Judgment Sheet

IN THE HIGH COURT OF SINDH, BENCH AT SUKKUR

Ist Appeal No. D – 22 of 2017

Ist Appeal No. D – 23 of 2017

 

Before :

Mr. Justice Muhammad Shafi Siddiqui

Mr. Justice Rasheed Ahmed Soomro

 

 

Date of hearing                    :           16.01.2019.

 

Date of judgment                 :           30.01.2019.

 

 

Mr. Mukesh Kumar G. Karara, Advocate for the appellants.

Mr. Hassan Akbar, Advocate for respondent No.1.

Mr. Sikandar Ali Junejo, Advocate for respondent No.7.

Mr. Muhammad Mahmood Khan Yousfi, Deputy Attorney General.

 

 

J U D G M E N T

 

MUHAMMAD SHAFI SIDDIQUI, J. – These appeals impugn an order passed in Banking Suit No.262 of 2000 under Section 12(2), CPC.

2.         Brief facts of the case are that the suit bearing No.262 of 2000 was filed by Habib Bank, Daharki Branch for the recovery of outstanding loan against respondents / defendants as under:

1)         M/s New Madina Cotton Ginners, Jhuley Lal Cotton Factory, G.T. Road Daharki, District Ghotki.

2)         Taj Din son of Chand Khan

3)         Ghulam Rasool son of Taj Din

4)         Muhammad Hussain son of Taj Din

5)         Ali Hassan son of Faqir Muhammad

6)         Haji Mehar Din son of Chand Khan

3.         By way of an amended title, the two sets of defendants / appellants i.e. Munawar Ali Malik, Jam Abdul Ghaffar Khan, Jam Naeem Ahmed Khan and Jam Faheem Ahmed Khan as one set and another set of defendants / appellants namely Kirshan Das, Shirimati Bebi Bai, Bhawan Das and Gurdas Mal Bai were impleaded as necessary and proper party. These appellants / defendants filed application to defend the suit. The order available on record dated 05.04.2006 passed in the suit whereby issues were framed, shows that the leave was granted by consent of the parties vide orders dated 10.01.2003 and 19.12.2005, which fact is not denied, and following issues were framed:

1.   Whether defendants No.1 to 5 had availed finances of Rs.25,000 Millions, 4000 Millions, Renewal finance of Rs.4.000 Millions, Demand Finances-I of Rs.5.384 Millions, Demand Finance-II (Restructing) of Rs.3,006 Millions and Demand Finance-III of Rs.2.000 Millions from the plaintiff on markup basis on their personal guarantees as well as guarantee of defendant No.6 and mortgage of property including property of defendants No.7 to 10?

2.      Whether defendants No.1 to 6 had committed default in the repayment of amount of finances?

3.      What amount if any is outstanding against defendants No.1 to 6?

4.      Whether defendant No.6 committed fraud by exceeding his authority at the time of mortgaging the property of defendants No.7 to 10 as security of finances advanced to defendants No.1 to 6 in capacity of their general attorney?

* 5.      Whether defendants No.7 to 10 had revoked their power of attorney executed in favour of defendant No.6? If so what is its effect?

6.      Whether defendants No.7 to are liable to pay outstanding amount against defendants No.1 to 6? If so to what extent?

* 7.      Whether the defendants No.7 to 10 had sold out mortgaged property M/s Jhuley Lal Cotton Ginning and Pressing Factory Daharki constructed on S. No.65, 483, 558 of Deh Daharki along with its construction machinery fittings and fixtures during pendency of the suit with malafide intention? If so what is its effect?

* 8.      Whether defendant No.11 had sold out 0.30 Paisas share in the mortgaged property of defendants No.7 to 10 to defendants No.12 and 13 during pendency of the suit by way of registered sale deed? If so what is its effect?

9.      Whether defendant No.11 had reconveyed 40 Paisas share in the mortgaged property of defendants No.7 to 10 defendant No.14 by way of registered sale deed during pendency of the suit? If so what is its effect?

* 10.    Whether plaintiff’s suit is based on forged, fabricated and invalid documents?

11.    Whether statement of account filed by plaintiff incorrect and plaintiff has charged markup over markup from defendants No.1 to 6?

12.    Whether the plaintiff is entitled to liquidated damages as claimed?

13.    Whether the suit is time-barred?

14.    Whether the suit is bad for multifariousness?

15.    Whether the suit is barred U/S 69 of Partnership Act?

16.    What shall the decree be?

4.         During the pendency of the suit and while the matter was fixed for the cross-examination of the bank’s witness, on whose behalf affidavit-in-evidence was filed, the suit was compromised between principal borrower and the bank. Both sets of defendants / appellants did not sign the compromise application and the suit was disposed of by moving an application of compromise and also after antedating the matter during summer vacation, whereas, the matter was fixed on 4th August 2015 (after summer vacation).

5.         Aggrieved of the order of compromise, two appeals were preferred by the two sets of appellants on 24.08.2017. These appeals were assigned No.11 and 12 of 2015 and were disposed of by a Bench of this Court with the observation that in case any application under Section 12(2), CPC, is pending before the Banking Court, the same shall be decided within a period of three (03) months strictly in accordance with law after providing an opportunity of hearing to the parties.

6.         After disposal of the appeals, the appellants appeared before the Banking Court in pursuance of their application under Section 12(2), CPC, which was heard by the Banking Court No.1 Sukkur and was disposed of on 9th October 2017, against which these two appeals have been preferred by the two sets of appellants, who have been subsequently added by the Banking Court only as being necessary and proper parties.

7.         Learned counsel for the appellants, at the very outset, submits that in all fairness when the leave was granted by the Court and the issues were framed, the collusive decree obtained by the bank and the main borrower is nothing but an act to deprive the appellants from their rights over the alleged mortgaged property. He submits that amongst other, there were 16 issues which were framed and those include the issue as to whether defendant No.6 Haji Mehar Din was within his right to execute documents on behalf of the owner of the property that relates to mortgage of the property when such power-of-attorney was revoked before any lien was created and whether the owner has a right to contest the suit on his own.

8.         Parties on the basis of their pleadings do not dispute the execution of the power-of-attorney but before such could be acted upon it claimed to have been revoked and thus it was yet to be adjudicated by the Banking Court as to whether the property was lawfully mortgaged since the leave was granted and the issues were framed.

9.         The respondent’s counsel on the other hand relied upon the irrevocable general power-of-attorney and another document which is claimed by Mr. Hassan Akbar as registered sale agreement, on the strength of which it is claimed that since the powers have been delegated, whatever rights the appellants have over the property ceases on execution of these two documents which are registered instruments, hence, for all intents and purposes, it is the original defendant who could be considered as a necessary and proper party as being customer under the provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and by no stretch of imagination, these appellants, who have no right over the property, could be allowed to defend the suit. He submits that the suit has already been disposed of between bank and the principal borrower and the properties have already been assigned in the compromise application out of which the amount is to be recovered, which include the subject property i.e. Survey No.65, 483 and 558 measuring 5-32 acres at Deh Daharki, Taluka Daharki, District Ghotki, Sindh and is to be released subject to payment of outstanding liabilities or will be auctioned for realization of decretal amount. The outstanding liabilities here mean the liabilities upon the principal borrower.

10.       I have heard the learned counsel for the parties and perused the material available on record.

11.       The attorney Haji Mehar Din son of Haji Chand Khan Malik was appointed by one set of appellants as their attorney on the basis of the irrevocable general power-of-attorney. They appointed the attorney on the ground that they cannot afford time to run the business of Jhuley Lal Cotton Ginning Pressing Oil Mill and Rice Mill. Similarly, the executant No.4 Shirimati Bebi Bai being lady was not in a position to manage the business, therefore, Haji Mehar Din son of Haji Chand Khan Malik was appointed as their attorney. The attorney acted on behalf of principal and attempted to create equitable mortgage by submitting original documents. Had the attorney acted on behalf of principal, that principal, in fact, would stand as guarantor for repayment of outstanding loan pursuant of contract of guarantee. Record, however, shows that the said registered power-of-attorney was revoked by another registered instrument before lien was marked. The decision was not given by the trial Court of these points.

12.       The Banking Court reached to the conclusion that the application under Section 12(2), CPC, was not maintainable. The reasons assigned by the Banking Court in substance are that there was no need to frame issues and record evidence for the disposal of the subject application under Section 12(2), CPC, and that the applicants approached the Court with un‑cleaned hands; that the decree was objected by the appellants by (i) moving an application under Section 151, CPC, wherein the stay was operating since last two years, (ii) by moving an application under Section 152, CPC, for correction of the clerical mistake, (iii) by filing an appeal against compromise decree. Last but not least, the Banking Court held that during the pendency of the three applications, the appeal was also preferred but failed to argue for about two (02) years. The Banking Court further held that they failed to establish the relationship of financial institution as defined under Section 2 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. It is claimed that they were unnecessarily joined as party. It is further urged that a transaction in favour of 2nd set of appellants took place during pendency of the suit, hence, they were neither necessary nor proper property and since it is fraud committed by one of set of appellants, therefore, they have not approached the Court with clean hands, and consequently, the applications were dismissed.

13.       The perusal of the order reveals that the reasoning is neither here nor there. The Banking Court reviewed its own order whereby the two sets of appellants were impleaded as party on the strength of the grounds mentioned in the leave application, without providing them an opportunity. The issues which include subject mortgage were also framed. There is no denial to the facts that attempt was made by attorney to mortgage the property. The powers were delegated by the appellants to their attorney on the reasoning assigned therein. However, Mr. Hassan Akbar, learned counsel for respondent No.1 submits that though power-of-attorney and registered sale agreement does not constitute title, yet all rights of the appellants concerning mortgage ceases once the property was mortgaged. That is a correct proposition of law but principal has every right to contest the suit as being guarantor and also to establish his case that property was not lawfully mortgaged. It may be emphasized that Mr. Hassan Akbar, Advocate read the registered instrument as registered sale agreement and not as sale deed.

14.       Suit No.262 of 2000 was filed before Banking Court No.1 for the recovery of the outstanding loan by M/s Habib Bank Limited against (i) M/s New Madina Cotton Ginners Jhuley Lal Cotton Factory (ii) Taj Din son of Chand Khan, (iii) Ghulam Rasool son of Taj Din, (iv) Muhammad Hussain son of Taj Din, (v) Ali Hassan son of Faqir Muhammad and (vi) Haji Mehar Din son of Chand Khan. Out of them, defendant No.1 was a firm carrying on business of cotton, ginning, oil spiller and rice husking, while defendants No.2 to 6 were its partners. They availed finance facility against equitable mortgage of certain property. Defendant No.6 as an attorney of the defendants / appellants also claimed to have executed a mortgage deed of the property bearing Survey No.65, 483 and 558 of Deh Daharki, Taluka Daharki along with construction / structure, machinery, fitting and fixture of cotton factory known as Jhuley Lal Cotton Ginning Pressing Factory by executing memorandum of deposit of title deed and a charge was created on 10.11.1999 with Mukhtiarkar Daharki. These finances were guaranteed in the shape of guarantee executed by defendant No.6 in the shape of equitable mortgage of the subject property. The finances availed by main borrower / defendants No.1 to 5 were renewed and the repayment was again guaranteed by defendant No.6 by execution of the guarantee as ‘Anneuxre-44’ attached to the plaint. The second renewal was also made by the bank and this renewed finance was also guaranteed by defendant No.6 by way of letter of guarantee filed along with the plaint. A Demand Finance-I was availed by defendants No.2 to 6 which was again guaranteed by defendant No.6 in the shape of letter of guarantee available along with the plaint as ‘Annexure P-64’. A restructuring finance was also availed as Demand Finance-II of Rs.3 million by defendants No.1 to 5 and a personal guarantee of defendants No.2 to 6 was also obtained. Defendant No.6, being guarantor, executed letter of guarantee available with the plaint as ‘Annexure P-74’. Another renewal was executed as Demand Finance of Rs.2 million for which defendant No.6, as guarantor, executed letter of guarantee as ‘Annexure P‑84’. A Demand Finance-III was availed through a finance agreement for Rs.23,72,000/- which remained unpaid.

15.       While the transaction was pending, record shows that the power-of-attorney was allegedly revoked by defendants No.7 to 10 and they have attempted to create a third party interest over the property. The newly added respondents, who are now appellants before us, were added. While the case was pending, the Suit was compromised between the plaintiff and the main borrower.

16.       Bhawan Das, Gurdas Mal, Shirimati Bebi Bai and Kirshan Das executed the registered irrevocable power-of-attorney in respect of the subject land being owner of Jhuley Lal Cotton Ginning Pressing Oil Mill and Rice Mill. No doubt the act of the attorney in respect of the mortgage of the property cannot be overturned by virtue of alleged revocation in case such was subsequent in time, however, cancellation instrument available on record dated 4th November 1999, which is a registered instrument is prior to 10.11.1999 when charge was created. In case such irrevocable general power-of-attorney was cancelled by the executants Bhawan Das and Kirshan Das, etc, then question arises whether charge was lawfully created over the property on 10th November 1999. These are questions of facts, which at best, to our understanding, could have been resolved only by way of evidence.

17.       It goes without saying that any such transaction prior to alleged cancellation will not disturb the equitable mortgage if created under the law but answers to these questions are not available.

18.       These appellants were granted leave to defend the suit and the questions which were framed are whether defendants No.7 to 10, which is one set of appellants, had revoked their power-of-attorney executed in favour of defendant No.6 Haji Mehar Din who had mortgaged the property. Since the two documents relied upon i.e. power-of-attorney and registered agreement of sale do not constitute the title, as agreed by Mr. Hassan Akbar, then in all fairness, the appellants may have a case of revocation and at least entitled to defend the suit, but on the other hand, they may not be entitled to ratify all such actions which were taken by their attorney on the strength of power-of-attorney alone in case it was not cancelled or already acted upon.

19.       These are questions which in our view could be decided only after recording of evidence.

20.       The appeals are thus allowed. Case is remanded to the Banking Court to record evidence in respect of application under Section 12(2), CPC, and decide application within four (04) months.

 

 

 

J U D G E

 

J U D G E

Abdul Basit