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