IN THE HIGH COURT OF SINDH AT KARACHI
I.A. No.26 OF 2018
[Khojas Capital Management Pvt Ltd., & others v. Habib Metropolitan Bank Ltd & another]
PRESENT:
Mr. Justice Arshad Hussain Khan
Mr. Justice Amjad Ali Sahito
Appellants : Through Mr. Abdul Shakoor, Advocate
Respondent No.1 : Through Mr. M. Baqar Raza, Advocate.
Date of hearing : 09.09.2026
Date of order : 09.09.2026
O R D E R
ARSHAD HUSSAIN KHAN J; Through this First Appeal, preferred under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the Appellants have assailed the Judgment dated 17.01.2018 and Decree dated 25.01.2018 passed by the learned Banking Court No.I at Karachi in Suit No.1821 of 2010, whereby the suit filed by the Respondent/Plaintiff was decreed in the sum of Rs.24,492,613.93 against the Appellants/Defendants No.1, 3, 4 and 5, jointly and severally, along with cost and cost of funds from the date of default till realization. Prayers (B), (C) and (D) of the plaint were also allowed, whereas the liability of Defendant No.2 (Respondent No.2 herein) was confined to the extent of his guarantee dated 23.01.2007.
2. Briefly, the facts giving rise to the present appeal are that The Respondent/Plaintiff Bank instituted the suit under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, for recovery of Rs.32,362,605.02. Its case was that Appellant/Defendant No.1 had obtained a Running Finance Facility of up to Rs.150,000,000/- under the sanction letter and finance agreement dated 23.01.2007, secured through hypothecation of book debts and receivables and personal guarantees furnished by its directors. Despite availing the facility, Defendant No.1 failed to discharge its repayment obligations. Subsequently, the management of Defendant No.1 was taken over by persons associated with appellants No.2 and 3/Defendants No.3 and 4. The outstanding liability was thereafter rescheduled and, according to the Bank, Defendants No.1, 3 and 4 acknowledged an outstanding amount of Rs.32,599,972.93 and executed the relevant rescheduling/security documents. Defendant No.2 also acknowledged the outstanding liability and confirmed continuation of his personal guarantee. As the liability remained unpaid despite these arrangements, the Bank filed the underlying suit for recovery of Rs.32,362,605.02 along with ancillary reliefs. Upon service of summons, the Defendants entered appearance and filed applications for leave to defend. The applications filed by Defendants No.1, 3 and 5 were dismissed for non-prosecution on 11.11.2015, while Defendant No.4 did not file any such application. The subsequent restoration applications filed on 24.04.2017, along with the application for leave to defend filed by Defendant No.2, were dismissed through the impugned judgment. Being aggrieved by the impugned Judgment and Decree, the Appellants have preferred the present first appeal.
3. From the record, it appears that during the pendency of the present appeal, the decree under challenge stood fully satisfied.
4. Learned counsel for Respondent No.1, while referring to the statement filed before this Court on 30.04.2026, along with a certified copy of the statement dated 28.11.2018 and the order dated 29.11.2018 passed by the learned Banking Court No.I, Karachi, in Execution No.93 of 2018 (arising out of Suit No.1821 of 2010), submits that, in compliance with the order dated 06.11.2018 passed in the execution proceedings, the attached shares of the judgment-debtors lying with the CDC were transferred in favour of the decree-holder. Consequently, vide order dated 29.11.2018, the learned Banking Court recorded satisfaction of the decree and disposed of the execution application accordingly. Learned counsel, therefore, contends that, the decree having been fully satisfied, no subsisting grievance survives in the present appeal and prays that the same be dismissed as having become infructuous.
5. Learned counsel for the Appellants does not dispute the factual position that the decree stands fully satisfied. He, however, contends that notwithstanding such satisfaction, the present appeal is required to be decided on merits, particularly to determine whether Appellants No.2 to 4 had any legal relationship with, or liability towards, Respondent No.1/Bank. He submits that such determination remains necessary as the decretal amount was satisfied exclusively out of the assets of Appellant No.1 and not from the assets of Appellants No.2 to 4.
6. Although we are of the view that, once a decree has been fully executed and satisfied, ordinarily no useful or practical purpose would be served by deciding questions that have thereby become academic. Judicial proceedings are intended to resolve subsisting controversies rather than to pronounce upon abstract or moot questions, and litigation must attain finality once the decree has been completely satisfied. Nevertheless, in order to address the contention advanced by learned counsel for the Appellants regarding the alleged absence of any legal relationship or liability of Appellants No.2 to 4 towards Respondent No.1/Bank.
7. We have heard learned counsel for the parties at length on merits and have carefully examined the material available on record.
8. A perusal of the record reveals that Appellant No.1 had admittedly availed finance facilities from Respondent No.1/Bank. Defendant No.2, being one of its directors along with other, had executed their personal guarantees[1] in favour of the Bank. Subsequently, Appellants No.3 and 4 became involved in the acquisition and takeover of the management and liabilities of Appellant No.1, while Appellant No.4, being the sponsor of Appellants No.2 and 3, also furnished a guarantee[2] to secure the repayment obligations of Appellant No.1. In view of their respective undertakings and obligations arising out of the finance transaction, they fall within the ambit of “customer” as contemplated under Section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
9. The record further reflects that, vide Board Resolution dated 09.03.2009[3], the existing directors of Appellant No.1 resigned and new directors were appointed, who were also directors of Appellants No.2 and 3. The Board Resolution and Form-29[4] available on record evidencing such change. Furthermore, vide letter dated 13.02.2009[5], Defendant No.2 acknowledged the outstanding liability of Appellant No.1 towards the Bank and expressly confirmed continuation of the personal guarantee earlier furnished by him.
10. More importantly, following the change in management and upon a request for rescheduling of the outstanding liability, the Bank approved the proposed arrangement through its internal memorandum dated 14.03.2009[6]. The record also contains Board Resolutions dated 28.03.2009[7] passed by Appellants No.3 and 4 authorizing their respective signatories to execute the rescheduling agreement and related documents in respect of the finance facility extended to Appellant No.1. The parties thereafter entered into an agreement dated 20.03.2009[8] relating to the change of management and settlement/rescheduling of the outstanding liability of Appellant No.1. Under the said agreement, Appellants No.1, 2 and 3 acknowledged an outstanding liability of Rs.32,599,972.93 towards the Bank and agreed upon the manner of its repayment. The agreement, inter alia, contemplated that Appellant No.2 would acquire the paid-up share capital of Appellant No.1; that the assets and liabilities of Appellant No.1 would be taken over by Appellant No.3; that an initial amount of Rs.5,712,054.46 would be paid towards the outstanding liability; and that the balance would be discharged through 24 equal monthly instalments. It was further agreed that, upon amalgamation of Appellant No.1 with Appellant No.3, the latter would continue payment of the monthly instalments. Appellants No.1, 2 and 3 also undertook to assign their assets in favour of the Bank and furnish post-dated cheques towards repayment of the outstanding amount.
11. The Appellants do not dispute the execution of the aforesaid documents. Their principal contention, however, is that the arrangement never matured into a concluded and enforceable contract and that the guarantee furnished in connection therewith was consequently of no legal effect. It is further contended that Appellants No.2 to 4 had themselves neither sought nor availed any finance facility from the Bank and, therefore, could not be saddled with liability arising out of the finance extended to Appellant No.1.
12. We are unable to accept this contention. The liability attributed to Appellants No.2 to 4 does not rest merely upon their having directly availed the original finance facility. Rather, it arises from the subsequent arrangement voluntarily entered into by them, whereby they participated in the takeover of Appellant No.1, acknowledged and assumed obligations concerning its outstanding liability, agreed upon its rescheduling and repayment, and furnished security/guarantee for its discharge. The documentary record, including the Board Resolutions and the agreement referred to above, demonstrates their conscious participation in and acceptance of the arrangement with the Bank. Significantly, there is nothing on record to show that, prior to institution of the suit, the Appellants ever communicated to the Bank that the arrangement had not culminated into a binding agreement or that they considered themselves absolved of the obligations undertaken thereunder. In these circumstances, the mere assertion that Appellants No.2 to 4 did not themselves avail the original finance facility does not, by itself, absolve them of the obligations subsequently assumed by them. We, therefore, find no substance in the contention that the impugned Judgment and Decree are liable to be set aside qua Appellants No.2 to 4 on this ground.
13. For the foregoing reasons, we find no legal or factual infirmity in the impugned Judgment dated 17.01.2018 and Decree dated 25.01.2018 warranting interference in appellate jurisdiction. Moreover, the decree having already been fully satisfied during the pendency of the appeal and such satisfaction having been duly recorded by the learned Banking Court, no further relief survives for consideration. Accordingly, the instant First Appeal, along with all pending application(s), is dismissed, with no order as to costs.
JUDGE
JUDGE
Naveed PA