Order Sheet
IN THE HIGH COURT OF SINDH KARACHI
Special High Court Appeal No.158 of 2015
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Date |
Order with Signature of Judge |
Hearing/ priority case.
1. For order on office objection / reply of advocate as at “A”.
2. For hearing of main case :
27.11.2018 : Mr. Abdul Rahman, Advocate for the appellant.
Ms. Sofia Saeed Shah, Advocate for respondent No.1.
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NADEEM AKHTAR, J. – This appeal is directed against the order passed on 10.04.2015 by a learned single Judge of this Court in Suit No.B-32/2003 whereby CMA No.11377/2014 filed in the said Suit by the present appellant under Order VII Rule 11 CPC for rejection of plaint on the ground that the Suit was barred by limitation, was dismissed. It was observed in the impugned order that issues had already been settled in the Suit and the matter was at the stage of cross-examination of the plaintiff. After making this observation, the application was dismissed on the ground that the same was not maintainable when the matter was at the stage of evidence. The other ground on which the application was dismissed was that the issue with regard to limitation had already been framed. Learned counsel for the appellant submits that the observation in the impugned order that the application was not maintainable when issues had been settled and the matter was at the stage of evidence, is not sustainable in law and as such the same is liable to be set aside.
It is now well-settled that in a Suit under the Financial Institutions (Recovery of Finances) Ordinance, 2001, (‘the Ordinance’) except for an application for leave to defend the defendant cannot file any other interlocutory application prior to the grant of leave to defend the Suit. However, we may clarify that when it comes to rejection of plaint in a Suit under the Ordinance, the legal position is different. The question whether or not the plaint in a Suit under the Ordinance can be rejected prior to the grant of leave to defend came under discussion in Gulistan Textile Mills Ltd. V/S Askari Bank Ltd., etc. 2013 CLD 2005 decided by a learned single Judge of Lahore High Court. In the above-cited case, which was authored by Mr. Justice Syed Mansoor Ali Shah (as his lordship then was and now a Judge of the Hon’ble Supreme Court), it was held, inter alia, that in the earlier reported cases holding that the plaint cannot be rejected prior to the hearing and disposal of the defendant’s application for leave to defend, the inherent and suo moto power of the Court to reject the plaint, which precedes the power of granting leave to the defendant, was not discussed ; the said earlier decisions were based on the premise that an objection under Order VII Rule 11 CPC raised by the defendant in his application for leave to defend can only be heard once his application for leave to defend is heard and granted ; and, the Court has a primary obligation to examine the plaint and reject it, inter alia, if it does not disclose a cause of action. By exercising the inherent and suo moto power under Order VII Rule 11 CPC, the plaint in the above-cited case was rejected before / without hearing and deciding the defendants’ applications for leave to defend, as it failed to disclose any cause of action.
Similar view was taken by this Court in National Bank of Pakistan V/S Messrs ARK Garments Industry (Pvt.) Ltd., 2015 CLD 179, authored by one of us (Nadeem Akhtar, J.), relevant extracts whereof are reproduced below for convenience and ready reference :
“11. Sub-Section (1) of Section 10 of the Ordinance provides that in the event of the defendant’s default in obtaining leave from the Banking Court to defend the Suit in which summons has been served on him, the allegations of fact in the plaint shall be deemed to be admitted, and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof, or such other material as the Banking Court may require in the interest of justice. The consequences mentioned in Sub-Section (1) ibid are penal in nature, therefore, it must be construed strictly. The words underlined by me for emphasis, appearing in Sub-Section (1) ibid, are of great importance. The said words undoubtedly indicate that if the defendant fails in obtaining leave to defend the Suit, his admission shall be deemed only to the extent of the allegations of fact in the plaint, and a decree in favour of the plaintiff may be passed only because of such admission of the allegations of fact in the plaint, or such other material as the Banking Court may require in the interest of justice. The reason for highlighting the above aspect is that before passing a decree in favour of the plaintiff in a blindfolded fashion because of the defendant’s failure in obtaining leave to defend the Suit, allegations of fact in the plaint must be examined critically and minutely by the Banking Court so as to corroborate as to whether or not the same constitute a cause of action in favour of the plaintiff. In such a situation, it must be kept in mind by the Banking Court that cause of action arises only and only out of the facts pleaded / alleged in the plaint. Another significant aspect in Sub-Section (1) ibid is that, it is directory and not mandatory in nature because of the use of the word “may” therein.
12. 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. However, this does not mean that a Suit, which does not disclose a cause of action or is otherwise not maintainable being barred by any law, and which ought to be dismissed or the plaint ought to be rejected, should be decreed simply because the defendant did not file the application for leave to defend, or he was unable to obtain leave to defend the Suit on account of dismissal of his application for leave to defend, or he failed in fulfilling the conditions attached to the grant of leave to defend. For instance, if a Suit is barred by limitation, or is based on illegal or void claim, the Banking Court is certainly not expected to decree the same either under Sub-Section (1) or under Sub-Section (11) of Section 10 of the Ordinance. I can say with conviction that this surely must not have been the intention of the lawmakers. It is, therefore, held that 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 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. It is also held that irrespective of the defense set up by the defendants, and in Suits filed under the Ordinance, whether or not the defendant files the application for leave to defend, or whether his application for leave to defend is maintainable or not, or even if his application for leave to defend is dismissed, the Banking Court would still be duty-bound to first apply its mind and confirm as to whether or not the plaint discloses a cause of action against the defendant ; whether the Suit, as framed, is maintainable or not ; and, whether or not the plaintiff is entitled to the relief prayed for, whether the defendant is before the Court or not.
13. ……………………….
14. In view of the above discussion and the law laid down by the Hon’ble Supreme Court in the aforementioned Full Bench authorities, the contention of the learned counsel for the plaintiff that the maintainability of the Suit cannot be examined at this stage even by the Court, without first hearing and deciding the defendants’ application for leave to defend, and, the plaint cannot be rejected nor can the Suit be dismissed at this stage, does not appear to be correct.
15. Rule 11 of Order VII CPC provides that the plaint “shall” be rejected in any of the four eventualities mentioned therein, including where the plaint does not disclose a cause of action. I have already held that when this was filed on 29.11.2006, the plaintiff had no cause of action to file this Suit against the defendants, as alleged in the plaint. Therefore, the plaint is liable to be rejected.”
We hereby affirm the cases of National Bank of Pakistan and Gulistan Textile Mills Ltd. (supra) decided by this Court and learned Lahore High Court, respectively. We have briefly discussed both the above principles ; namely, the general principle that in a Suit under the Ordinance except for an application for leave to defend a defendant cannot file any other interlocutory application prior to the grant of leave to defend the Suit ; and, with specific reference to rejection of plaint that even before hearing and deciding the application for leave to defend, maintainability of a Suit under the Ordinance can be examined and plaint can be rejected or the Suit can be dismissed in case the Suit is barred by law. We are of the considered view that the application filed in the instant case for rejection of the plaint was maintainable under the former general principle and it ought to have been decided on merits at the relevant time as leave to defend had already been granted in the present case admittedly prior to the filing of the said application ; and, under the latter principle also the said application ought to have been decided on merits at the relevant time as the question of maintainability of the Suit on the ground of limitation was involved. Therefore, with respect to the learned single Judge, we say with all humility that the observation in the impugned order that the application for rejection of the plaint was not maintainable when issues had been settled and the matter was at the stage of evidence, was not correct, especially when the said application was filed on the ground that the Suit was barred by limitation.
Learned counsel for respondent No.1 points out that entire evidence has been recorded and the Suit is now at the stage of final arguments. Both the learned counsel state that at this stage they would prefer decision of the main Suit on merits rather than decision on the application for rejection of the plaint. They request that this appeal be disposed of by setting aside the above observation in the impugned order. Order accordingly.
The appeal stands disposed of with no order as to costs in terms of the above discussion and observations.
J U D G E
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J U D G E