Judgment Sheet
IN THE HIGH COURT OF SINDH KARACHI
Suit No. B – 40 of 2006
Before :
Mr. Justice Nadeem Akhtar
Plaintiff : Meezan Bank Limited,
through Syed Wasi Haider Jafri, Advocate.
Defendants 1, 2, 3, 5 & 6 : A. H. International (Pvt.) Limited, Muhammad
Adnan Sherazee, Mrs. Seema Sherazee,
Malik Ali Zain, and Omega Hosiery Mills (Pvt.)
Limited, through Mr. Abdul Shakoor, Advocate.
Defendant No.4 : Ahsan Elahi, ex-parte.
Defendant No.7 : Askari Commercial Bank Limited, called absent.
Defendant No.8 : Citi Bank N.A., called absent.
Dates of hearing : 26.03.2014, 24.12.2014, 22.12.2015, and
16.06.2016.
J U D G M E N T
NADEEM AKHTAR, J. – CMA No.8122 of 2006 has been filed by defendants 1, 2, 3, 5 and 6 under Section 10 of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 (‘the Ordinance’), praying that unconditional leave be granted to them to defend this Suit. The Suit has been filed by the plaintiff / financial institution against the defendants under Section 9 of the Ordinance for recovery of Rs.92,644,473.72 with cost of funds thereon from the date of default till realization, as well as for sale of the immovable properties mortgaged and movable properties hypothecated in its favour by the defendants in consideration of the finance facilities availed by them.
2. The Suit was originally filed against defendants 1 to 6. As defendant No.4 did not file any application for leave to defend, it was ordered on 03.10.2007 that the Suit shall proceed ex-parte against him. Subsequently, Askari Commercial Bank Limited and Citi Bank N.A. filed separate applications under Order I Rule 10 CPC for joining this Suit. By consent, these applications were allowed and accordingly they were joined as defendants 7 and 8, respectively. Vide order dated 18.04.2008, the leave to defend applications filed by the said defendants 7 and 8 were allowed with the consent of the learned counsel for the plaintiff.
3. The case of the plaintiff, as averred in the plaint, is that at the request of the original defendants three finance facilities were granted to them by the plaintiff, which were (i) Master Murabaha Facility of Rs.70,000,000.00, (ii) Letter of Guarantee Facility of Rs.1,114,354.00 and (iii) Negotiation / Purchase of Export Bills Facility of Rs.25,000,000.00. The above facilities were granted on the terms and conditions stated in the plaintiff’s approval letter dated 07.02.2005. In respect of the facility mentioned at (i) above, defendant No.1 executed a Master Murabaha Facility Agreement dated 07.02.2005 for Rs.70,000,000.00, and as security for its repayment, demand promissory note, agency agreement and letters of hypothecation were also executed. Defendants 2 to 5 executed their personal guarantees to secure the above facility. Similarly, for the facility mentioned at (iii) above, Master Murabaha Facility Agreement dated 07.02.2005 for Rs.25,000,000.00 and Master Agreement for Purchase of Foreign Exchange dated 07.02.2005 were executed, and as security for their repayment, demand promissory note, agency agreement, undertaking and indemnity were also executed. Defendants 1, 2, 4 and 5 mortgaged in favour of the plaintiff their immovable property ; namely, Plot No.D-6/1, Block-4, Scheme No.5, Kehkashan, Clifton, Karachi, and they also hypothecated their plant, machinery, equipment, etc. in favour of the plaintiff. Defendant No.6 also mortgaged in favour of the plaintiff its immovable properties ; namely, Plot No. D-99, SITE, Survey Sheet No.36, and Plot No. 35-L/13, measuring 1.45 acres, situated in SITE, Trans Liyari Quarters, Karachi. Memorandum of Deposit of Title Deeds in respect of the above mentioned immovable properties were executed in favour of the plaintiff, and the original title documents thereof were deposited with the plaintiff. It is alleged that the facilities were fully availed and utilized by the defendants, but they committed breach in fulfilment of their obligations as they did not settle the same. As per the statement made in the plaint, defendants 1 to 6 are liable to pay to the plaintiff an amount of Rs.92,644,473.72 as at 12.09.2006.
4. On 18.03.2010, the Suit was partly decreed against defendants 1 to 6 to the extent of Rs.70,000,000.00 pertaining to Master Murabaha Facility of Rs.70,000,000.00. This decree was passed with the consent of the said defendants. The leave to defend application filed by defendants 1, 2, 3, 5 and 6 is, therefore, pending only to the extent of the remaining two facilities of Letter of Guarantee Facility of Rs.1,114,354.00 and Negotiation / Purchase of Export Bills Facility of Rs.25,000,000.00.
5. In their joint application for leave to defend, defendants 1, 2, 3, 5 and 6 have raised several objections regarding the maintainability of this Suit and several grounds have been urged seeking unconditional leave to defend the Suit. Under Sub-Section (4) of Section 10 of the Ordinance, 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. However, a perusal of their application for leave to defend reveals that they have failed to disclose any of the above particulars, and as such they have not complied with the mandatory requirements of Sub-Section (4) ibid as contemplated therein. Under Sub-Section (5) of Section 10 of the Ordinance, the defendants were further 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. However, no such document has been filed by them. 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) of Section 10 ibid, shall be rejected unless the defendant discloses therein sufficient cause for his inability to comply with any such requirements. The defendants have not only failed in fulfilling the mandatory requirements of Sub-Sections (4) and (5) ibid, but have also failed to disclose any sufficient cause for their inability in complying with the same.
6. Under Sub-Section (3) of Section 9 of the Ordinance, the plaintiff was obliged to specifically disclose in the plaint (a) the amount of finance availed by the defendants, (b) the amounts paid by the defendants and the dates of payment, and (c) the amount of finance and other amounts relating to the finance payable by the defendants to the plaintiff up to the date of institution of the Suit. I have noticed that no such particulars / details have been disclosed in the plaint by the plaintiff in respect of Letter of Guarantee Facility of Rs.1,114,354.00 and Negotiation / Purchase of Export Bills Facility of Rs.25,000,000.00 allegedly granted in favour of the defendants. Moreover, the purported statements of account filed by the plaintiff in respect of the above two facilities as annexures G/2 and G/3 to the plaint cannot be deemed to be proper, complete or duly certified statements of account under the Bankers’ Books Evidence Act, 1891, as required under Section 9(2) of the Ordinance, as the same are incomplete and do not support the amounts shown therein as outstanding against the defendants. Needless to say that specific disclosure of the above details in the plaint by the plaintiff and filing of statements of account along with the plaint as per the Bankers’ Books Evidence Act, 1891, was mandatory under Sub-Sections (3) and (2) ibid, respectively, because of the word “shall” used therein.
7. In the recent authoritative pronouncement of the Hon'ble Supreme Court in the case of Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd., PLD 2012 S.C. 268 = 2012 CLD 337, the case of Bankers Equity Limited and 5 others V/S Messrs Bentonite Pakistan Limited through Chief Executive and 7 others, 2010 CLD 651, was examined and approved by the Hon’ble Supreme Court, wherein it was held that Sub-Section (2) of Section 9 of the Ordinance makes it mandatory for a financial institution to support its plaint in a Suit against its customer by a statement of account duly certified under the Bankers’ Books Evidence Act, 1891, and also by all other relevant documents relating to the grant of finance ; without such a statement of account filed along with the plaint, a customer will obviously remain totally unaware of the amount advanced, mark up charged, the basis of calculation of account, nature of default and the actual amount of the bank’s claim against the defendant customer ; absence of the requisite statement of account along with the plaint will essentially amount to absence of providing adequate, proper and reasonable opportunity of defence to the defending customer ; upon the compliance by the financial institution with the provisions of Section 9(2) ibid depends the right of defence of a defendant in the summary Suits as visualised under the Ordinance ; and, without strict compliance of the above, the plaint is incomplete and cannot become the basis of a Suit under the Ordinance. After approving the above-cited case, it was held by the Hon’ble Supreme Court in Apollo Textile Mills Ltd. supra that in the absence of the statement of account and documents, Suit of the plaintiff-institution was liable to be rejected.
8. The Hon’ble Supreme Court has further been pleased to hold in Apollo Textile Mills Ltd. supra 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 ibid 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 been specifically held that non-impleadment of accounts under Sub-Section (3) of Section 9 and Sub-Sections (3) and (4) of Section 10 ibid 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.
9. At the time of filing of the Suit, the plaintiff had the full opportunity to comply with the mandatory requirements of Sub-Sections (2) and (3) of Section 9 ibid, but it failed in doing so. Likewise, the defendants had the full opportunity to comply with the mandatory requirements of Sub-Sections (4) and (5) of Section 10 ibid at the time of filing the application for leave to defend, but they also failed in availing such opportunity. Therefore, the plaintiff as well as the defendants are bound to face the consequence of their non-compliance as held by the Hon’ble Supreme Court in Apollo Textile Mills Ltd. supra.
10. In view of the above discussion, CMA No.8122 of 2006 filed by defendants 1, 2, 3, 5 and 6 for leave to defend the Suit is dismissed as it does not comply with the mandatory requirements of Section 10(4) and (5) of the Ordinance ; and, the Suit to the extent of the remaining two facilities, that is, Letter of Guarantee Facility of Rs.1,114,354.00 and Negotiation / Purchase of Export Bills Facility of Rs.25,000,000.00, is dismissed as the plaint does not comply with the mandatory requirements of Sections 9(2) and 9(3) of the Ordinance in respect of the said two facilities.
11. Since the Suit was partly decreed on 18.03.2010 against defendants 1 to 6 with their consent to the extent of Rs.70,000,000.00 pertaining to Master Murabaha Facility of Rs.70,000,000.00, the plaintiff shall also be entitled to cost of funds thereon from the date of default at the rate prescribed by the State Bank of Pakistan, costs of the Suit, and sale of the mortgaged properties and hypothecated assets.
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JUDGE