IN THE HIGH COURT OF SINDH AT KARACHI
First Appeal No. 103 of 2011
Present :
1. Mr. Justice Faisal Arab
2. Mr. Justice Nadeem Akhtar
Date of hearing : 23-05-2012
For the Appellant : Mr. Khaleeq Ahmed,
Advocate.
For the Respondent : Mr. Khalid Mahmood Siddiqui, Advocate.
J U D G M E N T
NADEEM AKHTAR, J.- This appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance of 2001(THE ORDINANCE) has been filed by the appellant against the judgment delivered on 12.08.2011 and decree prepared on 23.08.2011 by the Banking Court No.V at Karachi in Suit No. 1710 of 2009 filed against the appellant by the respondent. By the impugned judgment and decree, respondent's Suit has been decreed against the appellant in the sum of Rs. 19,715,098.15 with cost of funds thereon from the date of filing of the Suit till realization at the current rate prescribed by the State Bank of Pakistan. Costs of the Suit have been awarded to the respondent and a mortgage decree has also been passed in favour of the respondent for sale of the immovable property mortgaged by the appellant in favour of the respondent.
2. Brief facts of this case are that the above mentioned Suit was filed on 20.08.2009 by the respondent against the appellant under Section 9 of the Ordinance for recovery of Rs.23,744,401.38 with cost of funds thereon. It was the case of the respondent that the appellant applied to the respondent for a finance facility of Rs.18.000 million through an application dated 11.07.2006 for a period of twenty (20) years for purchasing a property. Vide sanction letter dated 11.07.2006 issued by the respondent, a facility of Rs.17.000 million was sanctioned in favour of the appellant, wherein it was mentioned that the tenor of financing will be 240 months, and that the applicable markup rate would be benchmarked against 01 year KIBOR / PIB Ask rate of the last day of the previous month at the time of booking and repricing. It was also the case of the respondent that the appellant, as a customer of the respondent, availed and utilized the finance facility of Rs.17,000,000.00 through an Agreement for Financing on Markup Basis dated 12.07.2006. By virtue of the said agreement, it was agreed that the purchase price would be Rs.17.000 million and marked-up price was agreed at Rs.75.768045 million. Repayments were to be made by the appellant to the respondent in monthly instalments as per the schedule attached to the said agreement. Vide clause 13.1 of the agreement, it was agreed that default by the appellant shall be constituted in case of his failure in payment of any amount payable under the said agreement on the due date for payment.
3. It was pleaded by the respondent that in order to secure repayment of the finance facility and in consideration thereof, the appellant mortgaged in favour of the respondent immovable property, namely, Bunglow No. C-8, measuring 600 sq. yds., Block-13-D/1, Gulshan-e-Iqbal, Karachi, by executing a Memorandum of Deposit of Title Deeds and depositing with the respondent all the original title documents of the said property. The appellant also executed an Irrevocable General Power of Attorney in respect of the said mortgaged property in favour of the respondent. On the basis of above averments, the respondent prayed for a decree against the appellant in the sum of Rs.23,744,401.38, including principal amount of Rs.17,000,000.00, markup of Rs.8,196,857.80 till filing of the Suit, and other amounts such as property insurance, overdue charges and liquidated damages. A decree for sale of the mortgaged property was also sought by the respondent.
4. Upon service of summons, the appellant filed an application under Section 10 of the Ordinance seeking unconditional leave to defend the Suit. In his application, it was admitted by the appellant that the facility in question was availed by him, and also that he could not pay the monthly instalments with effect from March 2009 due to financial crisis. The claim of the respondent and the markup charged by the respondent were disputed by the appellant in a general and vague manner without disclosing any justification or basis for disputing the same. It was claimed by the appellant that according to the 'Balance Certificates' dated 17.10.2009 and 20.10.2009 issued by the respondent, his outstanding liability was only to the extent of Rs.3,777,965.00.
5. The respondent filed its replication wherein the claim in Suit was reiterated and all the allegations levelled by the appellant were denied. The respondent raised specific objections regarding maintainability of appellant's application for leave to defend, that the same was not in conformity with the mandatory requirements of Section 10(3), (4) and (5) of the Ordinance ; that the appellant was not entitled for leave to defend as he had admitted execution of documents and availing of the finance facility ; that dispute only with regard to calculation of liability was no ground for leave to defend ; and that the appellant had miserably failed to raise any question of law or fact which may require evidence. Regarding the letters 'Balance Certificates' issued by the respondent, it was clarified by the respondent in its replication that the amount of Rs.3,777,964.05 mentioned therein was the amount of outstanding instalments at that particular point in time, whereas the claim in Suit was based on the outstanding principal amount as well as the balance instalments.
6. By order dated 31.05.2011, appellant's application for leave to defend was dismissed by the Banking Court. It was held by the Banking Court that since the Appellant had admitted availing of the finance facility as well as execution of all the documents and also commission of default due to financial crisis, no substantial question of law or fact was raised by the appellant.
7. Thereafter, the respondent filed its statement / break-up of account before the Banking Court wherein same amounts were claimed and reiterated which were mentioned in the plaint. The appellant also filed his statement / break-up of account wherein once again no details were disclosed by him regarding the amount availed by him, the amount(s) and date(s) of repayment(s) made by him, and the amount which was outstanding according to him. Appellant's said statement showed only a sum of Rs.3,777,965.05 as the outstanding amount, which was the amount mentioned in respondent's above mentioned 'Balance Certificates'. After hearing the parties and examining their respective statements / break-ups of account, and also as appellant's application for leave to defend had already been dismissed, respondent's Suit was decreed against the appellant as mentioned earlier.
8. Mr. Khaleeq Ahmed, learned counsel for the appellant, challenged the impugned judgment and decree by submitting that the questions raised by the appellant in his application for leave to defend have not been considered by the Banking Court in a proper manner. He contended that leave to defend ought to have been granted to the appellant because the rate of markup was disputed by him as being highly excessive, and also on the ground that the statement of account filed by the respondent was not in accordance with the Bankers' Books Evidence Act, 1891. While emphasising on the Balance Certificates issued by the respondent showing the balance amount of Rs.3,777,965.05 in appellant's account, the learned counsel submitted that the respondent had no justification to claim any amount more than the aforesaid amount and that the Suit of the respondent could not have been decreed for more than the said amount. According to the learned counsel, the appellant was ready and willing to pay the said amount of Rs.3,777,965.05. He prayed for setting aside of the impugned judgment and decree to the extent of the remaining amount. In support of his submissions, Mr. Khaleeq Ahmed relied upon the under mentioned two reported cases :-
(i) 2007 CLD 678 (Division Bench – Lahore High Court)
National Bank of Pakistan through Manager V/S Messers Mujahid Nawaz Cotton Ginners through partners and 6 others.
In the above cited case, it was held inter alia that the bank should have filed vouchers, receipts, etc. manifesting that amounts were actually paid to the insurance company, and that in the absence of the above, bank was not entitled to recover such amounts merely on the ground that the same were mentioned in the statement of account. It was also held in the aforesaid case that a certificate should be given at the foot of statement of account so as to make it a certified copy. The above cited case can not be applied to the instant case, firstly, as property insurance charges of Rs.52,403.00 claimed by the respondent from the appellant have not been allowed by the Banking Court, and secondly, as the statement of account filed by the respondent was duly certified.
(ii) 2011 CLD 790(Division Bench – SHC)
MessersShaz Packages & 3 others V/S Messers Bank Alfalah Ltd.
In this case, the defendants in their application for leave to defend had raised many preliminary objections and had also framed questions of law, but the Banking Court dismissed their application without appreciating their objections and questions of law and decreed the Suit. The above cited case can not be relied upon in the instant case for the simple reason that in the instant case the appellant in his application for leave to defend had categorically admitted execution of documents, availing of the facility and commission of default due to financial crisis.
9. On the other hand Mr. Khalid Mahmood Siddiqui, learned counsel for the respondent, vehemently opposed the appeal by submitting that the Suit has been rightly decreed against the appellant as he did not fulfil the mandatory requirements of Section 10(3), (4) and (5) of the Ordinance in his application for leave to defend by not disclosing therein the amount of finance availed by him from the respondent, the amount paid by him to the respondent with dates of payments, the amount of finance and other amounts relating to the finance payable by him to the respondent till the date of institution of the Suit, and the amount payable to the respondent. Learned counsel further submitted that the appellant had also failed to raise any question of law or fact before the Banking Court. In the end, learned counsel submitted that as the appellant had admitted execution of documents, availing of the finance facility and default in respect thereof, the impugned judgment and decree should be maintained.
10. We shall first deal with the submissions made on behalf of the appellant regarding Balance Certificates issued by the respondent. It is an admitted position that the finance facility was availed by the appellant from respondent through Current Account No. 01-4651340-01 maintained at the Main Branch of the respondent. The Balance Certificates, which were issued by the respondent at the request of the appellant for Income Tax purposes, contained the words "We further certify that the mentioned account is maintaining a balance of PKR 3,777,964.05 Dr as of 16th October 2009 as per our book records". The word "balance" mentioned in the said Certificates is important as it denotes only the balance amount available in appellant's account on the above mentioned date. It was nowhere mentioned in any of the two Certificates that the said balance was actually the outstanding balance against the appellant, otherwise words like "outstanding" and / or “payable” would have been mentioned in the said Certificates along with the word "balance". It is also an admitted position that the finance of Rs.17.000 million was availed by the appellant in July 2006 for twenty(20) years, therefore, only a sum of Rs.3,777,965.05 could not have been the outstanding or payable balance in October 2009. This position is further confirmed by the fact that the respondent in its plaint had specifically mentioned only a sum of Rs. 5,481,759.65 as total repayments by the appellant, which was never denied by the appellant and he also did not allege any further payments. We are of the opinion that the appellant had tried before the Banking Court and is still trying before this court to take undue advantage of the said Certificates which only showed the balance and not the outstanding or payable balance in October 2009. This plea having no force or basis is therefore rejected.
11. The objection raised by the appellant regarding statement of account filed by the respondent also has no force. The said statement was not only duly certified, but also contained the date of loan, amount of loan, components of principal amount, components of markup, amounts of monthly instalments, amount paid, as well as amounts of insurance and other charges. In addition to the above, the respondent, in compliance of Section 9(3) of the Ordinance, had specifically disclosed in the plaint all the details of the finance availed by the appellant, the amounts paid by the appellant with all the dates of such payments, and the total recoverable amount including principal and markup. The above detailed statement in the plaint was duly verified on oath. We are of the view that there was no defect in the statement of account filed by the respondent.
12. The record clearly shows that the appellant did not comply with the mandatory requirements of Section 10(3), (4) and (5) of the Ordinance in his application for leave to defend. In order to appreciate the effect of non-compliance of the above mandatory requirements by the appellant, we would like to briefly refer to the following cases :
(i) 2012CLD 337 (Supreme Court)
Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd.
Paragraphs 14, 15, 16, 18 and 19 of this latest authority of the Hon’ble Supreme Court are important and relevant and as such the same are reproduced below for convenience and ready reference :-
"14. The plaintiff institution and the defending 'customer' have identical statutory responsibility respectively under sections 9(3) and 10(4) 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 has also been saddled with the additional responsibility to also specify the amounts disputed by him.
A defending customer is thus obliged to put in a definite response to the banks' accounting and has under sections 10(3) and (4) to compulsorily plead in answer in the leave petition his accounts as well as the facts and amount disputed by him as repayable to the plaintiff.
15. The rationale of the schematic discipline of Ordinance of 2001 is evident. A banking suit is normally as 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. The parties to a suit have been obliged equally to definitely plead and to specifically state their respective accounts.
16. To scope of the suit thus becomes well defined. 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. The trial would remain within the laid out parametrical scope of the claimed and the disputed accounts.
17. ……………………………
18. The Financial Institutions (Recovery of Finances) Ordinance, 2001 i.e. is a Special law. It provides a special procedure for the banking suits. The provisions of the Ordinance, 2001 under section 4 thereof override all other laws. The provisions contained in the said Sections require strict compliance. Non-compliance therewith attract as above referred, consequences of rejection of leave petition along with decree etc. etc.
19. In this case, the application for leave to defend the suit filed by the petitioners did not fulfil the requirements of section 10(3), (4) and (5) of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001. It was admittedly not in conformity with the said mandatory provisions. No cause or the reason for inability to comply with said requirements was shown. Instead it was expressly admitted by the learned Senior Advocate Supreme Court for the petitioners before the High Court and also before us that the petitioners failed to fulfil the mandates of the said provisions and did not plead the required Accounts. The petitioners / defendants thus attracted the prescribed legal consequences of :-
(i) rejection of their leave petition under section 10(6) ;
(ii) non-entitlement under section 10(1) to defend the suit for not obtaining leave to defend the suit in terms provided for in section 10 ;
(iii) the allegations of fact in the plaint were deemed under section 10(1) to have been admitted by them ; and
(iv) a judgment and decree against them and in favour of the plaintiff bank under section 10(1) and (11) ibid. "
(Emphasis added)
(ii) 2004 CLD 1741 (Division Bench – Lahore High Court)
Zeeshan Energy Ltd. V/S Faisal Bank Ltd.
In the above case, it was held that leave application was to be rejected under Section 10(6) of the Ordinance for failure of the defendant to meet with the requirement of Sub-Sections (3) and (4) of Section 10 of the Ordinance, as the said provisions are mandatory in nature.
(iii) 2005 CLD 1489 (Division Bench – Lahore High Court)
Shahid Farooq Shaikh V/S Allied Bank of Pakistan Limited.
In the above noted case, Banking Court decreed the Suit after dismissing leave application for lacking requisite information under Section 10(4) of the Ordinance. It was held that provisions of Section 10(6) of the Ordinance were mandatory, and leave application not complying with requirements of Section 10(3), (4) and (5) of the Ordinance would not be taken / treated as leave application and presumption would be that no leave application had been filed. Appeal in this case was dismissed and the impugned judgment and decree were maintained.
13. In view of the latest authority of the Hon’ble Supreme Court and the two other Division Bench cases referred to above, the application for leave to defend filed by the appellant was not maintainable and was rightly rejected by the Banking Court under Section 10(6) of the Ordinance as the appellant had not complied with the mandatory requirements of Section 10(3), (4) and (5) of the Ordinance. As a consequence of dismissal of appellant's application for leave to defend, it was the duty of the Banking Court to proceed forthwith to pass judgment and decree in favour of the respondent against the appellant under Section 10(11) of the Ordinance, which has been done in this case. In addition to the said failure on the part of the appellant, categorical admissions made by him about execution of documents, availing of facility and committing default thereof, have also been considered by the Banking Court while passing the decree.
14. The Banking Court has awarded decree to the respondent in the sum of Rs.19,715,098.15 on the basis of the following calculation :-
Outstanding principal amount: Rs.17,000,000.00
Plus agreed markup till filing of the Suit : Rs.8,196,857.80
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Rs.25,196,857.80
Less repayments by the appellant : Rs. 5,481,759.65
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Total amount of the decree : Rs.19,715,098.15
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The respondent has claimed markup only till the date of filing of the Suit. All other charges and amounts claimed by the respondent have been denied by the Banking Court and repayments of Rs.5,481,759.65 have been duly adjusted in favour of the appellant. In view of the above discussion, there is no illegality or infirmity in the impugned judgment and decree which may require interference by this court. Accordingly this appeal is dismissed, however, with no order as to costs.
Judge
Judge