aside the ex-parte decree fell within the scope of Section 12 ibid or not. The tenor of the impugned order clearly shows that the application filed by the appellant has not been decided in accordance with law.
9. In view of the above discussion and particularly the admitted position discussed above, the impugned order cannot be allowed to remain in the field. Accordingly, the application filed by the appellant under Section 12 of the Ordinance is allowed and the ex-parte order dated 22.08.2016 as well as the ex-parte judgment and decree dated 11.01.2017 and 27.01.2017, respectively, passed in Suit No.580/2016 are hereby set aside. The appellant / defendant may file an application for leave to defend within ten (10) days, as provided in Section 12 of the Ordinance, from the date of first hearing to be fixed by the learned Banking Court, after notice to parties, in pursuance of this judgment. If any such application is filed by the appellant, the same shall be decided by the learned Banking Court strictly in accordance with law.
10. Though the impugned judgment and decree have been set aside, however, before parting with this case it is necessary to observe that in the impugned judgment and decree cost of funds were granted by the learned Banking Court from the date of filing of the Suit till realization. In this context, it may be noted that grant of cost of funds from the date of filing of the Suit is not permissible under the Ordinance as cost of funds should be granted from the date of default as specifically provided in Section 3(2) of the Ordinance.
Foregoing are the reasons of the short order announced by us on 06.12.2018 whereby this appeal was allowed in the above terms with no order as to costs.
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