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Petitioner: SOOFI RICE MILLS through Proprietor and 2 others VS Respondent: NATIONAL BANK OF JUDGMENT
Court Name: Sindh High Court Judge(s): Zafar Ahmed Rajput, Agha Faisal Title:SOOFI RICE MILLS through Proprietor and 2 others vs NATIONAL BANK OF
JUDGMENT
Reported As: 2020 P C T L R 1180, 2019 CLD 395 Result: Appeal dismissed Judgment JUDGMENT AGHA FAISAL, J.---Through this appeal, the appellants have assailed the judgment dated 28.08.2013 delivered in Suit No, 22 of 2011 by the learned Banking Court No, I, at Larkana ("Impugned Judgment"). 2. The relevant facts culminating in the Impugned Judgment are delineated in seriatim herein below: i. The respondent No,1 herein, National Bank of Pakistan ("NBP"), had filed a suit for recovery, inter alia against the present appellants, which was decreed ex parte vide judgment and decree dated 15.12.2001 and 20.12.2001 respectively. ii. Execution proceedings were initiated subsequent thereto and immoveable property, mortgaged to secure the financial obligations, was auctioned and purchased by the respondent No,2 herein. The auction proceeds were conveyed to NBP and the auctioned property was handed over to the respondent No,2 after issuance of confirmation and sale certificate. iii. The appellant No,2 herein moved an application before the learned Banking Court under section XII of Financial Institutions (Recovery of Finances) 2001 ("Ordinance") which was dismissed vide order dated 01.03.2005. The aforesaid order was challenged before the High Court in appeal, which appeal was allowed and the matter was remanded back to the learned Banking Court for deciding the same afresh. In due compliance of the orders of High Court, permission was given to the defendants therein to defend the suit and after an exchange of pleadings, issues were framed. iv. A complete trial was held and in conclusion thereof the suit was allowed, once again, vide the Impugned Judgment and the decree pursuant thereto was issued on 4th September, 2013, hence,
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the present appeal. 3. Mr. Zahir Ahmed Chishti, learned counsel for the appellants argued that while the claim of NBP, as decreed there-against, was not disputed however, the Bank was required to set off the same against the stock of paddy and rice pledged therewith. It was next contended that the value of the claim sought was in excess of the claim of NBP hence the remaining amount was required to be refunded to the appellants. Per learned counsel, the auction, sale certificate, registration of sale deed and delivery of possession of the auctioned property, in favour of the respondent No,2, was unmerited and unlawful and hence it was incumbent upon this Court to declare the same as void ab initio. 4. Mr. Bashir Ahmed Dargahi, learned counsel for NBP controverted the arguments of the appellants and stated that there was no counter claim filed and hence the issue of set off is frivolous. The learned counsel demonstrated from the Impugned Judgment that the issue of the purportedly pledged stock was discussed at length therein and that it was prima facie manifest that no such stock was available with the NBP and therefore the question of "adjusting the same against the liabilities of the appellants does not arise. The learned counsel stated that the present appeal, filed in the year 2013, was frivolous and devoid of merit, hence, was required to be dismissed forthwith. 5. We have given careful consideration to the arguments. of the learned counsel and have had the opportunity to review the record placed before us. The appellants have already admitted the liability, adjudged there against vide the Impugned Judgment, and therefore, no deliberation is merited in respect thereof. The primary issue placed before this Court in the present appeal is whether the appellants were entitled to a set off as claimed and also whether sufficient grounds exist to interfere in the concluded transaction in respect of the auctioned immoveable property. 6. The statutory provisions pertaining to set off are contained in Order VIII, Rule 6, C.P.C. and a treatise upon the essentials thereof is contained in the judgment of the honorable Supreme Court titled Civil Aviation Authority v. JAPAK International (Pvt.) Ltd. (reported as 2009 SCM R 666) wherein it has been observed as follows: "The essential conditions of legal set-off are as follows: (i) The suit must be one, for the recovery of money. (ii) As regards the amount claimed to be set-off--- (a) it must be an ascertained sum of money; (b) such sum must be legally recoverable; (c) it must be recoverable by defendant or by all the defendants A if more than one; (d) it must be recoverable by the defendant from the plaintiff or all the plaintiffs if more than one; (e) it must not exceed the pecuniary limits of the jurisdiction of the court in which the suit is brought; and (f) both parties must fill, in the defendants claim to set-off, the same character as they fill in the plaintiffs' suit." 7. The progressive development of the phrase "legally recoverable" has been discussed at considerable length in the judgment titled Ahmad Hassan v. Haji Ajab Khan and others (reported as 1985 CLC 1575), wherein it has been determined as follows: "In the first instance it may be seen that Order VIII, Rule 6, C.P.C. visualizes claims for set off in suit for recoveries of money by raising a demand of debts which are legally recoverable from plaintiff and fall within pecuniary jurisdiction and territorial limits of the Court trying the suit. Therefore, ascertainment of setoff evidently pre-supposes that suit must be for (i) recovery of money, (ii) amount of set off must be legally recoverable from the plaintiffs, (iii) claim must be for ascertained sum of money (iv) claim of set off should be in respect of debts for which cause of action has accrued within pecuniary and territorial jurisdiction of the Court and (v) must be raised on the first hearing of the suit and not afterwards, unless permitted by the Court. It is, therefore, suggested that
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set off primarily is a defence against the action of plaintiff. It by no means, can wipe out plaintiff's claim, rather it seeks independent ascertainment and determination regarding additional claim of defendant for ultimate recording of decree as specified under Order XX, Rule 19, C.P.C. which, therefore, may disclose actual amount falling due from the either of the parties. Whereas strictly speaking counter-claim is not specifically known to the Code of Civil Procedure, it is generally deemed and treated something similar to set off, with of course much wider scope. But practically both are essentially different-from each other. Actual similarity appears only to the extent that both types of claims are in the nature of cross actions. Apparently set off is merely a defence, for pleading adjustment of respective claims which are otherwise legally recoverable from each other; and pre-supposes that same should be an existing debt recoverable from the plaintiff when cause was initiated, whereas counter-claim is a weapon of offence enabling, the defendant to enforce his claim against the plaintiff. It is normally pleaded in the written statement merely to avoid multiplicity. The counter-claim is relatable to the subject-matter raised by the plaintiff. In most of the rulings superior Courts have treated, counter-claim as a shield, pleaded by defendant to reduce the liability against him. It has also been shown to be weapon of offence which enables the defendant to enforce his claim against the plaintiff as effectually as in an independent action. However, extracts from some of the reported judgments dealing with, distinction between "set off" and "counter-claim" are reproduced below:---- (i) Lassoo & Sons v. Krishna Bahadur Nepali AIR 1932 Born. 617. "In this respect however the distinction between a set off and a counter-claim must be borne in mind. In one sense both are cross-actions but a set off is also a ground of defence. If established it affords an answer to the plaintiff's claim either wholly or pro-tanto for a set off is really a debt claimed by a defendant against the plaintiff balancing a debt claimed by the plaintiff against the defendant. A counter claim on the other hand is really a weapon of offence and enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action." (ii) Jitendra- Nath Ray v. Jananda Kanta Das Gupta AIR 1936 Cal. 277. "As set off may be purely defensive, that is, it may amount to an adjustment or satisfaction of the plaintiff's claim or it may be a counter-claim under which the defendant claims a decree for the surplus amount due to him. In a defensive set off, the set off claimed must be recoverable at the date of the plaintiff's suit. In a counter-claim the sum claimed by the defendant should be legally recoverable at the date when he makes the claim i,e, at the date when he files written statement. The words "legally recoverable in Order VIII, Rule 6, mean legally recoverable at the date of the institution of the suit in one case and mean legally recoverable at the date when the counter- claim is made in the other case. Although in Order VIII, Rule 6 and Order XX, Rule 19, there is no clear distinction between a mere set off, i,e, a defensive set off and a counter claim, a distinction has been made in Indian Courts in accordance with the law of England, as it is based on a sound principle." (iii) Bai Harendra Nath Chaudhury v. Bai Sourindra Nath AIR 1942 Cal. 559. "Although the word set-off oily is used in Order VIII, Rule 6 and not the word counter-claim also, the claim to the ascertained sum of money which the Code permits the defendant to set up in the plaintiff's action for money may not only be what is strictly termed set off but what is also a counter-claim. If the claim set up by the defendant is in respect of a debt which is less than or equal to the plaintiffs claim in the suit it is a plea of set off pure and simple, tut if it exceeds the plaintiff's claim it is to the extent of the excess of a cross-claim for the excess he is to be given a decree against the plaintiff in the same action". (iv) Sarawwathiswani v. Sridhora Siverama Moorthy AIR 1949 Mad. 630. "A counter claim may be set up only in respect of claims as to which the party could bring an independent action in the Court in which the counter-claim is brought. Because the plaintiff has
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brought an action which he was entitled to do, it does not mean that the defendant's right to put forward a counter-claim became limitless e.g. to put forward a claim which nobody else could put forward as a plaintiff." (v) Abdul Majid y. Abdul Rashid and others AIR 1950 All. 201. "The essence of a counter-claim is that the defendant should have a cause of action against the plaintiff. The counter-claim is in the nature of a cross-action; and not merely a defence to the plaintiffs claim." (vi) Shoebanchan Pandey and another v. Madho Sarah Chowbay and others AIR 1952 Pat. 73. "In P.S. Moideen Baba v. Chettyar Firm AIR 1934 Rang. 190; it has been held that for either to be able to sue for specific performance there must be mutuality. Once there is that mutuality that one party can sue the other for specific performance, there is no reason why the other party also cannot enforce specific performance. In Carangdhar Singh and another v. Lakshmi Narayan Wahi AIR 1955 Pat. 320 it has been held that 'A counter-claim is substantially a cross-action and need not be an action of the same nature as the original action or even analogous thereto. Though there is no provision in the Code of making a counter-claim, a Court has got the power to treat the counter-claim as a plaint in the cross-suit and hear them together if the counter-claim is properly stamped." (vii) Sarangdhar Singh and another v. Lakshmi Narayan Wahi AIR 1955 Pat. 320. "A counter-claim is substantially a cross-action and need not be an action of the same nature as the original action or even analogous thereto. Though there is no provision in. the Code of making a counter-claim a Court has got the power to treat the counter-claim as a plaint in the cross-suit and hear them together, if the counter-claim is properly stamped." (viii) Syed Naimat All and others- v . Dewan Jairam Dass PLD 1983 SC 5. "However, there is a well-recognized distinction between a set off and a counter-claim. Although in one sense both are identical inasmuch as they are cross-actions on the part of the defendant but a set off is essentially a weapon of defence if the defendant succeeds in establishing it, it serves the purpose of answering to the plaintiff's claim either wholly or pro-tanto because a set off-is really a debt claimed by the defendant against the plaintiff to counter balance a debt claimed by the plaintiff against the defendant: A counter-claim on the other hand, is essentially a weapon of offence and is not really relevant as a plea in defence to the claim of the plaintiff. It enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action. Its essential nature is that of a cross suit pleaded through the means of the written statement in the same suit. Having regard to these essential features of the character of a counter-claim, it is plain that a right to make a counter-claim is not admissible if it does not fall within the ambit of Order VIII, Rule 6, C.P.C. or qualify as an equitable setoff. The right to make a counter=claim has been always held to be a statutory right and as already observed there is nothing in the Code of Civil Procedure conferring the right, to plead such counter-claim, upon a defendant. Thus, it has been held in certain decisions of the Privy Council and of the High Courts that a counter-claim was not admissible in the Muffasil Courts." There is yet another aspect which has considerable importance for determining contentions raised on behalf of the parties in this matter. Order VIII, Rule 6, C.P.C. clearly suggests that set off can be in respect of "ascertained sum" which may be legally recoverable. It, therefore, requires to be seen whether claim for compensation, tentatively fixed by the defendants to a particular amount could legitimately be deemed "ascertained sum" within the meanings assigned to it by law. Some of the reported judgments have dealt with the meaning of "ascertained sum".- It would be profitable here to refer to some of those: (i) Har Prasad and another v. Firm Ram Sarup Radha Kishen AIR 1924 Ail. 87, 2.
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"What the defendants say is that there were definite sums of debit and credit between the parties and that on the date of suit a definite known balance, the amount of which is given in the written statement, was due to the defendants from the plaintiff and that this balance is shown in their account books as due on the date of suit. In any ordinary meaning of the term the sum so claimed is an ascertained sum. The learned counsel for the respondent has argued that a sum can only be treated as ascertained when it has been either admitted by the plaintiff or decreed by the Court. None of the authorities to which he has referred, supports this proposition, and the case of Edward Dalgieisn v. Ramdin Singh Chowdhry definitely contradicts it. The comtnentators on the Code are also all agreed that the words 'ascertained sum are used to exclude such items as unliquidated damages and mesne profits the amount of which is not ascertainable until the Court determines' ." (ii) Bhikanrao v. Shridhar AIR 1931 Nag. 12. "The defendant's claim for a set off was obviously in respect of an ascertained sum of money. The expression 'ascertained sum' does not mean a sum admitted by the plaintiff. It is used in contra- distinction to unliquidated damages. An ascertained sum means, according to the ordinary significance of the words, a sum of money of which the amount is fixed and known: See Edward Dalgleish v. Ramdin Singh An 'ascertained sum' used in the Code excludes such items as unliquidated damages and mesne profits, the amount of which is not ascertainable until the Court determines them. See Har Prasad v. Firm Ram Sarup Radha Kishen. (iii) Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal AIR 1940 Nag. 177. "Now according to Order VIII, Rule 6, Civil P.C. before a legal set off can be claimed, it must be presented in a written statement which shall have the same effect as a plaint, and it must be shown that it is an ascertained sum of money legally recoverable by the defendant from the plaintiff, and that both parties fulfil the same character as they fill in the plaintiff's suit. The claim for the commission over reduction of losses is stated approximately and cannot be considered as an 'ascertained sum' of money. It would require accounts to be gone into and the written statement admits as much. In AIR 1931 Nag. 12 it was pointed out that an 'ascertained sum' means a sum of money of which the amount is fixed and known and that it excludes such items as unliquidated damages and mesne profits, the amount of which is not ascertainable until the Court determines them." (iv) Sankara Pillai v. Parameswaran Pillai AIR 1959 Ker. 352. "Taking up first, the aspect of legal set off it is no doubt true that the defendant was putting forth the claim for the specific amount of Rs.204 and odd for purpose of set off. But every claim for a specified sum is 'not necessarily for a 'ascertained sum' of money 'legally due' within the meaning of Order VIII, Rule 6, C.P.C. It is unnecessary in this connection to go to the extent of the dictum in Mr. Dilter Koer v. Harkhoo Singh AIR Pat. 167 that the claim to be ascertained must be 'beyond challenge and beyond dispute, concluded and conclusive'. " It may for example, be a sum not admitted by the other side and not decreed by Court. But it must in any event be a cross-claim for a liquidated amount, that is debts due for liquidated sums or demands, which can be ascertained with certainty at the time of the pleading and not what may ultimately be ascertained by the Court at the time of passing of the decree. (v) AIR 1964 Mad. 108. In order to effectively elucidate observations in afore-quoted judgments it would be appropriate to also record meanings of unliquidated debt. Unliquidated has been described in Black's Law Dictionary revised 4th Edition at p.1706 as under:---- "Unliquidated - Not ascertained in amount; not determined; remaining unassessed or unsettled; as unliquidated damages"; "A debt is spoken of as 'unliquidated' if the amount thereof cannot be ascertained at the trial by a mere computation, based on the terms of the obligation or on some other accepted standard.
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Hattrick Mfg. C. V. Barish, 120 Misc. 673. 199 N.Y. S.755. 767." Thus, carefully considering aforequoted judgments and meaning attached to terminology used in Order VIII, Rule 6, C.P.C. obvious conclusions are, that claim of compensation, for which cause of action has arisen subsequent to the filing of suit, or was not asserted at initial stage of filing original written statement or is not of an ascertained sum, or is beyond territorial or pecuniary jurisdiction of the Court and otherwise is not legally due, would not be appropriately entertainable. I have given my anxious thought to all aspects of counter-claim put forth by defendant in the case. Since cause of action evidently relates to period subsequent to institution of suit amount of compensation needs enquiry and determination, and does not arise from transaction which is subject-matter of the suit, therefore, same cannot be permitted to be put up as counter-claim. Similarly mere assertions of a fixed amount of compensation cannot be assumed to be ascertained amount within the purview of Order VIII, Rule 6, C.P.C. On this analogy thus claim for money which is not conclusively and definitely identifiable and otherwise is not legally recoverable cannot constitute basis of set off or counterclaim. For the foregoing reasons I do not find any justification to interfere with impugned judgment. However, petitioner is not precluded from separately approaching Court of competent jurisdiction in respect of claim set up by him in written statement, if otherwise law so permits." 8. It is apparent from the record that there has been no ascertainment of whether the amounts claimed by the appellants were legally recoverable. Notwithstanding the foregoing, it is apparent from a bare perusal of the pleadings of the appellants that the set off or counter claim was never pleaded in the manner prescribed under the law. An illuminating judgment determining the manner in which set off/counter claim was required to be pleaded is the case of Syed Ahmad Saeed Kirmani v. Messrs Muslim Commercial Bank Ltd., Islamabad (reported as 1993 SCM R 441), wherein it was held by the honorable Supreme Court as follows: "Where a party claims a set-off he has to comply with the rules of pleading contained in the Code of Civil Procedure. By claiming set-off in an amount which exceeds the claim of the plaintiff, the defendant in effect pleads to write off the plaintiffs claim and claims a decree for the balance amount. It is therefore in the nature of written statement as well as a plaint/counter-claim for purposes of claiming the balance amount. Therefore, the rules of pleading should be followed in all cases including cases where damages are claimed. The claimant must state the particulars and basis of the claim and if it is quantified the basis of such quantification as well. It would not be a proper pleading in such cases to merely state that due to breach committed by the defendant the claimant is entitled to damages. In the present case on analysis and close scrutiny of the pleadings and evidence it is clear that the appellant had been vague and unspecific so far his claim for damages is concerned." 9. In addition to the alleged set off / counter claim not having been pleaded in accordance with the law, it is also an admitted fact that no Court Fee was ever paid by the appellants with respect to their purported counter claim. The law in such regard is meticulously encapsulated in the judgment titled Khurshid Ahmed and another v. Khair Din (reported as PLD 1962 (W.P.) Lahore 313), wherein it has been laid down as follows: "...Section 4 of the Court-fees Act prohibits filing, exhibiting or recording in of any document of any kind specified in the First or Second Schedule to the Act unless the fee prescribed for such a document was paid. A written statement pleading a set-off is such a document. It would, therefore, be clear that such a written statement cannot be accepted unless the fee prescribed is paid. The provisions relating to the proceedings which can be conducted in the forma pauperis have been clearly mentioned in the Statute. They cannot be extended by any analogy on the basis of what has been remarked in Order VIII, Rule 6. Order VIII, Rule 6, simply lays down the time at which a set- off can be claimed. It lays down as follows:-
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"(1) Where in a suit for the recovery of money the defendant claims to set-off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off. (2) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect both of the original claim and of the set-off but this shall not affect the lien, upon the amount decreed, of any pleader in respect of the costs payable to him under the decree. (3) The rules relating to a written statement by a defendant apply to a written statement in answer to a claim of set-off." The mere fact that it has been described that a person claiming a set-off will have the same character as a plaintiff in a suit, would not mean that his written statement could be treated as a plaint and he could be regarded as a plaintiff making a claim. There is no doubt that 54 P R 1905 was decided before the present Civil Procedure Code came into operation, but the ratio decidendi of that authority would hold good even now, because it has been laid down that when there is specific provision relating to a matter in a Statute the Court cannot exercise its discretion to extend the operation of such a provision. Although the question of a written statement claiming set-off was not directly in issue In re: U. Ananthakrishna Baliga, but the question was incidentally considered in that case and the remarks in that judgment which were given by Mr. Justice Abdur Rehman (Judge of the Supreme Court) when his Lordship was a Judge of the Madras High Court, are very…
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