Order Sheet
IN THE HIGH COURT OF SINDH AT KARACHI
Suit No. 596 of 2002
Present :
Mr. Justice Nadeem Akhtar
Dates of hearing : 15.11.2012, 21.11.2012, 05.12.2012, 20.12.2012,
25.11.2013 and 17.12.2013.
Plaintiff : Union National Bank, through Mr. Habib-ur-Rahman,
advocate.
Defendant No.1 : M/S Silver Reed International (Pvt.) Limited,
(Mitsumi Electronics) and Salahuddin Ahmed,
through M/S Abdul Sattar Pinger, and Tariq Qureshi
advocates.
Defendant No.3 : Mrs. Safia Aftab, ex-parte.
O R D E R
NADEEM AKHTAR, J.- This Suit was filed on 18.04.2002 by the plaintiff against the defendants in the original civil jurisdiction of this Court for recovery of AED 1,514,802.38, then equivalent to Pak Rs.24,918,499.00. Defendant No.1 has been sued as the principal borrower, and defendants No.2 and 3 have been sued as guarantors of defendant No.1.
2. Relevant facts of the case, as averred in the plaint, are that the plaintiff is incorporated in Abu Dhabi, UAE, as a banking company, and it does not carry any business of banking in Pakistan. Defendant No.1 opened an account bearing No.01044055 with the plaintiff-bank in Abu Dhabi, which, according to the plaintiff, was existing till the time of filing of this Suit. Somewhere in 1994, defendant No.1 was granted permission / special license by the Government of Dubai to conduct business activity of assembling and disassembling of electronic equipments and re-export of electronic parts. In order to facilitate its business, defendant No.1 applied to the plaintiff for certain financial facilities, and after settling the terms and conditions, the plaintiff offered certain credit facilities to defendant No.1 through its offer letter dated 25.05.1996 on the terms and conditions contained therein. The said terms and conditions were duly accepted by defendant No.1. In pursuance of the said agreed terms and conditions and in order to secure the credit facilities allowed by the plaintiff, defendants No.2, 3 and 4 executed their personal guarantees on behalf of defendant No.1 in favour of the plaintiff, and delivered the same to the plaintiff, whereby they undertook to pay / liquidate the entire outstanding liabilities of defendant No.1 as principal debtor. In order to further secure its outstanding liability, defendant No.1 hypothecated in favour of the plaintiff its stock by executing a letter of hypothecation and delivering the same to the plaintiff ; and, also executed a promissory note in the sum of AED 900,000.00, carrying rate of interest at 3% at every three months subject to minimum of 9% per annum at monthly basis, which was also delivered to the plaintiff.
3. It is the case of the plaintiff that the defendants availed the facility granted to them by the plaintiff, but they miserably failed to repay the same as per the agreed terms and conditions. The plaintiff issued a number of notices to the defendants to settle their outstanding liabilities, but they failed to do so. The defendants abandoned their business in Dubai, and shifted to Pakistan without liquidating their outstanding liabilities towards the plaintiff. On 24.05.2001, the plaintiff’s counsel in Pakistan issued a legal notice to the defendants, calling upon them to settle their liabilities. The plaintiff’s legal notice was replied to by the defendants’ counsel, wherein the liability was denied. The plaintiff has claimed that the defendants are jointly and severally liable to pay a sum of AED 1,504,058.38 towards the outstanding overdraft drawings and for accepted bills, and also to a sum of AED 10,744.00 on account of letter of guarantee, making their total outstanding liability to AED 1,514,802.38. In the above background, this Suit was filed by the plaintiff praying that a decree be passed against the defendants jointly and severally in the sum of AED 1,514,802.38 with interest with effect from 01.11.2001 at the rate of 3% over three months ADIBOR or 9%, whichever is higher.
4. Sub-Section (4) of Section 7 of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 (‘the Ordinance of 2001’) provides that no court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under the Ordinance of 2001. In view of the above, Mr. Habib-ur-Rehman, the learned counsel for the plaintiff, was asked to satisfy the Court about the maintainability of this Suit in the original civil jurisdiction of this Court. The learned counsel submitted that the plaintiff-bank has stated in the plaint that it does not carry business of banking in Pakistan, therefore, this recovery Suit against the defendants could only be instituted under the original civil jurisdiction of this Court. He further submitted that this Suit for recovery of money is maintainable under the original civil jurisdiction as it has been filed by the plaintiff as the creditor of the defendants. In support of his submissions, the learned counsel relied upon the case of Valuegold Limited and 2 others V/S United Bank Limited, PLD 1999 Karachi 01, and unreported judgment in Suit No.167/1989, Bank of Credit and Commerce (Emirates) V/S Ikram-ul-Haque Siddiqui and others. In the case of Valuegold Limited supra, it was held inter alia by a learned single Judge of this Court that the claim for damages on the basis of fraudulent and malafide actions alleged against the officers of the defendant-bank, having taken place abroad on a foreign soil, is an action in personam which clearly falls within the exceptions to the doctrine of lex situs ; the Suit could lawfully be maintained by the plaintiff against the defendant-bank in Pakistan, where its head office was situated ; and, objection regarding choice of forum could not be maintained in such circumstances. In the unreported case of Bank of Credit and Commerce (Emirates) supra, a Suit was filed in the original civil jurisdiction of this Court by the plaintiff-bank for recovery of the amount advanced to the defendants in Sharjah. In the said case, it was held inter alia by a learned single Judge of this Court that a Suit for recovery of money can lawfully be filed against a person residing within the territorial jurisdiction of this Court ; the condition about a defendant not carrying on business within the jurisdiction of this Court, was not attracted nor was required to be fulfilled where the parties sued reside within the jurisdiction of this Court ; and, exclusion of Section 20 CPC or transfer of the Suit for trial under banking jurisdiction, does not divest this Court of its jurisdiction to proceed with the matter and to adjudicate upon the controversy between the parties.
5. The pre-requisite for the assumption of jurisdiction by a Banking Court over the Suit by a “financial institution” against the “customer” is the “default” of the “customer” in fulfilling an “obligation” with regard to any “finance”. “Financial institution” has been defined in Section 2(a) of the Ordinance of 2001 as under :
“(a) “financial institution” means and includes –
(i) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a government savings bank, but excludes the State Bank of Pakistan ;
(ii) a modaraba or modaraba management company, leasing company, investment bank, venture capital company, financial company, unit trust or mutual fund of any kind and credit or investment institution, corporation or company ; and
(iii) any company authorized by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify ; ”
(Emphasis added).
6. It is averred in the plaint that the plaintiff does not carry any business of banking in Pakistan. However, in his cross-examination, the plaintiff’s witness / attorney / Vice President and Manager Special Accounts ; namely, Mr. Mustafa Ali Rekaby (PW-1), has admitted that “It is correct that our bank have branch in Pakistan. Union National Bank taken over business from BCC Emirates in the year 1991”. In view of the above categorical admission by the plaintiff’s witness / attorney, the plaintiff falls within the definition of “financial institution” as defined in Section 2(a) of the Ordinance of 2001. Consequently, the defendants are the “customers” of the plaintiff under Section 2(c) of the Ordinance of 2001; the amounts advanced by the plaintiff to the defendants, as claimed in this Suit, fall within the definition of “finance” under Section 2(d) of the Ordinance of 2001 ; and, the commitment / promise made by the defendants for repayment, as claimed in this Suit, comes within the definition of “obligation” under Section 2(e) of the Ordinance of 2001. In view of the specific bar contained in Sub-Section (4) of Section 7 of the Ordinance of 2001, that no court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under the Ordinance of 2001, this Court has no jurisdiction to adjudicate upon this Suit in its original civil jurisdiction. The cases cited and relied upon by the learned counsel for the plaintiff are neither relevant nor are applicable in the instant case, as both the said cases were decided prior to the promulgation of the Ordinance of 2001.
7. In the case of Town Committee, Gakhar Mandi V/S Authority under the Payment of Wages Act, Gujranwala and 57 others, PLD 2002 Supreme Court 452, the Hon’ble Supreme Court was pleased to hold inter alia that jurisdiction of any forum, court or tribunal holding any proceedings is always the core question, and it is obligatory for such forum to determine the question of its jurisdiction whenever some doubt exists or is expressed about it, irrespective of the stage of the proceedings at which such an objection is raised. In Khyber Tractors (Pvt.) Ltd. Through Manager V/S Pakistan through Ministry of Finance, Revenue and Economic Affairs, Islamabad, PLD 2005 Supreme Court 842, it was held inter alia by the Hon’ble Supreme Court that the question of jurisdiction of a forum is always considered to be very important and any order passed by a court or a forum, having no jurisdiction, even if found to be correct on merits, is not sustainable ; and, the jurisdiction of a court lays down a foundation stone for a judicial or quasi-judicial functionary to exercise its powers / authority, and as soon as the question of jurisdiction is decided in negative, the whole edifice, built on such defective proceedings, is bound to crumble down.
8. It is well-settled that when a court lacks pecuniary, territorial or special jurisdiction, the proper course is to return the plaint for presentation to the court of appropriate jurisdiction ; and, such court cannot pass any judicial order except that of returning the plaint. It is also well-settled that the provisions of Rule 10 of Order VII of the Code of Civil Procedure, 1908, in this context are mandatory in nature. For the foregoing reasons, the plaint is liable to be returned to the plaintiff for presentation before the Banking Court having pecuniary jurisdiction in this matter. At the time of institution on 18.04.2002, this Suit was valued at AED 1,514,802.38, then equivalent to Pak Rupees 24,918,499.00. Since the said amount is less than Rupees fifty million, this Court, under Section 2(b) of the Ordinance of 2001, has no pecuniary jurisdiction to adjudicate upon this Suit under its banking jurisdiction.
9. In view of the above discussion, the office is directed to return the plaint to the plaintiff for presentation before the Banking Court, and to retain copies of the pleadings for record purposes.
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J U D G E