Judgment Sheet
IN THE HIGH COURT OF SINDH KARACHI
First Appeal No. 15 of 2011
Present :
Mr. Justice Nadeem Akhtar
Mr. Justice Sadiq Hussain Bhatti
Appellants : Muhammad Akhtar Hookmani and another,
through Mr. Khaleeq Ahmed Advocate.
Respondent : Faysal Bank Limited,
through Mr. Khalid Mahmood Siddiqui Advocate.
Date of hearing : 13.08.2014.
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J U D G M E N T
NADEEM AKHTAR, J. – This first appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (‘the Ordinance’) has been filed by the appellants challenging the order passed on 19.01.2010 by the Banking Court No.IV at Karachi in the respondent’s Suit No.124/2009, whereby their application for leave to defend was dismissed and the Suit was decreed with costs against them in the sum of Rs.12,551,238.00 with cost of funds thereon from the date of default till realization of the said amount.
2. The relevant facts of the case are that the respondent filed Suit No.305/2009 in the Banking Court No.IV at Karachi against the appellants for recovery of Rs.15,080,326.00. It was the case of the respondent, as averred in the plaint, that two finance facilities of Rs.10,700,000.00 and Rs.2,000,000.00, aggregating to Rs.12,700,000.00, were granted by it in favour of the defendants, who are husband and wife ; the parties entered into a Morabaha (purchase and sale) agreement dated 15.09.2006, a supplementary Morabaha finance agreement and a Morabaha (sale and purchase) agreement dated 25.05.2007 ; in order to secure the repayment of the purchase prices, appellant No.1 executed promissory notes and declarations in favour of the respondent ; appellant No.2 executed in favour of the respondent a memorandum of deposit of title deeds and an irrevocable power of attorney in respect of her immovable property ; and, the original title documents of the mortgaged property were deposited with the respondent by appellant No.2. It was further averred in the plaint that the amount sanctioned by the respondent was drawn and fully availed by the appellants. It was alleged by the respondent that despite promises and written commitments, the appellants committed default and failed to fulfil their obligations. In the above background, the Suit was filed by the respondent against the appellants for recovery of the aforementioned amount. Cost of funds was also claimed by the respondent, and a final decree for sale of the mortgaged property was also sought.
3. Summons was issued through all prescribed modes, whereafter the appellants filed their joint application for leave to defend. The respondent filed its replication in reply to the said application. After hearing the learned counsel for the parties, the application was dismissed by the Banking Court and the Suit was decreed with costs against the appellants in the sum of Rs.12,551,238.00 with cost of funds thereon from the date of default till realization of the said amount.
4. Mr. Khaleeq Ahmed, the learned counsel for the appellants, submitted that the impugned decree was passed by the Banking Court without proper application of mind, without appreciating the material on record, and contrary to the mandatory provisions of the Ordinance. In support of this submission, he 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 was defective as the same did not bear the names of the respondent’s attorneys who had certified it. It was urged that the said statement could not be treated as a statement of account as contemplated in the Bankers’ Books Evidence Act, 1981. He further contended that the documents filed by the respondent in support of its claim could not be relied upon in view of Section 18 of the Ordinance as the appellants’ signatures thereon were obtained by the respondent when the said documents were blank. He argued that the said blank documents were obtained by the respondent after promulgation of the Ordinance, therefore, the same were void and inadmissible, and their alleged genuineness and authenticity could not be proved without evidence. He further argued that the appellants were not liable to pay the amounts mentioned in the said documents as the said amounts were never agreed by them. He referred to the statement dated 12.12.2011 filed in this appeal on behalf of the appellants along with a copy of the deposition and cross-examination of the respondent’s witness in Criminal Complaint No.09/2008, wherein, according to him, the respondent’s witness had admitted that the documents were signed by the appellants when the same were blank.
5. Mr. Khaleeq Ahmed Advocate also contended that the statement of account dated 22.12.2011 and the documents attached therewith filed by the respondent in this appeal on 22.12.2011, cannot be considered by this Court as the same were not on record before the Banking Court when the appellants’ application for leave to defend was dismissed and the impugned decree was passed. He relied upon Messrs Kinza Fashion (Pvt.) Ltd. and others V/S Messrs Habib Bank Ltd, and another, 2009 CLD 1440, in support of this submission. It was further contended by him that the amount claimed in the Suit did not tally with the amount shown in the statement of account and the promissory note dated 25.05.2007 filed by the respondent. By inviting our attention to the bank statement filed by the appellants along with their application for leave to defend, he pointed out that no amount was shown therein by the respondent as outstanding against the appellants as on 03.10.2007. It was urged that all the above questions agitated by the appellants before the Banking Court were substantial questions of law and fact, which could not be decided without evidence. It was also urged that the impugned order is not a speaking order as reasons ought to have been given therein by the Banking Court for rejecting the substantial questions of law and fact raised by the appellants. In support of his last submission, he relied upon Messrs Shaz Packages and 3 others V/S Messrs Bank Alfalah Limited, 2011 CLD 790.
6. Mr. Khalid Mahmood Siddiqui, the learned counsel for the respondent, strongly opposed the appeal and the submissions made by the learned counsel for the appellants. He contended that in paragraph 5 of the plaint, all relevant details of the amount availed by the appellants, the amount repaid by them, the amount payable by them, and their total outstanding liability, were specifically disclosed, therefore, the requirements of Section 9 of the Ordinance were duly complied with by the respondent. Regarding the statement of account, he contended that the same was duly certified by two attorneys of the respondent, whose powers of attorney had been filed with the plaint. He submitted that the amounts of Rs.10.700 million and Rs.2.000 million availed by the appellants were admitted by them ; Rs.10.700 million by admitting the execution of the first agreement wherein the said amount was mentioned ; and, Rs.2.000 million by admitting the execution of the second agreement as well as by filing the bank statement of their own account with their application for leave to defend, showing credit entry of the said amount in their favour on 29.05.2007. He specifically pointed out that in their application for leave to defend, the appellants had not only admitted the execution of the documents filed and relied upon by the respondent, but had also admitted that they had availed the facilities from the respondent. He argued that in view of these important admissions by the appellants, the objections raised by them, particularly with regard to the statement of account, had no basis ; there were in fact no substantial question of law or fact before the Banking Court ; and, therefore, the Suit was rightly decreed in favour of the respondent. As to the statement of account and documents filed in this appeal on 22.12.2011 by the respondent, he stated that although one week’s time was granted by this Court on 23.02.2012 to the learned counsel for the appellants at his request to seek instructions from the appellants regarding the amounts mentioned in the said statement, to this date no reply or objections thereto have been filed by the appellants ; therefore, the contents of the said statement and documents should be deemed to have been admitted by them.
7. Mr. Khalid Mahmood Siddiqui Advocate further submitted that the appellants had not complied with the mandatory requirements of Section 10 of the Ordinance as the amounts stated by them in their application for leave to defend were incorrect, vague and were not supported either by their pleadings or by any document, therefore, their application was liable to be dismissed. In support of this submission, he pointed out that in their application the appellants on the one hand had admitted the execution of Morabaha agreements of Rs.10.700 million and Rs.2.000 million, and on the other hand, had stated that they availed the facility of Rs.10.000 million ; they had not explained the repayment of Rs.3,674,062.00 alleged in the application ; after the said alleged repayment, Rs.10.000 million was still shown by them as the amount payable by them ; and, despite showing Rs.10.000 million as the amount payable, Rs.3,229,725.00 was shown by them as the amount payable till the filing of the Suit. It was also pointed out by him that as per the statement of account filed by the respondent, last payment was made by the appellants in August 2005. He submitted the appellants never claimed that any other or further amount was paid by them to the respondent after August 2005, therefore, their default after August 2005 and all entries of the respondent’s statement of account, stood admitted by them. Regarding the documents, the learned counsel stated that the same were not obtained in blank, nor did the respondent’s witness make any admission to this effect.
8. We have heard the learned counsel for the parties at length, and have also examined the material available on record and the cases cited at the Bar. Perusal of the plaint shows that in paragraph 5 thereof, details of the principal amount of Rs.12,700,000.00 availed by the appellants, Rs.3,349,063.00 being the amount repaid by them with dates of repayments, and their total outstanding liability of Rs.15,080,326.00, were specifically disclosed by the respondent. The amount outstanding towards the principal amount and other amounts payable by the appellants were separately shown by the respondent. 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.
9. The Suit was filed by the respondent on the basis of two Morabaha (sale and purchase) agreements, one dated 15.09.2006 for Rs.10.700 million, and the other dated 25.05.2007 for Rs.2.000 million. In their application for leave to defend, the appellants had admitted the execution of both the Morabaha agreements and the charge documents relating thereto. Their only contention was that the respondent obtained their signatures on the said documents when they were blank. In Messrs International Traders through Proprietorship and 3 others V/S Union Bank Ltd., 2003 CLD 1464, the customer / defendant had not denied the availing of finance facility and execution of loan documents, and had alleged that his signatures were obtained by the bank on blank documents. It was held in the cited case by a learned Division Bench of Lahore High Court that signing a blank document would amount to creating or impliedly authorizing the bank to fill in any amount at a later point in time ; the contention of the defendant that blank documents were signed by him had no force ; and, Banking Court was justified in dismissing the application for leave to defend. In addition to the above legal position, it would be advantageous to note that it was conceded by the learned counsel for the appellants during the course of hearing that prior to the institution of the Suit, the appellants never made any protest nor did they send any letter or notice to the respondent or initiated any legal proceedings to challenge the said documents or for their cancellation. In this view of the matter, the assertion made on behalf of the appellants that the respondent obtained their signatures on blank documents, has no force.
10. In their application for leave to defend, the appellants had asserted that the amounts were not disbursed to them and they were not liable to pay the amount claimed in the Suit. Same argument was advanced before us by their learned counsel. In the purported compliance of Section 10 of the Ordinance, they made the following disclosure in paragraph 11 of their application :
“Amount availed 10000000.00
Amount paid 3674062.00
Amount payable 10000000.00
Amount payable up-to filing of the suit 3229725.00
Amount disputed Suit Amount ”
The above disclosure made by the appellants in their application for leave to defend clearly appears to be incorrect and contrary to their stance. First of all it belies the case set up by them that the amount was not disbursed to them as they had admitted Rs.10,000,000.00 as the “Amount availed”, and had also admitted Rs.10,000,000.00 as the “Amount payable”. These admissions were sufficient to dismiss their application. They had also stated that the “Amount payable up-to filing of the suit” was Rs.3,229,725.00, which on the face of it was incorrect because if the repayment of Rs.3,674,062.00 claimed by them is deducted from the admitted amount of Rs.10,000,000.00, the balance amount payable by them should have been Rs.6,325,938.00. The dates of repayments of Rs.3,674,062.00 claimed by them were not disclosed by the appellants as required under Section 10(4)(b) of the Ordinance ; and, their application for leave to defend was also not accompanied by the documents which in their opinion supported the purported substantial questions of law or fact raised by them, as required under Section 10(5) of the Ordinance. Regarding the second finance facility of Rs.2.000 million, the appellants themselves filed a copy of the bank statement of their own account with their application for leave to defend, showing credit entry of the said amount of Rs.2.000 million in their favour on 29.05.2007.
11. The very object of Section 10(4)(b) of the Ordinance is to give an opportunity to the defending customer to make out a case for the grant of leave by disclosing the amounts paid by him to the financial institution and the dates of such payments. He will not be absolved from his obligation under Section 10(4) ibid by simply disputing or denying the amount claimed in the Suit, or by stating an amount towards repayments in general or vague terms without disclosing dates of payments and without filing documents in support thereof. In the instant case, the appellants did not file any proof before the Banking Court nor did they disclose the dates of payments in order to show that they had settled their liability or that they were not liable to pay the amount claimed in the Suit. In the recent case of Apollo Textile Mills Ltd. and others V/S Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, the honourable Supreme Court was pleased to hold inter alia that under Section 10(4) of the Ordinance, the defending customer has statutory responsibility to plead and state clearly and particularly the finances availed by him, repayments made by him, the dates thereof, and the amounts of finance repayable by him ; and, he 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 specifically held that non-impleadment of accounts under Sub-Sections (3) and (4) of Section 10 ibid 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. In the instant case, the appellants had full opportunity to comply with the mandatory requirements of Sub-Sections (4) and (5) of Section 10 ibid at the time of filing the application for leave to defend, but as they failed in availing such opportunity, they were bound to face the consequence of their non-compliance as held by the honourable Supreme Court in Apollo Textile Mills Ltd. supra ; and, their application for leave to defend was liable to be rejected.
12. In view of the execution of the documents filed by the respondent and the categorical admissions made by the appellants in their application for leave to defend that the amounts were availed by them and the amount payable by them was Rs.10,000,000.00, and also in view of their failure in not disclosing the amounts and dates of payments, the objections raised by them in relation to the respondent’s claim and statement of account had no basis. Moreover, no specific entry in the statement of account was pointed out by the appellants in their application for leave to defend in order to make the respondent’s claim doubtful. Therefore, no substantial question of law or fact existed before the Banking Court requiring evidence, and as such there was no occasion for granting leave to defend to the appellants. It is well-settled that if the defendant admits availing of the facility, execution of documents and liability to pay is not disputed, the defendant would be deemed to have failed to make a case for the grant of leave to defend.
13. Some cases are briefly discussed here in support of the above views expressed by us. In Siddique Woolen Mills and others V/S Allied Bank of Pakistan, 2003 CLD 1033, the honourable Supreme Court was pleased to hold that since liability towards outstanding amount of the bank was not denied by the customers, the Banking Court had rightly passed the judgment and decree. In Messrs Aima Industries (Pvt.) Ltd. and others V/S Allied Bank of Pakistan Ltd., 2003 CLD 1770, decided by a learned Division Bench of Peshawar High Court, availing of financial assistance and execution of documents by the defendant in favour of the bank had not been denied by the defendant. It was held that the defendant was not able to point out any wrong or bogus entry in the statement of account creating doubt in one’s mind regarding its authenticity; therefore, judgment and decree of the Banking Court were proper and well-reasoned. In Travel Kings (Pvt.) Limited through Chief Executive and 4 others V/S Union Bank Limited and 2 others, 2004 CLD 460, the decree passed by the Banking Court was upheld by a learned Division Bench of Lahore High Court as the defendants had admitted the availing of loan facilities and execution of all documents on the basis of which Suit had been filed against them and entries and statement of account had not been denied. In Tariq Javed and another V/S National Bank of Pakistan, 2004 CLD 838, decided by a learned Division Bench of Lahore High Court, availing of loan facility was admitted and execution of documents was not denied by the defendants. It was held that bare assertion of incorrectness of statement of account could in no way be given any weight or made basis for grant of leave. In National Bank of Pakistan through Zonal Chief and others V/S Messrs Power Textile Industries Ltd. through Chief Executive and others, 2004 CLD 1239, it was held by a learned Division Bench of Lahore High Court that leave application was rightly dismissed and the Suit was rightly decreed by Banking Court as the defendants had not denied the availing of loan facilities and also claimed to have paid certain amounts towards discharge of their liability, but had denied execution of loan documents in vague and general terms by not raising any specific plea regarding fabrication or forgery in the documents ; and, they had also not denied execution of guarantees and mortgage documents.
14. In our opinion, the case of Messrs Kinza Fashion (Pvt.) Ltd. (supra) relied upon by the learned counsel for the appellants is not applicable in the instant case as in the said case, the application for leave to defend was dismissed by the Banking Court in a hasty manner without examining in detail the defence put up by the defendant and in the absence of material with regard to one of the facilities. Likewise, the case of Messrs Shaz Pakages (supra) relied upon by the learned counsel for the appellants is of no help to him as the Banking Court in the said case had not exercised its jurisdiction properly and had dismissed the defendants’ application for leave to defend in perfunctory and cursory manner, without application of mind and without appreciating the questions of law and facts raised by them.
15. In view of the above discussion and the cases discussed above, it is our considered view that the appellants had failed in raising any substantial question of law or fact, and therefore, the Banking Court was fully justified in dismissing their application for leave to defend and decreeing the Suit against them. It is to be noted that while decreeing the Suit against the appellants, termination charges, late payment charges, legal charges and other charges claimed in the Suit, were not granted to the respondent. We have found the impugned judgment and decree in accordance with law, which does not require any interference by this Court.
Foregoing are the reasons of the short order announced by us on 13.08.2014, whereby this appeal and the listed application were dismissed with no order as to costs.
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