IN THE HIGH COURT OF SINDH, KARACHI

Ist Appeal No.10 of 2010

[ Habib Bank Limited v. Tax Trade International Ltd., & another ]

PRESENT:

Mr. Justice Arshad Hussain Khan

Mr. Justice Amjad Ali Sahito .

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Appellant	Through Mr. Zayyad Khan Abbasi, Advocate
Respondents	Mr. Zeeshan Bashir Khan, Advocate
Date of Hearing:	09.04.2026
Date of Decision:	09.04.2026

JUDGMENT

ARSHAD HUSSAIN KHAN J; Through the present first appeal filed under Section 22 of the Financial Institutions (Recovery of Finance), Ordinance, 2001 “the FIO, 2001”, the appellant has challenged the order dated 09.10.2009 and decree dated 07.11.2009 passed in Suit No.59 of 2002 by the learned Judge, Banking Court No.IV, Karachi whereby the suit filed by the Appellant for recovery against the respondents was dismissed being time barred with no order as to costs.

2. Briefly, the facts giving rise to the present appeal are that respondent/defendant No.1, a limited company incorporated under the laws of Hong Kong and managed by close family members, went into liquidation in Hong Kong. It is the case of the appellant-bank that, at the request of respondent No.1, various financial facilities were extended, for which respondent/defendant No.2 stood as guarantor. The facilities were secured through a promissory note dated 16.05.1997 for Hong Kong $ 5.100 million and a letter of guarantee of the same date was executed by respondent No.2. Upon default in repayment, respondent No.2 relocated to Karachi. Consequently, the appellant instituted a suit for recovery of Hong Kong $ 4.291 million against the respondents before the Banking Court No. IV, Karachi. Upon service, the respondents sought leave to defend, which was allowed subject to furnishing security equivalent to the suit amount within one month. Their subsequent review application under Section 114 read with Section 151 C.P.C. was dismissed vide order dated 16.06.2008. Thereafter, the respondents, particularly respondent No.2 through legal heirs, failed to pursue the matter. The appellant filed a detailed statement of account, and the case was fixed for consideration thereof. However, vide judgment and decree dated 09.10.2009, the learned trial court dismissed the suit on the ground of limitation. Being aggrieved, the present appeal has been preferred.

3. Learned counsel for the appellant-bank argues that the impugned judgment and decree is a result of gross misapplication of the law. He contended that the Trial Court, having already exercised its discretion by granting conditional leave to defend on 25.06.2007, was legally bound by the mandatory provisions of Section 10(11) of the FIO, 2001. According to the appellant, once the Respondents failed to comply with the condition of furnishing security, the court had no authority to probe into technicalities and was obligated to pass a decree in favor of the Bank immediately. Furthermore, the counsel asserted that the suit was not time-barred, as the Trial Court ignored the correspondence between the parties. Specifically, he pointed to the Appellant’s letter dated 05-04-1999 and the Respondent’s reply dated 20-04-1999, asserting that these documents constitute a valid acknowledgment of debt under Section 19 of the Limitation Act, effectively extending the limitation period to April 2002, which makes the filing of the suit in March 2002 within time.

4. Conversely, the learned counsel for the Respondent No.2 while supporting the impugned order and decree submits that the same are well-reasoned and has been passed in accordance with law. He argued that the reply dated 20-04-1999 was merely a request for an attested copy of a document to enable a response, rather than a clear and unequivocal acknowledgment of liability. He however, concedes that the conditional leave was granted to the respondents, which was not complied with but a procedural default in providing security cannot breathe life into a suit that is legally dead by virtue of limitation, and thus, the Trial Court’s decision was just and based on the face of the record. He has relied upon the case of Messrs Al-Fatah Cotton Ginners and Oil Mills and another v. Messrs Allied Bank of Pakistan Limited and 7 others [2015 CLD 477], Messrs Standard Chartered Leasing Limited v. Federation of Pakistan and 4 others [2016 CLD 762], Sahibzadi Shah Bano Khan v. Messrs Citibank N.A., [2006 CLD 258], Homepack Freight International and another v. Saudi Pak Leasing Company Ltd., [2016 CLD 82] and Meezan Bank Ltd., v. Messrs Facus Apparels (Pvt) Ltd and 6 others [2015 YLR 241].

5. We have heard the learned counsel for the parties and, with their able assistance, have carefully perused the material available on record. Upon such examination, we are of the considered view that the controversy involved in the present matter rests upon a mixed question of law and fact, which could not have been conclusively determined in a summary manner. Although the learned Trial Court was justified in taking note of the plea of limitation, it nonetheless fell into error in failing to properly consider and appreciate the legal effect and import of the correspondence dated 20.04.1999, being a reply by the respondents to the appellant’s letter dated 05.04.1999. The said communication, whereby an “attested copy” of the guarantee was sought in order to “enable an appropriate reply,” prima facie gives rise to a triable issue as to whether the respondent, through such correspondence, was acknowledging the subsistence of the jural relationship and the underlying liability, or was merely calling for information without any intention to admit the claim.

6. Since the question of maintainability of the suit and the issue of limitation are inextricably linked with the true interpretation, context, and intent underlying the said correspondence and allied documents, the matter necessarily warranted a full-fledged trial after recording evidence and affording the parties an opportunity to cross-examine the relevant witnesses. An issue of such foundational importance, going to the very root of the lis, could not have been lawfully determined in a summary manner. More so, where the appellant-bank’s claim emanates from substantial financial facilities, denial of an opportunity to establish or rebut the implications of the said correspondence and the documents relied upon would amount to a violation of the right to fair trial and due process as enshrined under Article 10-A of the Constitution of the Islamic Republic of Pakistan.

7. The case laws relied upon by the learned counsel for the respondents have been carefully considered; however, the same are found to be distinguishable on facts and circumstances of the present case and, therefore, are not applicable.

8. For the foregoing discussion, we are of the considered view that the matter warrants remand for a decision on merits after a full-fledged trial. Accordingly, the impugned judgment dated 09.10.2009 and decree dated 07.11.2009 are hereby set aside, and the respondents are granted unconditional leave to defend the suit.

The case is remanded to the learned Banking Court with the direction to frame specific issues, particularly with regard to limitation, as well as the existence of the jural relationship and the underlying liability, and to decide the matter afresh after recording evidence and affording fair opportunity of hearing to the parties, strictly in accordance with law, preferably within a period of four (04) months from the date of receipt of this order.

JUDGE

Naveed PA.