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Petitioner: KHAIRPUR TEXTILE MILLS LTD. and 7 others VS Respondent: NATIONAL BANK OF PAKISTAN JUDGMENT
Court Name: Sindh High Court Judge(s): Muhammad Roshan Essani, Muhammad Mujeebullah Siddiqui Title:KHAIRPUR TEXTILE MILLS LTD. and 7 others vs NATIONAL BANK OF PAKISTAN
JUDGMENT
Reported As: 2003 CLD 326 Result: Order accordingly Judgment JUDGMENT ' MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The relevant facts, giving rise to this appeal are that, the appellant No,1, a Public Limited Company , obtained financial assistance from the respondents. The appellant No,1 was maintaining two accounts being ACs. Nos,C/C-92 and C/C-120 with the respondent No,l. The principal amount in AC No,CJC-92 was Rs,6,47,000 in March, 1987. The principal amount in AC No,C/C-120 was Rs,3,99,000 in March, 1987. In the year 1987 certain persons became interested in purchasing the shares of appellant No,1. Since the properties of appellant No,1, were already mortgaged in consideration of loan obtained from respondents 1 and 2, they approached them for rescheduling of the outstanding loan. Both the respondents acceded to the request. It was accordingly settled between respond ent No,1 and the appellant that AC Nos,C/C-92 and C/C-120 shall be closed and the total principal amount in both the accounts as on 26-3- 1987, were transferred and shown as principal amount in a new account opened by the appellant with the respondent No,1. As regards, the interest accrued in the said accounts amounting to Rs,27.679 million in March, 1987, it was mutually decided to convert them in the ordinary shares. An agreement was executed between the parties in this behalf on 10-3-1987. The agreement was acted upon. Subsequently , the respondent No,1 filed Suit No,658 of 1984 against the appellants for recovery of the outstan ding loan. The liability against the appellant No,1, was shown in the sum of Rs,4.566 million towards principal amount and Rs,27.679 million towards interest. The suit was decreed ex parte.
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2. After the decretal of suit, the State Bank of Pakistan announced incentive scheme for loan defaulteRs, According to the scheme, the persons against whom decree was passed could also take advantage of the said scheme. The appellant No,1, served three notices for settlement of claims in pursuance of the incentive scheme of the State Bank of Pakistan. These notices were in respect of ACs Nos,C/C-92 and C/C-120 and new AC No,C/F-1. It is alleged that since ACs Nos,C/C-92 and C/C-120 were already closed and merged into new AC No,C/F-1, therefore, there was no question of making any payment agains t those closed accounts. The appellant therefore, paid the amount of Rs,47,83,800 in respect of AC C/F-1 . Respondent No,1, thereafter asked the appellant to pay a sum of Rs,57,750 towards legal charges, which were also paid. In spite of aforesaid payments, the respondent No,1, did not issue Clearance Certificate to the appellants as they were insisting upon payment of mark-up/interest as shown in their notices relating to AC Nos, C/C-92 and C/C-120. The appellants, therefore, lodged complaint with the Complaint Cell of the State Bank of Pakistan. The matter was taken up by the Committee of State Bank of Pakistan and the view of respondent No,1, was upheld regarding payment of unserviceable portion of the debit, i,e, interest. The appellants submitted a review application and the committee agreed with the view-point of the appellant and modified their earlier decision. It was finally agreed that the respondent No,1, shall be directed to implement the decision of the State Bank of Pakistan. A direction was issued accordi ngly. The respondent No,1, approached the State Bank of Pakistan for review of its decision. The request was declined. 3. Since respondent No,1, did not issue Clearance Certificate despite decision of the State Bank of Pakistan, therefore, the appellants applied to the Banking Court for recording satisfaction of decree. This application was contested by respondent No, 1. The Banking Court, after hearing both the parties recorded satisfaction of the decree and directed respondent No,1 to redeem the mortgage and return the title documents of the mortgaged property . According to appellant the respondent No,1, instead of complying with the direction of the Banking Court; filed an appeal before this Court which was barred by time and it was dismissed on 21-2-2001. Thereafter , the respondent No,1, filed an application under section 12(2), C.P.C. Which was numbered J.M. No,37 of 2001. A learned Single Judge of this Court heard the application, which was allowed vide order , dated 13-9-2001, setting aside the order of Banking Court, dated 24-8-1998. Whereby satisfaction of decree was recorded and respondent No,1 was directed to redeem the mortgage and return the title document of the mortgaged property . 4. Being aggrieved with the order of learned Single Judge, the appellant has preferred this Special High Court Appeal. 5. The appeal came up for hearing on 6-8-2002. In the grounds of appeal, it has been urged inter alia that the provisions contained in section 12(2), C.P.C. Is not applicable to the proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and its predecessor enactment, namely Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, the Banking Tribunals Ordinance. 1984 and the Banking Companies (Recovery of Loans) Ordinance, 1979. 6. Mr. Rizwan Ahmed Siddiqui, learne d counsel for the respondent No,2, supported this contention of the appellants and submitted that the point in issue already stands decided by a Division Bench of the Lahore High Court and the Hon'ble Supreme Court has upheld and affirmed the view held by the Lahore High Court, therefore, the impugned judgment passed by a learned Single Judge of this Court is liable to be set aside point of law only and there is no necessity of going into the merits of the case. 7. In view of the above contention, the arguments of the learned Advocates for the parties were heard on the point, if section 12(2), C.P.C. Is applicable to the proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and its predecessor enactments. The arguments were heard with the clear
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understanding that, if the contention of learned counsel for the appellant and respondent No,2, regarding the applicability of section 12(2), C.P.C. To the proceedings under the Banking laws is not accepted, the matter shall be heard afresh on merits. 8. Mr. Rizwan Ahmed Siddiqui, learned counsel for the respondent No,2, placed reliance on the judgment by a Division Bench of Lahore High Court, in the case of Messrs Gold Star International v. Muslim Commercial Bank Limited 2000 MLD 421. In this case an application under section 12(2), C.P.C. Was dismissed by Banking Court, at Lahore. The relevant facts were that, the Banking Court passed ex parte decree. No appeal was preferred against the ex parte decree and instead an application was submitted by the defendants under section 12(2), C.P.C. The said applicatio n was dismissed by the Banking Court for the reason that, it was not maintainable and competent in law. It was contended before the Lahore High Court that, in view of the provisions of section 7(2) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, the Banking Court was obliged to follow the procedure laid down in the Code of Civil Procedure, in respect of , the matters for which the procedure had not been provided in the Act. On behalf of bank it was contended that no appeal was filed against the judgment and decree and thus it attained finality in terms of section 27 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act. 1997 and no application under section 12(2), C.P .C. Was competent. 9. A learned Division Bench of the Lahore High Court upheld the order of Banking Court on consideration of facts/merits as well as on the point of law . The relevant findings of the Lahore High Court are reproduced "7. We also find force in the submission of the learned counsel for the responde nt that under section 27 of Act XV of 1997 subject to the provisions of appeal the judgment and decree attains finality and cannot be called in question. Act XV of 1997, which is a special law, provides the remedies to the parties concerned including the right of appeal under section 21 of the Act and an application in the nature of section 12 of the Act if and when warranted by the circumstances. Since the special law takes care of the various situations itself, application under the general law i,e,, section 12(2) of C.P.C. Would not be competent. To hold, otherwise, would amount to circumvent the provisions of a special law which will erode the very object and purpose of the said law . 8. It may be noted that an appeal under section 21(4) can be preferred even against a decree passed ex-parte which admittedly was not filed by the appellants. The judgment and decree thus, became final against the appellants/defendants, which could not be sought to be re-opened through a side wind by making an application under section 12(2) of C.P .C." 10. The above Division Bench judgment of the Lahore High Court was followed by learned Single Judge of the same High Court in C.M. No,601-B of 1999, Suit No,47 of 1996 Nasir Mehm ood v. Doha Bank Limited. It was held that the application under section 12(2), C.P.C. Does not lie in proceedings arising under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. 11. The order of learned Single Judge of the Lahore High Court. Dated 28-3-2002 was assailed before the Hon'ble Supreme Court in Civil Petitio n No,780-L of 2000. The leave to appeal was refused by a Bench comprising two judges of Hon'ble Supreme Court in the following terms:- "No ground is made out to interfere with the order of the Lahore High Court, Lahore dismissed. Leave to appeal is refused." 12. Mr. Rizwan Ahmed Siddiqui, learned counsel for respondent No,2 has submitted that the Hon'ble Supreme Court of Pakistan while refusing to grant leave to appeal has upheld and approved the view held by a Division Bench of Lahore High Court in the case of Messrs Gold Star International v. M.C.B. Limited (supra), therefore, the question pertaining to the applicability of section 12(2), C.P.C. Stands settled. He has contended that the impugned order of a learned Single Judge of this Court is not sustainable in law and is liable to be set aside,
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without resorting to the merits of the case. Mr. Shahenshah Hussain, Advocate for the appellant has adopted the arguments addressed by Mr . Rizwan Ahmed Siddiqui, Advocate, on the point under consideration. 13. On the other hand, Mr. Gulzar Ahm ed, learned counsel for the respondent No,1, has submitted that the provisions contained in section 12(2), C.P.C. Are attracted and applicable to the proceedings arising under the provisions of the Financial Institutions (Recovery of Finance) Ordinance, 2001 and its predecessor enactments. 14. In support of his contention he has placed reliance on the case of Mian Munir Ahmed v. United Bank Limited (PLD 1998 Karachi 278). In this case a question came for consideration pertaining to the applicability of section 12(2), C.P.C. To the proceedings arising out of Banking Companies (Recovery of Loans) Ordinance, 1979. A Division Bench of this Court held as follows:-- "That provision, needless to add, effectively provides for safeguards against a decree which may have, inter alia, operated in excess of jurisdiction. The applicability of section 12(2) to the proceedings before a Special Court does not seem to be in doubt because section 3 in the Banking Companies (Recovery of Loans) Ordinance, 1979, expressly mandates that the provisions of the Ordinance shall be in addition to, and unless otherwise provided, not in derogation of other laws. Besides, a Special Court, in the exercise of its civil jurisdiction, has, in respect of claims. Entertainable by it, all the powers of a civil Court under the Code of Civil Procedure, which obviously includes powers under section 12, C.P.C. What is more, procedure of such Court, relevantly , pursuant to section 7 of the Ordinance, is the summary procedure provided for in Order 37 of the Code, in turn subject to section 12, if attracted." 15. He has further referred to the case of Messrs Tawakal Export Corporation v. Muslim Commercial Bank Ltd. (1997 CLC 1342). Dilating on a similar question a Division Bench of this Court came to the following conclusions: "However , it is axiomatic that fraud vitiates the most solemn of proceedings and an order passed without jurisdiction is a nullity . Prior to the insertion of section 12(2) in the Code of Civil Procedure, in cases where fraud or lack of jurisdiction was claimed to vitiate the relevant proceedings, and a decree was consequently sought b to be avoided, an aggrieved person could resort to a suit for obtaining redress. With the advent of section 12(2), C.P.C., in matters where a judgment. Decree or order is assailed on the grounds of misrepresentation, fraud of lack of jurisdiction, an independent suit stands barred and the aggrieved person can only resort to an application under section 12(2), C.P.C. For securing such relief as be capable of being administered. Question, therefore, arises whether in similar matters falling within the purview of the Banking Tribunals Ordinance, an independent suit would lie or an application under section 12(2), C.P.C. Can be preferred or the special law leaves the aggrieved person with no redress whatsoever . Relevantly , section 10 of the Banking Tribunal Ordinance, 1984, envisages finality of orders in these terms:-- "10. Finality of ordeRs,---Subject to the provisions of appeal under section 9, no Court or other Authority shall call, or permit to be called, in question any proceeding, order , judgment or decree of a Banking Tribunal or the legality or propriety of anything done or intended to be done by the Banking Tribunal under this Ordinance. ' From a perusal of section 10 aforesaid, it clearly emer ges that no Court or other authority is to permit to be called in question any proceedings, order , judgment or decree of a Banking Tribunal or the legality or propriety of anything done or intended to be done by the Banking Tribunal under such Ordinance. An independent suit, therefore, would be barred. Even so, section 3 of the Ordinance postulates that the provisions of the Ordinance shall be in addition to and, save as otherwise provided in the Ordinance itself, not in derogation of any law for the time being in force. Correspondingly , under section 5 of the Ordinance, a Banking Tribunal shall, in the exercise of its jurisdiction, have in respect of a claim filed by a Banking Company against a customer in respect of or arising out of finance provided by it, all the power vested in the Civil Court under the Code of
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Civil Procedure, 1908. Likewise, under the same section, a Banking Tribunal shall, in all matters with respect to which procedure has not been provided for in the Ordinance, follow , inter alia, the procedure laid down in the Code of Civil Procedure. It would thus seem that the power of recall of an order , judgment or decree tainted with fraud and misrepresentation or suffering from want of jurisdiction would be implicit within the power of the Banking Tribunal where due cause for such exercise arises. This is all the more so because the general but fundamental principles of law, invalidating the proceedings or the outcome thereof in a judicial forum, cannot be assumed to be missing for the purposes of the proceedings before the Tribunal. Questions touching the elements of justice, equity and good conscience, where permissible, would be some such questions. Inherent powers of a Civil Court cannot also be denied to a Banking Tribunal, invested as it is with all the powers' of a Civil Court. The un-escapable conclusion, therefore, is that the principle in section 12(2), C.P.C. Applies as much to the Tribunal constituted under the Ordinance of 1984 as to any other civil forum." 16. The third case on which Mr. Gulzar Ahmed has placed reliance is between the same parties litigating in the present appeal namely , National Bank of Pakistan v. Khairpur Textile Mills Ltd. (2001 CLC 1187). In this case an appeal was preferred by the National Bank of Pakistan, against the order , dated 24-8-1998 whereby satisfaction of decree was recorded (This- is the same order which has been set aside by the learned Single Judge under section 12(2), C.P.C. In J.M. No,37 of 2001, giving rise to this appeal). The appeal was dismissed on the point of limitation with the following observations on the point of maintainability of an application under section 12(2), C . P . C:: - - "7. As regards Mr. Gulzar Ahmed's doubts as to the maintainability of an application under section 12(2), C.P.C. It may be observed that under section 7 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, a Banking Court has all powers vested in a Civil Court under the C.P.C. In the exercise of its civil jurisdiction. Section 3 provides that provisions of this Act are in addition to and unless expressly provided, not in derogation of any other law for the time being in force. The recent trend of judicial precedent indicates that these provisions are not confined to civil suit before Courts of general jurisdiction strictly covered by the C.P.C. But to different proceedings of a civil nature. In the cases of Mian Muneer Ahmed v. United Bank Limited (PLD 1988 Kar. 278) and Tawakal Export Corporation and others v. Muslim Commercial Bank and another (1997 CLC 1342) two Division Benches of this Court have held that the provisions of section 12(2), C.P.C. Are applicable to decrees passed under the Banking Companies (Recovery of Loans) Ordinance, 1979 and the Banking Tribunals Ordinance, 1984. No provision of the 1997 Act (which replaces these two statutes) has been pointed out to indicate that the principle laid down in the above cases would not apply to decrees under this Act. We, therefore, find Mr. Gulzar Ahmed's apprehension to be misconceived." 17. Mr. -Gulzar Ahmed has submitted that, the application under section 12(2), C.P.C. Was submitted by the respondent No,1, National Bank of Pakistan, in pursuance of the above findings of a Division Bench of this Court while disposing of the appeal. He has contended that Mr. Shahenshah Hussain, Advocate for the appellant, Khairpur Textile Mills, was appearing in the earlier appeal and he had not raised any objection to the maintainability of application under section 12(2), C.P.C. In the proceedings arising out of laws pertaining to the recovery of loans and advances granted by the banks. 18. He has further referred to a recent judgment of this Court in the case of Dadabhoy Cement Industries Limited v. Messrs National Development Finances Corporation, (2002 CLC 166). In this case a Division Bench of this Court while hearing appeals arising out of order dismissing application under section 12(2), C.P.C. Decided the appeal on merits. Mr. Gulzar Ahmed, maintained that in this appeal a contention was raised that the order assailed through application under section 12(2), C.P.C. Was requi red to be challenged by way of
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an appeal under section 21 of the Bank ing Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, but the same was not pressed into action and no appeal was filed within period of limitation provided in the above section, with the result that the order attained finality and the appellants were precluded from challenging the same by way of application under section 12(2), C.P.C. It was held by a Division Bench of this Court as follows:-- "It is without any dispute that the Cour ts possess inherent power to set aside their own judgment, decree of final order which had been obtained fraudulently by way of misrepresentation and concealment/suppression of facts or collusively . This subsection provides an aggrieved person with a right to file an application for recalling or setting aside a decree, final order or judgment which had been obtained by fraud or misrepresentation." 19. Mr. Gulzar Ahmed, has further pointed out that, the above judgment was assailed before the Hon'ble Supreme Court of Pakistan in the case of Messrs Dadabhoy Cement Industries Ltd. v. National Development Finance Corporation, Karachi (PLD 2002 SC 500). A Full Bench of Hon'ble Supreme Court of Pakistan dismissed the petition refusing the leave to appeal holding that the learned Division Bench of the High Court has exhaustively dealt with each and every point alleged before it and their lordships saw no ground to interfere with the well-founded judgment. 20. Mr. Gulzar Ahmed, has submitted that, so far, the order of Hon'ble Suprem e Court of Pakistan on which Mr. Rizwan Ahmed Siddiqui, has placed reliance, is concerned, it cannot be treated as a precedent having binding effect on the subordinate Courts and the High Court. According to learned counsel, a Division Bench of the Lahore High Court, in the case of Messrs Gold Star International (supra), which dealing with the question pertaining to the applicability of section 12(2), C.P.C. To the proceed ings arising under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, decided the same in a very cursory and summary manner . It appear s that the learned Judges of the Lahore High Court were not properly assisted with the result that the real import and implication of the provisions contained in section 27 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, were not properly considered and thrashed out. He has contended that section 27 of the said Act (hereinafter referred to as Act XV of 1997) contains that, "subject to the provisions of appeal, no Court or other authority shall revise or review or call, or permit to be called, in question any proceeding, order , judgment. Decree or sentence of a Banking Court of the Banking Mohtasib or the legality or propriety of anything done or intended to be done by the Banking Court or the Banking Mohtasib under this Act". 21. This finality protected the orders of Banking Court from being thrown to challenge before any other Court or authority except by way of appeal provided in Act, XV of 1997. However , it did not had the effect of clipping the powers of the Banking Court itself from exercising the jurisdiction vested in it to set aside a judgment/order , if it was shown that a fraud or misrepresentation was practised or it was a case of lack of jurisdiction. He has further submitted that the Division Bench judgment of the Lahore High Court in the case of Messrs Gold Star International, was not challenged before the Hon'ble Supreme Court of Pakistan. It was followed by a learned Single Judge of the Lahore High Court in the case of Nasir Mehmood v. Doha Bank Ltd. The learned Single Bench judgment of the Lahore High Court was challenge d before the Hon'ble Supreme Court in Civil Petition No,780-L of 2000 and the leave to appeal was refused by short order with the observation that no ground was made out to interfere with the order of the Laho re High Court. The proposition of law was not considered elaborately and no spedfic finding was recorded by the Hon'ble Supreme Court on the proposition of law and the Hon'ble Supreme Court merely stated that their lordships were not inclincd to interfere with the order of Lahore High Court. He has urged that the order of Hon'ble Supreme Court in the
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case of Nasir Mehmood v. Doha Bank Ltd. Does not have the force of precedent while the judgment of Hon'ble Supreme Court in the case of Dadabhoy Cement Industries Ltd., has the force of precedent as a Full Bench of Hon'ble Supreme Court has decided the case by full-fledged judgment, containing the detailed reasons with conscious mind that they were dealing with the application under section 12(2), C.P.C. In the Banking matter and that such application was examined on merits and found to be not maintainable as ingredients of section 12(2), C.P.C. Were lacking in the case. He has further submitted that the judgment of Hon'ble. Supreme Court in the case of Dadabhoy Cement Industries Ltd.. Shall prevail on the order of Hon'ble Supreme Court in the case of Nasir Mehmood v. Doha Bank Ltd., for the reasons that the judgment in the case of Dadabhoy Cement Industries Ltd., is of a subsequent date and secondly , it is by Full Bench of a Supreme Court as against the case of Nasir Mehmood v. Doha Bank Ltd., in which leave to appeal was refused by a Division Bench of Hon'ble Supreme Court without giving detailed reasons and the specific findings. In support of his contention, he has placed reliance on an observation made by one of us (Muhammad Mujibullah…
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