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Official Citation: 2025 SHC 39
Court / Jurisdiction: Sindh High Court
Petitioner: I. A 38/2025 (D.B.) Sindh High Court, Karachi - Dubai Islamic Bank (Appellant)
Ruling Summary: This decision was rendered by the Sindh High Court, officially reported as 2025 SHC 39. In this matter between I. A 38/2025 (D.B.) Sindh High Court, Karachi - Dubai Islamic Bank (Appellant) and the Respondent, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
COURT: Sindh High Court CASE NO: I. A 38/2025 (D.B.) Sindh High Court, Karachi CITATION: 2026 SHC KHI 18, 2026 SHC KHI 24, 2026 SHC KHI 26 PARTIES: Dubai Islamic Bank (Appellant) ORDER DATE: 12-JAN-26 BENCH: Hon'ble Mr. Justice Muhammad Faisal Kamal Alam, Hon'ble Justice Ms. Sana Akram Minhas(Author) A.F.R: Yes ------------------------------------------------------------ IN THE HIGH COURT OF SINDH AT KARACHI First Appeal No.38 of 2025
( Dubai Islamic Bank v. Mohammad Bux Shaikh )
A N D
First Appeal No.108 of 2025
( Dubai Islamic Bank v. Najamul Hassan )
Before: Muhammad Faisal Kamal Alam J & Sana Akram Minhas J
Appellant Dubail Islamic Bank (in both Appeals): Through, Mr. Khalid Mahmood Siddiqui & Mr. Ghulam Rasool Korai, Advocates
Respondent Muhammad Bux Shaikh (in First Appeal No.38/2025): None appeared
Respondent Najamul Hassan (in First Appeal No.108/2025): Mr. Abdul Shakoor, Advocate
Date(s) of Hearing: 12-12-2025 & 18-12-2025
Date of Decision: 12-1-2026
J U D G M E N T
1. Sana Akram Minhas, J : The question for determination in both Appeals (which impugn the judgments of the Banking Court dismissing the Appellant Bank’s Suits as time-barred), is whether, where loan repayment is structured in monthly instalments, the period of limitation for the institution of proceedings is to be computed from the date of the first default in payment of an instalment, or from the date on which the last instalment falls due and payable i.e. at the end of the contractual period.
Key Facts Of First Appeal No.38/2025
2. This First Appeal No.38/2025 (“Appeal 38”) is directed against the Judgment and Decree dated 21.1.2025 (“Impugned Judgment No.1”) rendered by the learned Banking Judge in Suit No.96/2024 (Dubai Islamic Bank v. Muhammad Bux Shaikh), whereby the said Suit filed by Dubai Islamic Bank (“Bank”) was
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dismissed as being barred by limitation on the premise that, in terms of Article 57 of the Limitation Act, 1908 (“Act 1908”), the limitation period of three (3) years for a recovery suit commences from th e date of default, which in the view of the learned Banking Judge, occurred upon the second consecutive failure to make payment, i.e. 30.7.2019, and not from the expiry of the contractual period (which matured on 3.3.2023).
3. A perusal of Impugned Judgment No.1 (particularly paragraph 2), shows that despite service through publication, the Respondent Mohammad Bux Shaikh, did not appear and was proceeded against ex parte. The said Respondent has chosen not to appear in the present Appeal as well despite service.
4. As per the Bank ’s Statement of Account 1 and the Instalment Payment Schedule2 annexed to the “Musawamah Agreement” (“Agreement No.1”) dated 28.2.20183, following were the salient features of the Personal Finance extended to Respondent Mohammad Bux Shaikh:
Finance Tenor: 5 years Finance Amount: Rs.1,460,000/- Finance Booking Date: 28-2-2018 Maturity Date: 3-3-2023 Sale Price: Rs.2,622,780/- Number of Instalments: 60 Monthly Instalment Amount: Rs.43,713/- 1st Instalment Payment Date: 3-4-2018 60th (Last) Instalment Payment Date: 3-3-2023
5. The Plaint in Suit No.96/2024, presented on 6.12.2024, records various dates of cause of action (in paragraph 5). The last such date is 3.3.2023, marking the expiry of Agreement No.1, whereas the date of default specified in the prayer clause4 is 3.7.2019.
Key Facts Of First Appeal No.108/2025
6. The First Appeal No.108/2025 (“Appeal 108”) challenges the Judgment and Decree dated 10.5.2025 (“Impugned Judgment No.2 ”) of the learned Banking Judge in Suit No.97/2024 ( Dubai Islamic Bank Limited v. Najamul
1 At Court File Pg.103 (Annex K)
2 At Court File Pg.81
3 At Court File Pg.55
4 Prayer: “It is, therefore, prayed that this Hon'ble Court may graciously be pleased to pass a Judgment and Decree in favour of the Plaintiff and against the Defendant for the sum of Rs.1,966,410.00/- (Rupees One Million Nine Hundred Sixty-Six Thousand Four Hundred Ten Only), along with costs of suit and cost of funds from the date of default i.e. 03-07-2019 till realization.”
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Hassan), whereby the Bank’s Suit was dismissed on the ground of being time- barred. As in Appeal 38, the same learned Banking Judge has held that, under Article 57 of the Act 1908, the three-year limitation period for a suit for recovery runs from the date of default, which as held by him, arose upon the second consecutive failure to make paymen t, i.e. 30.7.2019, rather than from the expiry of the contractual term (which matured on 3.4.2023).
7. Paragraph 2 of Impugned Judgment No.2 shows that after service, the Respondent Najamul Hassan, appeared and filed a n application for leave to defend, which was rejected by order dated 10.5.2025.
8. As per the Bank ’s Statement of Account 5 and the Instalment Payment Schedule6 annexed to the “Musawamah Agreement” (“Agreement No.2”) dated 31.3.20187, following were the salient features of the Personal Finance extended to Respondent Mohammad Bux Shaikh:
Finance Tenor: 5 years Finance Amount: Rs.500,000/- Finance Booking Date: 31-3-2018 Maturity Date: 3-4-2023 Sale Price: Rs.952,260/- Number of Instalments: 60 Monthly Instalment Amount: Rs.15,871/- 1st Instalment Payment Date: 3-5-2018 60th (Last) Instalment Payment Date: 3-4-2023
9. The Plaint in Suit No.97/2024, presented on 6.12.2024, sets out various dates of cause of action in paragraph 5. The last date of cause of action is shown as 3.4.2023, being the date of expiry of the Agreement No.2, while the date of default mentioned in the prayer clause8 is 3.9.2019.
Contentions Of Parties
10. The learned Counsel for the Bank contended that the Bank has the option either to institute proceedings upon the occurrence of the first default or to defer such action and institute proceedings after the date on which the last instalment falls due. Counse l further submitted that, in the present Appeals,
5 At Court File Pg.95 (Annex K)
6 At Court File Pg.75
7 At Court File Pg.59
8 Prayer: “It is, therefore, prayed that this Hon'ble Court may graciously be pleased to pass a Judgment and Decree in favour of the Plaintiff and against the Defendant for the sum of Rs.698,148/- (Rupees Six Hundred Ninety Eight Thousand One Hundred Forty Eight Only), along with costs of suit and cost of funds from the date of default i.e. 03-09-2019 till realization.”
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the Bank opted to await the expiry of the last instalment period , which was payable on 3.3.2023 (in Appeal 38) and 3.4.2023 (in Appeal 108) respectively, and thereafter instituted proceedings on 6.12.2024. It was accordingly argued that both Appeals were well within the prescribed period of limitation. T o reinforce his submission, the Bank’s Counsel referred to an unreported Division Bench judgment of this Court dated 11.1.2016 in House Building Finance Corporation v. Muhammad Mohsin Ali delivered in First Appeal No.45/2012 (comprising Sajjad Ali Shah, Chief Justice and Muhammad Junaid Ghaffar, J , and authored by the latter) , and a reported Division Bench judgment in Adnan Ali v. National Bank of Pakistan (2019 CLD 912, Lahore).
11. On the other hand, learned Counsel for the Respondent appearing in Appeal 108 has supported Impugned Judgment No.2 and submitted that the Banking Judge rightly held th e Bank’s Suit to be time barred as the limitation period arose upon the second consecutive failure to make payment, and not from the expiry of the contractual period. Counsel further contended that the Bank ’s decision to await the expiry of the last instalment did not alter the fact that its Suit was time -barred and that the Impugned Judgment No.2 was in accordance with law and well-reasoned.
Court’s Opinion
12. We have heard learned Counsel for the parties and have examined the record.
Common Relevant Provisions Of Agreements No.1 And No.2
13. The factor that influenced the learned Banking Judge in arriving at the conclusion – that under Article 57 of the Act 1908, the three -year limitation period for a suit for recovery runs from the date of default, which, in his view, occurred upon the second consecutive failure to make payment i.e. 30.7.2019 in the case of both Agreement No.1 and No.2, rather than from the expiry of the contractual term – was his interpretation of clauses 4.1 and 7.3 of the two Agreements (which are identical in both the Agreements), executed between the parties. These are:
Clause 4.1
The Buyer shall pay the Sale Price as per clause 3.2 and Annexure 2 of this Agreement on the due dates; and if it fails to pay two consecutive installments on their due dates for any reasons, all the remaining amount / outstanding installments shall become due and the Buyer shall be liable to pay all the remaining amount / outstanding installments in a single bullet payment.
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Clause 7.3
If the Buyer defaults in its obligations under this Agreement, the Seller shall be entitled to resort to recovery proceedings in order to recover the outstanding Sale Price or any part thereof (in resp ect of which the default has occurred ) including the compensation as mentioned in clause 4.2 above and the late payment charity as mentioned in clause 4.3 and shall have the right to recourse to the Buyer and all his properties / assets in case of any shortfall in recovering the above. The Buyer undertakes to make good any shortfall in such case and shall also be liable to pay all of the actual cost s, including judicial and legal expenses and any costs that may have been Incurred by the Seller towards recovering the Sale Price or any part thereof, the compensation a per clause 4.2 and the late payment charity as per clause 4.3, if any.
14. In the view of the learned Banking Judge, these aforesaid clauses provided that failure to make two consecutive payments constituted a default rendering the entire outstanding amount payable. On this basis, the Banking Judge held that such consecutive non -payments triggered the initiation of legal proceedings and that the Bank ought not to have waited until the expiry of the contractual period to commence legal action.
15. Clause 4.1, inter alia, provides that, if the Buyer (Respondents herein) fails to pay two consecutive instalments for any reason, all remaining unpaid amounts or outstanding instalments under the Agreement(s) shall immediately become due, and the Buyer shall be liable to pay the entire outstanding balance in a single lump-sum payment. Clause 7.3 confers upon the Seller (Bank) the right to initiate recovery proceedings to recover the outstanding Sale Price, in whole or in part, in the event of default by the Buyer under the Agreement(s).
16. In essence, th ese clauses allow for accelerated recovery of the outstanding amount upon default; however, they do not make it mandatory for the Bank to exercise this option. The Bank retains the discretion to either treat the default as triggering full repayment or continue with the original instalment schedule. Thus, while the clauses, in particular the acceleration clause which is intended entirely for the benefit of the creditor, empower the Bank to demand immediate payment of the remaining balance in the event of two consecutive defaults, they do not compel the Bank to do so, leaving it to the Bank ’s discretion whether to exercise this right.
17. The Bank, by not immediately instituting the Suit(s) for recovery despite the Respondent’s default of two consecutive instalments, did not forfeit its right under the accelerated payment clause nor alter the validity of its claim. By choosing to wait until the expiry of the contractual period or a later date before initiating proceedings, the Bank exercised its discretion under the contracts/ Agreement(s), which is fully permissible under the terms of the Agreement(s). Consequently, the Bank’s decision to defer filing the Suit(s) does not affect its
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entitlement to recover the entire outstanding amount, nor does it render the Suit(s) barred by limitation, as the right to claim under the Agreement(s) continues to subsist.
18. A similar issue of starting point of limitation period arose in t he House Building Finance decision (supra), wherein the Division Bench of this Court set aside the Banking Court ’s judgment and allowed the appeal of House Building Finance Corporation. To facilitate in understanding the decision, the relevant extracts of the judgment are reproduced below:
Paragraph 2
2. Briefly, the facts as stated are that the respondent had obtained a House Finance Facility of Rs. 200,000/ - repayable in 240 monthly instalments of Rs. 3078/- per month, starting from 1.8.1997 to 31,9.2017, whereas, after obtaining such facility not a single penny was repaid. On such default the appellant filed Suit on 18.6.2009, wherein the leave to defend application filed by the respondent was dismissed vide order dated 8.10.2010, whereafter, both the parties filed their breakups and through impugned Judgment the Suit has been dismissed. [ Emphasis added ]
Paragraph 7
7. Insofar as the question of limitation is concerned, the period of default which was to start actually from 21.9.2017, has not commenced as yet, the objection of limitation therefore, cannot be sustained . Whereas the other legal objections are concerned, we are of the view that the same are not justified … … … … …. [ Emphasis added ]
19. As is apparent from the excerpts quoted above, the borrower/respondent in the cited case had obtained a house-finance facility repayable in 240 monthly instalments from 1.8.1997 to 30.9.2017, but failed to make any payments. The appellant filed a suit on 18.6.2009, which was dismissed by the concerned Banking Court as time-barred. On the question of limitation, it was held by the Division Bench that the period of def ault, which was to commence from 21.9.2017, had not yet begun and accordingly, the objection of limitation could not be sustained.
20. We find ourselves in agreement with the view taken by the Division Bench in the House Building Finance case.
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Conclusion
21. Given the foregoing, it is evident that the Appellant Bank was fully entitled to exercise its option under the accelerated recovery clauses contained in Agreements No.1 and No.2. The mere fact that the Bank did not immediately institute proceedings upo n the Respondents ’ default of two consecutive instalments neither prejudices its rights nor in any manner impairs its claim. The limitation period cannot be held to have commenced at that point in time (i.e. upon the default of two consecutive instalments on 30.7.2019), as the loan repayments were structured in instalments and the final instalments had not, at that stage, fallen due. The respective Agreement No.1 and No.2 matured on 3.3.2023 (in Appeal 38) and 3.4.2023 (in Appeal 108) respectively. The banking Suit(s) for recovery, instituted on 6.12.2024, were therefore filed well within the prescribed period of three (3) years from the expiry of the respective contractual periods.
22. In view of the foregoing, the Impugned Judgment No.1 and Decree dated 21.1.2025, and Impugned Judgment No.2 and Decree dated 10.5.2025 – whereby Banking Suit No.96/2024 and Banking Suit No.97/2024 were held to be time-barred – are without merit and are her eby set aside. Consequently, First Appeal No.38/2025 and First Appeal No.108/2025 are allowed, with no order as to costs. Both Banking Suit s are restored to the stage of hearing and/or arguments as they stood on the dates when the respective Impugned Judgments and Decrees were passed and are remanded to the respective Banking Courts for adjudication in accordance with law and the observations made herein.
JUDGE
JUDGE