Judgment Sheet
IN THE HIGH COURT OF SINDH KARACHI
First Appeal No. 57 of 2009
Present :
Mr. Justice Nadeem Akhtar
Mr. Justice Sadiq Hussain Bhatti
Appellants : M/S S. F. International, Faisal Mustafa Ahmed alias
Shah Faisal and Mehboob Shah, through
Mr. Khaleeq Ahmed Advocate.
Respondent : Habib Bank Limited, through Mr. Nabeel Kolachi
Advocate.
Date of hearing : 11.08.2014.
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J U D G M E N T
NADEEM AKHTAR, J. – This first appeal has been filed by the appellants under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (‘the Ordinance’) against the judgment delivered on 05.10.2009 and decree drawn on 29.10.2009 by the Banking Court No.I at Karachi in the respondent’s Suit No.20/2005, whereby the Suit was decreed with costs against them in the sum of Rs.2,975,447.00 with cost of funds thereon as specified by the State Bank of Pakistan from the date of institution of the Suit till realization of the said amount.
2. The relevant facts of the case are that the respondent filed Suit No.20/2005 in the Banking Court No.I at Karachi against the appellants for recovery of Rs.2,975,447.00. As averred in the plaint, it was the case of the respondent that finance facilities were sanctioned and disbursed from time to time to the appellants by the respondent, and the last running finance facility of Rs.2.500 million was sanctioned and disbursed on 21.01.2003 ; mark-up on the said facility was agreed at 45 Paisas per Rs.1,000.00 per day ; the parties entered into an agreement for financing on mark-up basis (running finance) dated 21.01.2003 ; in order to secure the repayment of the purchase price, the appellants executed a promissory note, their personal guarantees and a letter of hypothecation in favour of the respondent ; and, the appellants also mortgaged their immovable properties in favour of the respondent by executing a memorandum of deposit of title deeds, registered mortgage deeds and a supplemental memorandum of deposit of title deeds. It was averred in the plaint that the amount sanctioned by the respondent was fully availed and utilized by the appellants, but they failed in discharging their obligations. The Suit was filed by the respondent against the appellants in the above background for recovery of the aforementioned amount. Cost of funds was also claimed by the respondent from the date of default till realization. A decree for sale of the hypothecated goods and a mortgage decree for sale of the mortgaged properties were also sought.
3. Summons was issued through all prescribed modes, whereafter the appellants filed their joint application for leave to defend. It is stated in the impugned judgment that the said application filed by the appellants was disposed of vide order dated 07.12.2007 and the parties were directed to file breakup of their accounts along with documents. However, copy of the said order has not been filed in this appeal by the appellants nor was any request made on their behalf during the course of hearing to place the same on record. After hearing the parties and examining the breakup of accounts filed by them, the Banking Court decreed the Suit with costs against the appellants in the sum of Rs.2,975,447.00 with cost of funds thereon from the date of institution of the Suit till realization of the said amount.
4. Mr. Khaleeq Ahmed, the learned counsel for the appellants, contended that the respondent had not complied with the mandatory requirements of Section 9 of the Ordinance, and the statement of account filed with the plaint contained entries of amounts illegally charged by the respondent. It was further contended that the repayments made by the appellants were suppressed by the respondent as the same were not disclosed in the statement of account filed with the plaint. In addition to this, he reiterated the grounds urged by the appellants in their application for leave to defend. It was urged that unconditional leave to defend ought to have been granted to the appellants as they had raised substantial questions of law and fact which required evidence.
5. Perusal of the plaint shows that in paragraph 9 thereof, the respondent had clearly disclosed the principal amount of Rs.2,589,710.00 availed by the appellants, amount repaid by them as “nil”, mark-up of Rs.385,737.00 with the rate and the period thereof, and Rs.2,975,447.00 as the total outstanding liability of the appellants. Relevant documents were also filed by the respondent along with the plaint in support of its claim. Thus, there was no default on the part of the respondent in complying with the requirements of Section 9 of the Ordinance. The objection raised on behalf of the appellants in this context is, therefore, rejected.
6. We have noticed that no proof whatsoever was filed by the appellants along with their application for leave to defend in support of their assertion that the repayments made by them had been suppressed by the appellant, or that they were not liable to pay the amount claimed in the Suit by the respondent. Therefore, there was no material before the Banking Court that could create any doubt with regard to the claim of the respondent, and as such there was no question of recording evidence. Before us also, there is nothing on record to support the above assertion. In view of the above admission and in the absence of any proof of the alleged repayments, the objections raised by the appellants regarding the claim of the respondents, have no basis.
7. Vide order passed in this appeal on 29.03.2010, the parties were directed to file detailed breakups of their respective accounts. In compliance of the said order, both the parties filed their respective accounts. As per the statement filed by the respondent, an amount of Rs.2,975,447.31 was payable by the appellants, including further withdrawals made by them during the period of the agreement in question, and the mark-up charged thereon. It is to be noted that the Suit was decreed for the above mentioned amount. The statement filed by the appellants showed Rs.2,231,371.00 as the amount outstanding against them.
8. It was frankly conceded by the learned counsel for the appellants that the appellants did not comply with the mandatory requirements of Section 10 of the Ordinance in their application for leave to defend. In this context, we may refer to the recent authoritative pronouncement of the Hon'ble Supreme Court in the case of Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, wherein it has been held that the plaintiff institution and the defending customer have identical statutory responsibility respectively under Sections 9(3) and 10(4) of the Ordinance, to plead and state clearly and particularly the finances availed by a defendant, repayments made by them, the dates thereof, and the amounts of finance repayable by such defendant, who is saddled with an additional responsibility to also specify the amounts disputed by him. It has been further held that a defending customer is obliged to put in a definite response to the bank’s accounting and has under Sub-Sections (3) and (4) of Section 10 ibid to compulsorily plead and answer in the application for leave to defend his accounts as well as the facts and amounts disputed by him as repayable to the plaintiff. It has been further held that a banking Suit is normally a 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 ; and the parties to a Suit have been obligated equally to definitely plead and to specifically state their respective accounts. It has been specifically held that non-impleadment of accounts under Sub-Sections (3) and (4) of Section 10 ibid and Sub-Section (3) of Section 9 of the Ordinance in terms thereof, entails legal consequences under Sub-Sections (1), (6) and (11) of Section 10 ibid. It has been further held that because of the Ordinance being a special law, the provisions of Section 4 thereof override all other laws ; the provisions contained in the said Sections require strict compliance ; and, non-compliance therewith attract consequences of rejection of the application for leave to defend along with decree.
9. At the time of filing the application for leave to defend, the appellants had full opportunity to comply with the mandatory requirements of Sub-Sections (4) and (5) of Section 10 ibid, but as they admittedly failed in complying with the same, they were bound to face the consequence of their non-compliance as held by the Hon’ble Supreme Court in Apollo Textile Mills Ltd. supra. Accordingly, their application for leave to defend was rightly dismissed and the Suit was rightly decreed against them.
10. We have noticed that in the statement of account filed by the respondent on 06.05.2010 in this appeal in pursuance of the order passed by this Court on 29.03.2010, an amount of Rs.138,200.00 was claimed towards “various charges”, which could not be allowed as no explanation or agreement was on record for claiming the said charges. The said statement also shows that “further mark-up” of Rs.151,498.03 was claimed by the respondent for the period 21.01.2004 to 31.05.2004. This amount is also liable to be deducted from the claim of the respondent as mark-up could be allowed only for the period of the agreement, that is, from 21.01.2003 to 20.01.2004, and not beyond that. After deducting the above mentioned two amounts from the amount awarded to the respondent through the impugned decree, the amount to which the respondent is entitled comes to Rs.2,685,749.28.
11. Before parting with this case, we may observe that the respondent had prayed for the grant of cost of funds from the date of default till realization. However, cost of funds was granted by the Banking Court to the respondent from the date of institution of the Suit. By doing so, the Banking Court committed an error in law, as at the time of passing the decree, it is mandatory under Sections 3(2) and 17(1) of the Ordinance that cost of funds be allowed from the date of default and not from the date of institution of the Suit. Such an error, which is contrary to the mandatory provision of the special law, cannot be allowed to perpetuate.
12. Foregoing are the reasons of the short order announced by us on 11.08.2014, whereby this appeal and the listed applications were disposed of by modifying the impugned decree by reducing the amount thereof from Rs.2,975,447.00 to Rs.2,685,749.28 with cost of funds thereon from the date of default till realization of the said amount.
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