Judgment  Sheet

 

 

IN  THE  HIGH  COURT  OF  SINDH  AT  KARACHI

 

Suit No. B 125 of 2011

 

 

Date

Order with signature of Judge

 

 

For hearing of C.M.A. No.796 of 2012 (Application for leave to defend) :

 

 

Plaintiff                      :   Habib Metropolitan Bank Limited, through

    M/S Khalid Anwer, Rashid Anwer and Anas Makhdoom,

    advocates.

 

Defendants               :   Century 21 Textile & Sportswear (Pvt.) Limited,

    Centurion (Pvt.) Limited, Zahid Razzak and

    Mrs. Ambreen Zahid, through

    M/S Arshad Mohsin Tayebaly and Muhammad Shahid,

    advocates.            

 

Dates of hearing      :   07.11.2013, 19.11.2013, 04.12.2013 and 16.12.2013.

…………

 

 

J U D G M E N T

 

 

NADEEM AKHTAR, J. This application has been filed jointly by the defendants under Section 10 of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 (‘the Ordinance’), praying that unconditional leave to defend this Suit be granted to them. This Suit has been filed by the plaintiff-bank under Section 9 of the Ordinance, praying for a decree against the defendants in the sum of Rs.816,140,170.51 ; a mortgage decree for the attachment and sale of the mortgaged properties along with all structures and assets thereon ; a decree for the attachment and sale of the pledged and hypothecated goods and assets ; a decree for the attachment and sale of all the movable and / or immovable properties of the defendants for recovery of the amount claimed in this Suit ; and, cost of funds till realization of the decreed amount. Defendant No.1 has been sued as the principal borrower, and defendants 2, 3 and 4 have been sued as guarantors / sureties of defendant No.1. According to the plaintiff, the defendants are its customers in relation to the finances advanced to them by the plaintiff, which are the subject matter of this Suit.

 

2.         In their application for leave to defend, the defendants have raised a number of pleas and objections in opposition to the plaintiff’s claim, which, according to the defendants, are substantial questions of law and fact requiring evidence in this matter. The averments and allegations made by the defendants are given below in brief :

 

a.         The Suit has been filed by an unauthorized person ;

 

b.         The plaintiff has not complied with the mandatory requirements of Section 9(3) of the Ordinance ;

 

c.         The plaintiff’s claim is barred by limitation ;

 

d.         The plaintiff has charged markup over markup, and markup beyond the agreed period ;

 

e.         The signatures of the defendants were obtained by the plaintiff on blank papers, which are void ab initio ;

 

f.          The defendants have not committed any default in any obligation owed to the plaintiff ;

 

g.         The plaintiff has pleaded in paragraph 48 of the plaint that the total amount sanctioned to defendant No.1 is Rs.997,667,000.00, but there is no document showing disbursement of any such amount to defendant No.1 ;

 

h.         The plaintiff has claimed that obligations owed to it are based on a Running Finance Facility, but no certified statement of account for any such facility has been annexed to the plaint ;

 

i.          Various penalties and fines of the State Bank of Pakistan have been illegally debited by the plaintiff from the defendant No.1’s account ;

 

j.          The amounts claimed by the plaintiff are not legally due and outstanding against the defendants in view of the agreements for sale of immovable properties between the parties ;

 

k.         The Demand Finance Facility of Rs.50 million, claimed by the plaintiff, was never availed by defendant No.1 ;

 

l.          The Term Finance Facility of Rs.40 million, claimed by the plaintiff, has since been fully repaid, therefore, the plaintiff is liable to release the shares pledged and the personal guarantees furnished by defendant No.1 in consideration of the said facility ;

 

m.        The securities relied upon by the plaintiff are not valid or subsisting, and the same are liable to be returned / redeemed as per the arrangement between the parties ;

 

n.         The personal guarantees and the corporate guarantee filed and relied upon by the plaintiff, are unenforceable and void ;

 

o.         The plaintiff had agreed to waive the compounded markup and to adjust the entire outstanding liabilities of the defendants in lump sum of Rs.395 million in full and final satisfaction against their two properties ; namely, Plot No.C-55, KDA Scheme No.1, Karachi, measuring 1,113 sq. yds. (‘the KDA property’), and Plot No.B/25, Survey Sheet No.21, 35P/1-35L/13, SITE, Karachi, measuring 3.5 acres (‘the SITE property’) ;

 

p.         To give effect to the above arrangement, the plaintiff and defendant No.1 entered into two separate agreements to sell, dated 17.04.2010 and June 2010 for the KDA property and the SITE property, respectively, whereby the sale consideration of the KDA property was agreed at Rs.70 million, and that of the SITE property was agreed at Rs.325 million ;

 

q.         The above agreements were acted upon by the parties as the plaintiff paid the entire sale consideration of the KDA property to defendant No.1 by crediting the same to the defendant No.1’s account, and in consideration thereof, conveyance deed in respect of the said property was executed by defendant No.1 on 23.07.2011 in favour of the plaintiff. For the SITE property, the plaintiff paid a substantial amount of the sale consideration to defendant No.1 in the same manner by crediting the said amount to the defendant No.1’s account. As the balance sale consideration was payable by the plaintiff for the SITE property and the same was to be transferred in the plaintiff’s name subsequently, it was agreed that the SITE property would be given on monthly rent by the plaintiff to defendant No.1 ;

 

r.          In view of the above arrangement, the Suit is barred under the principles of promissory estoppel ;

 

s.         After the above arrangement, which was acted upon by the parties, the plaintiff was bound to release all other securities ;

 

t.          The plaintiff backed out from the above arrangement and committed a breach thereof, as instead of completing the sale of the SITE property, the plaintiff filed this Suit despite the fact that all the outstanding liabilities of defendant No.1 had been settled in full and final satisfaction in consideration of Rs.395 million through sale of both the aforementioned properties ;

 

u.         The plaintiff on the one hand has received rent from defendant No.1 for the SITE property and is claiming to be the owner of both the KDA and SITE properties, and on the other hand, the plaintiff has prayed for a mortgage decree for the sale of the said properties ;

 

v.         The KDA and SITE properties, on which the plaintiff is claiming charge as a mortgagee, have already been sold to the plaintiff ;

 

w.        Prior to the filing of this Suit by the plaintiff, the defendants filed Suit No.B-108/2011 before this Court against the plaintiff-bank, which is subjudice, inter alia for declaration that all the outstanding liabilities of defendant No.1 stand fully settled against the transfer of the KDA and SITE properties, and the plaintiff is liable to release all the securities, including the personal guarantees ; and, specific performance of the agreement for sale of the SITE property ; and,

 

x.         The defendants also filed Suit No.B-113/2011 against the plaintiff before this Court prior to the filing of the instant Suit by the plaintiff, which is subjudice, inter alia for declaration that the personal guarantees of the present defendants 3 and 4 stand discharged as the Term Finance Facility has been fully settled ; and, for direction to the plaintiff-bank to release the pledged shares.

 

 

3.         Mr. Arshad Mohsin Tayebaly, the learned counsel for the defendants, submitted that the defendants have raised a number of important substantial questions of law and fact which cannot be decided without allowing the parties to adduce evidence; therefore, the defendants deserve unconditional leave to defend this Suit on merits. His main thrust of arguments was that after executing the agreements for sale of the KDA and SITE properties in consideration of Rs.395 million in full and final settlement of the outstanding liabilities of defendant No.1, there was no occasion for the plaintiff to file this Suit. He pointed out that both the said agreements for sale are admitted documents, as the plaintiff has not only mentioned the same in the plaint, but has also relied upon them. He contended that as the entire outstanding liability of defendant No.1 stood settled, the defendants are not obliged to pay any amount to the plaintiff as claimed in this Suit, or otherwise. He referred to clauses 5(d) and 6(d) of the agreements for sale of the KDA and SITE properties, respectively. The learned counsel submitted that under the said clauses, in case of failure on the part of the seller (defendant No.1) to complete the sale and to fulfill its obligations under the said agreements, the purchaser (plaintiff-bank) had the right to reverse the credit of payments made under the said agreements, and further to enforce its rights as the mortgagee of the said properties in order to recover the dues owed by the defendant No.1 to the plaintiff. He argued that in case defendant No.1 had committed default, as alleged by the plaintiff, at best the plaintiff could only reverse the credit entries in the defendant No.1’s account and enforce its rights against the mortgaged properties. The Suit, in any event, could not have been filed. He contended that the Suit is malafide and is barred under the principles of promissory estoppel. It was urged that the dispute / question as to whether the defendants are liable to pay the amounts claimed in this Suit by the plaintiff, or whether the entire claim of the plaintiff against the defendants was settled in full and final satisfaction, cannot be resolved effectually and completely without evidence. It was further urged that since this dispute goes to the root of the case, the defendants are entitled for an unconditional leave to defend this Suit on this ground alone.

 

4.         In continuation to his above submissions, learned counsel for the defendants submitted that the plaintiff-bank has also filed two Suits against the defendants under the original civil jurisdiction of this Court ; one being Suit No.227/2012 for possession of the KDA property ; and, the other being Suit No.346/2012 for specific performance of the conveyance / assignment of the SITE property. It was urged that in case leave is not granted to the defendants to defend this Suit and this Suit is decreed in favour of the plaintiff, it would tantamount to the dismissal of Suit No.B-108/2011 and Suit No.B-113/2011 filed by the defendants against the plaintiff without trial, which are subjudice before this Court, and would also tantamount to decreeing the aforementioned two Suits filed by the plaintiff-bank against the defendants without trial, which are also subjudice before this Court. It was further urged that this Suit cannot be decreed in the above manner without first determining the liability, if any, of the defendants.

 

5.         In addition to the above ground based on the agreements for sale of the KDA and SITE properties, the learned counsel for the defendants raised several objections in relation to the amounts mentioned in the plaint and the statements of account filed by the plaintiff. He pointed out that in paragraph 41 of the plaint, the plaintiff has stated that a sum of Rs.345 million was adjusted towards advance payment of the KDA and SITE properties, but in paragraph 48 of the plaint, an amount of Rs.336,853,325.54 has been shown by the plaintiff towards such adjustment. He also pointed out that in paragraph 46 of the plaint, the plaintiff has claimed that it was certified by defendant No.1 on 09.07.2011 that an amount of Rs.1,093,171,639.46 was then owed by it to the plaintiff. However, the summary of accounts filed by the plaintiff as Annexure ‘KK’ (page 3153) reflects the same amount, but on 22.06.2011 and not on 09.07.2011. It was contended that the plaintiff has pleaded in paragraph 48 of the plaint that the total amount sanctioned to defendant No.1 is Rs.997,667,000.00, but there is no document showing disbursement of any such amount to defendant No.1. He further pointed out that the amount of Rs.345 million towards full sale consideration of the KDA property and advance part payment towards the SITE property, have been added by the plaintiff in the alleged outstanding liabilities of defendant No.1 instead of deducting the same therefrom. The learned counsel contended that there are serious discrepancies in the amounts mentioned in the plaint and in the statements of account annexed to the plaint. He further contended that the statements of account show charging of markup over markup and markup beyond the agreed period ; and, various penalties and fines of the State Bank of Pakistan have been illegally debited by the plaintiff from the defendant No.1’s account. No other ground was urged on behalf of the defendants at the time of hearing of this application.

 

6.         At the very outset, Mr. Khalid Anwer, the learned counsel for the plaintiff, raised a preliminary objection regarding the maintainability of this application on the ground that the defendants have not complied with the mandatory requirements of Sub-Sections (4) and (5) of Section 10 of the Ordinance. He pointed out that, under Sub-Section (4) ibid, the defendants were obliged to disclose (a) the amount of finance availed by them from the plaintiff, (b) the amounts paid by them to the plaintiff and the dates of payments, (c) the amount of finance and other amounts relating to the finance payable by them to the plaintiff up to the date of institution of the Suit, and (d) the amount, if any, which they dispute as payable to the plaintiff, and the facts in support thereof. He submitted that none of the above details have been disclosed by the defendants in their application. He also pointed out that, under Sub-Section (5) ibid, the defendants were also obliged to file all such documents along with their application which, in their opinion, support the purported substantial questions of law and fact raised by them. He submitted that no such document has been filed by the defendants, and they have in fact relied upon the documents, including the statements of account, filed by the plaintiff along with the plaint. The learned counsel further submitted that the implications for not complying with the mandatory requirements of Sub-Sections (4) and (5) ibid are specifically provided in Sub-Section (6) of Section 10 of the Ordinance, which provides that an application for leave to defend which does not comply with the requirements of any of Sub-Sections (3), (4) and/or (5) ibid shall be rejected unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement. It was urged that the defendants have not only failed in fulfilling the mandatory requirements of Sub-Sections (4) and (5) ibid, but they have also miserably failed to disclose any sufficient cause for their inability in complying with the same. It was further urged that, as the requirements prescribed in Sub-Sections (4) and (5) ibid are mandatory, and as dismissal of the application for leave to defend is the mandatory implication under Sub-Section (6) ibid for not complying with the same, this application is liable to be dismissed summarily on this ground alone. In support of this preliminary objection, the learned counsel for the plaintiff cited and relied upon the cases of (1) Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, (2) Shahid Farooq Sheikh V/S Allied Bank of Pakistan Ltd. through Manager, 2005 CLD 1489, (3) United Bank Ltd. V/S Progas Pakistan Ltd., 2010 CLD 828, (4) Bank of Punjab through EVP / General Manager V/S Genertech Pakistan Ltd. through Chief Executive and 2 others, 2008 CLD 765, and (5) MCB Bank Ltd. V/S Eastern Capital Ltd. and 7 others, 2011 CLD 84.

 

7.         The contention of Mr. Arshad Tayebaly that the entire outstanding liabilities of defendant No.1 were agreed and adjusted in full and final settlement against the sale of KDA and SITE properties in favour of the plaintiff in consideration of Rs.395 million, was emphatically denied by Mr. Khalid Anwer, the learned counsel for the plaintiff. He specifically referred to letter dated 09.06.2010 (Annexure ‘EE’ page 2991) addressed to the plaintiff by defendant No.1, and submitted that defendant No.1 had admitted therein its existing liability to the extent of Rs.832.69 million as at 09.06.2010. It was pointed out by him that in the aforementioned letter, as well as in its letter dated 16.06.2010 (Annexure ‘FF’ page 2997), defendant No.1 had categorically agreed only about adjustment of its liabilities through sale of its properties to the plaintiff. The learned counsel also referred to Annexure ‘KK’ (page 3153) annexed to the plaint, wherein the defendants had admitted on 09.07.2011 their outstanding liabilities of Rs.1,093,171,639.46 as on 22.06.2011. He pointed that, in their application for leave to defend, the defendants have given an evasive reply to the said Annexure ‘KK’, which amounts to an admission on their part of the contents thereof. He submitted that in any event there was no question of settlement of all the outstanding liabilities at Rs.395 million through sale of the said two properties, when the outstanding liabilities were admittedly more than Rs.832 million in June 2010 when the agreements to sell in respect of both the properties were executed by the parties, and was Rs.1,093,171,639.46 on 22.06.2011 when the contents of Annexure ‘KK’ (page 3153) was endorsed and accepted by the defendants.

 

8.         In response to the objections raised by the learned counsel for the defendants in relation to the amounts mentioned in the plaint and statements of account annexed to the plaint, the learned counsel for the plaintiff submitted that the plaintiff has nowhere claimed that the amount of Rs.997,667,000.00 was sanctioned or disbursed by the plaintiff to defendant No.1 through a single transaction or document. It was contended by him that it is the case of the plaintiff that the said amount was sanctioned to defendant No.1 through various finance facilities on different dates, and the amount actually disbursed was Rs.960,042,050.54 as disclosed in paragraph 48 of the plaint in compliance of Section 9(3) of the Ordinance. The amounts pertaining to penalties and fines paid by the plaintiff to the State Bank of Pakistan because of the defendant No.1’s default in fulfilling its obligations were shown to me in the statement of account by Mr. Khalid Anwer, which are duly supported by covering letters. In reply to the allegations made regarding charging of markup over markup and markup beyond the agreed period, the learned counsel submitted that all such allegations are baseless and misleading, as no markup has been charged by the plaintiff prior to 31.03.2006, and markup has been charged only for the agreed period and for the period subsequent to the cut-off date. He further submitted that, to show its bonafides, markup charged and debited by the plaintiff, at the agreed rate and for the agreed period, has been disclosed separately in respect of each finance facility in paragraph 36 of the plaint, and is also shown in the same manner in separate statements annexed to the plaint. It was specifically argued by the learned counsel that none of the accounts were disputed by the defendants till the filing of this Suit, and as soon as the Suit was filed, they came up with all kinds of objections, which shows their malafides. He also argued that the defendants have miserably failed to point out such entries which, according to them, pertain to markup over markup or to markup beyond the agreed period ; and, they have also not filed any document to rebut the amounts disclosed in the plaint or the statements of account filed and relied upon by the plaintiff. He pointed out that no amount of Rs.300 million has been claimed by the plaintiff in paragraph 48 of the plaint, as alleged by the defendants ; but on the contrary, the plaintiff has adjusted / deducted an amount of Rs.336,853,325.54 in the said paragraph from the defendant No.1’s liabilities towards the advance purchase price of the two properties. He submitted that only the amount agreed for the SITE property is shown in Annexure ‘KK’ (page 3153) as the outstanding liability of defendant No.1 because defendant No.1 was obliged to transfer both the properties in favour of the plaintiff by August 2010, but only the KDA property was transferred, and that too after one year, and as such only the amount of Rs.70 million, being the agreed sale consideration for the KDA property, was adjusted from the outstanding liability of defendant No.1. It was urged in the end by the learned counsel for the plaintiff that this application for leave to defend is liable to be dismissed as no substantial question of law or fact has been raised by the defendants which may require evidence.

 

9.         In his rebuttal, Mr. Arshad Tayebaly, the learned counsel for the defendants, denied that the defendants have failed in complying with the requirements of Sub-Sections (4) and (5) of Section 10 of the Ordinance, or that this application is liable to be dismissed on this ground. In support of this submission, he relied upon the contents of paragraph 19 of the application. He conceded that the requirements of Sub-Sections (4) and (5) ibid are mandatory, but he submitted that it is not mandatory that the details required under Sub-Section (4) ibid are disclosed in the application for leave to defend strictly in the same manner as provided in Sub-Section (4) ibid. According to him, in order to determine as to whether such compliance has been made or not, the substance of the application for leave to defend should be seen rather than its format. It was further contended that the arrangement arrived at between the parties, for adjustment of the defendant No.1’s outstanding liabilities in full and final settlement, has been specifically pleaded by the defendants in their application, which comes within the definition of sufficient cause mentioned in Sub-Section (6) of Section 10 ibid for the defendant’s inability, if any, to comply with the said requirement. He argued that in view of such sufficient cause disclosed by the defendants in their application, their application is not liable to be dismissed under Sub-Section (6) ibid. In this context, the learned counsel relied upon the cases of (1) Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, (2) Messrs Taxila Cotton Mills Ltd. and 10 others V/S Allied Bank of Pakistan Ltd. and 4 others, 2005 CLD 244, and (3) Messrs Soneri Bank Ltd. V/S Messrs Compass Trading Corporation (Pvt.) Ltd. through Director / Chief Executive and 3 others, 2012 CLD 1302. The learned counsel submitted that the case of Apollo Textile Mills Ltd. supra, wherein the Hon’ble Supreme Court was pleased to hold that an application for leave to defend which is not compliant of Sub-Sections (3), (4) and (5) of Section 10 ibid, is liable to be dismissed, is not applicable in the instant case, as in the said authority the customer had admitted not having complied with the requirements of the said Sub-Sections. Whereas, in the present case, the defendants have not so admitted and have pleaded sufficient cause, that is, the arrangement between the parties for full and final settlement of the defendant No.1’s liabilities, which is sufficient for complying with the requirements of Sub-Section (4) ibid

 

10.       On the above point, learned counsel for the defendants further submitted that in case of a dispute, it is quite natural that the amounts disclosed by the defendant are different from those disclosed by the plaintiff. In such an event, or where the defendant completely denies his liability and states that he does not owe any amount to the plaintiff, it cannot be said that the defendant has not complied with the requirements of Section 10(4) of the Ordinance. According to him, the mandatory requirement of disclosure by the defendant under Section 10(4) ibid is fulfilled even if the amounts disclosed by him are based on his own calculation, or if he states that the outstanding liability is zero. He submitted that the defendants have duly complied with the requirements of Section 10(4) ibid according to their own calculation based on the facts and circumstances of this case.

 

11.       I have examined the most recent authoritative pronouncement of the Hon'ble Supreme Court in the case of Apollo Textile Mills Ltd. supra. It has been held therein that the plaintiff institution and the defending customer have identical statutory responsibility respectively under Sections 9(3) and 10(4) of the Ordinance, to plead and state clearly and particularly the finances availed by a defendant, repayments made by him, the dates thereof, and the amounts of finance repayable by such defendant, who is saddled with an additional responsibility to also specify the amounts disputed by him. It has been further held that a defending customer is obliged to put in a definite response to the bank’s accounting and has under Sub-Sections (3) and (4) of Section 10 of the Ordinance to compulsorily plead and answer in the application for leave to defend his accounts as well as the facts and amounts disputed by him as repayable to the plaintiff. It has been further held that a banking Suit is normally a Suit on accounts which are duly ledgered and maintained compulsorily in the books of accounts under the prescribed principles / standards of Accounting in terms of the laws, rules and banking practices ; as such instead of leaving it to the option of the parties to make general assertions on accounts, the Ordinance binds both the sides to be absolutely specific on accounts ; and the parties to a Suit have been obligated equally to definitely plead and to specifically state their respective accounts. It has also been held that the controversies are confined to the claimed and / or the disputed numbers, facts and reasons thereof ; unnecessary controversial details, the evidence thereto and the time of the trial, are curtailed ; and, the trial would remain within the laid out parametrical scope of the claimed and the disputed accounts. It has been specifically held that non-impleadment of accounts under Sub-Sections (3) and (4) of Section 10 ibid and Sub-Section (3) of Section 9 of the Ordinance in terms thereof, entails legal consequences under Sub-Sections (1), (6) and (11) of Section 10 ibid. It has been further held that because of the Ordinance being a special law, the provisions of Section 4 thereof override all other laws ; the provisions contained in the said Sections require strict compliance ; and, non-compliance therewith attract consequences of rejection of the application for leave to defend along with decree.

 

12.       For the sake of convenience and ready reference paragraph 19 of the defendants’ application for leave to defend is reproduced here :

 

19.     In compliance of the provisions of Section 10 of the Ordinance, and without prejudice to anything contained in this Application the answering Defendants respectfully submit the following details:

 

  Total Liabilities                                                          Amount (PKR)

  Total Outstanding Liability                                          395,000,000

  Total Adjusted                                                              345,000,000

  Remaining Liability to be paid by the Plaintiff           50,000,000

 

It is respectfully submitted that the remaining amount of PKR 50 Million is to be paid by the Plaintiff against the sale consideration of the SITE Property which is to be adjusted against any remaining liabilities of the Defendant, if any. The Plaintiff has with mala fide intentions withheld the amount to be paid to the Defendant No.1 under the arrangement entered into between the parties. as such the only outstanding amount is PKR 50 Million which should be adjusted by the Plaintiff itself being the remaining sale consideration.

 

13.       A perusal of the above-quoted paragraph shows that the defendants have stated only the “total outstanding liability”, “total adjusted” and “remaining liability to be paid by the plaintiff”, according to their own calculation. None of the above fulfills the requirements of Section 10(4) of the Ordinance. The defendants have not denied availing various finance facilities from the plaintiff. It is the defendants’ own case that the entire outstanding liabilities of defendant No.1 were settled against the sale of their two properties, therefore, it is an admitted position that there were outstanding liabilities when the purported settlement took place. Despite the above admitted position, the defendants have not disclosed in their application (a) the amounts of finance availed by them from the plaintiff, (b) the amounts repaid by them to the plaintiff and the dates of payments, (c) the amount of finance and other amounts relating to the finance payable by them to the plaintiff either at the time of the purported settlement or up to the date of institution of the Suit, and (d) the amount, if any, which they dispute as payable to the plaintiff, and the facts in support thereof. Mr. Arshad Tayebali appears to be correct in saying that the amounts disclosed by the defendant are usually different from those disclosed by the plaintiff in case of a dispute, and in such an event, or where the defendant completely denies his liability and states that he does not owe any amount to the plaintiff, it cannot be said that the defendant has not complied with the requirements of Section 10(4) of the Ordinance. I may have agreed with the learned counsel that the application is not liable to be dismissed under Section 10(6) of the Ordinance as the defendants have pleaded sufficient cause in their application. However, I am not inclined to agree with the learned counsel for many reasons. It is not the case of the defendants that they have repaid the entire outstanding liability, and nothing is due or payable by them. They have pleaded that some portion of their outstanding liabilities was waived by the plaintiff, and the balance amount payable by them was adjusted against Rs.395 million in full and final settlement of the entire outstanding liabilities through sale of the defendant No.1’s two properties. In order to avail the benefit of sufficient cause under Section 10(6) ibid, in addition to disclosing the amounts of finance availed by them from the plaintiff, the defendants were obliged to disclose first of all the amount of the outstanding liability which was purportedly settled at Rs.395 million ; they were then obliged to disclose the amount that was purportedly waived by the plaintiff under the purported settlement ; they were further obliged to disclose the repayments with dates ; and, they were also obliged to disclose the dates of the purported adjustments of Rs.345 million mentioned in paragraph 19 of their application. The application does not contain any such statement which may show, or even suggest, the amount of the outstanding liability that was actually adjusted and settled according to the defendants. The particulars specified in Section 10(4) ibid are completely missing, and the contents of the application relied upon by the defendants, cannot be treated as due compliance of Section 10(4) ibid by any stretch of imagination. The cases of Messrs Taxila Cotton Mills Ltd. and Messrs Soneri Bank Ltd. Supra relied upon by the learned counsel for the defendants in the above context are of no help to him, as both the said cases were decided prior to the recent authoritative pronouncement of the Hon’ble Supreme Court in the case of Apollo Textile Mills Ltd. supra.

 

14.       Except for the Banking Tribunals Ordinance LVIII of 1984, under which law the defendant could defend the Suit as a matter of right by filing his written statement, a defendant in banking Suits has never been allowed to defend the Suit unless leave to defend the Suit is granted to him by the Banking Court. Same procedure is prevailing since 1908 in Suits filed under Order XXXVII CPC. Hence, the concept of obtaining leave to defend the Suit by a defendant, is not new or unusual. It must be kept in mind that it is for the first time in the banking legislation of Pakistan that, under Section 9(3) of the Ordinance the plaintiff / financial institution, and under 10(4) of the Ordinance the defendant / customer, have been obligated with identical statutory responsibility to clearly and particularly plead and state the finances availed by a defendant, repayments made by him with the dates thereof, and amounts of finance repayable by such defendant, and a defendant is burdened with an additional responsibility to also specify the amounts disputed by him. No such provision existed in any previous law, or in the Banking Companies (Recovery of Loans) Ordinance XIX of 1979, or in the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act XV of 1997. This new and distinctive addition in the Ordinance, wherein the proceedings are of summary nature, must have been introduced especially and clearly with the view that the dispute of accounts should come before the Court straightaway through the pleadings of the parties, so that the dispute can be resolved in a summary manner without going through the lengthy procedure of evidence. It is also because of the above reason that the plaintiff / financial institution is obliged under Section 9(2) of the Ordinance to file relevant documents and statement of account along with the plaint in support of its claim, and the defendant / customer is obliged under Section 10(5) of the Ordinance to file all such documents along with his application for leave to defend, which, in his opinion, support the substantial questions of law or fact raised by him. After examining the contents of the plaint and the application for leave to defend, the discretion vests with the Banking Court to allow the defendant to defend the Suit, or reject his application. The defendant, in order to succeed, shall have to show that his application for leave to defend is compliant of all the mandatory requirements of Section 10 of the Ordinance ; and, likewise the plaintiff shall have to show, even if leave to defend the Suit is refused to the defendant, that his plaint is compliant of all the mandatory requirements of Section 9 of the Ordinance, and the Suit is not barred by any law.

 

15.       The cumulative effect of the above is that the newly introduced special requirements of Sections 9 and 10 of the Ordinance, whatever they may be and in whatever form, manner or context they are required to be fulfilled, being mandatory in nature, must be strictly construed and complied with, whether they suit the defendant or not. At the time of filing the application for leave to defend, the defendants had full opportunity to comply with the mandatory requirements of Section 10(4) ibid, but as they failed in availing such opportunity, they are bound to face the consequence of their non-compliance. As held by the Hon’ble Supreme Court in Apollo Textile Mills Ltd. supra, the Ordinance is a special law, and by virtue of Section 4 thereof, its provisions override all other laws ; the provisions contained in Sections 9 and 10 of the Ordinance require strict compliance ; and, non-compliance therewith attract consequences of rejection of the application for leave to defend along with decree. In view of the above, it is my considered opinion that the application for leave to defend filed by the defendants is liable to be dismissed, as they have failed to comply with the mandatory requirements of Section 10(4) of the Ordinance.

 

16.       Regarding the main ground urged by the learned counsel for the defendants that the entire outstanding liability of defendant No.1 was settled at Rs.395 million in full and final settlement through the sale of the KDA and SITE properties in favour of the plaintiff, it is to be noted that there are four (04) documents on which the defendants are relying. The said documents are         (i) letter dated 09.06.2010 (Annexure ‘EE’ page 2991) addressed to the plaintiff by defendant No.1 ; (ii) letter dated 16.06.2010 (Annexure ‘FF’ page 2997) addressed to the plaintiff by defendant No.1 ; (iii) agreement to sell dated 17.04.2010 for the KDA property ;  and, (iv) agreement to sell dated June 2010 for the SITE property. It is also to be noted that both the parties admit all the above documents. In order to appreciate the respective contentions of both the learned counsel, I have minutely examined the said documents, and have observed as under :

 

A.        In its letter dated 09.06.2010, defendant No.1 had stated as follows :

 

Reference to our meeting with Mr. Haroon Ahmed & Mr. Usman  Abedin during today’s visit to our factory following matter have(!) been discuss(!):-

               

EXISTING LIABILITY

               

ERF                            Rs.      564.00 (M)

Running Finance     Rs.        96.38 (M)

Term Finance           Rs.        40.00 (M)

LAFB                          Rs.        32.31 (M)

Local L/c                    Rs.      100.00 (M)

Total                           Rs.      832.69 (M)

 

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As discussed we have agreed to sale of two following properties already mortgage(!) with you as follows:-

 

B-25 S.I.T.E., Karachi                                     @ Rs.  370.00 (M)

C-55, KDA Scheme # 1,

Karsaz Road, Karachi                                    @ Rs.    80.00 (M)

Total                                                                               450.00 (M)

 

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As this process will take few days we request you to consider 50% advance payment against these properties of Rs.225.00 (M) and adjust the outstanding Local L/c of Rs.100.00 (M) and allow us to make payments Rs.50.00 (M) for vendors payments through Pay orders & open new L/c’s within existing limit of Rs.100.00 (M) for procurement of Fabric & Yarn for our existing export orders as there will be no PDA.

 

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After receiving of payment of two properties our liabilities will be reduced and ERF limit to be revised to Rs.435 (M) against Rs.564 (M) which is at present and Rs.100 (M) local L/c for 90 days.

 

We assure you that in future all L/c payments will be paid on or before due date and we shall regularly service ERF markup on quarterly basis.

 

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After the re-structuring and adjustment of above we will be in a position to run our business smoothly and will provide you monthly shipment of around US$ 1.20 Million from August 2010 onwards.

 

 

            The contents of the above letter show that the matter of existing liability of Rs.832.69 million in respect of five finance facilities availed by defendant No.1 was discussed in the meeting held between the parties. It clearly shows that defendant No.1 had admitted its existing liability of Rs.832.69 million as at 09.06.2010. Had this not been the position, defendant No.1 would not have mentioned the amount of Rs.832.69 million as its existing liability, or it would have disputed its existing liability. Through this letter, defendant No.1 requested the plaintiff to consider payment of Rs.225 million as 50% advance payment against the KDA and SITE properties, which were agreed to be sold by defendant No.1 to the plaintiff in consideration of Rs.450 million as per this letter. Defendant No.1 had requested for adjustment of the said 50% advance payment of Rs.225 million towards the outstanding Local L/c of Rs.100.00 (M). It is important to note that 50% of the sale consideration of both the properties was to be adjusted only against one facility. It was further stated in this letter by defendant No.1 that after receiving the payment for two of its properties, its liabilities will be reduced, and the ERF limits were to be revised. This clearly shows that both the properties were agreed to be sold by defendant No.1 for reduction of its liabilities, and the finance facilities were to continue on revised limits. Defendant No.1 had also stated in this letter that in future all L/C payments will be paid on or before due dates and ERF markup will also be paid on quarterly basis. This again shows that the relationship of financial institution and customer between the parties was to continue even after completion of sale of both the properties. In the last paragraph of this letter, defendant No.1 had categorically stated that after restructuring and adjustment, it will be in a position to run its business smoothly and will provide the plaintiff monthly shipment of around US$ 1.20 million from August 2010 onwards. This not only shows that the said two properties were agreed to be sold for restructuring and adjustment purposes, but also that the defendants had committed to fulfill their obligations from August 2010 onwards, even after execution of the agreements in June 2010 for sale of its two properties. There was no occasion for the defendants to commit to fulfill their obligations from August 2010 onwards if their entire outstanding liabilities had been settled in June 2010 in full and final settlement.

 

B.        In its letter dated 16.06.2010, defendant No.1 had stated as under :

 

With reference to our Meeting with Mr. Haroon Ahmed and Mr. Usman Abedin in your office today regarding adjustment of outstanding liabilities and sale of following 2 properties which are mortgaged with your Bank.

 

B-25 S.I.T.E., Karachi (Land & Building only) @   Rs.  325.000 (M)

C-55, KDA Scheme # 1,

Karsaz Road, Karachi                                        @   Rs.    70.000 (M)

Total                                                                              Rs.  395.000 (M)

 

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As the total sale proceeds of the both the properties would be Rs.395.000 (M) which will be payable to us after completion of conveyance deed and transfer of properties in your Banks(!) favour meanwhile we request you to kindly grand(!) us advance payment of Rs.300.000 (M) against this sale of 2 properties by crediting our account with you for adjustment of our outstanding Running Finance, Term Finance, FAFB, PDA,  and L/C accepted liabilities aggregate to Rs.26.000 (M) approximately plus up to date mark-up thereon for which we authorize you to debit our account from the advance payment of Rs.300.000 (M).

 

Further when all formalities are completed for sale of above mentioned properties, the balance payment of Rs.95.000 (M) to be credited to our account and accordingly you are authorize(!) to recover Rs.95.000 (M) towards part adjustment of our ERF facility.

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            In this letter, defendant No.1 had once again mentioned about the meeting held in connection with adjustment of outstanding liabilities. Defendant No.1 had requested for advance payment of Rs.300 million against the sale of its two properties for adjustment of its outstanding Running Finance, Term Finance, FAFB, PDA and L/C accepted liabilities, aggregating approximately to Rs.266 million, plus the up to date markup thereon. Furthermore, defendant No.1 had authorized the plaintiff to recover the balance amount Rs.95 million towards part adjustment of its ERF facility. The above clearly shows that the sale consideration of the two properties was meant for adjustment of the aforesaid liabilities of defendant No.1.

 

C.        The contents of the agreements to sell in respect of the KDA and SITE properties are almost the same. The agreements stipulate that defendant No.1 had agreed to sell the properties to the plaintiff for the sale consideration specified therein. Vide clauses 5(a) and 6(a) of the agreements for the KDA and SITE properties, respectively, it was specifically agreed by the parties that the payments made to defendant No.1 by the plaintiff under the said agreements shall be appropriated by the Purchaser towards the outstanding liabilities owing by the Seller to the Purchaser in respect of finance provided by the Purchaser to the Seller and the Seller hereby irrevocably authorizes the Purchaser to make such appropriations. It was nowhere provided in any of the agreements that the sale proceeds of the two properties were to be adjusted in full and final settlement towards the outstanding liabilities of defendant No.1. If such an arrangement had been agreed upon by the parties, as claimed by the defendants, appropriation of the sale proceeds towards the outstanding liabilities of defendant No.1 would not have been specifically provided in the agreements.

 

17.       In view of the above discussion and examination of the admitted documents relied upon by both the parties, the contention of Mr. Arshad Tayebaly that the entire outstanding liabilities of defendant No.1 were agreed and adjusted in full and final settlement against the sale of KDA and SITE properties in favour of the plaintiff in consideration of Rs.395 million, does not appear to be correct. The documents relied upon by the defendants do not support their contention, and no other document has been placed on record in support of such contention. Because of the unambiguous language and construction of the admitted documents referred to above, I am of the view that this plea urged by the defendants does not require evidence.

 

18.       Regarding the contentions of the defendants in relation to the amounts disclosed by the plaintiff in the plaint and the statements of account annexed to the plaint, the defendants were unable to show or specify any irregular, wrong or illegal debit entry of markup, or any other amount, either in the amounts disclosed in the plaint or in the statements of account annexed to the plaint. On the contrary, in paragraph 36 of the plaint, the plaintiff has disclosed in respect of the Export Refinance Part-I and Part-II facilities, the markup paid by it to the State Bank of Pakistan, fine imposed by the State Bank of Pakistan for non-shipment, bank charges for processing the above facilities, and other fines imposed due to Non Submission Proceed Realization Certificate, late submission of shipping documents & mis-reporting. In paragraph 48 of the plaint, the plaintiff has disclosed Rs.997,667,000.00 as the total amount of finance sanctioned to the defendants ; Rs.960,042,050.54 as the total amount of finance availed by the defendants and due against them as at 20.12.2011 ; the amounts of markup have been disclosed separately ; the total amount payable by the defendants, including the principal and markup has been disclosed as Rs.1,177,168,161.54 ; and, the total amount paid and adjusted by the defendants has been separately shown as Rs.361,027,991.03, including Rs.336,853,325.54 towards advance purchase price of the defendant No.1’s two properties, Rs.16,173,000.00 towards exports prior to 22.06.2010, and Rs.8,001,665.49 as other credits. After deducting the total amount paid and adjusted by the defendants from the total amount outstanding against them, an amount of Rs.816,140,170.51 has been shown by the plaintiff as the net amount due against the defendants, which has been claimed in this Suit. I have noticed that the above disclosure in the plaint by the plaintiff in terms of Section 9(3) of the Ordinance, does not contain any amount on account of liquidated damages, penalties or any other penal charges. The amount of penalties and fines imposed by the State Bank of Pakistan had been agreed by the defendants, and payment thereof by the plaintiff was shown to me from the record by the learned counsel for the plaintiff. In addition to the above, after minutely examining the statements of account annexed to the plaint, I have come to the conclusion that the entries appearing therein and the claim made in this Suit, fully corroborate each other.

 

19.       In view of the above, and also as the defendants have not denied the availing of finance facilities and they have not been able to show or specify any irregular, wrong or illegal debit entry of markup, or any other amount, either in the amounts disclosed in the plaint or in the statements of account annexed to the plaint, in my humble opinion there appears no substantial question of law or fact in this matter that may require evidence. Therefore, the application is hereby dismissed on the grounds that it does not comply with the mandatory requirements of Section 10(4) of the Ordinance, and also as the defendants have not been able to raise any substantial question of law or fact in this matter that may require evidence.

 

20.       Sub-Section (11) of Section 10 of the Ordinance provides that where the application for leave to defend is rejected, or where the defendant fails to fulfill the conditions attached to the grant of leave to defend, the Banking Court shall forthwith proceed to pass judgment and decree in favour of the plaintiff against the defendant. The Banking Court can exercise jurisdiction under   Sub-Section (1) or under Sub-Section (11) of Section 10 ibid and pass a decree thereunder in favour of the plaintiff, only when summons in the prescribed form are issued and served on the defendant as provided in Sub-Section (5) of Section 9 of the Ordinance ; the plaint is compliant of the mandatory requirements of Sub-Section (3) of Section 9 of the Ordinance ; the allegations of fact in the plaint disclose a subsisting cause of action against the defendant ; the Suit is maintainable by all standards ; and, the plaintiff is able to show that he is entitled to the relief prayed for against the defendant. If any one of the above conditions precedent for a competent Suit are lacking, the plaintiff shall not be entitled to a decree either under Sub-Section (1) or under Sub-Section (11) of Section 10 of the Ordinance. Since none of the above conditions precedent is lacking in this Suit and the defendants’ application for leave to defend has been dismissed, the plaintiff is entitled forthwith for a judgment and decree in its favour against the defendants under Section 10(11) ibid.

 

21.       I do not agree with the contention of the learned counsel for the defendants that in case this Suit is decreed in favour of the plaintiff, it would tantamount to the dismissal of Suit No.B-108/2011 and Suit No.B-113/2011 filed by the defendants against the plaintiff without trial, which are subjudice before this Court, and would also tantamount to decreeing Suit No.227/2012 and Suit No.346/2012 filed by the plaintiff-bank against the defendants without trial, which are also subjudice before this Court. It is now well-settled that where counter Suits are filed against each other by financial institution and the customer, applications for leave to defend in both the Suits are to be decided independently and on their own merits ; and, in case leave to defend is granted in one Suit, even then the defendant in the other Suit does not become entitled for leave to defend the Suit as a matter of right. Moreover, all the Suits were fixed together for hearing before me, but no request was made on behalf of the defendants that the applications for leave to defend filed by the plaintiff-bank in their Suits should be heard and decided first, or that the applications for leave to defend in all Suits should be heard together. In any event, the hearing of the listed application could not be stayed in view of Section 9(4) of the Ordinance, which specifically provides that the provisions of Section 10 CPC shall have no application for and in relation to Suits filed under the Ordinance. The other Suits filed by the parties against each other will be proceeded with and decided in accordance with law.

 

22.       Before proceeding to pass judgment and decree in favour of the plaintiff, I have carefully examined the claim made in this Suit. In Annexure ‘KK’ (page 3153) filed by the plaintiff, a sum of Rs.1,093,171,639.46 has been claimed by the plaintiff, which includes Rs.300,000,000.00 towards the advance amount paid by the plaintiff as sale consideration of the defendant No.1’s two properties, and Rs.22,500,000.00 as the arrears of rent of the SITE property. It was rightly pointed out by Mr. Arshad Tayebaly that both these amounts have neither been disclosed by the plaintiff in the statement made in the plaint under Section 9(3) of the Ordinance, nor has the plaintiff claimed the same in this Suit. I have noticed that the plaintiff has shown in paragraph 48 of the plaint deduction of Rs.336,853,325.54, out of the defendants’ outstanding liabilities, as payment / adjustment by the defendants towards advance purchase price of the defendant No.1’s properties. It is for this reason, that the plaintiff has filed Suit No.346/2012 for specific performance of the conveyance / assignment of the SITE property. The amount of Rs.22,500,000.00 claimed by the plaintiff as the arrears of rent of the SITE property, does not fall within the definition of obligation defined under the Ordinance and thus cannot be granted by this Court in its banking jurisdiction. Hence the plaintiff is not entitled to any of the above amounts in this Suit. Since both the above amounts are not mentioned or claimed in the plaint, and the accounts disclosed by the plaintiff in paragraph 48 of the plaint in compliance of Section 9(3) of the Ordinance have been found by me to be in order, the Suit is hereby decreed with costs against the defendants in the sum of Rs.816,140,170.51 (Rupees eight hundred sixteen million one hundred forty thousand one hundred seventy and Paisas fifty one only), with cost of funds thereon at the rate prescribed by the State Bank of Pakistan, from the date of default till realization of the entire decreed amount. The liability of defendants 2, 3 and 4 shall be restricted to the amounts guaranteed by them. The Suit is decreed also for the sale of the pledged and hypothecated assets.

 

23.       The plaintiff has also prayed for a decree for the sale of seven (07) mortgaged properties described in paragraph 37 of the plaint, including the KDA and SITE properties. No decree can be passed in favour of the plaintiff in relation to the KDA property, as the sale consideration thereof has been shown to have been adjusted by the plaintiff out of the defendants’ outstanding liabilities, and the said property already stands conveyed in favour of the plaintiff through a registered conveyance deed dated 23.07.2011. Likewise, no decree can be passed in favour of the plaintiff in respect of the SITE property, as part payment towards the sale consideration thereof has been shown to have been adjusted by the plaintiff out of the defendants’ outstanding liabilities, and the plaintiff has filed Suit No.346/2012 for specific performance of the conveyance / assignment of the SITE property. Accordingly, the Suit is hereby decreed for the sale of the mortgaged properties described in paragraphs 37(i)(b), 37(i)(d), 37(i)(e), 37(i)(f) and 37(ii) of the plaint.

 

 

 

 

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J U D G E