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Petitioner: M/S. DADABHOY CEMENT INDUSTRIES LTD. And Other VS Respondent: M/S. NATIONAL DEVELOPMENT FINANCE CORPORATION
Court Name: Sindh High Court Judge(s): Mushir Alam, Sayed Saeed Ashhad Title:M/S. DADABHOY CEMENT INDUSTRIES LTD. And Other vs M/S. NATIONAL
DEVELOPMENT FINANCE CORPORATION Case No.: High Court Appeals Nos. 159, 160, 161 and 162 of 2001 Date of Judgment:2001-09-19 Reported As: K.L.R. 2002 Civil Cases 307 Result: order dismiss Judgment ORDER SAIYED SAEED ASHHAD C.J. - All the aforesaid four Special High Court Appeals have been filed by M/s. Dadabhoy Cement Industries Limited and others ayamst M/s. National Development I Finance Corporation, Two of the appeals are against order dated 18.6,2001 dismissing two applications under Section 12(2), CPC numbered as J.M. No. 29/2000 and J M. No. 30/2000 and two Misc. Applications in Ex. Nos, 110 of 2000 and 137 of 2000. As common questions and issues of facts and law are involved in all the aforesaid Spl. HCAs, they will be disposed of by this common order. The facts as stated by the* appellants in the memos, of appeals are that the respondent in 1982 granted several loan/finance facilities to the tune of Rs. 583,065,920/- to M/s. Dadabhoy Cement Industries Limited (hereinafter referred to as DCIL) to make payment of a total sum of Rs. 1.013,066,026/- towards the repayment of the above loan facility. The above loan facilities were secured by way of mortgage of the properties of DCIL and after making payment of the aforesaid amount, DCIL filed a-suit against the respondent for redemption of mortgage being Suit No. 416/96, whereas the respondent filed a suit against DCIL being Suit No. 1430/97 for recovery of the amount allegedly [Vol.XXI Dadabhoy Cement Industries Ltd. V. C.C. 311 National Development Finance Corporation (Saiyed Saeed Ashhad, C.J.) outstanding in respect of the aforesaid loan facilities, In Suit No. 416/96, the parties filed an application under Order XXIII, Rule 3, CPC (hereinafter referred to as the Compromise)1 for disposal
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of the suit in terms of the compromise. As the appellants have vehemently challenged the legality *and propriety of the Compromise and had prayed for its* cancellation, it will be appropriate to reproduce the same in extenso as underi- It is submitted on behalf of the parties in the above suit that pursuant to a Memorandum of Understanding dated 19.12.1997 (Annexure 'A') executed between Dadabhoy Cement Industries ("DCIL") the plaintiff No. 1 herein 'and NDFC the defendant a settlement has been arrived at including the dispute in the present suit encompassing all the disputes in relation to the accounting of various facilities provided by NDFC to DCIL and rescheduling/restructuring of there loans/facilities including the dispute in the present suit. The dispute involved in the present suit has been resolved on the following terms and conditions:- (1) That it has been agreed between the parties that the interest based loan facilities and mark-up based finance facilities specified in Annexure 'B' offered by NDFC to DCIL shall be treated as withdrawn/cancelled in all respect as if the said facilities as to each and every one of them was never offered by NDFC to DCIL. I (2) That it has been agreed between the parties that out of the amounts from time to time paid by or for the account of DCIL to NDFC and received by NDFC up to 1.9.1997 on account of various interest based term loan facilities as well as mark-up based term finance facilities, an aggregate amount of Rs. 948.10 million (Rupees nine hundred forty-eight million one hundred only) received from DCIL in cash, through adjustment of certain loan amounts disbursements, amounts reimbursed by the local banks and Rs. 10.36 million received from Asian Development Bank) shall be deemed to have been received and appropriated by NDFC in part payments of amounts owing from DCIL on account of the interest based term loan facilities ana m payment of the mark-up based term finance facilities provided to DCIL. (3) That bn the basis of the appropriation as stated in para 2 thereof, the account of interest based term loan facilities shall be deemed to be re-stated, resulting in an aggregate amount of Rs. 717,000,000/- (Rupees seven hundred seventeen million only) owing and payable in respect of the aforesaid facilities which shall be paid by DCIL to NDFC in the manner stated hereafter. (4i That it. Is turtner i.Ireeo between the parties that the mark-up based term finance facilities (with the exception of working capital facilities which is subject-matter in Suit No. 1430/97 and for which a separate compromise application has been moved) shall be deemed to have been settled and finally closed for all intent and purposes. (4) That as a result of the settlement so arrived at betvyeen the parties DCIL is liable to pay to NDFC an aggregate amount of Rs. 717,000,000/- as on the effective date i.e: 1.9.1997 which DCIL has agreed to pay to NDFC in the tOlloWinc ">nr (5) That on execute, 1 aforesaid memorandum of understanding dated 1u. ;. . ' DCIL has paid to NDFC the sum of Rs. Two (2) million and the balance of Rs. 715,0, 000/- (Rupees seven hundred fifteen million only) payable on account of interest based term, loan facilities shall, from the effective date i.e. 1.9.1997, bear interest @ 15% per annum on daily balance and on the basis of a 360 days year with quarterly rest until full payment of principal and interest is made to NDFC, The aforesaid sum of Rs, 715,000,000/- snail be payable by DCIL to NDFC within 15 years from the effective date i.e. 1.9.1997 in 60 (sixty) equal quarterly instalments
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payable on or before 1st January,, 1st April, 1st Juiy and 1st December in each calendar year together with interesp accrued at the rate aforesaid up to the date of * r- payment of each such instalment as.Detailed in Annexure IVol.XXI Dadabhoy Cement industries Ltd. V. C.C, 313 National Development Finance Corporation (Saiyed Saeed Ashhad. C. J.) 'C' with the first such instalment shall be payable on or before 1.4.1 998.' ,v- (7) That in the event of default in payment of any instalment, as agreed upon the entire principal and interest accrued thereon then : remaining unpaid, shall become immediately due and payable by DCIL to NDFC without any notice, In such an event DCIL shall be liable to pay to NDFC an additional interest @ 4% per "annum with semi annual rest on the entire amount of overdue principal, and interest in additioh to the 15% interest per annum on daily balances, as stbted in para 6 hereof. V . ' f'f. . (8) That it is agreed that the following shall constitute an even of default:- fi) If DCIL shall default in making any payment due to NDFC or shall be in breach of any provision of the said MOU dated 19.12.1997 or of any agreement, as modified by the said MOU, governing any interest based term loan facility or of any compromise decree of this Flon'ble Court or of any document creating or evidencing security in favour of NDFC whether alone or together with others tor money owing from DCIL to NDFC. Iii) if DCIL shall suffer any petition for its winding up to be filed or any resolution for its winding up to be passed or any decree for money to be passed or any receiver or administrator or manager to be appointed in respect of the business pf DCIL or any its assets on income in or over which NDFC has a security interest. , , , Iiii) If in the opinion of NDFC any security held by.It tor the indebtedness of DCIL is adversely affected * whether or account of actions taken 6r> threatened by one or more creditors against the assets of DCIL in or over, which NDFC has a security interest for money owing from DCIL. ' - (iv) If DCIL fails to fulfil any one or more of its obligations including the disposal of the various cases filed by DCIL and NDFC against each other pending in this Honourable Court in pursuance of the settlement arrived at through the aforesaid memorandum of understanding. 9. That it is clarified and fully understood by the parties that notwithstanding the execution of the aforesaid MOU, all the credit agreements and security documents executed by DCIL in favour of NDFC and personal guarantees given by the plaintiff No. 2 to 7 shall remain valid binding and enforceable. However, the terms and conditions of the credit agreements, security documents including personal guarantees "Shall be -deemed to have been modified pursuant to the execution of the aforesaid MOU. It is, therefore, prayed that this Honourable Court may be pleased to dispose of the above suit in terms of compromise as stated herein above with no order as to costs. The Compromise was allowed vide order dated 18.2.1998 and it will also be useful to reproduce the order as under:- 18.2.1998. Mr. Arshad Mohsin alongwith Nayyar Karim Company Secretary of the plaintiff. Mr. Afsar Abidi, Advocate for defendants. The parties have jointly filed application under Order XXIII, Rule 3, CPC, seeking disposal of the suit in terms of the compromise recorded therein. The application is signed by all the plaintiffs and their learned counsel. On behalf of the defendants one Talat Behzad and the learned counsel for the defendants have signed the application. The. Signatures -are duly verified by the learned counsel
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who admit execution of the application by their respective clients. I have examined the terms of the compromise which appear to be lawful and within the scope of the suit tfvith the exception that in para 7 of the application, the plaintiff have burdened with liability to pay to the defendant additional interest at the rate of 4%'per annum with bi-annual rests on the entire [Vol.XXI Dadabhoy Cement Industries Ltd. V. C.C. 315 National Development Finance Corporation (Saiyed Saeed Ashhad, C. J.) amount of over-due principal and the interest. The last mentioned term amounts to imposition to penal interest which cannot be allowed.' in the circumstances, such term is modified and it is ordered that para 7 of the application shall be incorporated in the decree as follows:- "7. That in the event of default in payment of any instalment, as agreed bpon, the entire principal and interest accrued thereon then remaining unpaid, shall become immediately due and payable by DCIL to NDFC without further notice, In such an event, NDFC shall be entitled to file execution application seeking payment of the entire amount as above from the plaintiffs." With the above modification, the application is granted and the suit is decreed according with no order ae to costs. Sd/- JUDGE Suit No. 1430/97 filed by respondent NDFC was also disposed of in terms of the above compromise and consent order. According to the above Compromise and the order dated 18.2.1998, DCIL had undertaken to repay a sum of Rs. 715,0, 000/- together with interest at 15 percent per annum on 'daily balance with quarterly rest. This amount was to be repaid within fifteen (15) years effective fr6m 1.9,1997 in sixty (60) equal quarterly instalments payable on or before 1st January, 1st April, 1st July and 1st December and first such instalment was payable on 1.4,1998. According to paragraph 7 of the Compromise, on default in payment of any instalment, on the part of DCIL, they would become liable for payment to NDFC of the entire principal amount and the interest accrued thereon immediately without any notice. DCIL defaulted in the payment of quarterly instalments after making payment of four (4) quarterly instalrnents. Thereafter DCIL filed applications under Section 12(2), CPC in June, 1998, whereas the respondents filed execution applications in both the aforesaid suits. Application under Section 12(2) filed in Suit No. 416/99 was registered as J.M. 30/99, whereas such application in Suit No. 1430/97 was registered, as J.M. 29/99. Both the aforesaid J.M. Petitions and the two Misc. Applications in the two execution applications being Ex. Applications No. 110/2000 and 137/2000 were disposed of by order dated 18.6.2001, whereby the learned Single Judge refused to recall the order dated 18.2.1998 aggrieved dismissed both the J.M. Petitions Nos. 29/99 and 30/99. Feeling aggrieved and dissatisfied with the aforesaid order, the appellants have filed the aforesaid four (4) Spl. HCAs. We have heard the arguments of Mr. Syed Sharif-ud-Din Pirzada, the learned counsel for the appellants and Mr. Khalid Anwar, the learned counsel for the respondent. We have also perused the material on record, the relevant provisions of law and have gone through the case-law relied upon by the learned counsel in support of their respective arguments. It was agreed upon by the learned counsel for the parties that all the four Special High Court Appeals may be disposed of finally at the stage pf Katcha. Peshi, if need be. After admitting them to regular hearing. , . . Mr. Syed Sharif-ud-Din Pirzada/assailed the Compromise as well as the order dated 1 8.2.1998 allowing- the said Compromise and disposing of Suit No. 430/96 in terms of-the contents of the above Compromise on the following grounds:-
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|A) .The MOU was based on misrepresentation, suppression of facts, deliberate and gross miscalculation on the part of the respondents with the intention of coerce DCIL to make payments of the amounts in excess of the amounts legally due and payable and recoverable from1 DCIL which the respondents were prohibited by Banking Control Department's (hereinafter referred to as BCD) Circulars Nos. 13 and 32 of State Bank of Pakistan and that the original amount of loan was blown ' up by respondent NDFC out of proportion by addition of interest., penal interest and mark- up over mark-up which was . Prohibited by law in the form of BCD's Circulars Nos. 1 3 and 32. (B) That the aforesaid facts not only constituted commission of fraud as contemplated by Section 1 2(2), CPC but also IVol.XX! Dadabhoy Cement Industries Ltd. V- C.C. 317 National Development Finance Corporation fSaiyed Sseed Ashhad C.J. I amounted to jurisdictional defect inasmuch as any action in clear disregard of law cannot be said to be an action or order according to the jurisdiction vesting in the' authority and would amount to unlawful order for want of jurisdiction as contemplated rn Section 12(2),.CPC. ? (C) That the said order was also defective and illegal as the - learned Single Judge failed t& take into consideration the provisions of Corporate and Industrial Restructuring Corporation Ordinance, '200Q (hereinafter-referred fO as CIRC Ordinance L of 2000 LVIII of 2000) which provided an expeditious legal remedy for recovery of outstanding loan payable to the Bank or financial institution by a non- ' performing asset by referring the sartr'e to State Bank of Ci ' - Pakistan for calculation of the. Actual amount due by the - verification Committee. Mr. Sharif-ujf-Din pirzada further submitted that MOU and the consent decree suffered from misrepresentation as narrated above and had been obtained by fraud and further that such a consent decree/cornpromise icould be set aside .On the ground that it was obtained by fraud if the aggrieved party could establish fraud or illegality. Further argument of Mr. Sharif-ud-Din Pirzada was that a consent decree did not stand on a higher footing or pedestal than an ordinary decree and could be set aside or recalled if it could De proved thaT the same was obtained by practising fraud on the Court and/or was against any express provision of law in support of this above contention, he placed reliance on the following cases: - (1) Zafar Ahmad and 5 others Vs. Government of Pakistan through Secretary, Ministry of Production, Islamabad and 6 others (1 994 MLD 161 2): l2) Government of Sindh through the Chief Secretary ana others Vs. Khahi Ahmed and others (1994 SGMR 782); (3) Union Carbide Corporation and others Vs. Union of India and others 11991 4 SCC 584; and (4) State of Punjab (now Haryana) and others Vs. Amar Singh and another (1 974) 2 SCC 70. He further submitted that there was no such principle that a party who was aggrieved bv a. Consent decree having been obtained by fraud or was contrary to. Law was estopped from challenging the consent decree on the ground that there was no estoppel against law. In support-of his above contention he placed reliance on the following cases:- * (1) Ruby Sales and Services (P) Ltd. And another Vs. State of Maharashtra and others (1994) 1 SCC 531; (2) Pir Sabir Shah Vs. Shad Muhammad Khan, Member - Provincial Assembly, N.W.F.P, and another
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(PLD 1995 SC 66); . (3) Malik Asad AH and others Vs. Federation of Pakistan through Secretary Law, Justice and Parliamentary Affairs, Islamabad and others (PLD 1998 SC 161); and (4) Muhammad Ayub Khan Vs. The Custodian of Evacuee Property and others (PLD 1963 Karachi 551), Another ground on which the impugned order dated 18.6.1991 was assailed was that the application ifnder Section 12(2), CPC was vigorously contested by1 the parties inasmuch as counter affidavit and affidavit-in-rejoinder were filed by the aforesaid parties and in view of the controverted and disputed issues and questions of facts and law, it was incumbent upon the learned Single Judge to enter into an investigation and inquiry and the learned Single Judge in dismissing the application under Section 12(2), CPC without holding an inquiry and investigation into the disputed questions of facts and issues committed an illegality as a result of which his order has been rendered unlawful and is liable to be set aside." In support of his above contention, he placed reliance on the follovying cases:- (1) Gtiulam Muhammad Vs. M. Ahmad Khan and 6 others (1994 SCMR 662); (2) Abdul Razzaq Vs. Muhammad Islam and 3 others (1999 SCMR 1714). Mr. Khalid Anwar, the learned counsel for the respondent [Vol.XXI Dadabhoy Cement Industries Ltd. V. C.C. 319 National Development Finance Corporation (Saiyed Saeed Ashhad, C.J.) objected to the maintainability of the aforesaid appeals and submitted that they were hopelessly time-barred but the appellants by. Circumvention of law proceeded to initiate the proceedings, which they were not legally entitled to initiate, with a view to obtain orders from a Court of law which*could provide them fresh period of limitation for filing the aforesaid appeals. Elaborating his arguments, he submitted that the order dated 18.2.1998 was passed on the Compromise, the contents of which were reduced to writing with the agreement and consent of both the contesting parties and both of them had full knowledge and awareness as to the contents thereof as well as the implication of the contents, In the circumstances, there was no occasion of the Compromise being based on misrepresentation, miscalculation and cqncealment/suppression of facts or that the order dated 18.2.1998 was obtained by way of fraud as a result of which the' grounds of fraud and misrepresentation mentioned in Section 12(2), CPC would not be available to the appellants. He further submitted that mere mention by the aggrieved party that the compromise application contained statements and figures based on misrepresentation, concealment of facts and miscalculation was not sufficient to warrant maintainability of an application under Section 12(2), CPC on the basis of fraud and misrepresentation and it was necessary for the appellants to have mentioned in detail the particulars of the misrepresentation, concealment of facts and miscalculation of the figures, In support of his above contention, he placed reliance on the following cases:- (1) Muhammad Umar Vs. Muqarab Khan and another (1968 SCMR 983); (2) Mst. Sahib Noor Vs. Haji Ahmad (1 988 SCMR 1703); (3) Ghulam Muhammad Vs. M. Ahmad Khan and 6 others (1993 SCMR 662); and
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(4) Kunjabehari Chakrabarty Vs. Krishnadhone Majumdar (AIR 1940 Calcultta 489). With regard to vyant/lack of jurisdiction as envisaged in Section 12(2)r CRC it was submitted by Mr. Khalid Anwar that the making of an order by a Court in violation or in ignorance of any provision of law through amounted to an illegality yet such an order could not be said to be an order without jurisdiction or lacking in jurisdiction so as to bring the same within the scope of the words "want of jurisdiction" and the same could not be Challenged by an application under Section .12(2), CPC but only by means of an appeal, In support of the above, he placed reliance on the following cases:- . (1) Muhammad Khan and another Vs. Massan and others ' 3 (V^W'SCMR 4-64)'; :'0'- (2) Rehmat AH' Vs. The Additional DistrictJudge, Multan and . Others l t 998 SCJ 7*3 U; . #tbs (3) (4) #to Mst. Naseem Akhtar and 4 others Vs^ Shalimar General Insurance Company Limited and 2 others (1994 SCMR 22); . . Muhammad Usman Vs.__ Pehlwan and 4 others (2000 YLR 2324); and (5) Saifuddin i/s. Zainuddin and others (1992 MLD 631). He further submitted that in the circumstances, the order dated 18.2.1998 was required to be challenged by way of an appeal under Section 21 of the Banking Companies (Recovery of Loans. Advances ' Credits and Finances) Act, 1997 (hereinafter referred to as the Act of 1997) but the same was not pressed into action and no . Appeal was filed against the above order within thirty (30) days as provided in Section 21(1) of the Act of 1997 on which the order attained finality and the appellants were precluded from challenging the same by way of application under Section 12(2), CPC. In support of his above contention, he placed reliance on the case , of Mst. Naseem Akhtar and 4 others Vs. Shalimar General Insurance Company Limited and 2 others (1994 SCMR 22! Isuprai. The arguments advanced by Mr. Khalid Anwar on the basis of which he had objected to the maintainability of these appeals are the same which were advanced by him while arguing the merits of the appeals, In the circumstances, it will be appropriate to proceed with the appeals on merits as the question of maintainability.f the ^Vol.XXI Dadabhoy Cement Industries Ltd. V. C.C. 321 National Development Finance Corporation (Saiyed Saeed Ash had, C.J.} appeals being inter-linked with the objections and the grounds raised by Mr. Khalid Anwar would automatically decide the fate of the appeals with regard to their maintainability. It is without any dispute that the Courts possess inherent power to set aside their on. Judgment, decree or final order which had been obtained fraudulently by way of misrepresentation and concealment/suppr'ession of facts or collusively. This sub-section 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. The essential requirement for such an application is that full particulars of the fraud and misrepresentation must be given in the application. Fraud includes untrue statements by one-who did not believe it to be true and active concealment of facts, it is also pertinent to note that the provisions of this section will not be attacted when the alleged fraud or misrepresentation was not in connection with the proceedings but prior their initiation. A party alleging commission of fraud or misrepresentation in obtaining the decree, judgment or final order has to state facts and circumstances which could warrant a presumption or the possibility of commission of fraud or misrepresentation. Mr. Sharif-ud-Din
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Pirzada has vehemently relied on the case of Abdur Rehman Khan Vs. Muhammad Altar and 3 others (1997 CLC 1260) wherein this Court pronounced that where allegation of fraud was made during the course of judicial proceedings then it was the duty of the Court to investigate and inquire into the matter to find out as to whether the impugned order or action was the result of fraud or misrepresentation and without making a detailed inquiry and investigation, the allegation of fraud ought not to have been rejected.- We are in agreement with the observations made by this Court in the'aforecited case. However, from a careful perusal of the aforecited case, it transpires that it had been maintained that the allegation of fraud or misrepresentation must be supported by the attending circumstances and facts of the case and a presumption relating to the possibility of commission of fraud should be forthcoming before any. Investigation or inquiry could be ordered and on mere allegation without there being any material to tend support or substantiate the commission of fraud or making of misrepresentation would not require commencement of any investigation or inquiry. This Court has further pronounced that there ought to be specific and definite allegation of fraud, it will also be pertinent to note that the definition of the fraud and the discussion as to what amounted to fraud in the aforecited case would make it difficult to infer that in the presence of the facts and circumstances of the case it could be held that respondent NDFC had committed fraud as the main ingredient of fraud namely, intention to deceive or to induce…
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