IN THE HIGH COURT OF SINDH
CIRCUIT COURT LARKANA
First Civil Appeal D - 03 of 2013
Present: Zafar Ahmed Rajput and Agha Faisal, JJ.
Soofi Rice Mills and Others
N.B.P and Others
For the Appellants: Mr. Syed Zahir Hussain Chishti, Advocate.
For the Respondents: Mr. Bashir Ahmed Dargahi, Advocate.
Date of Hearing: 26.09.2018
Date of Announcement: 26.09.2018
Agha Faisal, J. Through this appeal, the appellants have assailed the judgment dated 28.08.2013 delivered in Suit No. 22 of 2011 by the learned Banking Court No. I, at Larkana (“Impugned Judgment”).
2. The relevant facts culminating in the Impugned Judgment are delineated in seriatim herein below:
i. The respondent No.1 herein, National Bank of Pakistan (“NBP”), had filed a suit for recovery, inter alia against the present appellants, which was decreed ex parte vide judgment and decree dated 15.12.2001 and 20.12.2001 respectively.
ii. Execution proceedings were initiated subsequent thereto and immoveable property, mortgaged to secure the financial obligations, was auctioned and purchased by the respondent No.2 herein. The auction proceeds were conveyed to NBP and the auctioned property was handed over to the respondent No.2 after issuance of confirmation and sale certificate.
iii. The appellant No.2 herein moved an application before the learned Banking Court under section XII of Financial Institutions (Recovery of Finances) 2001 (“Ordinance”) which was dismissed vide order dated 01.03.2005. The aforesaid order was challenged before the High Court in appeal, which appeal was allowed and the matter was remanded back to the learned Banking Court for deciding the same afresh. In due compliance of the orders of High Court, permission was given to the defendants therein to defend the suit and after an exchange of pleadings, issues were framed.
iv. A complete trial was held and in conclusion thereof the suit was allowed, once again, vide the Impugned Judgment and the decree pursuant thereto was issued on 4th September, 2013, hence, the present appeal.
3. Mr. Zahir Ahmed Chishti, learned counsel for the appellants argued that while the claim of NBP, as decreed there-against, was not disputed however, the Bank was required to set off the same against the stock of paddy and rice pledged therewith. It was next contended that the value of the claim sought was in excess of the claim of NBP hence the remaining amount was required to be refunded to the appellants. Per learned counsel, the auction, sale certificate, registration of sale deed and delivery of possession of the auctioned property, in favour of the respondent No.2, was unmerited and unlawful and hence it was incumbent upon this Court to declare the same as void ab initio.
4. Mr. Bashir Ahmed Dargahi, learned counsel for NBP controverted the arguments of the appellants and stated that there was no counter claim filed and hence the issue of set off is frivolous. The learned counsel demonstrated from the Impugned Judgment that the issue of the purportedly pledged stock was discussed at length therein and that it was prima facie manifest that no such stock was available with the NBP and therefore the question of adjusting the same against the liabilities of the appellants does not arise. The learned counsel stated that the present appeal, filed in the year 2013, was frivolous and devoid of merit, hence, was required to be dismissed forthwith.
5. We have given careful consideration to the arguments of the learned counsel and have had the opportunity to review the record placed before us. The appellants have already admitted the liability, adjudged there against vide the Impugned Judgment, and therefore, no deliberation is merited in respect thereof. The primary issue placed before this Court in the present appeal is whether the appellants were entitled to a set off as claimed and also whether sufficient grounds exist to interfere in the concluded transaction in respect of the auctioned immoveable property.
6. The statutory provisions pertaining to set off are contained in Order VIII Rule 6 CPC and a treatise upon the essentials thereof is contained in the judgment of the honorable Supreme Court titled Civil Aviation Authority vs. JAPAK International (Pvt.) Ltd (reported as 2009 SCMR 666) wherein it has been observed as follows:
“The essential conditions of legal set-off are as follows:
(i) The suit must be one for the recovery of money.
(ii) As regards the amount claimed to be set-off---
(a) it must be an ascertained sum of money;
(b) such sum must be legally recoverable;
(c) it must be recoverable by defendant or by all the defendants if more than one;
(d) it must be recoverable by the defendant from the plaintiff or all the plaintiffs if more than one;
(e) it must not exceed the pecuniary limits of the jurisdiction of the court in which the suit is brought; and
(f) both parties must fill, in the defendants claim to set-off, the same character as they fill in the plaintiffs' suit.”
7. The progressive development of the phrase “legally recoverable” has been discussed at considerable length in the judgment titled Ahmad Hassan vs. Haji Ajab Khan and Others (reported as 1985 CLC 1575), wherein it has been determined as follows:
“In the first instance it may be seen that Order VIII, Rule 6, C.P.C. visualizes claims for set off in suit for recoveries of money by raising a demand of debts which are legally recoverable from plaintiff and fall within pecuniary jurisdiction and territorial limits of the Court trying the suit. Therefore, ascertainment of setoff evidently pre‑supposes that suit must be for (i) recovery of money, (ii) amount of set off must be legally recoverable from the plaintiffs, (iii) claim must be for ascertained sum of money (iv) claim of set off should be in respect of debts for which cause of action has accrued within pecuniary and territorial jurisdiction of the Court and (v) must be raised on the first hearing of the suit and not afterwards, unless permitted by the Court.
It is, therefore, suggested that set off primarily is a defence against the action of plaintiff. It by no means, can wipe out plaintiff's claim, rather it seeks independent ascertainment and determination regarding additional claim of defendant for ultimate recording of decree as specified under Order 20, Rule 19, C.P.C. which, therefore, may disclose actual amount falling due from the either of the parties.
Whereas strictly speaking counter‑claim is not specifically known to the Code of Civil Procedure, it is generally deemed and treated something similar to set off, with of course much wider scope. But practically both are essentially different from each other. Actual similarity appears only to the extent that both types of claims are in the nature of cross actions. Apparently set off is merely a defence, for pleading adjustment of respective claims which are otherwise legally recoverable from each other; and pre‑supposes that same should be an existing debt recoverable from the plaintiff when cause was initiated, whereas counter‑claim is a weapon of offence enabling the defendant to enforce his claim against the plaintiff. It is normally pleaded in the written statement merely to avoid multiplicity. The counter‑claim is relatable to the subject‑matter raised by the plaintiff. In most of tile rulings superior Courts have treated, counter‑claim as a shield, pleaded by defendant to reduce the liability against him. It has also been shown to be weapon of offence which enables the defendant to enforce his claim against the plaintiff as effectually as in an independent action. However, extracts from some of the reported judgments dealing with, distinction between "set off" and "counter-claim" are reproduced below:‑---
(i) Lassoo & Sons v. Krishna Bahadur Nepali A I R 1932 Bom. 617.
"In this respect however the distinction between a set off and a counter‑claim must be borne in mind. In one sense both are cross‑actions but a set off is also a ground of defence. If established it affords an answer to the plaintiff's claim either wholly or pro‑tanto for a set off is really a debt claimed by a defendant against the plaintiff balancing a debt claimed by the plaintiff against the defendant. A counter claim on the other hand is really a weapon of offence and enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action."
(ii) Jitendra Nath Ray v. Jananda Kanta Das Gupta A I R 1936 Cal. 277.
"As set off may be purely defensive, that is, it may amount to an adjustment or satisfaction of the plaintiff's claim or it may be a counter‑claim under which the defendant claims a decree for the surplus amount due to him. In a defensive set off, the set off claimed must be recoverable at the date of the plaintiff's suit. In a counter‑claim the sum claimed by the defendant should be legally recoverable at the date when he makes the claim i.e. at the date when he files written statement. The words "legally recoverable in Order VIII, Rule 6, mean legally recoverable at the date of the institution of the suit in one case and mean legally recoverable at the date when the counter‑claim is made in the other case. Although in Order VIII, Rule 6 and Order XX, Rule 19, there is no clear distinction between a mere set off, i.e. a defensive set off and a counter claim, a distinction has been made in Indian Courts in accordance with the law of England, as it is based on a sound principle."
(iii) Bai Harendra Nath Chaudhury v. Bai Sourindra Nath AIR 1942 Cal. 559.
"Although the word set‑off only is used in Order VIII, Rule 6 and not the word counter‑claim also, the claim to the ascertained sum of money which the Code permits the defendant to set up in the plaintiff's action for money may not only be what is strictly termed set off but what is also a counter‑claim. If the claim set up by the defendant is in respect of a debt which is less than or equal to the plaintiffs claim in the suit it is a plea of set off pure and simple, but if it exceeds the plaintiff's claim it is to the extent of the excess of a cross‑claim for the excess he is to be given a decree against the plaintiff in the same action".
(iv) Sarawwathiswani v. Sridhora Siverama Moorthy A I R 1949 Mad. 630.
"A counter claim may be set up only in respect of claims as to which the party could bring an independent action in the Court in which the counter‑claim is brought. Because the plaintiff has brought an action which he was entitled to do, it does not mean that the defendant's right to put forward a counter‑claim became limitless e.g. to put forward a claim which nobody else could put forward as a plaintiff."
(v) Abdul Majid v. Abdul Rashid and Others A I R 1950 All. 201.
"The essence of a counter‑claim is that the defendant should have a cause of action against the plaintiff. The counter‑claim is in the nature of a cross‑action; and not merely a defence to the plaintiffs claim."
(vi) Shoebanchan Pandey and Another v. Madho Sarah Chowbay and Others A I R 1952 Pat. 73.
"In P.S. Moideen Baba v. Chettyar Firm A I R 1934 Rang. 190; it has been held that for either to be able to sue for specific performance there must be mutuality. Once there is that mutuality that one party can sue the other for specific performance, there is no reason why the other party also cannot enforce specific performance. In Carangdhar Singh and. another v. Lakshmi Narayan Wahi A I R 1955 Pat. 320 it has been held that 'A counter‑claim is substantially a cross7action and need not be an action of the same nature as the original action or even analogous thereto. Though there is no provision in the Code of making a counter‑claim, a Court has got the power to treat tire counter‑claim as a plaint in the cross‑suit and hear them together if the counter‑claim is properly stamped."
(vii) Sarangdhar Singh and another v. Lakshmi Narayan Wahi AIR 1955 Pat. 320.
"A counter‑claim is substantially a cross‑action and need not be an action of the same nature as the original action or even analogous thereto. Though there is no provision in the Code of making a counter‑claim a Court has got the power to treat the counter‑claim as a plaint in the cross‑suit and hear them together, .if the counter‑claim is properly stamped."
(viii) Syed Naimat Ali and others v . Dewan Jairam Dass P L D 1983 SC. 5,
"However, there is a well‑recognized distinction between a set off and a counter‑claim. Although in one sense both are identical inasmuch as they are cross‑actions on the part of the defendant but a set off is essentially a weapon of defence if the defendant succeeds in establishing it, it serves the purpose of answering to the plaintiff's claim either wholly or pro‑tanto because a set off is really a debt claimed by the defendant against the plaintiff to counter balance a debt claimed by the plaintiff against the defendant: A counter‑claim on the other hand, is essentially a weapon of offence and is not really relevant as a plea in defence to the claim of the plaintiff. It enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action. Its essential nature is that ‑of a cross suit pleaded through the means of the written statement in the same suit. Having regard to these essential features of the character of a counter‑claim, it is plain that a right to make a counter‑claim is not admissible if it does not fall within the ambit of Order VIII, Rule 6,‑C.P.C. or qualify as an equitable set off. The right to make a counter‑claim has been always held to be a statutory right and as already observed there is nothing in the Code of Civil Procedure conferring the right, to plead such counter‑claim, upon a defendant. Thus, it has been held in certain decisions of the Privy Council and of the High Courts that a counter‑claim was not admissible in the Muffasil Courts."
There is yet another aspect which has considerable importance for determining contentions raised on behalf of the parties in this matter. Order VIII, Rule 6, C.P.C. clearly suggests that set off can be in respect of "ascertained sum" which may be legally recoverable. It, therefore, requires to be seen whether claim for compensation, tentatively fixed by the defendants to a particular amount could legitimately be deemed "ascertained sum" within the meanings assigned to it by law. Some of the reported judgments have dealt with the meaning of "ascertained sum".‑ It would be profitable here to refer to some of those:
(i) Har Prasad and another v. Firm Ram Sarup Radha Kishen AIR 1924 All. 87,2.
"What the defendants say is that there were definite sums of debit and credit between the parties and that on the date of suit a definite known balance, the amount of which is given in the written statement, was due to the defendants from the plaintiff and that this balance is shown in their account books as due on the date of suit. In any ordinary meaning of the term the sum so claimed is an ascertained sum. The learned counsel for the respondent has argued that a sum can only be treated as ascertained when it has been either admitted by the plaintiff or decreed by the Court. None of the authorities to which he has referred, supports this proposition, and the case of Edward Dalgleisn v. Ramdin Sing Chowdhry definitely contradicts it. The commentators on the Code are also all agreed that the words 'ascertained sum are used to exclude such items as unliquidated damages and mesne profits the amount of which is not ascertainable until the Court determines'."
(ii) Bhikanrao v. Shridhar A I R 1931 Nag. 12.
"The defendant's claim for a set off was obviously in respect of an ascertained sum of money. The expression 'ascertained sum' does not mean a sum admitted by the plaintiff. It is used in contra‑distinction to unliquidated damages. An ascertained sum means, according to the ordinary significance of the words, a sum of money of which the amount is fixed and known: See Edward Dalgleish v. Ramdin Singh An 'ascertained sum' used in the Code excludes such items as unliquidated damages and mesne profits the amount of which is not ascertainable until the Court determines them. See Har Prasad v. Firm Ram Sarup Radha Kishen.
(iii) Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal A I R 1940 Nag. 177.
"Now according to Order VIII, Rule 6, Civil P.C. before a legal set off can be claimed, it must be presented in a written statement which shall have the same effect as a plaint, and it must be shown that it is an ascertained sum of money legally recoverable by the defendant from the plaintiff, and that both parties fulfil the same character as they fill in the plaintiff's suit. The claim for the commission over reduction of losses is stated approximately and cannot be considered as an 'ascertained sum' of money. It would require accounts to be gone into and the written statement admits as much. In AIR 1931 Nag. 12 it was pointed out that an 'ascertained sum' means a sum of money of which the amount is fixed and known and that it excludes such items as unliquidated damages and mesne profits, the amount of which is not ascertainable until the Court determines them."
(iv) Sankara Pillai v. Parameswaran Pillai A I R 1959 Ker. 352.
"Taking up first, the aspect of legal set off it is no doubt true that the defendant was putting forth the claim for th specific amount of Rs.204 and odd for purpose of set off. Bu every claim for a specified sum is not necessarily for a 'ascertained sum' of money 'legally due' within the meaning of Order VIII, Rule 6, C.P.C. It is unnecessary in this connection to go to the extent of the dictum in Mr. Dilter Koer v. Harkhoo Sing A I R Pat. 167 that the claim to be ascertained must be 'beyond challenge and beyond dispute, concluded and conclusive'. "
It may for example, be a sum not admitted by the other side and not decreed by Court. But it must in any event be a cross‑claim for a liquidated amount, that is debts due for liquidated sums or 1 demands, which can be ascertained with certainty at the time of the pleading and not what may ultimately be ascertained by the Court at the time of passing of the decree.
(v) A I R 1964 Mad. 108.
In order to effectively elucidate observations in aforequoted judgments it would be appropriate to also record meanings of unliquidated debt. Unliquidated has been described in Black's Law Dictionary revised 4th Edition at p.1706 as under:‑---
"Unliquidated - Not ascertained in amount; not determined; remaining unassessed or unsettled; as unliquidated damages”;
"A debt is spoken of as 'unliquidated' if the amount thereof cannot be ascertained at the trial by a mere computation, based on the terms of the obligation or on some other accepted standard. Hattrick Mfg. C . V . Barish, 120 Misc. 673. 199 N.Y. S.755. 767."
Thus, carefully considering aforequoted judgments and meaning attached to terminology used in Order VIII, Rule 6, C.P.C. obvious conclusions are, that claim of compensation, for which cause of action has arisen subsequent to the filing of suit, or was not asserted at initial stage of filing original written statement or is not of an ascertained sum, or is beyond territorial or pecuniary jurisdiction of the Court and otherwise is not legally due, would not be appropriately entertainable.
I have given my anxious thought to all aspects of counter‑claim put forth by defendant in the case. Since cause of action evidently relates to period subsequent to institution of suit amount of compensation needs enquiry and determination, and does not arise from transaction which is subject‑matter of the suit, therefore, same cannot be permitted to be put up as counter‑claim.
Similarly mere assertions of a fixed amount of compensation cannot be assumed to be ascertained amount within the purview of order VIII, Rule 6, C.P.C. On this analogy thus claim for money which is not conclusively and definitely identifiable and otherwise is not legally recoverable cannot constitute basis of set off or counterclaim.
For the foregoing reasons I do not find any justification to interfere with impugned judgment. However, petitioner is not precluded from separately approaching Court of competent jurisdiction in respect of claim set up by him in written statement, if otherwise law so permits.”
8. It is apparent from the record that there has been no ascertainment of whether the amounts claimed by the appellants were legally recoverable. Notwithstanding the foregoing, it is apparent from a bare perusal of the pleadings of the appellants that the set off or counter claim was never pleaded in the manner prescribed under the law. An illuminating judgment determining the manner in which set off / counter claim was required to be pleaded is the case of Syed Ahmad Saeed Kirmani vs. M/s. Muslim Commercial Bank Ltd., Islamabad (reported as 1993 S C M R 441), wherein it was held by the honorable Supreme Court as follows:
“…..Where a party claims a set‑off he has to comply with the rules of pleading contained in the Code of Civil Procedure. By claiming set‑off in an amount which exceeds the claim of the plaintiff, the defendant in effect pleads to write off the plaintiffs claim and claims a decree for the balance amount. It is therefore in the nature of written statement as well as a plaint/counter‑claim for purposes of claiming the balance amount. Therefore, the rules of pleading should be followed in all cases including cases where damages are claimed. The claimant must state the particulars and basis of the claim and if it is quantified the basis of such quantification as well. It would not be a proper pleading in such cases to merely state that due to breach committed by the defendant the claimant is entitled to damages.
In the present case on analysis and close scrutiny of the pleadings and evidence it is clear that the appellant had been vague and unspecific so far his claim for damages is concerned.”
9. In addition to the alleged set off / counter claim not having been pleaded in accordance with the law, it is also an admitted fact that no Court Fee was ever paid by the appellants with respect to their purported counter claim. The law in such regard is meticulously encapsulated in the judgment titled Khurshid Ahmed and another v. Khair Din (reported as PLD 1962 (W.P.) Lahore 313), wherein it has been laid down as follows:
“…Section 4 of the Court-fees Act prohibits filing, exhibiting or recording in of any document of any kind specified in the First or Second Schedule to the Act unless the fee prescribed for such a document was paid. A written statement pleading a set-off is such a document. It would, therefore, be clear that such a written statement cannot be accepted unless the fee prescribed is paid. The provisions relating to the proceedings which can be conducted in the forma pauperis have been clearly mentioned in the Statute. They cannot be extended by any analogy on the basis of what has been remarked in Order VIII, rule 6. Order VIII, rule 6, simply lays down the time at which a set-off can be claimed. It lays down as follows:-
“(1) Where in a suit for the recovery of money the defendant claims to set-off against the plaintiff ‘s demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff’s suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off.
(2) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect both of the original claim and of the set-off but this shall not affect the lien, upon the amount decreed, of any pleader in respect of the costs payable to him under the decree.
(3) The rules relating to a written statement by a defendant apply to a written statement in answer to a claim of set-off.”
The mere fact that it has been described that a person claiming a set-off will have the same character as a plaintiff in a suit, would not mean that his written statement could be treated as a plaint and he could be regarded as a plaintiff making a claim. There is no doubt that 54 P R 1905 was decided before the present Civil Procedure Code came into operation, but the ratio decidendi of that authority would hold good even now, because it has been laid down that when there is specific provision relating to a matter in a Statute the Court cannot exercise its discretion to extend the operation of such a provision. Although the question of a written statement claiming set-off was not directly in issue In re: U. Ananthakrishna Baliga, but the question was incidentally considered in that case and the remarks in that judgment which were given by Mr. Justice Abdur Rehman (Judge of the Supreme Court) when his Lordship was a Judge of the Madras High Court, are every pertinent and lend support to the view that has been taken by the Administrative Civil Judge. I, therefore, find no force in this petition which is dismissed with costs. The case will be sent back to the lower Court for decision on merits.”
10. The appellants demonstrate knowledge of the loss of their pledged stocks as far back as 2001, whereas the first purported claim in respect thereof was contained in the pleadings filed in the banking suit ostensibly in 2010. The law requires adherence to the limitation prescribed and it is manifest that no claim was ever preferred by the appellants within the applicable period of limitation. An early authority in such regard is the pronouncement in the case of Rai Harendra Nath Chaudhury v. Rai Sourindra Nath Choudhury and Others (reported as A.I.R. (29) 1942 Calcutta 559), wherein it was delineated as follows:
“…. The question is what date, the date of the presentation of the plaint or the date of the written statement in which set-off was pleaded, would be the material date. Order 8, R.6, Civil P.C., does not deal with this point. By enacting in sub-r. (1) that the money claimed by the defendant must be “legally recoverable” the Legislature indicated among others the question of limitation. The claim of the defendant which is sought to be set-off must not be a dead claim. Sub-rule (2) enacts that the written statement shall have the effect to a plaint in a cross suit, the object being, as is expressed in the sub-rule itself and in O. 20, R. 19, to confer power on the Court to adjudicate also upon the claim to the sum of money made by the defendant in his written statement and to pass a decree in his favour in case the balance turned in his favour. There being thus no clear indication on the point in the rule itself we will have to decide the question in accordance with principles and precedents. We have already stated that in its origin set-off was purely a weapon of defence and not of attack. Both set-off and counter-claim are creatures of statute. They are, however, essentially different. In (1881) 5 Q.B.D. 5691 Cockburn C.J. dealing with set-off in its original sense thus observed :
“In my opinion it is altogether a mistake to treat a counter-claim and set off as standing on the same footing, or a counter-claim as equivalent only to a set-off. Set-off and counter-claim may be, and commonly are, essentially different; and it becomes necessary, therefore, to see in each case whether a counter-claim amounts in effect to no more than a set-off, or whether it is in effect a cross action….. The plea (of set-off) can only be used in the way of defence to the plaintiff’s action, as a shield, not as a sword. Though the defendant succeeded in proving a debt exceeding the plaintiff’s demand, he was not entitled to recover the excess; the effect was only to defeat the plaintiff’s action, the same as though the debt proved had been equal to the amount of the claim established by the plaintiff and no more.”
The learned-Chief Justice after quoting with approval the following observations of Brett, L.J. made in (1878) 3 Q. B. D. 324;
“A counter-claim is sometimes a mere set-off, sometimes it is the nature of a cross action; sometimes it is in respect of a wholly independent transaction,” finally observed thus :
“I am therefore of opinion that, while under the special enactment of the statutes relating to set-off a plaintiff recovers no more than the amount of his claim as reduced by the set-off, the effect of a counter-claim is altogether different, and where such a claim is set up as a cross action, each party recovers the amount of his claim, although by a wise and salutary provision the party establishing his claim for the larger amount, whether plaintiff or defendant, obtains judgment for the excess only of his claim over that of the other.”
In this passage the learned chief Justice was obviously referring to O. 19, R.3 of the Supreme Court Rules which runs thus:
“A defendant in an action may set off , or set up by way of counter claim against the claims of the plaintiff, any right or claim, whether such set off or counter claim sound in damages or not, and such set-off or counter-claim shall have the same effect as the statement of a claim in a cross action, so as to enable the Court to pronounce a final judgment in the same action, both on the original and on the cross claim.”
The first part of this rule is wider than O. 8, R. 6, sub-r. (1),Civil P.C., for the counter-claim may be in respect of a debt, i.e., an ascertained sum of money, as also in respect of damages. But the last part of this rule, corresponds substantially to sub-r. (2) of O. 8, R.6. Although the word “counter-claim” is not used in our statute and although generally speaking a counter claim is incompetent under the procedure laid down in the Code of Civil Procedure and such a claim by the defendant must be enforced in a separate suit (60 I.A. 297 at p.303) O. 8, R.6 read with O.20 R.19 does permit what is in essence a counter claim of a specific kind, namely where the counter claim is in respect of an ascertained sum of money exceeding the plaintiff’s demand and in the case it is permissible for the Court to pass a decree in favour of the defendant for the excess sum over the plaintiff’s demand. Although the word set-off only is used in O.8, R. 6, and not the word counter-claim also, the claim to the ascertained sum of money which the Code permits the defendant to set up in the plaintiff’s action for money may not only be what is strictly termed set-off but what is also a counter claim. If the claim set up by the defendant is in respect of a debt which is less than or equal to the plaintiff’s claim in the suit, it is a plea of set-off pure and simple, but if it exceeds the plaintiff’s claim it is to the extent of the excess a cross claim, for the excess he is to be given a decree against the plaintiff in the same action.
In the case before us what has been pleaded is pure set-off, for the defendant claims an ascertained sum of money which is less than the plaintiff’s demand in the suit. On general principles there would have been no question of limitation, for a defence is not barred by lapse of time. But a plea of set off urged by way of defence and only as a defence to the plaintiff’s claim for money being of statutory creation must be regulated by the provisions of the statutes which creates it. By the terms of O. 8, R.6 of the Code the claim must be legally recoverable, that is, must not be a dead claim. As the set off we are considering is merely defensive (for the defendant does not claim a sum in excess of the plaintiff’s claim)- an answer to the plaintiff’s claim, on principle the relevant enquiry would be whether it was a dead claim at the date of the plaintiff’s suit. If the other view be taken, namely that the material date is to be date of the written statement, it would lie in the power of the plaintiff to defeat such a plea of the defendant by simply delaying the service of the summons on the defendant. In (1850) 15 Q. B. 1046= 117 E. R. 755, the view we take was adopted and though the judgment does not give any reason the argument of the counsel that “any other view would lead to this injustice; that the defendant might not bring an action on his claim, knowing that the plaintiff had a claim, whereas the plaintiff by issuing his writ and not declaring till the defendant’s right of action was barred, might avail himself of his own claim and get rid of the demand against him,” is worth consideration.
In such a case, duty requires, that the plaintiff should himself deduct from his demand the debt which was due from him to the defendant and which was not dead at the time of his suit and sue the defendant for the balance, and if he does not act in that manner, the Court will place him in the same position in which he ought to have placed himself. The view we are adopting is supported by a long series of decisions of all the High Courts, 7 All.284 at p. 287, 56 All. 821 48 Cal. 817 at pp.823, 824. A.I.R 1936 Cal 277, A.I.R. 1923 Bom. 113 and A.I.R 1920 Mad. 819= 42 Mad. 873. Where, however, the defendant pleads for a sum of money which is in excess of the plaintiff’s claim he occupied to the extent of the excess the position of a plaintiff in a cross suit and in such a case and for the excess amount time is to be reckoned not from the date of the plaintiff’s suit but from the date when he filed his written statement. On the facts of this case, we hold that the claim of the defendant for the rent of 1341 also can be set off against the plaintiff’s demand.”
11. The judgment of a Division Bench of this Court titled Apollo Textile Mills Ltd vs. Soneri Bank Limited (reported as 2011 CLD 1655) is within our contemplation wherein the very issue of set off in banking matters has been deprecated and it has been observed as follows:
“17. The appellants have claimed set off on account of damages as allegedly suffered by the appellants on account of actions/non-actions on the part of the respondent Bank. By placing reliance on the case-law referred to in para 6 hereinabove, the learned counsel for the appellants has argued that in appropriate cases the claim of damages can be treated as set off. Learned Single Judge while responding to such objection has held that "the question is not as to whether a claim of damages can be treated as set off but as to whether a claim of set off can be set up by a Borrower in a suit instituted by a Financial Institution under section 9 of Ordinance, 2001 and the short answer to my mind appears to be "No". The reason being that if a Borrower is permitted to set up counter claims it would amount to frustrate the very intend of Ordinance 2001 as in every case where damages by way of counter claim or set off are asserted the provisions of subsection (8) of section 10 of Ordinance, 2001 would become redundant and the Borrower would automatically become entitle to Leave to Defend for the simple reason that a claim of damages cannot be rejected outrightly unless the claimant is permitted to lead evidence." The learned Single Judge has placed reliance on the judgment of a Division Bench of Lahore High Court in the case of Messrs Ansari Cotton, Ginning and Pressing Factory (Pvt.) Ltd. through Directors and 5 others v. Habib Bank Limited (2006 D 1220). The learned Single Judge has also placed reliance on the case of Siddique Woollen Mills and others v. Allied Bank of Pakistan (2003 SCMR 1156 = 2003 CLD 1033), wherein the Hon'ble Supreme Court refused to interfere in a case where the plea of the Borrowers regarding unauthorized detention of Borrowers' goods were rejected on the ground that it did not give rise to bona fide dispute between the parties.
We are persuaded to agree with the finding of the learned Single Judge, which is otherwise based on the judgment of Hon'ble Supreme Court and a D.B. judgment of Lahore High Court. Further reliance can also be made to the cases, American Express Bank Ltd. v. Adamjee Industries Limited (1995 CLC 880), Messrs Razzaq and Company v. Messrs Riazeda (Pvt.) Ltd; and International Finance Corporation v. Sarah Textiles Ltd. and 3 others (2009 CLD 761). The case-law referred in this regard by the learned counsel for the appellant is based on distinguishable facts and proceedings hence not attracted in the instant case.
18. Learned counsel for the appellants has mainly argued on the ground of alleged illegal removal of pledged articles from the godowns by the respondents and stated that it is the bailee's duty to take care of the goods entrusted upon him, and in case of any loss, it is responsibility of the bank and their employees to make goods loss. Learned counsel further stated that the essence of bailment is the possession of the articles, which per learned counsel for the appellants was given to the respondent bank. Learned counsel further argued that the amount pledged is more than the amount decreed, hence the same could be adjusted by the respondent under the circumstances.
Learned Single Judge while responding to such objection has held as under:--
"Regarding pledge goods and their removal the plaintiff in para-11 of the plaint have pleaded as under:--
"11. That in consideration of and as security for the financial facilities allowed/agreed to be allowed to the defendant No.1 by the plaintiff the defendant No.1 initially created a pledge over its stocks of Raw Cotton Bales and/or Yarn by executing a letter of Pledge dated 14-3-2007 for the amount of Rs.385.00 Million."
(sic.) and have placed on record Letter of Pledge (Annexure 'H'-Page- 97). A minute perusal of Letter of Pledge reflects that the physical possession of the goods against the concept of ordinary pledge as envisaged under section 172 of the Contract Act perhaps was never transferred by the defendants and the Bank has only posted a Muqqadam to supervise unauthorized removal. This appears to be for more than one reasons: firstly, clauses 2 and 3 of the Letter of Pledge provides:-
2. You will be at liberty to have the pledged goods surveyed/valued from time to time by an appraiser to be appointed by you and the fees and expenses of every such survey/appraisement/valuation shall be paid by us on demand and in the event of our failure to do so we undertake to pay to you additionally twenty percent thereof as and by way of liquidated damages and you will have at all times a right to debit the same to any of our accounts maintained with you.
3. We shall keep or cause to be kept a register of goods for the time being and from time to time pledged with you wherein I/We shall duly and punctually enter or cause to be entered particulars of all pledged goods for the time being remaining under your pledge hereunder and I/We shall, weekly or as often as you may require, furnish to you a certified statement or copy of all entries which shall have been made in the said register since the last statement or since the copy was furnished and shall, as often as you may require, produce to you or your nominees or agents, the said register, all accounts and other books, invoices, bills, vouchers, instruments and papers in any way relating to the pledged goods or any part thereof and shall permit you, your nominees and agents to inspect and take copies of or extracts from the same and shall furnish to you, your nominees and agents all such particulars of or information concerning the pledged goods as you may require.
and secondly, the Letter of Pledge does not provide the weight or quantity of goods pledged in its schedule except "Pledge of Imported/Local Raw Cotton Bales and Yarn" and further the defendants almost every month provided Stocks Report to the Plaintiffs. Notwithstanding since the defendants have already filed a suit seeking recovery of damages against the plaintiff therefore, on this count they are not found entitle to leave of this Court to defend the suit."
We are of the view that above finding of the learned Single Judge, under the facts and circumstances of this case, appears to be reasonable and does not require any interference by this Court. We, therefore, hold that the suit for recovery of the amount was competently filed by the respondent after complying with the provisions of section 9 of the Ordinance, 2001.”
12. The Impugned Judgment duly considered the issue of set off / counter claim and adjudicated it, upon appraisal of the evidence, in the following manner:
“Issue No. 1 & 2.
These issues being interconnected are being decided together. It is admitted position that loan of Rs.30,00,000/= was sanctioned by the plaintiff and same was obtained by the Defendant No.1 to 3. Though stock of the defendant was mortgaged but originally the security was property i.e. Rice Mill therefore in the Objections/Written Statement the Defendants No.1 to 3 have taken plea that Paddy Crop worth Rs.58,41,250/= was stored in the Godown and under the guard and control of Plaintiff. In this connection I have considered the arguments and relevant Law on which the parties counsel have relied upon. It is admitted position that Defendant Jan Mohammad has filed Suit No.143/2001 wherein he himself admitted that stock was being sold but no proper offer was received. In this Connection I have also read the contents of documents produced as Exhibit 4-C. For ready reference the Para No.3 & 4 of the same are reproduced here under:-
Para No.3. I/We shall keep or cause to be kept at register of the goods for the time being and from time to time pledged with you and wherein I/We shall duly and punctually enter or cause to be entered particulars of all pledged goods and merchandise consumed there from and I/We shall weekly or as you may require furnish to you certified statement or copy of all entries which shall have been made in the said register since the last statement or copy was furnished and shall as often as may be required produce to you, your nominees or agents, the said register all account and other books, invoices, bills vouchers instruments and papers in any way relating to the pledged goods or any pad thereof and shall permit you, your nominees and agents to inspect and take copies of or extract from the same and shall furnish to you, your nominees and agents shall other particulars of or information concerning the pledged good as you may require.
Para No.4. I/We shall hold you, your nominees and agents harmless and indemnified against all loss of injury, damaged or deterioration that may be caused to the pledged goods as a consequence or result, however, remote of any cause whatever, including fire, storm, tempest earth quake, rain floods, riots, civil commotion, rebellion insurrection and acts of God, or the enemies of the State strikes lockouts, political or labour disturbances, theft misappropriation or embezzlement, notwithstanding the fact of your possession of the same or otherwise and if the pledged goods shall at any time suffer any reduction or diminution in their market value as consequence on result of any such cause as aforesaid, I/We shall forthwith, upon demand made by the deposit with your further securities in the manner and to the extent of short fall in the value of the same.
From the perusal of above paragraph it is clear that stock was lying in the Mill which were in custody of the Defendants No.1 to 3. It is also admitted position that Mill was adjoining to the houses of Defendants, though Nominee/Chowkidar was deputed by the Bank authorities but he was working at the Mill under the control of Defendants No.1 to 3, therefore, contention of the Defendants No.1 to 3 that stock was responsibility of plaintiff is without force. Moreover specific pleas was taken by the Defendants No.1 to 3 in their Objections/Written Statement therefore burden was upon them to prove Issue No.2 but in my opinion they have failed to prove the same hence Issue No.1 is decided in Affirmative while Issue No.2 is decided with the observations that Defendants No.1 to 3 were responsible for any loss to the stock and as mentioned above in the Plaint of Suit No.143/2001 Defendant Jan Mohammad himself has not alleged that stock was taken by the plaintiff but was lying with him. Issues answered accordingly.
In view of the findings of Issue No.2 I am of the opinion that Defendants have failed to prove that Bank is liable to pay the remaining amount of value of stock or adjust the same from stock available there.”
13. The Impugned Judgment has delved at length upon the issue of set off and determined that the appellants are not entitled to the same. There is no substantiation of NBP being culpable for any loss of stocks and hence no liability or obligation could be attributed thereto in respect thereof. Reliance is placed in such regard upon the judgment titled United Bank Limited vs. Consolidated Exports Limited & Others (reported as 1996 M L D 1727). It is thus maintained that the determination with respect to the appellants’ assertion of set off / counterclaim was validly addressed in the Impugned Judgment and we see no reason to interfere therewith.
14. This brings us to the final issue for determination, i.e. whether any grounds exist to merit interference in the concluded transaction in respect of the auctioned immoveable property.
15. A pioneering judgment of the Privy Council, dating back almost a century, in the case of Nanhelal and another v. Umrao Singh reported as AIR 1931 Privy Council 33, maintained that once a sale has been effected a third party’s interest intervenes. The honorable Supreme Court maintained, in the case of Hudaybia Textile Mills Ltd. and others v. Allied Bank of Pakistan Ltd. and others reported as PLD 1987 Supreme Court 512, that once an auction purchaser acquires an interest in a property, the same may not be whittled away by resort to procedural incongruities. A Division Bench of this Court deliberated upon the sanctity of a confirmation of sale, in the case of United Bank Limited v. Messrs A.Z. Hashmi (Pvt.) Limited and 8 others reported as 2000 CLC 1438,and held that when a sale was confirmed, an auction purchaser acquired valuable rights in the property which could not be disturbed. The ratio expounded by the honorable Supreme Court, in Muhammad Attique v. Jami Limited and others reported as PLD 2010 Supreme Court 993 and Mumtaz ud Din Feroze v. Sheikh Iftikhar Adil and others reported as PLD 2009 Supreme Court 207,delved into the nature of rights that are created upon the acceptance of an offer and the subsequent confirmation of sale. The cited pronouncements afford sanction and protection to a duly determined bona fide auction purchaser.
16. The appellants have failed to demonstrate any infirmity with respect to the auction proceedings. The appellants have also eschewed their right to challenge the auction proceedings, and / or any constituent thereof before the fori of appropriate jurisdiction, hence, could not be permitted to interfere in the peaceful title and possession with respect to the auctioned immovable property bestowed by the Court upon the auction purchaser.
17. In view of the foregoing we are of the considered opinion that the auction proceedings in respect of the auctioned immovable property have attained finality and that no grounds have been made out to merit any interference in the bona fide rights of the auction purchaser.
18. We have carefully considered the Impugned Judgment and no apparent irregularity or illegality has been found therein. The Impugned Judgment is found to be in due consonance with the law and as a consequence thereof the same is hereby maintained and upheld.
19. In view of the reasoning and rationale delineation herein below it is the considered opinion of this Court that this appeal is devoid of merit, hence, the same was dismissed vide our short order dated 26.09.2018. These are the reasons for the said short order.
Abid H. Qazi/**