Judgment Sheet
IN THE HIGH COURT OF SINDH AT KARACHI
Suit No. B – 04 of 2010.
Present :
Mr. Justice Nadeem Akhtar
Date of hearing : 30.10.2012.
Plaintiff : Askari Bank Ltd. through Mr. Waleed Khanzada,
Advocate.
Defendants : M/S Shahi Textiles and 3 others through
Mr. Asghar Khan Bangash, Advocate.
J U D G M E N T
NADEEM AKHTAR, J.- This Suit has been filed by the plaintiff against the defendants under the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 (the Ordinance) for recovery of Rs.217,890,000.00.
2. The case of the plaintiff, which is a financial institution, is that defendant No.1 requested the plaintiff for various finance facilities. Defendant No.1 is a partnership concern, and defendants No.2, 3 and 4 are its partners. All the defendants have been sued as principal borrowers / customers, and defendants No.2 to 4 have been sued as the guarantors as well. The finance facilities requested by the defendants were granted to them by the plaintiff through various finance agreements. It is also the case of the plaintiff that the said facilities were renewed at the request of the defendants, and at the time of such renewals, the facilities were enhanced and additional amounts were disbursed to the defendants by the plaintiff. Along with the plaint, the plaintiff has filed the first sanction letter as well as the subsequent sanction letters for renewals and enhancement of facilities, with endorsements thereon by the defendants regarding acceptance of the terms and conditions contained therein. The plaintiff has also filed the finance agreements in respect of all the facilities, duly executed by the defendants.
3. It has been stated in the plaint that, in order to secure the repayment of the finance facilities, the defendants executed in favour of the plaintiff a number of Promissory Notes along with Letters of Continuity. Letters and Agreements of Hypothecation were also executed by the defendants, whereby they hypothecated in favour of the plaintiff all their present and future receivables, plant and machinery located, attached or installed at three of their premises ; namely, (1) Plot No. L-26-C-1, Block 22, F. B. Area, KDA Improvement Scheme No.16, Karachi, (2) Plot No. L-25-C, Block 22, F. B. Area, KDA Improvement Scheme No.16, Karachi, (3) Plot No. L-26-D, Block 22, F. B. Area, KDA Improvement Scheme No.16, Karachi. The defendants also executed in favour of the plaintiff a Letter of Lien for Advance against Shares, Stocks and Securities, and a Letter of Set-off.
4. In order to further secure the repayment of the facilities, the defendants mortgaged in favour of the plaintiff all the aforementioned three immovable properties by executing Memorandums Confirming Deposit of Title Deeds dated 05.05.2001, 22.10.2002 and 21.06.2002 in respect thereof, and by actually handing over to and depositing with the plaintiff all the original title documents thereof. Defendants No.2, 3 and 4 executed their separate personal guarantees in favour of the plaintiff between 16.05.2005 to 02.03.2009, whereby they specifically and unconditionally undertook to pay to the plaintiff the amounts mentioned therein in consideration of the facilities granted by the plaintiff.
5. The plaintiff has alleged that the defendants committed deliberate and wilful breach of their obligations and failed to settle the finance facilities availed by them. The plaintiff has stated in the plaint that a sum of Rs.161,470,000.00 million was disbursed by the plaintiff, out of which only a sum of Rs.510,000.00 was paid by the defendants. On the basis of the markup payable by the defendants according to the plaintiff, the plaintiff has prayed for a decree against the defendants, jointly and severally, in the sum of Rs.217,890,000.00, as well as for the sale of the mortgaged properties and the hypothecated assets.
6. Upon service of the summons, the defendants filed their application for leave to defend the Suit (C.M.A. No. 25492 of 2010), wherein they disputed the claim of the plaintiff mainly on the ground that the claim of the plaintiff was exaggerated. It is important to note that the execution of the documents filed and relied upon by the plaintiff was not disputed by the defendants. In fact, it was admitted by them that they were ready to pay the principal amount and such charges which are payable by them. By Order dated 29.03.2010, the application filed by the defendants was dismissed on the ground that the same was not filed within time. Thereafter, this Suit was decreed on 07.07.2010 in the sum of Rs.161,470,000.00 jointly and severally against all the defendants.
7. The aforementioned judgment and decree were set aside by a learned Division Bench of this Court in Special High Court Appeal No.167/2010 by the judgment dated 20.12.2010, whereby the appeal was allowed, the impugned judgment and decree were set aside, the matter was remanded back to this Court with a direction to first hear the application for leave to defend on merits, and to dispose of the Suit in accordance with law after decision of the application on merits. In pursuance of the aforementioned Order passed by the learned Division Bench, the application for leave to defend filed by the defendants was heard at length on merits, and was dismissed vide Order dated 24.04.2012. After dismissal of the application for leave to defend on merits, the matter has now come up for final disposal.
8. Mr. Waleed Khanzada, the learned counsel for the plaintiff, referred to the relevant documents starting from the first request letter from the defendants, and then to the last sanction advice dated 03.09.2009, whereby several finance facilities described therein totalling up to Rs.161,470,000.00 were sanctioned to the defendants, and the defendants had accepted the terms and conditions of the sanction by signing the said sanction advices. The last two Agreements for Financing on Markup Basis, both dated 02.03.2009, executed by the defendants were also referred to by the learned counsel. He also referred to the last personal guarantees executed separately by defendants No. 2, 3 and 4. The learned counsel specifically referred to paragraphs 4, 6 and 10 of the application for leave to defend filed by the defendants, and submitted that they had admitted their liability therein.
9. Mr. Asghar Khan Bangash, learned counsel for the defendants, submitted that the claim of the plaintiff is not justified as it includes markup over markup and other charges, and also since the plaintiff has claimed markup beyond the agreed period. He further submitted that the grounds urged by the defendants in their application for leave to defend can still be looked into by the Court even if the said application has been dismissed. With respect to the learned counsel, this contention is untenable as the grounds urged by the defendants in their application for leave to defend have already been rejected by this Court, and as such the same cannot be re-agitated. Even otherwise, under Section 10(11) of the Ordinance, this Court has to pass judgment and decree in favour of the plaintiff against the defendants forthwith upon dismissal of the defendants’ application for leave to defend. This view is fortified by the reported cases of Apollo Textile Mills Ltd. & others V/S Soneri Bank Ltd, 2012 CLD 337 (Supreme Court), Messrs United Bank Ltd. V/S Banking Court No.II and 2 others, 2012 CLD 1556, Mrs. Jawahar Afzal V/S United Bank Ltd., 2003 CLD 119, Khawaja Muhammad Bilal V/S Union Bank Ltd., 2004 CLD 1555, Habib Bank Ltd. V/S Messrs SABCOS (Pvt.) Ltd., 2006 CLD 244.
10. The dismissal of the application for leave to defend does not mean that the entire claim of the plaintiff in a Suit under the Ordinance should be decreed as prayed by the plaintiff without examining the claim of the plaintiff. In such an event, no doubt the plaintiff becomes entitled to a decree, but only to the extent of such amount which is permissible in law. It has now been well settled that markup more than the agreed rate and / or beyond the agreed period cannot be granted to the financial institution. Similarly, no other charges or amounts can be allowed to the financial institution to which the customer had not agreed. The Court must examine the claim of the financial institution in the light of the above before passing the decree.
11. Mr. Waleed Khanzada, the learned counsel for the plaintiff, very frankly and fairly submitted that the plaintiff shall be satisfied in case a decree is passed for the principal amount and for the markup only to the extent of the difference between the sale price and the purchase price mentioned in the last two Agreements for Financing on Markup Basis dated 02.03.2009. The submission of the learned counsel is not only very fair, but is also in accordance with the settled law, as the purchase / marked up price includes markup for the agreed period. The disbursement of Rs.161,490,000.00 by the plaintiff has not been disputed by the defendants. The defendants have specifically admitted that they are ready to pay the principal amount and such charges which are payable by them. The defendants have also not disputed execution of the documents filed and relied upon by the plaintiff, including the Agreements of Financing whereby they undertook to pay to the plaintiff the purchase prices mentioned therein. The following position has emerged in view of the above :-
(i) Sale price of the first Agreement : Rs. 86,000,000.00
Purchase price of the first Agreement : Rs. 103,200,000.00
Difference between sale price and
purchase price : Rs. 17,200,000.00
(ii) Sale price of the second Agreement : Rs. 65,000,000.00
Purchase price of the second Agreement : Rs. 78,000,000.00
Difference between sale price and
purchase price : Rs. 13,000,000.00
Total difference i.e. markup payable
by the defendants (17,200,000.00 plus
13,000,000.00) comes to : Rs. 30,200,000.00
Amount admitted by the defendants : Rs.161,490,000.00
Add markup payable by the defendants : Rs. 30,200,000.00
Total amount payable by the defendants
including principal and markup : Rs.191,690,000.00
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12. The foregoing are the reasons for the short Order announced by me on 30.10.2012, whereby this Suit filed by the plaintiff was decreed with costs, jointly and severally, against the defendants in the sum of Rs.191,690,000.00 (Rupees one hundred ninety one million six hundred and ninety thousand only) with cost of funds thereon from the date of default, as well as for the sale of the mortgaged properties.
J U D G E
*Suit No. B-04 of 2010 Banking /Judgment Single/Court Work/Desktop/ARK*