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Petitioner: Messrs HABIB BANK LTD. VS Respondent: Messrs BELA AUTOMOTIVES LTD. and 7 others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title: Messrs HABIB BANK LTD. vs Messrs BELA AUTOMOTIVES LTD. and 7 others Case No.:Suit No,B-94 of 2001 and C.M.A. No,4652 of 2009 C.M.A. No,4652 of 2009 M.A.
No,4652 of 2009 Date of Judgment:2010-09-03 Reported As: 2010 CLD 1243 Result: Application allowed Judgment ORDER ' MUHAMMAD ALI MAZHAR, J.---By this order, I will dispose of C.M.A. No,4652 of 2009 filed by the defendant No,1 under Order VI, Rule 17 and section 151, C.P.C. In which it is inter alia contended that vide order dated 12-5-2004, this court appointed a Chartered Accountant to examine seven accounts mentioned in paragraph 13 of the plaint. The chartered accountant had submitted its report and according to the report, an amount of Rs, 151,430,296/98 is payable by the defendants to the plaintiff. When the Chartered Accountant was reviewing the accounts, the plaintiff filed a Statement of Project Loan Account which was not filed with the plaint. In the year 1994, the defendant No,1 had floated its shares for public subscription on 11-7-1994 on account of which the plaintiff had received a sum of Rs,34,450,540. The chartered accountant disclosed in its report that these payments were not adjusted against other facilities. The report further disclosed that the plaintiff had been transferring the amount from one account to the other accounts and charging mark-up in the newly created accounts on the same amounts which were part of earlier accounts. The Chartered Accountant has further mentioned in the report that analysis of the seven accounts resulted in disclosure of three additional finances provided by the plaintiff as follows:-- (I) IDA World Bank Loan. (II) Forced Loan (III) Demand Finance 1993 (of 1993) ' The Chartered Accountant has also disclosed that there are a number of missing vouchers not provided by the plaintiff for Running Finance and Cash Finance. There are number of entries in the accounts which do not carry any narration. On the basis of aforesaid report and the discrepancies
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pointed out by the Chartered Accountant, the defendant has craved leave of this court for making necessary amendments in the leave to defend application as follows:-- Additional Grounds for amendment into leave to defend application (a) The plaintiff did not adjust the share floatation money to the Project Loan Account on 11-7-1994 in spite of written instructions of defendant -No,1 vide its letter dated 25-5-1994 which was sent to the plaintiff by courier service. These documents are attached to the objections of the defendants to the Chartered Accountant's report attached marked 1 and 2. If such instructions had been followed, there would not have been any amount left in the Project Loan and for which reason nothing could have been transferred from the Project Loan by crediting the Demand Finance 1993. ' Thereafter creating further accounts. The plaintiff was not entitled under law and in fact to adjust, if any, the floatation money in any other account. (b) The transfer of the amount from Project Loan to Demand Finance 1993 and thereafter from DF 1993 to Demand Finance No,1 of 1998 and Demand Finance No,2 of 1998 were illegal and were made only for the purposes of charging further mark-up when, in fact, there was no liability to charge mark-up and there was no such agreement of charging mark-up on these accounts. In fact, all these accounts are fictitious. There are no finance agreements and even if there are (not in the knowledge of the defendants), the same would be void. No mark-up can be debited to the account of the plaintiff. (c) From the accounts, all entries for which no vouchers were produced and those which do not carry any narration are liable to be deleted. (d) The plaintiff has to account for the two payments of Rs,7 Lac and Rs,3 Lac made by the defendant No, 1 on 17-11-1999 and 18-11-1999, both by Pay Orders. (e) The accounts are unreliable and the plaintiff has to prove by evidence its claim, if any, against the defendants. (1) The 12 Finance Agreements relied upon by the plaintiff are all bogus and void. No amount was disbursed thereunder. (g) The plaintiff has to explain the contradiction in the statement of account of running account, specially the entry B/F, 5,807,240/88 (Annexure D/6 to the objections to the Report) and the one of the same date supplied to the chartered accountant showing debit balance of Rs,13,919,662/91. (h) The amounts which have been illegally transferred from one account to account already included interest, penal interest, additional interest and mark-up. In the newly created accounts, further mark-up has been levied without any justification and authority. Even, the entries of interest, penal interest and additional interest and mark-up entries are liable to be removed. (i) The plaintiff cannot claim any amount under the seven fictitious accounts and these accounts are unreliable. ' The Senior Manager of the plaintiff filed a counter-affidavit in which it is inter alia contended that during hearing of application for leave to defend, the learned counsel for defendants raised a specific plea of allegedly charging mark-up on mark-up in the statements of account filed by the plaintiff Bank with the plaint and also pointed out certain entries allegedly showing charging of mark-up on mark-up. The Chartered Accountant was appointed to examine seven accounts (annexed to the plaint). A perusal of annexure P/1 to P/9 to the plaint, admitted by the defendants in the application for leave to defend and vide letter dated 10-6-1997 admitted the total financing from the plaintiff as Rs, (53) million as per their Balance Sheet for the year ended 30-6-1996 and also requested to the Manager, HBL, S.I.T.E. Branch, Karachi to provide statement of account from 30-12-1993 up to date including the detail of outstanding mark-up and vide letter dated 25-11-1997 (Annexure P-3/2), the defendants confirmed that the entries as transferred to Demand Finance account stand identified and thus reconciled. Board Resolutions are attached with the plaint whereby the defendants undertook that no further rescheduling would be requested. On the
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request of the defendants vide their letter dated 4-1-1998 (Annexure P/38), the plaintiff vide Memorandum (Annexure P/39) renewed Running Financing Limit of Rs,(30) million and enhanced Inland Bills Purchased Finance Limit from 2.5 million to Rs,7.5 million and deferred the instalment of demand finance up to 31-3-1999 and in consideration thereof, the defendants executed and delivered Agreements for Financing and other charge document. In view of rescheduling/restructuring, renewal and enhancement of finance facilities, this court appointed Commissioner for verification of seven accounts enclosed with the plaint. After the Commissioner/Chartered Accountant submitted his Report, the defendants filed their objections to the said report and on behalf of plaintiff replies to the objections were filed, wherein it was specifically stated that Chartered Accountant and the defendants had no authority to deal with the past and closed transactions. It is further submitted in the Counter-affidavit that the defendant No,1 is a public limited company, whose accounts are audited each year by its own Auditors/Chartered Accountants firm and the Annual Reports are published every year and same are filed by the defendant No,1 with Security and Exchange Commission of Pakistan (SECP). The defendants in their application for leave to defend have relied upon the contents of the plaint in their Suit No,B-90 of 2001 filed by them against the plaintiff-Bank earlier in time to the instant suit, and filed copy of plaint as Annexure "A" to their leave application to the instant suit. In para 20 of the plaint in their Suit No,B-90 of 2001, the defendants have summarized their claims against the Bank on account of mark-up and on account of excise duty, allegedly illegally recovered by the Bank, and further claimed alleged losses and damages. It is further submitted that in the instant suit, the defendants did not specifically challenge any entry in the seven statements of account filed with the plaint and also did not file their own statement of account to rebut plaintiffs statements of accounts, therefore, after filing the leave to defend application, the defendants are stopped from introducing new pleas or they change their defence which has not been taken by them or to reopen past and closed transactions, the remedy in respect whereof has become time- barred. It is further submitted that there was no question of filing statement of Project loan account before the Chartered Accountant or with the plaint in the instant suit, as the same was past and closed transaction in consequences of rescheduling / restructuring of overdues in the year 1993 granted by the plaintiff-Bank on the request of the defendants. Again in the year, 1998, on the request of the defendants the plaintiff-Bank allowed rescheduling / restructuring of overdues, which were accepted and acted upon by the defendants and thereafter in the years 1999 and 2000, further rescheduling/restructuring of overdues and renewal/ enhancement of finances were granted. Due to above reasons, the statements of accounts annexed to the plaint start by the entries pertaining to the year, 1998, which have not been specifically rebutted or challenged by the defendants in their leave to defend application or by filing their own statements of account, as the defendant No,1 is a Public Limited Company and maintain its own accounts duly audited each year by their own Auditors/Chartered Accountants. It is amazing that the defendant No,1 wants to reopen past and closed transactions pertaining to the year 1993-1994, which have not been agitated in the leave to defend application filed in the instant suit. It is settled law that a Public Limited Company is required under the law to maintain its own accounts and the statements of accounts filed by the Bank certified on oath under Bankers Books Evidence Act carries presumption of correctness. The defendants did not file their own statement of account to rebut specific entries in the statements of accounts filed by the Bank for the obvious reason that they had no specific objections to any specific entries in Bank's statement of accounts. The defendants are estopped from challenging the specific entries in the statements of account annexed to the plaint, after filing of their leave to defend application on the ground that relevant vouchers were not provided by the Bank to the Chartered Accountants. The mala fide on the part of the defendants is evident that in para 10(a) they have referred to a false and fabricated letter dated 25-5-1994 allegedly sent to the
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plaintiff by an unknown courier service, which was neither delivered to nor received by the plaintiff, which was not even mentioned or referred in defendants' leave to defend application. It is further urged that this court has been exercising jurisdiction under Ordinance XLVI of 2001 which is a special law, wherein there is no scope of filing interlocutory applications touching the merits of the case, before disposal of application for leave to defend the suit. Similarly no amendment in the leave application or improvement therein or nullifying the admissions already made therein and in the documents annexed thereto can be allowed. The Chartered Accountant has already filed his report after verification of seven statements of accounts, therefore, defendants' leave to defend application be dismissed and mortgaged decree may be passed for recovery of said amount according to law. ' The defendant's Managing Director filed his rejoinder and submitted that the order dated 12-5- 2004 will speak for itself. This court in the first instance desired to have the accounting done by the Chartered Accountant. The accounts filed with plaint are nothing but re-scheduling of the liabilities. The plaintiff did not intentionally file accounts which were rescheduled and as a result of which, the plaintiff created of its own seven accounts filed with the plaint. It is also now the admitted position that no amount, as mentioned in the seven accounts, were advanced to the defendant No,1 same being rescheduled amounts. Reschedule does not mean adding markup on mark-up and capitalizing mark-up or charging mark-up beyond agreement of finance or without such agreement. The Balance Sheets are prepared for the Companies Ordinance purposes by the external auditors and they take amounts as advised to them directly by the financial institutions. The order dated 12-5-2004 would show that the court appreciated the illegal entries of capitalization and mark-up on mark-up. The defendant No,1 had pointed the same to the Chartered Accountant. The Chartered Accountant was required to consider the legal position of these as per rules and regulations and law. Banks are supposed to be honest and ethical. It is denied that the amendment application is changing defence. On the contrary, it is addition to the defence. There are no past and closed transactions as the plaintiff itself admitted that the present accounts are merely rescheduling amounts and nothing else. If true accounts are taken, it will be found that nothing is due from the defendants to the plaintiff. The fact that the amount of shares floatation has not been adjusted in the Project Loan Account became evident from the Chartered Accountant's report and Suit B-90 of 2001 was filed on the assurances of the plaintiff-Bank that same has adjusted in the Running Finance. If any payments have been made even after rescheduling it does mean that the defendants are barred from their right to challenge the accounts and from calling upon the plaintiff to render true and lawful accounts It is denied that the chartered accountant did not take into consideration the claim of the defendant No,1 regarding Rs,34.0 million due to alleged grounds of past and closed transactions. Had the vouchers been filed by the plaintiff with the statement of accounts at the time of filing the plaint, objections would have been taken about the missing vouchers. The plaintiff-Bank intentionally did not provide any vouchers as either the same did not exist or else contain material against the interest of the plaintiff. Rescheduling and restructuring does not mean the admission of liability. It is denied that there is no scope of filing interlocutory applications under the Ordinance XLVI of 2001. ' Heard the learned counsel for the parties. The learned counsel for the defendants Mr. Mansoor ul Arfin referred to page 435 of the report submitted by Auditor "Anjum Asim Shahid Rahman" in which it has been stated that a list of missing vouchers as provided by HBL and BAL for running finance and cash finance is attached as Annexure "R", which is available at page 733 of the report. It is further mentioned at the same page that Management of HBL could not produce any evidence that the payments against amount received on account of floatation of shares in August, 1994, payment claimed against cash finance through pay order dated November 17, 1999 and payment claimed against cash finance through pay order dated November 18, 1999 were adjusted against
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other facilities. He further argued that the plaintiff has to account for the two payments of Rs,7 lac and Rs,3 lac made by the defendant No,3 on 17-11-1999 and 18-11-2009. According to the learned counsel, there is a contradiction in the statement of account of running finance specially the entry B/F, Rs,5,807,240/88 and the one of the same date supplied to the chartered accountant showing debit balance of Rs,13,919,662/91. It was further alleged that the plaintiff was illegally transferring the amount from one account to another with penal interest, additional interest and mark-up and in the newly created accounts further mark-up has been levied without any justification. The learned counsel further argued that under subsection 10 of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, it is clearly provided that where the application for leave to defend is accepted, the Banking Courts shall treat the application as a written statement, therefore, he argued that it was incumbent upon the defendant to move an application under Order VI, Rule 17, C.P.C. For necessary amendments and if at this stage this application is not moved, then no amendment will be allowed in case the leave is granted and if the present leave to defend application is converted into written statement, therefore it is necessary for the defendant to move application for necessary amendments in view of the discrepancies pointed out by the Chartered Accountant. He further submits that under section 7 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, it is clearly mentioned that a banking Court in the exercise of its civil jurisdiction shall have all the powers vested in Civil Court under the Code of Civil Procedure, 1908 and a Banking Court shall in matters with respect to which the procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908. So far as Order VI, Rule 17, C.P.C. Is concerned, the learned counsel argued that the Court may at any stage of the proceedings allow either party to alter or amend the pleadings if amendment is necessary for the purposes of determining the real matter in controversy. In support of his arguments, the learned counsel relied upon the following judgments:-- (1) Falah ul Momineen Trust v. V.P. Abdullah PLD 1970 Kar.179. In this case, the learned Single Judge of this court has held that the legislature in the Civil Procedure Code provided for all possible eventualities and to such matters which were not foreseen at that time, a provision like section 151, C.P.C. Was enacted to empower the courts to meet such an unforeseen eventuality. Apart from section 151, C.P.C., the court has also inherent power to take all steps to execute its own mandates and orders as this power flows from the jurisdiction itself. It is further held that the refusal to exercise inherent jurisdiction amounts to refusal to exercise jurisdiction vested. The Legislature has in the Civil Procedure Code provided for all possible eventualities and to such matters which were not foreseen at that time, a provision like section 151, C.P.C. Was enacted to empower the courts to meet such an unforeseen eventuality. Apart from section 151, C.P.C., the court has also inherent power to take all steps to execute its own mandates and orders as this power flows from the jurisdiction itself. The support for this view can be had from the following passage on page 136, Corpus Juris Secundum, Vol. 21. "While a court may be expressly granted the incidental powers necessary to effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental powers essential to effectuate it, and, subject to existing laws and constitutional provisions, every regularly constituted court has power to do all things that are reasonably necessary for the administration of justice within the scope of jurisdiction, and for the enforcement of its judgments and mandates". This power has been judicially recognized and stated as an implied power flowing from the jurisdiction itself in the Interpretation of Statutes by Maxwell, 10th Edn., Page 136. (2) Muhammad Din v. Shaukat All 1980 CLC 1454. In this judgment, the learned Single Judge of the Lahore High Court has held that Code of Civil Procedure not strictly applicable to proceedings before Rent Controller. Procedural provisions contained in Rent Ordinance not exhaustive. No
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illegality has been committed by the Rent Controller in following the principles of said Code so far as not offending against provisions of Ordinance. Amendment of pleadings not barred under the Ordinance. (3) Lal Muhammad v. Additional District Judge 1983 CLC 700. In this case, it has been held that amendment in applications/replies which do not fall within the meaning of "pleadings" under rule 1, Order VI, C.P.C. Can be allowed by trial court by resort to proviso to Rule IV Order 12 and or inherent jurisdiction under section 151, C.P.C. (4) Bihar' Sahu and others v. Mt. Sudama Kuer and others AIR 1938 Patna 209. In this judgment, it is held that powers of court under Order VI, Rule 17, C.P.C. Are not exhaustive and the court has jurisdiction to allow an amendment to be made in an application to sue as pauper. (5) Husain Naser v. Syed Shamim Yaqub 1989 CLC 2125. In this judgment, it is held that a rule regarding amendments similar to that as incorporated in Order VI, Rule 17, C.P.C. Is also invocable in respect of applications. A corollary of such rule is that an amendment sought is not to be disallowed if the same fairly arises in the case and following this principle amendments have been allowed in pleadings even at the stage of Supreme Court proceedings. This, however, is no licence for permitting a party to delay or defeat justice by seeking to introduce unnecessary or extraneous material in the garb of seeking amendments. (6) Mst. Ghulam Bibi and others v. Sarsa Khan and others PLD 1985 SC 345. In this judgment, it is held that language used in rule 17 of Order VI, C.P.C. To the effect that "all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy is mandatory in nature............ " ' Therefore, once the court decides that the amendment is necessary for the said purpose of determining the real question, the court is required by law to not only to allow an application made by a party in that behalf but is also bound to direct the amendment for the said purpose. Thus, the rule can be divided into two parts. In the cases falling under the first part, the court has the discretion to allow or not to allow the amendment, but under the second part once the court comes to a finding that the amendment is necessary for the purpose of determining the real question, it becomes the duty of the court to permit the amendment. What has been stated above is, however, subject to a very important condition that the nature of the suit in so far as its cause of action is concerned is not changed by the amendment whether it falls under the first part of rule 17 or in the second part, because when the cause of action is changed the suit itself would become different from the one initially filed. It is further held that if the cause of action does not change the main substance of the suit and nature of the suit would not change and if that does not change the question of limitation would then remain only of form and not of substance. That is why this court has so far followed the liberal rule in interpreting Order VI, rule 17 so as to permit amendment if otherwise necessary notwithstanding the possibility that on account of some formal change, the question of limitation might have acquired pronounced importance, had it not been a case of amendment under Order VI, rule 17. Other principles governing the question of amendment in pleadings have adequately been determined and examined in the precedent law and no more discussion is necessary in so far as the question of law and principle is concerned. (7) Mst. Rahim Noor v. Mst. Salim Bibi and others PLD 1992 SC 30. In this judgment, the honourable Supreme Court has held that C.P.C. Does not prohibit the permission to amend pleadings even at late stage, when, of course it is otherwise necessary. (8) Mst. Mumtaz Begum and others v. Province of Sindh and others 2004 CLC 697. In this judgment, the Division Bench of this Court has held that amendment in pleadings can be sought at any stage of "proceedings" and the expression "at any stage of proceedings" used in Order VI, Rule 17, C.P.C. Has to be liberally construed. Even the amendment in the pleadings can be ordered up to the stage of Supreme Court. The courts are further required in law to allow all such amendments that
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may be necessary for the purpose of determining the real question in controversy. During pendency of proceedings, if any development takes place in the proceedings, the courts would not overlook such development and that too when it is material for the purposes of deciding controversy between the parties. The scope for grant of application under Order VI, Rule 17, C.P.C. Is very wide and such application ought to be granted liberally as same restrains parties from multitude of proceedings. (9) Kuwait Flour Mills Co. v. M.V. Kashmir and another 1989 CLC 1459. In this judgment, it is held that subsequent developments after filing of the suit are matters of evidence. Pleadings can always be amended and claimed relief can be adjusted in view of…
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