IN THE HIGH COURT OF SINDH, KARACHI.
First Appeal No. 97 of 2010
Present :
1. Mr. Justice Faisal Arab
2. Mr. Justice Nadeem Akhtar
Date of hearing : 10.04.2012
For the Appellant : Mr. Shahab Sarki, Advocate.
Respondent : Called absent.
J U D G M E N T
NADEEM AKHTAR, J. - The appellant, being a financial institution, filed Suit No.45 of 2009 before the Banking Court No.IV at Karachi under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance of 2001 (‘THE ORDINANCE’) against the respondent for recovery of Rs.423,965.48. The case of the appellant before the Banking Court was that the respondent applied to the appellant for a credit card facility and signed an application and declaration in this behalf containing certain terms and conditions. The appellant claimed that the respondent availed such finance facility and also paid to the appellant the amounts utilized by him. However, the respondent started committing default in payments and as such the respondent became liable to pay “late payment fee” of Rs.37,784.60 and “service fee” of Rs.286,057.81 to the appellant, to which the respondent had agreed by executing application form and declaration containing terms and conditions of finance. In addition to above mentioned late payment fee and service fee, the appellant also claimed from the respondent Rs,4,000.00, Rs.4,775.00, Rs.5,400.00, Rs.5,800.00 and Rs.2,069.00 towards membership fee, credit guardian, over limit fee, cash advance fee and Federal Excise Duty, respectively.
2. We may point out here that the exact date of the alleged default was not mentioned anywhere in the plaint. However upon a query by the Court during the course of hearing, Mr. Shahab Sarki learned counsel for the appellant submitted that the respondent started committing default from June 2007. We have noticed from the record that the rate(s) at which the appellant had claimed late payment fee and service fee and the relevant Clause / terms and conditions of the agreement in respect thereof were also not disclosed in the plaint. Before us only an application form containing a declaration in general terms is available, whereby the respondent had authorized the appellant inter alia to arrange on his behalf free of cost travel accident insurance, and undertook to pay all charges billed to him by the appellant. The record before us does not show any such terms and conditions, whereby the respondent had specifically agreed to pay late payment fee and/or service fee to the appellant.
3. In his application for leave to defend, the respondent volunteered to pay principal amount to the appellant, but challenged all the other charges, penalties, markup, etc. as illegal and malafide. At the time of hearing of respondent’s aforesaid application, the respondent further agreed to pay cost of funds on the principal amount, which fact is duly recorded in the impugned order / judgment dated 02.02.2010. In view of respondent’s above mentioned stance, his application for leave to defend was dismissed by the Banking Court by observing that no dispute was left between the parties which required evidence. After dismissing respondent’s said application, the learned Banking Court proceeded further to examine appellant’s claim / statements of account and all the charges and fee claimed therein.
4. In the detailed statement of account as well as the summary thereof filed by the appellant (available at pages 167 and 169 of the Court file), the appellant itself had shown a sum of Rs.509,194.00 as the principal amount availed by the respondent, out of which Rs.324,194.00 was shown as “new activity”, and Rs.185,000.00 as “cash advance”. In the aforesaid statements, the appellant admitted that a total sum of Rs.431,115.00 was received from the respondent in cash and through cheques. Other charges claimed by the appellant towards late payment fee, service fee, membership fee, credit guardian, over limit fee, cash advance fee and Federal Excise Duty were also mentioned in the said statements.
5. Keeping in view the above position, the learned Banking Court deducted the amount of Rs.431,115.00 admittedly paid by the respondent from the principal amount of Rs.509,194.00 availed by the respondent and decreed appellant’s suit in the sum of Rs.78,079.00 with cost of funds thereon from the date of default till payment, and also awarded costs of the suit to the appellant. The other charges claimed by the appellant towards late payment fee, service fee, membership fee, credit guardian, over limit fee, cash advance fee and Federal Excise Duty, were not allowed by the learned Banking Court. Being aggrieved by the impugned judgment and decree, this appeal has been preferred by the appellant.
6. Mr. Shahab Sarki, learned counsel for the appellant, at the very outset conceded before us that the appellant does not wish to press the claim in respect of credit guardian, late payment fee, over limit fee and cash advance fee for Rs.4,774.82, Rs.37,784.60, Rs.5,400.00 and Rs.5,800.00, respectively. The learned counsel, however, submitted that service fee of Rs.286,057.81, Federal Excise Duty of Rs.2,069.25 and membership fee of Rs.4,000.00 ought to have been allowed to the appellant by the learned Banking Court as the respondent was liable to pay the same in terms of the agreement. He contended that to such an extent the impugned judgment and decree is illegal and should be set aside.
7. For the purposes of this appeal, it is important to note that the entire amount of Rs.423,965.48 was claimed in the suit by the appellant as “the principal amount payable by the defendant”, and that cost of funds on the suit amount was claimed from the date of filing of the suit. From its own pleadings, it is clear that the appellant did not claim any other amount from the respondent except the principal amount. It is a settled principle of law that parties cannot go beyond their pleadings nor are they entitled to any such claim which they have not prayed for. By virtue of Section 7(1)(a) of the Ordinance, Banking Court, while exercising civil jurisdiction, is empowered with all the powers of a Civil Court under CPC. In this context, Order II Rules 2(1) and 2(2) CPC are relevant which are reproduced below for convenience and ready reference :-
“ (1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action, but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court.”
“ (2) Where a plaintiff omits to sue in respect of or intentionally relinquishes, any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished.”
As noted above, the appellant did not claim any other amount from the respondent except the principal amount. Under the above quoted Sub-Rules of Order II Rule 2 CPC, the amount claimed by the appellant in suit, whatever it was, shall be treated as the whole claim of the appellant, and further claim of the appellant, if any, shall be deemed to have been relinquished by the appellant. Therefore, further or additional amount(s), other than the amount claimed in suit, could neither be claimed / charged by the appellant from the respondent nor the same can be granted to the appellant. The view expressed by us above is supported by the following authorities :-
(i) 1988 SCMR 1696 - Mst. Jannat Bibi V/S Sher Muhammad & others : “……….. In civil proceedings a party is not permitted to deviate from his or her pleadings, nor can the court set up a different plea for a party and decide the suit on that basis……..”. (‘B’ at page 1701)
(ii) 2008 SCMR 456 - Malik Muhammad Faisal & others V/S State Life Insurance Corporation, through Chairman, & 2 others : As the petitioners in this case failed to plead and raise a specific ground in their pleadings from the very inception of the case, they were precluded from improving their case and to raise new ground of attack by departing from previous pleadings. (‘A’ at page 458 and ‘B’ at page 461)
(iii) PLD 2007 SC 460 - Sh. Fateh Muhammad V/S Muhammad Adil & others : It is a settled principle of law that parties are bound by their pleadings. (‘C’ at page 465)
(iv) PLD 2007 SC 582 - Zulifqar & others V/S Shahadat Khan : “12. ……… there is ample authority that unless a case is set up in pleadings, decision of the case cannot possibly rest on such a plea. This has been the consistent law with the rationale that the other party is not taken by surprise. ……….”. (Para 12 (‘K’) at page 591)
(v) 1996 SCMR 336 - Bin Yamin & 3 others V/S Choudhry Hakim & others : A party is required to plead facts necessary to seek relief claimed and he would be entitled to produce evidence to prove those pleas. Variation in pleadings is not permissible in law. Completely new plea, which had not been pleaded, cannot be allowed to be substituted. (‘B’ at page 339)
(vi) PLD 2009 Lahore 641 : (Division Bench)
Dr. Zia-ur-Rehman Khan & others V/S Dr. Atiq-ur-Rehman Khan : “7. ………. no one can substantiate and prove a case beyond the scope of his pleadings and even if any evidence has been brought on the record outside the purview thereof, it shall be ignored and overlooked by the court……”. (Para 7 (‘A’) at page 651)
(vii) 2004 CLD 587 : (Division Bench) (LHC)
M/S C.M Textile Mills (Pvt.) Ltd., through Chairman, & 5 others V/S Investment Corporation of Pakistan :
In this case, it was held inter alia that it is plaintiff’s burden to set out and formulate a plaint compliant with mandatory requirements of law ; that to succeed in the Suit, the plaintiff has to prove its claim as raised and pleaded in the plaint ; that if the Suit has been developed on documents, the plaintiff will be entitled to the relief only on showing the cause(s) of action to arise from the documents sued upon ; and that the requirement of exact adherence to the legal demands is more stringent for the plaintiff invoking jurisdiction of special Court created under a special law when the conditions and pre-requisites for resort to such jurisdiction have been specifically and expressly prescribed in the special law. (Para 9-A at page 593).
8. In his application for leave to defend, the respondent had specifically stated that he wanted to discontinue the credit card facility by surrendering the same to the appellant, and on the advice of appellant’s authorized representative, the credit card in question was cut into two pieces and was dropped by the respondent in the drop box of appellant’s branch on 22.06.2007. This fact was neither denied by the appellant in its replication before the Banking Court nor has been disputed before us. Since no facility and/or service whatsoever was extended to the respondent by the appellant from 22.06.2007 onwards, the appellant was not entitled to charge or claim any amount from the respondent on account of service fee.
9. Since the main thrust of learned counsel’s argument was in respect of service fee, he relied upon Hon’ble Supreme Court’s case of S.M.S. Bukhari V/S Citi Bank N.A. reported as 2004 CLD 1247. In the said case it was observed by the Hon’ble Supreme Court that vide Clause 5.1.2 of the terms and conditions agreed by the parties in the said case, charging of service fee by the financial institution at the rate of 3% per month was justified because extensive services were being continuously rendered by the financial institution in favour of the credit card holder. The Hon’ble Supreme Court also took notice of the fact in the aforesaid case that the credit card holder / customer had specifically agreed vide said Clause 5.1.2 of the terms and conditions agreed by the parties to pay service fee of 3% (or such other percentage as the bank may specify from time to time) of the current balance then outstanding in the card account. It was on the basis of the above facts and observations, the Hon’ble Supreme Court held that the fee claimed by the financial institution for the services rendered in terms of the agreement between the parties was permissible and was not interest. Mr. Shahab Sarki, learned counsel for the appellant, argued that in the light of the above mentioned judgment of the Hon’ble Supreme Court, the appellant is also entitled to service fee.
10. We do not agree with the above contention of the learned counsel as the facts of the instant case are clearly distinguishable from those which were before the Hon’ble Supreme Court in the above referred case. In the case before the Hon’ble Supreme Court the credit card holder / customer had specifically agreed vide Clause 5.1.2 of the terms and conditions agreed by the parties to the said case to pay service fee at a specific rate of 3% (or such other percentage as the bank may specify from time to time) of the current balance then outstanding in the card account. Whereas, in the instant case the appellant completely failed and neglected to plead or mention in the plaint specific Clause of the agreement whereby the respondent had agreed to pay service fee at a specific / agreed rate. The statements of account filed by the appellant also did not contain the rate at which service fee was charged by the appellant. In other words, there was no agreement between the parties for payment of service fee at a prescribed rate. The other distinction is that, in the case before the Hon’ble Supreme Court, service fee was held to be permissible in view of the fact that financial institution was rendering service to the credit card holder / customer. In the instant case the service, which was being rendered by the appellant to the respondent, came to an end on 22.06.2007 when the respondent admittedly stopped availing the facility and the credit card in question was cut into two pieces and was dropped by him in the drop box of appellant’s branch. As such, there was no justification for charging service fee after 22.06.2007. Service fee would have been justified only if the respondent, after committing default, was still utilizing the facility and the appellant was still rendering services to him.
11. Since the rate at which service fee was to be charged by the appellant was admittedly never agreed by the parties nor any specific rate was mentioned in the plaint and the statements of account, the settled principles of law on this particular point shall apply to this case, that is, markup / profit cannot be charged without mutual agreement and/or beyond the mutually agreed period. We would like to highlight a few reported cases on this particular point.
(i) 2004 CLD 162 : (Division Bench) (LHC)
Haji Fazal Elahi & Sons, through Muhammad Tariq V/S Bank of Punjab : In this case, finance agreement was for a particular period of time on markup basis, but in the statement of account, the bank charged markup beyond the contract period. It was held that in the absence of any agreement or law allowing charging of markup, claim of bank for markup beyond contract period would be illegal and could not be awarded.
(ii) 2004 CLD 974 : (Division Bench) (LHC)
Muhammad Sharif & Sons, through proprietor, and another V/S United Bank Ltd. : It was held in this case that penal interest could not be charged without any express contract.
(iii) 2004 CLD 1714 : (Division Bench) (LHC)
Muhammad Akram Choudhry V/S Style Enterprises (Pvt.) Ltd. : Judgement and decree passed in this case was set aside to the extent of markup charged by the bank beyond period of agreement, and such amount charged by the bank was held to be illegal and unauthorized.
12. Another important aspect of this case is that cost of funds was claimed by the appellant from the date of filing of suit, whereas the same has been awarded by the Banking Court from the date of default, which is in consonance with Section 3(2) of the Ordinance. It is our considered view that entitlement of cost of funds from the date of default was introduced through the Ordinance in order to safeguard the interest of the plaintiff, whether a financial institution or customer, by reimbursing him with an amount (cost of funds) as compensation for blockade of his funds. It would not be out of place to mention here that justification or cause of action for claiming cost of funds and service fee, or any other type of penalty, is the same, that is, default by the customer in fulfilment of his obligation. It does not appeal to our mind that a customer should be penalized twice for the same wrong / default and for the same period, that is, default in fulfilment of his obligation, by charging service fee or any other type of penalty from him from the date of default on the one hand, and on the other hand by claiming cost of funds from him with effect from the same date of default. A similar view was taken by a learned single judge of this Court (the learned senior member of this Bench, Faisal Arab, J.) in the case of Habib Bank Limited V/S Karachi Pipe Mills Limited, reported as 2006 CLD 842, wherein it was held inter alia that any delay in repayments did not bring any monetary gain to financial institutions, and for such reason, the Ordinance took away power of courts to grant markup beyond contracted period and replaced it with power to award only cost of funds. In the instant case, since cost of funds has been granted to the appellant by the Banking Court from the date of default on the amount claimed by the appellant, we hold that the appellant is not entitled to service fee for the same period.
13. In view of the reasons discussed above, the impugned decree does not require any interference. The appeal is, therefore, dismissed with no order as to costs.
Judge
Judge
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*I A 97-10/Judgment/ARK/D*