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Petitioner: NATIONAL BANK OF PAKISTAN VS Respondent: CAST-N-LINKS PRODUCTS LTD and 9 others
Court Name: Sindh High Court Judge(s): Aziz-ur-Rehman Title: NATIONAL BANK OF PAKISTAN vs CAST-N-LINKS PRODUCTS LTD and 9 others Case No.: Suit No. B-11 of 2001 Date of Judgment:2015-05-27 Reported As: 2015 CLD 1598 Result: Suit decreed
JUDGMENT
JUDGMENT AZIZ-UR-REHMAN, J.---The present suit has been filed by the plaintiff Bank, inter alia, for Recovery of US $ 1,775,977.28 and Rs .55,734 ,637.20 against defendants Nos.1 to 9 under Banking Companies [Recovery of Loans, Advances, Credits and Finances] Act, 1997 [Act No.XV of 19971 with the following prayers:- (a) a sum of Rs. 151,585,019 together with interest and/or mark-up pendente lite until realization; (b) interest and additional interest on the FCY from 30th June, 2000 to the date of suit, pendente lite and until realization; (c) against the defendant No.1 for sale of the mortgaged property bearing No. C/133, SITE Area, Nooriabad, SITE, Survey Sheet No. 35P11-35 L/23, admeasuring 3 acres or thereabouts, together with building, structure, fixture, fittings, plant, machinery and other equipment situated thereon, situated at Industrial Estates Trading Area, Nooriabad, with the Registration District, Sub-District and City of Dadu, for the realization of the amounts due under prayer clauses [a] to [e] above. (d) against the defendants 2 to 9 for the sale of the shares of the defendant No.1 held or owned by them and under pledge with the plaintiff for sale, for the realization of the amounts due under prayer clauses [a] to [e]; (e) granting costs of the suit to the plaintiff and; granting such other relief[s] as may be appropriate in the circumstances of the case. 2. The defendant No.1 in the suit has been joined in its dual capacity as principal borrower/customer in terms of section 2[c] and [d] in respect of Foreign Currency Loans i.e. First and 2nd Foreign Currency Loans which were later-on mutually agreed to be merged by means of a Supplementary Credit Agreement dated 26-2-1990] and finance facilities as defined in section 2[e]
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and [f] of Act No.XV of 1997. The Finance Facilities granted to and availed by defendant No.1 are duly mentioned in paras 1, 3(i), 5(i), 6(i), 7(i) and 9(i) of the plaint. Besides, principal borrower/customer, the defendant No.1 is a mortgagor while, defendants Nos.2 to 9 have been joined in their dual capacities as guarantors and pledgers in respect of the finance facilities availed by the defendant No.1. The defendant No.10 [ICP now IDBP] as being a 'pari passu charge' holder has been joined in the suit in pursuant to and in compliance with order dated 29-9-2011, by way of filing an 'AMENDED TITLE' on 30-10-2011. 3. In consideration of various finance facilities i.e. Foreign currency loans and mark-up based facilities granted to and availed by the defendant No.1, the defendant No.1 besides financial agreements, promissory notes also signed and executed Undertakings, Memoranda, Deeds of floating charge, Letters of hypothecation, Irrevocable general power of attorney[s], Charge certificates etc. Of various dates. Likewise, defendants Nos.2 to 9 signed and executed letters of personal guarantees, pledged letters/supplemental agreements for pledge of shares of different dates. All the aforesaid documents are annexed with the plaint as Annexures 'A' to 'X'. Besides, Certified Statement of Accounts are also enclosed as Annexures 'Y-1' to ' Y-25'. 4. The original plaint, as appears, was presented on 17-1-2001. Upon filing of the suit, process under section 9 of the Banking Companies [Recovery of Loans, Credits and Finances] Act, 1997 [Act No.XV of 1997], was issued to the defendants by all four [4] modes. In response, only on behalf of the defendants Nos.1 to 6, Leave to Defend Application bearing C.M.A. No.2029 of 2001 was filed, however, without any supporting affidavit[s] thereof. Nonetheless, later on, in support of the Leave to Defend Application bearing C.M.A. No.2029 of 2001 filed on 21-1-2001, 'five affidavits' were also filed on behalf of the defendants Nos.1 to 6 on 26-1-2001. As far as other defendants [i.e. Defendants Nos.7, 8 and 9] are concerned, they in their own wisdom did not file any Leave to Defend Application. The case of defendants Nos.7, 8 and 9 is fully covered under section 9[4] of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 [Act XV of 1997]. Subsection (4) of section 9 of Act XV of 1997 reads as follows:- "(9) Procedure of Banking Courts.-- (1)....... (2)....... (3)....... (4) In any case in which the summons has been served on the defendant as provided for in subsection (3) the defendant shall not be entitled to defend the suit unless he obtains leave from the Banking Court as hereinafter provided so to defend the same; and, in default of his doing so, the allegations of fact in the plaint shall be deemed to be admitted and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof or such other material as the Court may require in the interests of justice. 5. From the record, it reveals that by consent application under Order VI, Rule 17, C.P.C. Bearing C.M.A. No.7858 of 2001, filed by the plaintiff was granted on 26th April, 2002, and resultantly, the plaintiff was allowed to file amended plaint. Pursuant to and in compliance with aforesaid order of 26-4-2002, the amended plaint was filed on 10-5-2002. Per the aforesaid order, the defendants in order to meet the 'amended facts' if any, in the plaint were also permitted to file their 'Additional Leave to Defend Application'. For convenience and ready reference order dated 26-4-2002 is reproduced as under:- "26-4-2002 Mr. Adnan lqbal, Advocate Mrs. Seema Waseem, Advocate (1) C.M.A. No.7858/01 is granted by consent. Consequently, the plaintiff is allowed to file amended/plaint within two weeks. After filing of the amended plaint, the defendant is allowed to
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file additional leave to defend application to meet the amended facts introduced through amendment of plaint. (2) Deferred." 6. Subsequently, and after filing of the amended plaint on 10-5-2002, when above case came-up before the Court then, on 3-9-2002 the following order was passed:- "3-9-2002 Copy of additional leave to defend application has been supplied to the plaintiff's counsel, who may take any plea against such additional leave to defend, which has been filed in view of the amendment of the pleadings by the plaintiff. No leave to defend application has been filed on behalf of the defendants Nos. 7 to 9, the period for filing such application expired. The plaintiff granted two foreign currency facilities to the defendant No.1 in US Dollar $ 1.25 million vide agreement dated 15-3-1987, second in US Dollar $ 318,000 vide agreement dated 14-9-1988. Both foreign currency loans were merged in one loan in US Dollar $ 1,479,981.07. The defendant No.8 created charge over his share owned by him of defendant No.1 and also guaranteed its repayment by personal guarantee through annexure-H. The defendant No.1 also availed four local facilities on different dates and under different agreement [I] in the sum of Rs.9,450, [2] 1,544,252/0 sale price, [3] Rs.3,096,526 purchase price, [4] Rs.1,455,748/0 sale price and Rs.3,37,944 purchase price. The above three facilities were guaranteed by the defendant No.8 namely, Sikandar Ali by creating additional charge of share owned by him in defendant No.1 as well as personal guarantees. The local currency facility was also restructured by an agreement dated 26-10-1998. The payment under the restructuring of loan was not guaranteed by defendant No.8. The restructuring/consolidation of foreign currency account except the defendant No.8. The question which requires consideration is whether the defendants Nos. 7 and 9 stand discharged from their liability in view of the subsequent agreement in respect of the foreign currency and the defendants Nos. 7 to 9 in like manner in respect of the local currency facility. The counsel contends that the same question is involved in leave to defend application filed on behalf bf the defendants Nos.1 to 6 and he wants to argue this point while arguing replication for leave to defend." [Underlining is mine]. 7. From the record it further transpires, that in compliance with another order of 29-9-2011, an 'amended title' was also filed by the plaintiff Bank on 3-10-2011. The relevant part of order dated 29th September, 2011 reads as follows:- 29-9-2011 (3) (4) This is application by the intervener named therein seeking to be impleaded as co-plaintiff Learned counsel for the plaintiff states that he has no objection if the intervener is joined as defendant, to which learned counsel who has filed this CMA agrees, accordingly by consent this application is allowed in terms that the intervener may be impleaded as a defendant. Amended plaint to be filed within one week. Learned counsel now putting in appearance on behalf of defendants state that his Vakalatnama is under some sort of office objection, he undertakes to remove the same within one week. By consent adjourned. (Underlining is mine]. 8. Earlier on 29-11-2002, the application under Order XXXIX, Rule 7 read with section 151, C.P.C. Bearing C.M.A. No.8027 of 2002, filed by the plaintiff was also allowed and by consent 'Official Assignee' was appointed as Commissioner to carry out the inspection of properties of defendant No.1 and also to prepare an inventory of the available assets/properties by either personally or through some other responsible officer/representative nominated by him. In terms of the afore- said order, the parties were at liberty to join the concerned officer appointed for the purpose of inspection and preparation of the inventory. The relevant report of Official Assignee dated 27-1-
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2003 is available on record. Paras Nos.3, 4 and 5 therefrom, being relevant are reproduced as follows:- "(3) That on 12-12-2002 Mr. Naseem, Engineer of plaintiff and Mr. Nisar Ahmed from defendant attended. Official Assignee deputed his staff member Ali Raza with them for preparation of inventory. They reached at the factory known as Cast N-Links Products situated at plot No. C/133, SITE Nooriabad. Mr. Naseem Engineer for plaintiff bank took some photographs and told that inventory has been already prepared by another Engineer of the Bank who was on leave. As soon as he resumes duty, the inventory will be verified but thereafter no one attended from plom plaintiff Therefore Official Assignee sent notice dated 6-1-2002 to Mr. Tariq Ansari, AVP, National Bank of Pakistan and also copies of notice to plaintiff through Mr. Adnan Iqbal, advocate and defendants through Mr. Khalid Jawaid advocate to attend on 14-1-2003 for preparation/verification of inventory. (4) That on 14-1-2003 Mr. Asif Ali Shah, advocate representing Mr. Khalid Jawaid, advocate for plaintiff attended and requested for adjournment. At his request matter was adjourned to 21-1- 2003, such intimation was sent to Mr. Tariq Ansari, AVP, National Bank of Pakistan and also plaintiff and defendant through their advocates under letter dated 15-1-2003. However, on 21-1-2003 no one from plaintiff and defendant attended inspite of service of notice. (5) The Official Assignee respectfully submits that in view of above facts it appear that parties have lost interest in the case, matter may be consigned to record." [Underlining is mine]. 9. Later on, upon promulgation of Financial Institutions [Recovery of Finances] Ordinance, 2001 [In short FIO, 2001], two fresh Leave to Defend Applications under section 10 of F.I.O., 2001 bearing C.M.A. No.8356 of 2001 [Pg - 147] and C.M.A. No.6422 of 2002 [Pg - 253] both filed on behalf of defendants Nos.1 to 6 are available on record. 10. Being relevant section 10[12] of F.I.O., 2001 is reproduced as under:- "10. Leave to defend.-- 'Where an application for leave to defend has been filed before the coming into force of this Ordinance, the defendant shall be allowed a period of twenty-one days from the date of coming into force of this Ordinance, or from the date of first hearing thereafter, whichever is later, for filing an amended application for leave to defend in accordance with the provisions of this Ordinance." 11. In response to the fresh LEAVE TO DEFEND APPLICATION[S], filed on behalf of defendants Nos.1 to 6, "REPLICATION', as required, under section 10[7] of F.I.O., 2001, was also filed by the plaintiff Bank. On 8-10-2003, when the above case came-up before the Court, then the following order was passed:- "C.M.As. No.8356/01 and 8357/02 are listed today. C.M.A. No.8356/01 is an application under section 10 of the Ordinance 2001 whereas C.M.A. No.8357/02 is not traceable in record. Both the Counsel submitted that in fact C.M.A. No.6442/02 [correct No.6422 of 2002] should have been listed for hearing. By consent of both, this application is taken and heard. [2] Mr. Javaid raised number of questions pertaining to the conduct of the plaintiff while disbursing the amount to the defendants. The main ground is that it was due to the default of disbursement of the required amount by the plaintiff that caused the failure of the project. Otherwise the project was ready for all practical purposes. He further submitted that at present the factory is closed and the defendants are not in position to run the same due to absence of the finances. He also informed that the inventory has been prepared by the officials of the plaintiff and the same is with them. Mr. Javaid further submitted that though the factory is not in running position, his clients are still having their chowkidars at their cost posted there to secure the assets of the factory. He submitted that in these circumstances, the plaintiff be directed to take the factory and place their chowkidars at their own cost to secure their assets and save the defendantS incurring the salaries of the chowkidars. He also submitted that he will be satisfied, if he is allowed to participate into the proceedings to examine the statement of account submitted
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by the plaintiff at the time of determination the quantum of amount actually due and payable by the defendant to the plaintiff. Mr. Adnan has no objection to the above proposal. Order accordingly. All applications under section 10 of the Ordinance filed by the defendants are disposed off in terms of the above. [3] The plaintiffs to file a fresh statement of account on oath with break-up of the amounts disbursed and the amount payable in accordance with law. Mr. Javaid submitted that Mrs. Seema Waseem is no more appearing in this case, therefore, her name may be deleted from the file. Office to do needful and delete the name of Mrs. Seema Waseem from the file as well as from the cause list." [Underlining is mine]. 12. Pursuant to and in compliance with the aforesaid order of 8-10-2003 the plaintiff Bank viz. NBP [NDFC Unit], filed 'FRESH STATEMENT OF ACCOUNTS' made upto 31-10-2003 along with affidavit of one Syed Adnan Hasan on 6-12-2003 [Pg - 315]. Needless to observe, that the 'Statement of Accounts tiled along with the Plaint was only upto 30th June, 2000. The 'FRESH STATEMENT OF ACCOUNTS', as submitted by the plaintiff Bank are based on the agreements for finance facilities having been signed and executed between the parties. Per plaintiffs version the 'Statement of Accounts' accurately reflect all disbursement made, payments received and amounts charged. From the 'Fresh Statement of Accounts', the claim of liquidated damages, however, has been omitted. In the plaint, nonetheless in para 15, it has been averred that the plaintiff Bank is claiming liquidated damages in the sum of Rs.25,264,169 being 20% Rs.126,320.850. 13. The Summary of AGREEMENTS [i.e. 'INTEREST BEARING FACILITIES' AND 'MARKUP BEARING FACILITIES' [Pg - 553] and 'SUMMARY OF BREAK-UP' of the claim of the plaintiffs Bank in respect of both kind of facilities [Pg - 357] duly signed and executed between the parties are as follows:- A. SUMMARY OF AGREEMENTS PERTAINING TO INTEREST BEARING FACILITIES (i) AGREEMENT # 1: First Foreign Currency Loan For US$ 1.25 million Agreement dated 15-7-1987 Annexure "A", page 79. (ii) AGREEMENT # 2: Second Foreign Currency Loan For US $ 3,18,000 Agreement dated 14,9-1988 Annexure "E", page 483 (iii) AGREEMENT # 3: First Foreign Currency Supplemental Agreement For US $ 1,479,981.07 (being the amount actually disbursed under Agreement # 1 and Agreement # 1 and Agreement # 2) Agreement dated 26-2-1990 Annexure "1-1", page 637 (iv) AGREEMENT # 4: Second Foreign Currency Supplemental Agreement (for re-scheduling Agreement # 3) Agreement dated 24-6-1998 Annexure "S-1, page 1247 B. SUMMARY OF AGREEMENTS PERTAINING TO MARKUP BEARING FACILITIES (i) AGREEMENT # 5: LCY Finance Sale price = Rs.9,450,000; Marked-up price Rs.19,620,000 (Disbursed in full) Agreement dated 18/10/1988; Annexure "J-1", page 657 Restructuring Agreement dated 26-2-1990; Annexure "R1", page 1225 (ii) AGREEMENT # 6: TL LCY Loan Sale price = Rs.1,544,252; Marked-up price = Rs.3,096,526 (Disbursed in full)
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Agreement dated 28-7-1991 Annexure "L-1", page 831 (iii) AGREEMENT # 7; LMM Finance Sale price =Rs.1,455,748; Marked-up price = Rs.3,373,944 (Disbursed in full) Agreement dated 28-7-1991 Annexure "0-1", page 1027 (iv) AGREEMENT # 8 Consolidated Local Currency Facility (Whereby Principal sum of Agreement Nos. 5, 6 and 7 (Rs.12.45 mil) was converted into equity, and [ii] mark-up of Agreement Nos. 5, 6 and 7 (Rs. 10.7 mil) was rescheduled) Agreement dated 24-6-1998 Annexure "T-1", page. 1269 (v) AGREEMENT # 9; Term Loan Sale price = Rs.10,000,000; Marked-up price = Rs.18,121,788 (Amount disbursed = Rs.2,372,000; Marked-up = Rs.4,298,488) Agreement dated 10-2-1999 Annexure "V-1", page 1297 14. The 'break-up' of the Disbursed Amounts of both kind of facilities interest/mark-up, charged thereon and other charges filed by the plaintiff is as follows:-- Disbursement: Under Agreement # 1, 2 and 3 28,008,084 Under Agreement # 5 9,450,000 Under Agreement # 6 1,544,252 Under Agreement # 7 1,455,748 Sub-total 12,450,00 40,458,084 Under Agreement # 9 2,372,000 Total disbursement 42,830,084
Interest charged Deferred dues 33,500,000 Interest from 24-6-1998 to 31-10-200317,808,474.49 Additional interest till 31-10- 200385,467,580.33 Additional interest in US$ (converted a Rs.18.9)156 978.83
Total interest charged 136,933,033.65
Mark-up charged Under Agreement # 8 10,700.000 Under Agreement # 9 1,926,488 Total mark-up charged 12,626,488
Other charges 1,039,452.34
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Total charges 193,429,058 Less Repayments ( - ) 1,596,453.53 Less equity ( - ) 12,450,000 Total claim 179,382,604.47 15. Like-wise the 'STATEMENT OF BREAK-UP' of the Outstanding. Amounts vis-a-vis the Agreements filed on behalf of the defendants Nos.1 to 6 filed on 13-5-2004 [Pages - 363 and 565] reads as follows: 1. Credit Agreement dated 15-3- 1987 in foreign currency equivalent toUS$ 1,250,000.00 2. Credit Agreement dated 14-9- 1988 in foreign currency equivalent toUS$ 318,000.00
3. Supplementary Credit Agreement Dated 26-2-1990 showing actual disbursement i,e, Agreement Nos.1 and 2 mentioned above.US$ 1,479,981.00 4. Second Supplementary Credit Agreement dated 24-6-1998 showing the repayment schedule ending on 15 October, 2007. The above amount is equivalent toRs . 28,008,084 .00 5. Supplementary Credit Agreement dated 26th February, 1990 forRs,9,450,000.00 6.Agreement dated 28th July, 1991 forRs,1,544,252.00 7.Agreement dated 28th July, 1991Rs,1,455,748.00 8. Supplement Agreement dated 24 June, 1998 whereby the principal sum of aforesaid agreements at serial Nos.5, 6 and 7 has been converted into equity. 9. Agreement dated 10 February, 1999 regarding Working Capital Loan. However, the only amount disbursed wasRs,2,372,000.00 Total Rs,42,830.084 16. Since, there was no dispute regarding the Principal Amounts availed by defendant No,1 i,e, in the sum of Rs,42,830,084, a 'Preliminary Decree' [correct word - Interim Decree] in favour of the plaintiff Bank was consequently passed on 13-5-2004. As far as the amount of 'INTEREST and 'MARK-UP' is concerned, for calculation thereof, by consent, Chartered Accountants, Messrs Punjawani & Co.th th th
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Were appointed as Commissioner to ascertain the amounts payable by the defendants on account of 'INTEREST' and 'MARK-UP' etc. In the light of terms and conditions of the relevant Agreements duly signed and executed between the parties. Being relevant Order dated 13-5-2004 is reproduced hereinbelow:- "A statement of break-up of outstanding amount with reference to the agreements has been filed by the learned counsel for the defendants. The same is taken on record and a copy thereof has been supplied to the learned counsel for the plaintiffs. The defendants have admitted the claim of the plaintiff to the extent of principal amount of Rs,42,830,084. Accordingly a preliminary decree is granted to the plaintiff in the sum of Rs,42,830,084. However so far as calculation of interest, mark- u and other char es is concerned with the consent o the parties Messrs Punjwani & Co: Chartered Accountants 213 214, Second Floor, Burhani Chamber, Abdullah Haroon Road, Saddar, Karachi are appointed as Commission to ascertain the amount payable by the defendants in light of the terms and conditions stipulated in the relevant a reements executed between the parties. Such exercise shall be completed within four weeks, and report submitted in due course. Parties or their representatives shall appear before the commission, and submit the relevant documents within one week. The fees of the commissioner shall be negotiated by the plaintiffs and be paid to the commission which shall be included in the costs. To come up after summer vacations." [Underlining is mine]. 17. Nevertheless, MESSRS PUNJWANI & CO. CHARTERED ACCOUNTANTS, Second Floor, Burhani Chamber, Abdullah Haroon Road, Saddar, Karachi, appointed as Commissioner to ascertain amounts payable by the defendants in light of the terms and conditions stipulated in the relevant financial agreements duly signed and executed between the parties did not find themselves willing to proceed with the matter. Consequently, on their failure to take interest in the matter, on 11th October, 2004, by consent MESSRS FEROZ AZIZ & CO., CHARTERED ACCOUNTANTS having their office at Room No,211, second floor, Business Arcade, Block-6, P.E.C.H.S., Karachi, were appointed as Commissioner to carry out the exercise as per terms of the Order dated 13-5-2004. Being relevant Order dated 11-10-2004 is also reproduced as under:- "By order dated 13-5-2004 Messrs Panjwani & Co. Chartered Accountants were appointed Commissioner to ascertain the amount payable by the defendants in the light of the agreements executed between the parties. The exercise was to be concluded within four months. However, till date Commissioner has not submitted his report. Both the learned counsel submit that Chartered Accountant appointed Commissioner is not willing to proceed with the matter and has not initiated the exercise so far. The notices have been sent to the learned Commissioner from time to time, such notice issued for today has been served, however, none appeared on their behalf. It appears that Messrs Panjwani & Co. Are not willing to proceed, conclude the exercise. ' In the circumstances and with consent of the learned counsel Messrs Feroze Aziz & Co., Chartered Accountants, having their office at Room No,211, 2nd floor, Business Arcade, Block-6, P.E.C.S., Karachi are appointed Commissioner to carry out the exercise as per terms of the order dated 13-5-2004. The Commissioner after examining the record and the accounts shall submit his report within six weeks. As ordered earlier the fee of the Commissioner shall be paid by the plaintiff: The amount so paid shall be calculated towards the cost of the proceedings". [Underlining is mine]. 18. The 2nd Chartered Accountants, appointed as Commissioner after extension of time twicely submitted their 'FIRST REPORT' dated May 2, 2005 [Pg - 379]. Per Chartered Accountants' report of 2nd May, 2005, the parties WERE/ARE NOT IN DISPUTE OVER THE 'NUMBERS' AND 'AMOUNTS OF AGREEMENTS' having been duly signed and executed between the parties. The dispute between the parties only remained as to the payable due amounts of 'INTEREST' AND 'MARK-UP'. According to the report of Chartered Accountants, the calculations have been done from the respective dates of the Finance Agreements till October 31, 2003. From perusal of the REPORT of Chartered Accountants of
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2nd May 2005 it appears, that on behalf of defendants Nos.1 to 6 though some objections vis-a-vis interest, 'markup over markup' have been raised but practically defendants Nos.1 to 6 did void to file their 'own calculations' in respect of the so-called, charging of interest, 'markup over…
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