HCA 173 of 2004

IN THE HIGH COURT OF SINDH AT KARACHI

HIGH COURT APPEAL NO. 173 OF 2004

Present:

Mr. Justice Gulzar Ahmed &

Mr. Justice Irfan Saadat Khan.

J U D G M E N T

Date of hearing : 01.12.2009.

Appellant through : Mr. Azizur Rehman, Advocate.

Respondents through : Mr. Tasawar Ali Hashmi, Advocate.

>>>>>> <<<<<<

GULZAR AHMED, J.:- By this appeal, appellant has challenged the order dated 09.3.2004 passed by learned Single Judge of this Court in J.M.No.42 of 2001, by which the said J.M. was disposed off with finding that respondent will pay the amount of Rs.61,229/- towards the settlement of its dues.

The appellant had filed J.M.No.42 of 2001 under Section 39 of Industrial Development Bank of Pakistan, Ordinance 1961 for recovery of Rs.2,337,411.32 from the respondent. The respondent has resisted the said J.M. and filed its objections. Upon hearing the parties counsel, through elaborate order dated 28.10.2003, the learned Single Judge disallowed the claim of appellant on account of interim markup, markup for grace period and penalty/fine. With regard to claim of insurance premium and excise duty, the learned Single Judge ordered that same be supported by documentary evidence and ultimately directed that statement of account be filed. It is noted in the impugned order that a statement has been filed by the appellant counsel in which entries in respect of insurance premium and other charges in terms of the invoice came to Rs.13,055/-. A further amount of Rs.48,174/- was found to be outstanding against the respondent and thus respondent was made liable to make payment of Rs.61,229/- towards the settlement of appellant’s claim in the said J.M. It is further noted in the impugned order that no document to support the claim of excise duty was filed by the appellant.

Learned counsel for the appellant has contended that appellant was entitled to payment of markup on grace period, markup of interim period and fine in terms of the finance agreement. He further contended that markup for interim period has been paid by the respondent and appellant has no claim on this account and prayed for allowing of markup of grace period and fine/penalty and in support of his such submissions relied upon the cases of FEDERATION OF PAKISTAN THROUGH MINISTRY OF FINANCE & OTHERS V/S HAJI MUHAMMAD SADIQ & OTHERS(2007 CLD 1) and HALA SPINNING MILLS LTD. V/S INTERNATIONAL FINANCE CORPORATION & ANOTHER (2002 SCMR 450).

On the other hand, learned counsel for the respondent has supported the impugned order and has contended that respondent has already deposited the amount of Rs.61,229/- within the period as provided in the impugned order and that the appellant is not entitled to any further sum and in support of his submission has relied upon the cases of UNITED BANK LIMITED V/S M/S AZMAT TEXTILE MILLS LIMITED (2002 CLD 542), INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN V/S M/S HAJI DOSSA LTD & 6 OTHERS (PLD 1985 Kar.71), SHAIKH SHAUKAT ALI V/S THE TRUSTEES OF THE PORT OF KARACHI (PLD 1975 Kar.1096), and N.D.F.C. V/S ANWAR ZAIB WHITE CEMENT LTD. & OTHERS (1999 MLD 1888).

We have considered the submissions made by learned counsel and have gone through the record.

The appellant seems to have extended two finance facilities to the respondent; one under NRI Scheme in the sum of Rs.1,3,00,000/- (Resale price Rs.3,053,455) and the other of LFM under SBP’s Scheme in the sum of Rs.1,2,00,000/- (Resale price of Rs.1,688,970/-). Resale price of later facility was subsequently reduced to Rs.1,391,955/-. In terms of the finance agreement dated 05.1.1987 the resale price of assistance under LFM SBP’s Scheme was to be paid by respondent to the appellant in 15 six monthly installments commencing one year and six months from the date of first disbursement and under NRI Scheme six monthly installments commencing one year and six months of its first disbursement.

It appears that respondent availed total facility of Rs.1,2,00,000/- of LFM Scheme but under NRI Scheme, the respondent availed only Rs.1,000,000/-. The first disbursement under NRI Scheme was made to the respondent of RS.5,00,000/- on 05.1.1987 while second disbursement of Rs.5,00,000/- was made on 30.6.1988. Under LFM SBP’s Scheme the first disbursement of Rs.3,00,000/- was made on 10.3.1987, while second disbursement of Rs.504,000/- was made on 08.4.1987 and third disbursement of Rs.3,96,000/- was made on 13.3.1989.

The case of the appellant is that respondent had defaulted in making the repayment according to agreed terms of the finance agreement and thus became liable to the imposition of fine/penalty and further to markup of grace period while the case of respondent is that it has made all payments within the time limit provided by the finance agreement and is not liable to fine or markup of grace period.

So far the claim of the appellant for markup of grace period is concerned, we have gone through the agreement of finance dated 05.1.1987 made between the appellant and respondent filed as annexure A-6 with the memo of appeal and have not been able to find any clause providing for payment of markup of grace period. Under the agreement the respondent has been made liable to make payment of resale price, charges of the appellant, commitment charges and fine for default in payment. The counsel for the appellant has contended that markup for grace period is provided in the repayment schedule which is signed by the respondent. Merely mentioning markup of grace period in the schedule of repayment in itself will not constitute an agreement for payment of markup of grace period as such markup has to be specifically mentioned in the agreement of finance in order to create liability of such markup on the respondent. Clause 2.03(c) of the finance agreement only authorized the appellant to establish a schedule of markup price. Markup price is defined in clause 1.05 of the finance agreement as follows:

“1.05. “MARK-UP PRICE/RE-SALE PRICE” shall means and include sale price of the fixed assets to the customer by the Bank plus the margin of profit of the Bank payable by the Customers to the Bank but Mark-up price will not include “Charges” as defined above.”

The above definition amply shows that markup price means and include sale price of the fixed assets plus margin of Bank profit but not charges. It does not include item of markup of grace period. Thus the inclusion of item of markup of grace period in the schedule of repayment is even not authorized by the finance agreement itself.

The appellant has claimed that it is entitled to payments of fine under the agreement of finance. The agreement of finance does stipulate for payment of fine in the event of default in payment by the respondent. It is, by now, well settled proposition of law that claiming of fine, liquidated damages or penalty solely based upon the terms of finance agreement between the parties itself will not be sufficient to grant the fine, liquidated damages or the penalty amount inasmuch as the party claiming such fine, liquidated damages or penalty has to in the first place pleads such fact in its plaint or petition and thereafter to prove the same through cogent and reliable evidence and that too, the Court, if satisfied with the evidence, will not necessarily grant the specific amount of fine, liquidated damages or penalty as stipulated in the finance agreement but only a reasonable compensation to be ascertained from the evidence adduced by the parties. It was held in the case of Messrs UNITED BANK LIMITED versus Messrs M. ESMAIL AND COMPANY (PVT.) LIMITED & 2 OTHERS (2006 CLD 394), a judgment of Division Bench of this Court, that the whole case of bank for liquidated damages against the borrower was based upon the breach of terms of loan agreement and no other particulars of actual losses or damages were unfolded in the plaint and thus concluded that non-awarding of claim of liquidated damages which solely based on breach of terms of agreement was fully justified in the circumstances. Further, in the case of FATEH CHAND V/S BALKISHAN DASS (AIR 1963 SC 1405) it has been held by Their Lordships that in terms of Section 74 of Contract Act reasonable compensation will not be awarded by the Court when as a result of breach of contract no legal injury has resulted. Cumulative effect of the state of law, as discussed above, is that the fine, liquidated damages or penalty would be awarded by the Court to the extent of its reasonableness if the contract is breached and the damages of legal injury are pleaded in the plaint with sufficient material and is also proved in the evidence by the party. In the present case there is no fact pleaded in the J.M. of incurring of any damages or legal injury to the appellant and still there is no evidence to support the grant of fine as claimed by the appellant.

For the foregoing reasons, we find no merit in this appeal which is dismissed. The listed application is also disposed off.

J U D G E

Aamir/PS