IN THE HIGH COURT OF SINDH, KARACHI

Ist Appeal No.28 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Ghulam Mehdi Langha ]

[arising out of Suit No.220 of 2023]

Ist Appeal No.29 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Waris Masih ]

[arising out of Suit No.222 of 2023]

Ist Appeal No.30 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Abdul Hafeez ]

[arising out of Suit No.223 of 2023]

Ist Appeal No.31 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Umesh ]

[arising out of Suit No.224 of 2023]

Ist Appeal No.32 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Ehtesham Uddin Babar ]

[arising out of Suit No.225 of 2023]

Ist Appeal No.33 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Munawar Hussain]

[arising out of Suit No.226 of 2023]

Ist Appeal No.34 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Muhammad Iqbal Khan ]

[arising out of Suit No.227 of 2023]

Ist Appeal No.35 of 2024

[ M/s. Dubai Islamic Bank Pakistan Ltd., v. Khaleeq Jawed ]

[arising out of Suit No.228 of 2023]

PRESENT:

Mr. Justice Arshad Hussain Khan

Mr. Justice Amjad Ali Sahito

29.09.2026

Mr. Harchand Rai Khemani, Advocate for appellant in all appeals.

None present for the respondents.

JUDGMENT

ARSHAD HUSSAIN KHAN J; By this common judgment, we intend to dispose of First Appeals Nos.28 to 35 of 2024, as common questions of law and fact arise in all these connected appeals. Through these appeals, the Appellant-Bank has called in question the respective judgments and decrees passed by the learned Presiding Officer, Banking Court No.II at Karachi, in Suit No.220 of 2023 and Suits Nos.222 to 228 of 2023, whereby the recovery suits instituted by the Appellant-Bank under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 were decreed only to the extent of the principal amounts, after excluding the claimed profit/markup, while the claims towards profit/markup and statutory cost of funds were expressly declined.

2. Briefly stated, the facts common to these appeals are that the Appellant-Bank, a banking company incorporated under the laws of Pakistan, extended Personal Finance Facilities to the respective Respondents on Musawamah basis, repayable in monthly instalments in terms of the Musawamah Agreements and other finance documents executed by them. Upon default by the respective Respondents, the Appellant-Bank instituted separate suits for recovery before the learned Banking Court. The Respondents did not file applications for leave to defend within the prescribed period and, consequently, the suits proceeded ex-parte. By the impugned judgments and decrees, the learned Banking Court held that the profit/markup charged by the Appellant-Bank was contrary to the injunctions of Islam and amounted to Riba. The amounts already paid by the respective Respondents were accordingly adjusted towards the principal amounts, and the suits were decreed only to the extent of the outstanding principal amounts, along with costs of the suits, while the claims towards profit/markup and cost of funds were declined. Aggrieved thereby, the Appellant-Bank has preferred these appeals.

3. Learned counsel for the Appellant-Bank contends that the impugned judgments and decrees are legally unsustainable and suffer from inconsistency in the approach adopted by the learned Banking Court. He submits that the learned Presiding Officer could not have declared the profit structure of the Appellant-Bank to be contrary to the injunctions of Islam without examining the terms of the underlying finance documents, the nature and structure of the transactions, and the applicable legal and regulatory framework. He further points out that the same learned Presiding Officer, in contemporaneous judgments, including Suit No.51 of 2022 (M/s. Dubai Islamic Bank v. Muhammad Anees), Suit No.52 of 2022 (M/s. Dubai Islamic Bank v. Fatima Saleem), Suit No.260 of 2023 (M/s. Dubai Islamic Bank v. Junaid Akhtar Khan), Suit No.261 of 2023 (M/s. Dubai Islamic Bank v. Zeeshan Mazhar), Suit No.282 of 2023 (M/s. Dubai Islamic Bank v. Liaquat Ahmed) and Suit No.283 of 2023 (M/s. Dubai Islamic Bank v. Syed Muhammad Bilawal Hussain), awarded cost of funds, besides costs of the suits, in matters relating to Personal Finance Facilities extended on Musawamah basis, from the date of default until realization. According to him, departure from the approach adopted in those cases, without identifying any factual or legal distinction or assigning reasons therefor, renders the impugned judgments deficient in reasoning. In support of his submissions, learned counsel has relied upon Trycot Synthetic Fibre Company v. Habib Bank Limited [2012 CLD 1670], Ghulam Jaffar Phulpoto v. Messrs Allied Bank Limited and another [2015 CLD 1416], Messrs Industrial Development Bank of Pakistan v. Messrs Blossom Towel Industries (Pvt.) Ltd. and others [2022 CLD 143], SME Bank Limited v. Messrs Punjab Store [2022 CLD 251], Messrs Divine Developers (Pvt.) Ltd. and others v. Bank of Punjab [2019 CLD 489], Ahmad Deen v. Zarai Taraqiati Bank Ltd. [2014 CLD 119], Habib Bank Limited v. Pak Poly Products (Pvt.) Ltd. and 3 others [2013 CLD 1661] and Messrs Green Oil Mills and 4 others v. National Bank of Pakistan and another [2005 CLD 1676].

4. Despite service of notices, including through publication, and repeated opportunities having been afforded in these connected appeals, none has appeared on behalf of the Respondents to contest the appeals or controvert the submissions advanced on behalf of the Appellant-Bank. We have, therefore, proceeded to hear learned counsel for the Appellant-Bank and to decide these appeals on the basis of the material available on record.

5. We have heard learned counsel for the Appellant-Bank and perused the material available on record. The impugned judgments show that the learned Banking Court declined the claims towards profit/markup and cost of funds principally on the premise that the profit charged under the facilities amounted to Riba and was contrary to the injunctions of Islam. However, no examination appears to have been undertaken of the relevant terms of the Musawamah Agreements or the other finance documents so as to determine the true nature and structure of the transactions. Nor do the impugned judgments examine the applicable legal and regulatory framework governing such facilities or the statutory provisions relating to cost of funds. A determination as to whether a particular financial arrangement conforms to the applicable Islamic principles cannot rest merely upon the nomenclature employed by the parties or the character of the institution providing the facility; it necessarily requires consideration of the terms of the underlying transaction, its actual mechanism and the applicable legal, regulatory and Shariah governance framework. Similarly, the question of entitlement to cost of funds was required to be determined independently in accordance with the relevant provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and the law applicable thereto.

6. There is yet another aspect of the matter. Admittedly, the Respondents did not seek leave to defend the suits within the period prescribed under Section 10 of the Ordinance. The legal consequences flowing from such default were, therefore, required to be considered before determining the claims of the Appellant-Bank. The learned Banking Court was also required to consider the current legal effect of the authorities relied upon by it concerning Riba and their applicability to the transactions in question. Furthermore, although judgments rendered by the same Banking Court in other cases do not constitute binding precedent, where a different approach is adopted in materially similar matters, judicial consistency requires that the factual or legal basis for such distinction be discernible from the judgment. The impugned judgments disclose no such distinction while declining cost of funds which, according to the material relied upon by the Appellant-Bank, had been awarded by the same Court in other comparable matters.

7. In the circumstances, we are of the view that the impugned judgments do not contain adequate reasons for declining the claims towards profit/markup and cost of funds and, therefore, cannot be sustained in their present form. We clarify, however, that nothing stated herein shall be construed as an expression of opinion on the merits of the Appellant-Bank's claims, including whether the profit structure under the facilities in question conforms to the applicable Islamic principles or whether the Appellant-Bank is ultimately entitled to profit/markup or cost of funds. All such questions are left open for determination by the learned Banking Court in accordance with law.

8. Consequently, First Appeals Nos.28 to 35 of 2024 are allowed. The impugned judgments and decrees are set aside and the respective suits are remanded to the learned Banking Court concerned for decision afresh in accordance with law. While deciding the suits, the learned Banking Court shall consider, inter alia, the terms and nature of the respective finance transactions, the Appellant-Bank's claims towards profit/markup and cost of funds, and the legal consequences flowing from the Respondents' failure to seek leave to defend under Section 10 of the Ordinance. The learned Banking Court shall adopt such further procedure as may be warranted under the Ordinance and the applicable law, afford due opportunity of hearing to the parties, and record reasons for its conclusions. The exercise shall preferably be completed within sixty (60) days from the date of receipt of this judgment.

A copy of this common judgment shall be placed on the file of each connected appeal. The appeals, along with all pending applications, stand disposed of in the above terms, with no order as to costs.

JUDGE

Naveed PA