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Official Citation: 2026 LHC 2620
Court / Jurisdiction: Lahore High Court (Honorable Mr. Justice Muhammad Sajid Mehmood Sethi)
Parties: NBP vs M/S HUSSAIN MILLS PVT LTD ETC
Ruling Summary: This decision was rendered by the Lahore High Court (Honorable Mr. Justice Muhammad Sajid Mehmood Sethi), officially reported as 2026 LHC 2620. In this matter between NBP and M/S HUSSAIN MILLS PVT LTD ETC, 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: Lahore High Court (Honorable Mr. Justice Muhammad Sajid Mehmood Sethi) DECISION DATE: 25-03-2026 CASE DETAILS: Civil Original Suit (C.O.S) 13-22 ============================================================ Stereo. H C J D A-38. JUDGMENT SHEET IN THE LAHORE HIGH COURT, MULTAN BENCH, MULTAN JUDICIAL DEPARTMENT COS No.13 of 2022 National Bank of Pakistan Versus M/s Hussain Mills Limited & others J U D G M E N T Date of hearing: 15.04.2026. Plaintiff by: M/s Ambreen Moin and Javaria Latif, Advocates. Defendants by: M/s Zohaib Hassan and Aakif Majeed, Advocates. MUHAMMAD SAJID MEHMOOD SETHI, J .- Through the instant suit instituted under Section 9 of the Financial Institutions (Recovery of Finances) Ordin ance, 2001 (“Ordinance, 2001”) , the plaintiff-bank seeks recovery of an amount aggregating to of Rs. 1,838,239,306.79 (Rupees One Billion Eight Hundred Thirty -Eight Million Two Hundred Thirty -Nine Thousand Three Hundred Six and Seventy-Nine Paisas only) from the defendants on account of persistent default in repayment of various banking facilities extended to defendant No.1, which were subsequently restructured through duly executed financial instruments. 2. The case of the plaintiff -bank, as borne out from the pleadings and documentary record, is that multiple credit facilities were extended to defendant No.1 in the ordinary course of banking business. Upon default, defendant No.1 itself approached the plaintiff -bank for restructuring of its liabilities, wh ich request was accepted. The entire outstanding exposure was accordingly restructured through a duly passed Board Resolution, loan application, Facility Offer Letter dated 19.12.2019, Restructuring Agreement dated 31.12.2019, and subsequent Term Finance A greements. However, defendant No.1 failed to adhere to the agreed repayment terms. The outstanding liability, as reflected in the statement of account, comprises the 2 COS No.13 of 2022 principal finance availed, accrued markup, and frozen markup, aggregating to the claimed amount, details whereof are as under: Demand Finance Facility-I Amount of Finance Availed: Rs.1,335,406,382.20 Amount paid by defendants: Rs.00.00 Outstanding Mark-up Rs.412,332,924.59 Total: Rs.1,747,739,306.79 Frozen Mark-up: Rs.90,500,000/- Amount paid by defendants: Rs.00.00 Total Amount Outstanding: Rs.1,838,239,306.79 3. The defendants were summoned through summons in Form No.4 in Appendix ‘B’ of the Code of Civil Procedure, 1908, as required under Section 9(5) of the Ordinance, 2001, as well as through publication of proclamation in the newspapers. They appeared through learned counsel and filed PLA No.27 of 2022, seeking unconditional leave to defend the suit. In their application and written submissions, the defendants raised variou s objections, inter alia, contending that no liability survives after restructuring; that the restructuring documents do not constitute a binding acknowledgment of liability; that the statement of account is incomplete, incorrect, and not in accordance with Section 9(2) of the Ordinance, 2001; that the same is merely an “excel printout,” lacks proper certification, and has not been issued by the relevant branch; that the financing documents are disputed; and that the suit is not maintainable due to alleged non-compliance with statutory requirements. It was further contended that discrepancies exist in the number of facilities, debit entries, and accounting treatment of RF and LC facilities; that certain amounts were never availed; that entries are not supported by underlying current account statements; and that markup, including RF and LC -related markup, has been excessively charged or improperly calculated, with certain credits allegedly not adjusted. The defendants also asserted that disputed questions of fact arise, necessitating recording of evidence, and that no valid cause of action exists. In support of the contentions, learned counsel for the defendants placed reliance upon Messrs Muhammad Siddiq Muhammad Umar and another v. Australasia Bank Ltd. (PLD 3 COS No.13 of 2022 1966 Supreme Court 684) , Barkhurdar v. Muhammad Razzaq (PLD 1989 Supreme Court 749), Government of N.- W.F.P. through Secretary, Housing and Physical Planning, Peshawar and others v . Haji Sham Sher Khan and others (PLD 2011 Supreme Court 250) , Habib Bank Limited v. Orient Rice Mills Ltd. and others (2004 CLD 1289), Mst. Riffat Jehan and another v. Habib Bank Limited and 10 others (2005 CLD 941), Faisal Bank through duly appointed Attorneys v. Messrs Zimindara Rice Mills and 21 others (2007 CLD 1164) , Trading Corporation of Pakistan (Pvt.) Ltd. v. Messrs S.R. International (2008 CLD 412) , Mst. Akhtar Begum v. Muslim Commercial Bank Limited (2009 CLD 189) , Muhammad Umer Rathore v. Federation of Pakistan (2009 CLD 257) , Askari Bank Limited v. Waleed Junaid Ind ustries and 2 others (2012 CLD 1681) , Messrs Dhrala Oil Mills through Partners / Guarantors and 4 others v. The Bank of Punjab through Branch Manager (2014 CLD 153) , Elbow Room and another v. MCB Bank Limited (2014 CLD 985) , Messrs Ali Traders Rice Deale r Gujranwala through Sole Proprietor and another v. National Bank of Pakistan (2015 CLD 1) , Messrs Multan Textile Allied Industries (Pvt.) Limited through Managing Director and 5 others v. Habib Bank Limited through Branch Manager and another (2015 CLD 160 ), The Bank of Punjab through Branch / Chief Manager v. Messrs Khan Unique Developers Pvt. Ltd. through Chief Executive Officer and 9 others (2016 CLD 29), Sheikh Murshid Ali and others v. United Bank Limited (2016 CLD 1471), Askari Bank Limited v. Sagar Sports (Pvt.) Ltd. and others (2017 CLD 162), Jamal Tube (Pvt.) Ltd., Lahore through Chief Executive Officer and others v. First Punjab Modaraba, Lahore through Authorized Officer and another (2021 CLD 1372) , SME Bank Limited through Branch Manager v. Messr s Punjab Store through Proprietor and another (2022 CLD 251) and House Building Finance Corporation v. Amir Rafi and others (2022 CLD 892). 4. The plaintiff-bank, in its reply and replication, has controverted these assertions and relied upon the restructu ring documents, duly executed by defendant No.1, as well as the certified statement of account. It is contended that the defence is vague, unsupported by any 4 COS No.13 of 2022 material, and does not meet the mandatory requirements of Section 10 of the Ordinance , 2001. Learned counsel for plaintiff -bank has placed reliance upon Bank of Punjab v. Messrs Sultan Motors and others (2017 CLD 923). 5. I have heard the learned counsel for the parties and have carefully examined the pleadings as well as the documentary record. The c entral question requiring determination is whether, in the circumstances of the case, the defendants have disclosed any substantial question of law or fact within the meaning of Section 10 of the Ordinance, 2001, so as to warrant grant of leave to defend, or whether the defence raised is vague, unsupported by material particulars, and insufficient in law to merit trial. EXECUTION OF RESTRUCTURING DOCUMENTS AND ACKNOWLEDGMENT OF LIABILITY. 6. It is evident from the defendants’ own Loan Application Form and Facility Offer Letter that five (05) credit facilities were restructured, namely CF -P amounting to Rs. 899.242 million, CF -H amounting to Rs. 149.122 million, FIM amounting to Rs. 49.184 million, RF (backed by export documents) amounting to Rs. 88.158 million, and LC amounting to Rs. 150 million. The outstanding amounts in respect of CF -P, CF-H, and FIM are duly and accurately reflected in the statement of account placed on record. As regards RF backed by export documents and the LC facility, their accounti ng treatment, owing to the nature of transactions and maturity structure, has resulted in reflection through multiple entries in the statement of account. The RF facility of Rs. 88.158 million is accordingly shown in two entries, i.e. Rs. 61.810 million an d Rs. 26.347 million, which collectively correspond to the total sanctioned amount. Likewise, the LC facility has been recorded upon maturity in multiple tranches, i.e. Rs. 60.692 million, Rs. 62.002 million, Rs. 6.746 million, Rs. 10.110 million, and Rs. 10.047 million, collectively aggregating to Rs. 150 million, in conformity with the Loan Application Form and Facility Offer Letter. At the time of restructuring, the existing short -term liabilities were consolidated and carried forward in accordance with the restructuring arrangement, including conversion into a long -term 5 COS No.13 of 2022 demand finance structure and treatment of accrued markup as frozen markup. The Board Resolution of defendant No.1 reflects acknowledgment of Rs. 90.500 million as outstanding markup relat ing to earlier short -term facilities, which was accordingly classified under the restructuring arrangement. 7. From the record, it further transpires that the liability of defendant No.1 stands acknowledged through a series of duly executed financial instr uments, including the Board Resolution, Loan Application Form, Facility Offer Letter dated 19.12.2019, Restructuring Agreement dated 31.12.2019, Term Finance Agreement along with repayment schedule, and Demand Promissory Note. These documents, read collect ively, demonstrate that upon default, the defendants voluntarily approached the plaintiff -bank for restructuring of their liabilities and accepted the revised financial arrangement. The defendants, having consciously executed the restructuring instruments and agreed to the repayment structure, are bound by their contractual undertakings. The restructuring agreements and allied documents, bearing the admitted signatures of defendant No.1, constitute binding, valid and enforceable contractual obligations, and no material has been brought on record to suggest fraud, misrepresentation, coercion, or any other vitiating factor affecting their validity. It is a settled principle that a party who voluntarily enters into a contractual arrangement and derives benefit therefrom is estopped from resiling from its obligations. In the present case, the conduct of the defendants in seeking restructuring and acting upon the same clearly reinforces acknowledgment of liability and acceptance of the contractual terms, rendering any subsequent denial legally untenable. LEGAL EFFECT OF RESTRUCTURING OF FINANCIAL FACILITIES 8 Restructuring, as recognized under the law and settled judicial principles, constitutes a fresh arrangement of an already admitted liability. It does not invo lve any new disbursement; rather, it is a mechanism whereby the acknowledged outstanding amount is converted into a demand finance facility with a revised repayment schedule. Such restructuring is only undertaken upon default or 6 COS No.13 of 2022 inability of the borrower t o repay, and is granted upon the borrower's categorical admission of liability. It is by now settled jurisprudence that in cases of restructuring/rescheduling, the financial institution is not required to produce statements of account prior to the restruct uring agreement, as the liability stands admitted and acknowledged by the borrower. By agreeing to restructuring, the bank merely deferred its immediate right of recovery and enforcement, granting concessionary terms to facilitate repayment. The legal cons equence thereof is a clear and binding acknowledgment of liability, which operates as an estoppel against the borrower from subsequently disputing either the existence or the quantum of the debt. The plea that no liability survives after restructuring is, therefore, wholly misconceived and contrary to the settled principles governing financial and banking transactions. Reference can be made to Habib Bank Ltd. v. Taj Textile Mills Ltd. through Chief Executive and 5 others (2009 CLD 1143) , NIB Bank Ltd. v. De wan Textile Mills Ltd. (2012 CLD 141) , Syed Abbas Ali v. Bank of Punjab through Manager and others (2015 CLD 1409) and The Bank of Punjab through Executive Vice -President v. Flying Cement Company Limited through CEO/Director and 14 others (2015 CLD 1567). PLEA OF NON -COMPLIANCE WITH STATUTORY REQUIREMENTS 9. The plea regarding non -compliance with statutory requirements is also without merit. The plaint is accompanied by all requisite documents, including finance agreements, restructuring instruments, and the certified statement of account, as mandated under Section 9 of the Ordinance, 2001. The suit has been instituted through a duly authorized attorney of the plaintiff-bank, supported by a valid Power of Attorney available on record. No concrete deficiency has been pointed out by the defendants to render the institution of the suit defective. The law is well settled that technical objections, in the absence of demonstrable prejudice, do not defeat a claim otherwise validly instituted. The superior Courts ha ve consistently held that substantial compliance with statutory requirements is sufficient where the liability stands otherwise established through documentary evidence. The Court 7 COS No.13 of 2022 holds that the plaintiff -bank has strictly complied with the mandatory requirements of Section 9 of the Ordinance, 2001, by placing on record all relevant financing documents, restructuring instruments, and certified statement of account. The suit has been instituted through a duly authorized attorney, and no material illegality or procedural defect has been demonstrated by the defendants. It is well settled that technical objections, in the absence of demonstrable prejudice or failure of justice, cannot defeat a claim otherwise supported by unimpeachable documentary evidence. Acco rdingly, the objection regarding non -compliance is devoid of legal force and substance. Reliance in this regard could be placed upon cases reported as First Dawood Investment Bank Ltd. v. Bank Islami Pakistan Ltd. (2019 SCMR 1925) , The Bank of Punjab through Branch / Chief Manager v. Messrs Khan Unique Developers Pvt. Ltd. through Chief Executive Officer and 9 others (2016 CLD 29 Lahore ), Ehsan-Ul-Haq v. MCB Bank Limited through Manager (2016 CLD 1874 Lahore) , Allied Bank Limited through Principal Officers v. Messrs S.G. Polypropylene Pvt. Limited through Directors/Chief Executive and 5 others (2018 CLD 199) , Mian Ashiq Hussain and others v. Faysal Bank and others (2019 CLD 152 ), Messrs Bahawalpur Cotton Company v. United Bank Limited (2021 CLD 434) , The Ban k of Khyber through Branch Manager v. Messrs Kashmir Sugar Mills Limited through Chief Executive and others (2021 CLD 1220) . LIABILITY OF GUARANTORS 10. Furthermore, defendants No.2 to 5, being guarantors, have assumed liability which, under settled princi ples of banking and contract law, is co -extensive with that of the principal debtor, unless otherwise limited by the terms of the guarantee. The Court observes that a contract of guarantee creates an independent yet co -extensive obligation, enabling the cr editor to proceed against the sureties simultaneously with, or independently of, the principal borrower. It is further noted that the burden to establish discharge, novation, release, or any legally recognized mode of extinguishment of a guarantee squarely rests upon the guarantors. In the present case, no material whatsoever has been produced to demonstrate that the guarantees 8 COS No.13 of 2022 executed by defendants No.2 to 5 have been discharged, cancelled, or rendered unenforceable in accordance with law. Mere assertions, in the absence of supporting documentary evidence, are insufficient to rebut the contractual liability voluntarily undertaken. The Court also finds that the liability of a surety continues unabated so long as the principal obligation subsists, and the gu arantor remains bound by the express terms of the guarantee unless formally released by the creditor. The law is well -settled that the surety cannot escape liability merely on account of indulgence, restructuring, or concessions granted to the principal debtor, nor can such financial accommodations be construed as discharge of guarantee obligations. The superior Courts have consistently upheld this principle, holding that guarantees constitute enforceable and independent obligations, and that the creditor i s entitled to enforce the same without first exhausting remedies against the principal debtor. Reference can be made to Messrs Huffaz Seamlen Pipe Industries Ltd. and 2 others (2002 SCMR 1419), Sahara Trading International (Pvt.) Ltd. and others v. Bank Al falah Ltd . (PLD 2004 SC 925 ), Messrs State Engineering Corporation Ltd. v. National Development Finance Corporation and others (2006 SCMR 619) , Bolan Bank Limited through Attorneys v. Baig Textile Mills (Pvt.) Ltd. through Chief Executive and 6 others (2002 CLD 557 Lahore) and Standard Chartered Bank (Pakistan) Ltd. through Authorized Attorney v. Needle Point (Pvt.) Ltd. through Chief Executive and others (2016 CLD 2066 Lahore) , Adamjee Polycraft Limited and 3 others vs National Investment Trust Limited (2017 CLD 380 Sindh ) and Mian Furqan Idrees and others v. JS Bank Limited and others (2022 CLD 1395 Lahore ). DEFENDANTS’ OBJECTIONS REGARDING THE STATEMENT OF ACCOUNT AND OTHER DOCUMENTS AND THE EVIDENTIARY VALUE THEREOF 11. The plea that ten debit entries am ounting to Rs. 1,335.406 million in DF-I account are illegal or unsupported is without merit. The record clearly demonstrates that five pre -restructured facilities were consolidated into DF-I facility in terms of Loan Application Form and Facility Offer Le tter dated 19.12.2019 and Restructuring Agreement 9 COS No.13 of 2022 dated 31.12.2019. The alleged distinction between “five facilities” and “ten entries” is merely a matter of internal banking accounting segmentation of consolidated liabilities and does not give rise to any independent or additional liability. No specific entry has been shown to be fictitious, unauthorized, or not arising from admitted exposure. 12. Similarly, objections regarding RF and LC facilities being unadjusted or unsupported by documents are also wi thout substance. The restructuring instruments clearly reflect consolidation of all pre - existing liabilities, including RF (export-backed) and LC facilities, into DF-I structure. The reflection of LC and RF amounts in multiple entries corresponds to their transactional maturity structure and does not indicate fresh disbursement or duplication. The defendants have failed to point out any contractual exclusion of such facilities from restructuring. 13. The contention that disputed entries are not reflected in current account No. 9014 -5 is equally misconceived, as financing liabilities arising from structured credit facilities are recorded in loan/finance ledgers and not necessarily through operative current accounts. The defendants have not produced any coun ter-statement or expert audit report to rebut the certified accounts maintained by the plaintiff-bank. 14. The objection based on Article 48 of the Qanun -e-Shahadat Order, 1984 is also untenable. The plaintiff -bank has placed on record duly certified sta tements of account maintained under the Bankers’ Books Evidence Act, 1891, which carry a statutory presumption of correctness. The defendants have failed to rebut the same through any specific entry-wise challenge, independent account, or expert evidence. A general denial or arithmetic disagreement is legally insufficient to displace such presumption. 15. The objection regarding RF markup amounting to Rs. 412.333 million and alleged non-inclusion in restructuring is contrary to record. The restructuring a greement clearly shows consolidation of all outstanding liabilities, including RF exposure, into the restructured facility. Once liabilities are merged into restructuring, their earlier classification loses independent relevance unless expressly excluded, which is not the case here. 10 COS No.13 of 2022 16. The plea that markup cannot be charged on LC facility being non-fund based is also misconceived in the context of restructuring, as the liability has been converted into a funded demand finance structure governed by agreed repayment and markup terms. Likewise, the allegation of excess markup calculation is based on unilateral computation by the defendants without any contractual or expert backing, and no discrepancy has been demonstrated in the plaintiff - bank’s calculation. 17. The objection regarding alleged non -adjustment of frozen markup or minor accounting entries is purely internal in nature and does not affect the subsistence or quantum of liability. No prejudice or excess recovery has been shown by the defendants. Lastly, the plea that certain amounts were never availed or are not supported by current account statements is also without legal force. The restructuring documents, duly executed by defendant No.1, constitute clear acknowledgment of liability, and the burd en was upon the defendants to disprove the same through cogent evidence, which they have failed to do. 18. The objections raised by the defendants under various grounds, including alleged irregular debit entries, non -availment of facilities, improper acco unting of RF and LC transactions, discrepancies in account statements, and alleged excess markup calculations, are vague, fragmented, and unsupported by material particulars. No specific entry has been demonstrated to be unlawful, unauthorized, or contrary to the agreed restructuring framework. The assertions are based on unilateral assumptions without any supporting documentary or expert evidence, and thus do not give rise to any substantial question of law or fact requiring adjudication. 19. The challenge to the statement of account is misconceived and lacks any legal substance. The plaintiff -bank has placed on record a duly certified statement of account, maintained in the ordinary course of its business, which fulfills the requirements of the Bankers’ Bo oks Evidence Act, 1891 , reflecting the restructured Demand Finance Facility along with the frozen markup. The entire transaction relating to all facilities has been comprehensively captured in the certified 11 COS No.13 of 2022 statement of account. Such a statement carries a statutory presumption of correctness and constitutes prima facie evidence of the transactions recorded therein, unless specifically rebutted. In the present case, the defendants have failed to discharge this burden. No specific entry, calculation, or transaction has been identified as erroneous, nor has any contrary material been produced to challenge the veracity of the account. It is a settled proposition that a general or evasive denial of liability does not suffice to rebut the statutory presumption att ached to a certified statement of account. The law requires a defendant to point out precise discrepancies and support such objections with credible material, failing which the account statement must be accepted as correct. Furthermore, the defendants’ con duct reflects that no contemporaneous objection was raised at the relevant time despite the availability of account statements, thereby attracting the principle of financial estoppel. A party who remains silent in the face of communicated financial records cannot subsequently be permitted to dispute them without cogent justification. In these circumstances, the objections raised by the defendants, being vague, unsubstantiated, and devoid of particulars, do not give rise to any substantial question of law or fact within the meaning of Section 10 of the Ordinance, 2001. The evidentiary value of the certified statement of account, therefore, remains intact and unimpeached. Reliance in this regard may safely be placed on cases reported as Muhammad Saleem Khan vs . MCB Bank Limited (2020 SCMR 984) , Messrs Naeem Zafr Industries and others v. Bank of Punjab (2017 CLD 397) , First Dawood Investment Bank Limited v. New Allied Electronics (PVT.) Limited and another (2018 CLD 250) , and MCB Bank Limited through Authorized Officer v. Messrs City Steel UAE Mills (Pvt.) Ltd. through Chief Executive and others (2024 CLD 387). 20. From a cumulative appraisal of the pleadings, documentary record, and the written submissions of the parties, this Court finds that the defence set up by the defendants is evasive, fragmented, and bereft of material particulars. The application for leave to defend does not disclose any substantial question of law or fact within the contemplation of Section 10 of the Ordinance, 2001. The objections 12 COS No.13 of 2022 raised are largely technical in nature, directed against the statement of account, restructuring entries, and markup calculations, and appear to have been taken merely to delay and frustrate the recovery proceedings, rather than to raise any bona fide dispute warranting trial. Consequently, this Court is of the considered view that no case for grant of leave to defend is made out. The objections raised by the defendants are hereby repelled.…
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