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Petitioner: PAK OMAN INVESTMENT COMPANY LIMITED VS Respondent: CRESOX (PVT.) LIMITED
Court Name: Sindh High Court Judge(s): Aziz-ur-Rehman Title: PAK OMAN INVESTMENT COMPANY LIMITED vs CRESOX (PVT.) LIMITED Case No.: Suit No. B-2 of 2014 Date of Judgment:2017-07-26 Reported As: 2017 CLD 1659 Result: Suit decreed
JUDGMENT
JUDGMENT AZIZ-UR-REHMAN, J.---The plaintiff has filed the above suit on 03.01.2014 under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, for recovery of Rs.162,344,199/- along with liquidated damages, costs, charges and cost of funds, till the realization of the whole amount with following prayers:- "a. for payment and recovery of Rs. 162,344,199/- with future Mark-up at applicable rate from the date of filing of the suit till the date of final payment. b. for permanent injunction restraining the Defendant, its employees, agents or any other person acting for and on behalf directly and or indirectly from selling, alienating, disposing of or creating third party rights in any manner whatsoever in respect of the Hypothecated Assets charged in favour of the Plaintiff c. for sale of the Hypothecated Assets mentioned in para 5 above. d. for attachment and sale of all the movable and immovable assets and properties of the Defendant to recover the outstanding amount of the Plaintiff. e. for payment of cost of funds in terms of section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 on the aforesaid suit amount from the date of default till the date of realization. f. the suit may kindly be decreed with cost of fund and all other costs, charges and expenses incurred by the Plaintiff during the pendency of the suit. g. Any other relief, which the Hon'ble Court may deem fit in the circumstances of the case may also be granted. 2. Succinctly the relevant facts in the background are as follows:-
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3. Plaintiff as averred, is a company incorporated under the laws of Pakistan having its registered office at 1st Floor, Tower-A, Finance and Trade Centre, Shahrah-e-Faisal, Karachi, wherefrom, it is carrying on its investment business. The suit in hand has been filed by Mr. Mohsin Raza son of Mukhtar Hussain, who is duly authorized Attorney of the Plaintiff and well conversant with the, facts of the case. Besides, he is duly authorized to sign, verify the plaint, institute the instant proceedings and do all other acts, deeds and things being necessary and incidental thereto. 4. Defendant, it is not out of place to mention herein was formally incorporated as a Private Limited Company as Renfro Crescent (Pvt.) Limited; which later on, was merged with and into Cresox (Pvt.) Limited, having incorporated and existing under the laws of Pakistan and having its office at A-40, SITE, Mangopir Road, Karachi. 5. Per Defendant's request, it availed various finance facilities from the Plaintiff company i.e. from time to time and, as such, is a 'customer' of Plaintiff Company, as defined in section 2(a) of Financial Institutions (Recovery of Finances) Ordinance, 2001 [In short FIO, 2001]. The various finance facilities granted to and availed by Defendant, as stated was based upon Defendant's requests, representations and warranties including the following facilities:- i. A term finance facility of Rs.120,000,000 [Finance Facility-11 under State Bank of Pakistan's LTF- EOP Scheme pursuant to Finance Agreement dated June 13, 2007 as amended by First Addendum to Finance Agreement dated July 17, 2007. Second Addendum to Finance Agreement dated October 24, 2007 and Third Addendum to Finance Agreement dated May 11, 2012 [Finance Agreement-I]. The aforesaid Finance Facility-I, per Plaintiff's version was fully availed and utilized by the Defendant. Defendant defaulted in its repayment obligations and failed to make payments of the overdue installments in the year, 2011 on the respective due dates as more particularly mentioned in paragraph 7 of the pliant. Defendant thus requested the Plaintiff for Rescheduling of Finance Facility-1. The Plaintiff's request so made for rescheduling was allowed in terms of Third Addendum of Finance Agreement dated May 11, 2012. In view of the rescheduling the Mark-up over due as on April 17, 2012 [Effective date of Rescheduling] was frozen until June 30, 2013. ii. A term Finance Facility of Rs. 50.000,800/- [Finance Facility-11] under State Bank of Pakistan's LTFF Scheme pursuant to Finance Agreement dated December 18, 2009 as amended by First Addendum to Finance Agreement dated May 11, 2012 [Finance Agreement-II]. This Finance Facility- II as well was fully availed and utilized by the Defendant. Regarding this Finance Facility-II Defendant also committed default in its repayment obligations. Defendant thus not only ignored but also failed to make payments of the overdue installments in the year, 2011 on their respective due dates as more particularly mentioned in paragraph 7 of the plant. Defendant, nevertheless, requested the Plaintiff for Rescheduling of Finance Facility-II as well. Regarding Finance Facility-II since, the State Bank of Pakistan had already recovered the overdue principal amount of Finance Facility-11 from the Plaintiff: Defendant under such scenario requested the Plaintiff to convert the overdue principal portion into a term Finance Facility. The Plaintiff upon such request thus allowed the rescheduling in terms of the Addendum to Finance Agreement of May 11, 2012. 6. For and in view of Rescheduling the Mark-up overdue, as on April 17, 2012 [Effective date of Rescheduling], was frozen until June 30, 2013. The principal amount of Finance Facility-II, overdue as on April 17, 2012 [Effective date of Rescheduling] was, however, converted into a Term Finance Facility of Rs.9,375,000/-. [Finance Facility-III], pursuant to the Finance Agreement dated May 11,2012 [Finance Agreement-III]. 7. To secure repayment of Finance Facilities granted to and availed by Defendant and in consideration thereof, the details of securities created by Defendant in favour of the Plaintiff are as follows:- i. A first charge by way of hypothecation of all plant, machinery and equipment, with all essential
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parts and other assets shown as fixed assets of the CPL, affixed, installed, located or to be affixed, installed and attached thereto or therein at the factory or premises of CPL located at A-40 Mangopir Road, SITE, Karachi or kept in godowns wherever in Pakistan in the course of transmit, shipment or delivery to or from the factory/godowns with all the benefits of all rights relating thereto, pursuant to Letter of Hypothecation for plant and machinery dated July 5, 2007 as amended by First Supplemental Letter of Hypothecation for plant and machinery dated November 2, 2007; ii. A charge by way of hypothecation of all plant, machinery and equipment, with all essential parts and other assets shown as fixed assets of the CPL, affixed, installed, located or to be affixed, installed and attached thereto or therein at the factory or premises of CPL located at A-40 Mangopir Road, CITE, Karachi or kept in godowns wherever in Pakistan in the course of transmit, shipment or delivery to or from the factory/godowns with all the benefits of all rights relating thereto, pursuant to Letter of Hypothecation for plant and machinery dated December 21, 2009; and 8. The aforesaid Finance Facilities, were fully availed and utilized by Defendant. The Defendant, in breach of the agreed terms and conditions as laid down in various financial and security documents having been duly signed and executed, however, failed and/or neglected to repay the outstanding amount on its due dates and that too despite several requests and reminders. Defendant, thus not only continued to consistently renege on their commitments and promises but also failed to pay the outstanding amounts in respect of the Finance Facilities granted to and availed by Defendant. For and account of such default a sum of Rs.162.344.199/-, as on November 30, 2013, remained outstanding against Defendant. 9. The Plaintiff Institution despite its efforts to persuade Defendant to repay/adjust its outstanding liabilities, however, failed and/or avoided to honour its' commitments as per Finance Agreements etc. having been voluntarily executed by Defendant. The Defendant thus not only remained defaulter but also caused 'monetary loss' to Plaintiff. The Plaintiff as a last resort recalled the Finance Facilities through Legal Notice dated May 8, 2013. Defendant, however, neither replied the aforesaid Legal Notice of May 8, 2013 nor otherwise, re-paid its outstanding dues/liabilities. The attitude of Defendant, regarding to repay the outstanding amounts is nothing but a clear cut refusal, hence the instant suit was filed on 03.01.2011 for and in view of 'cause of action', stated to be arisen in favour of Plaintiff and against Defendant on several occasions as referred to and mentioned in Para 10 of the plaint inter alia for recovery of Rs.162,344,199/-, under section 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 before this Court. 10. Along with Plaint copies of various documents have been enclosed i.e. Sub-Power of Attorney dated 10.08.2012 executed in favour of Mohsin Raza son of Mukhtiar Hassan [Annexure 'A' to the Plaint]. Power of Attorney in favour of Agha Ahmed Shah son of Agha Akber Shah [Annexure All to the Plaint], Extract of Board Resolution [Annexure 'A/2' to the plaint]. Certificate of Incorporation of Change of name dated 10.12.2010 [Annexure 'A/3' to the Plaint], Sanction Letter dated 10.05.2007 [Annexure 'B' to the Plaint], Finance Agreement dated 13.06.2007 (Annexure B/1 to the Plaint]. First Addendum to Finance Agreement dated 17.07.2007 [Annexure 'B/2' to the Plaint]. Second Addendum to Finance Agreement dated October 24, 2007 [Annexure 'B/3' to. the Plaint]. Third Addendum to Finance Agreement dated 11.05.2012 [Annexure `B/4' to the Plaint]. Sanction Letter dated 24.11.2009 [Annexure 'C' to the Plaint]. Finance Agreement dated 18.12.2009 [Annexure 'C/1' to the Plaint]. 11.Apart from the above, other documents i.e. Addendum to Finance Agreement dated 11.05.2012 [Annexure 'C/2' to the Plaint]. Sanction Letter regarding Term Finance Facility dated 8.5.2012 [Annexure 'D' to the Plaint]. Finance Agreement regarding Term Finance Facility of Rs.9,375.000/- dated 11.05.2012 [Annexure 'D/1' to the Plaint]. Letter of Hypothecation for Plant and Machinery dated
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05.07.2007 Annexure `E' to the Plaint]. Charge Registration Certificate dated 09.07.2007 [Annexure 'E/1' to the Plaint]. First Supplementary Letter of Hypothecation for Plant and Machinery dated 02.11.2007 [Annexure 'E/2' to the Plaint]. Acknowledgment of Filing of 'Form-16' dated 07.11.2007, [Annexure 'E/3' to the Plaint], Letter of Hypothecation for Plant and Machinery dated 21.12.2009 [Annexure `E/4' to the Plaint], Charge Registration Mortgage Certificate dated 22.12.2009 [Annexure `E/5' to the Plaint]. Demand Promissory Note dated 13.06.2007 [Annexure 'E/6' to the Plaint] and Demand Promissory Note dated 18.12.2009 [Annexure 'E/7' to the Plaint]. Duly Certified Statement of Accounts [Annexure 'F' to 'F/8' to the Plaint]. Break-up-Summaries [Annexure 'F/9' to the Plaint]. Legal Notice dated 09.01.2012 [Annexure 'G' to the Plaint]. Courier Receipt [Annexure `G/1' to the Plaint] and Delivery Report [Annexure 'G 2' to the Plaint], were alse annexed with the plaint. All the annexed documents ex-facie support the claim of the Plaintiff as put forward and involved in the suit in hand. 12.On filing of the above suit 'process' under section 9(5) of. F.I.O., 2001, was issued to the Defendant through all requisite modes. Copies of Courier Receipts, Registered Post A/D and Publication in Newspapers i.e. Daily 'The News' English and Daily 'Jang' Karachi both dated 06.01.2014 are also available on record. Besides, the Bailiff has also returned the process as duly served upon the Defendant. 13. Per diary of Addl. Registrar [0.S.), Leave-to-Defend Application bearing C.M.A. No.1701 of 2014, has been filed on 10.02.2014 i.e. after expiry of statutory period of 30 days. In the Leave-to-Defend Application [C.M.A. No.1701 of 2014], the averments and assertions made by the Plaintiff institution have been denied. Defendant, nevertheless while, realizing subsequently, that the Leave-to-Defend Application No.1701 of 2014 filed on 10.02.2014, is time barred, preferred to file on 05.03.2014, another application for condonation of delay under sections 10(2), 12 and 24(1) of F.I.O., 2001 in the above suit. 14. The Plaintiff, upon service, in response to Leave-to-Defend Application [C.M.A. No.1701 of 2014], not only filed REPLICATION UNDER SECTION 10(7) OF F.I.O., 2001 but also filed a detailed COUNTER- AFFIDAVIT in answer to the application for condonation of delay, [C.M.A. No.2828 of 2014], in filing of Leave-to-Defend Application [C.M.A. No.1701 of 2014], wherein, all the adverse allegations levelled by Defendant were vehemently and specifically denied. Per stand of the Plaintiff's Institution, the Leave-to-Defend Application [C.M.A. No.1701 of 2012], filed by Defendant as being time barred is liable to be dismissed. In the Leave-to-Defend Application [C.M.A. No.1701 of 2014], filed on behalf of Defendant, inter alia some questions were also raised, which according to Defendant's version beside being substantial questions of law and facts, can only be answered after recording of evidence. The questions raised by Defendant which, per Defendant's stand, needs recording of evidence are as follows:- A. Whether the amount claimed by the Plaintiff is due? B. Whether plant and machinery were imported by the Defendant on the misrepresentation of the Plaintiff that the LTF-EOP Scheme was subsisting, and on the misrepresentation that finance for retiring such letters of credit would be extended to the Defendant under the LTF-EOP Scheme? If so, whether the Defendant is entitled to be put in the position in which it would have been if the representation of the Plaintiff had been true? If so, what would such position be? C. ................. D. Whether the terms and conditions set by the Plaintiff under Finance Agreement dated 18.12.2009 for repayment of Finance Facility-II were contrary to the LTFF Scheme i.e., MFD Circular No.7 of 2007 and SMEFD Circular No.16 of 2009 issued by the SBP? If so, on what terms is the Finance Facility-II to be repaid? E. Whether the rescheduling of Finance Facility-II vide the Addendum to Finance Agreement dated 11.5.2012, is void because it is in violation of MFD Circular No.7 of 2007 and because it purports to
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reschedule finance that was never due for repayment on that date? F. Whether the Defendant qualified for the facility given by the SEP pursuant to SMEFD Circular No.11 of 2009 and to what extent? If the Defendant qualified, what is the effect of the Plaintiffs refusal to give such facility to the Defendant? G. Whether. Finance Facility-III for Rs.9,375,000 was a fresh disbursement to the Defendant? If not, whether any markup can be claimed by the Plaintiff thereon? H. Whether Finance Facility-III which is the Finance Agreement dated 11.5,2012 [Annexure D/1 to the plaint] is void because it is in violation of MFD Circular No.7 of 2007 and because it purports to reschedule finance that was never due for repayment on that date? I. Whether the charge of markup by the Plaintiff' for rescheduling Finance Facility-I and Finance Facility-II is unlawful in view of the law laid down by this Hon'ble Court in the case of Habib Bank Ltd. v. Qayyum Spinning Mills, reported at 2001 M LD 1351'? Whether the charge of overdue markup by the Plaintiff is a penalty? If so, to what effect? K. Whether after the introduction of Article 10-A in the Constitution of the Islamic Republic of Pakistan, 1973, a refusal to grant leave in the facts of the cases would be violative of the fundamental right of the Defendant, its shareholders? 15. In the Replication filed by Plaintiff's Institution under section 10(7) of F.I.O., 2001, the above so- called substantial questions of law and facts were denied while, replying the same under the heading `Reply to the Questions or Law and Facts' as follows:- "a. That question 'A' raised by the Defendant is misconceived and misleading. It is respectfully submitted that the Defendant has failed to pay the admitted outstanding amount due to the Plaintiff as mentioned in the plaint. The Plaintiff has filed this suit for recovery of its outstanding amount in accordance with law. b. That the question of 'B' raised by the Defendant is misconceived and misleading. It is respectfully submitted that the Plaintiff extended the Finance Facility No.1 to the Defendant in accordance with Finance Agreement dated June 13, 2007, which was subsequently modified in terms of First Addendum to Finance Agreement dated July 17, 2007. The Defendant was fully aware of the status of the LTFF EOP Scheme at all relevant times. The allegation of any mis-representation on the part of Plaintiff, is vexatious. The Defendant has failed to fulfill its obligations for repayments in accordance with agreed terms and the Plaintiff has no other option but to file this suit. The contents of paragraph 4(i) of the plaint are reiterated for the sake of brevity and any assertions contrary to the above are denied. c. That the question 'D' raised by the Defendant is misconceived and misleading in terms of the Finance Agreement related to the Scheme and admittedly failed to repay the installments when the same became due in accordance with the LTFF Scheme. d. The question `E' raised by the Defendant is misconceived. It is respectfully submitted that the addendum dated May 11, 2012 was executed at the request of the Defendant and there is nothing contrary to MDF Circular 7 of 2007 in the said, addendum, The Defendant is estopped from questions the validity of the addendum signed at Defendant's own request. e. That the question 'F' raised by the Defendant is misconceived and irrelevant. The primary condition of eligibility. under the LTF-EOP Scheme was that the machinery must be new. The Defendant's machinery suffered damage during the rains and the Defendant's claim losses from its insurers and abandoned its request for seeking refinancing under LTF-EOP Scheme. f. That the questions 'G' and 'H' raised by the Defendant in respect of Finance Facility No.3 are misleading and misconceived. The Defendant failed to make payment of Facility II refinanced by State Bank of Pakistan, recovered the amount from Plaintiff's account. The Defendant requested another facility to fund the aforesaid repayments. It is respectfully submitted that the Plaintiff has clearly explained the details of Finance Facility No.3 in paragraph 4(ii) and (iii) of the plaint. It is
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specifically denied that the Finance Facility dated May 11, 2012 is a void document in violation of any Circular. The contents of paragraph 4(ii) and (iii) are reiterated for the sake of brevity and any assertions contrary to the above are denied. g. That the questions 'I' and T raised by the Defendant are misleading and misconceived. It is specifically denied that the Plaintiff charged any amount of Mark-up in violation of any law. It is respectfully submitted that the Plaintiff has charged the Mark-up in accordance with agreed terms and it is specifically denied that any amount of penalty was charged by the Plaintiff. h. That the question 'K' raised by the Defendant is misleading and misconceived. It is respectfully submitted that the provisions provided in the Ordinance. 2001, provides a fair trial and equitable procedure and therefore fulfills the requirements of Article 10-A of the Constitution. It is respectfully submitted that the Hon'ble Court has to see whether the Defendant has raised any substantial questions of law and fact and if the Court reaches the conclusion that such questions have been raised which require recording of evidence then the Court will grant leave otherwise, the leave to defend application will be dismissed. It is specifically denied that insertion of Article 10-A in the Constitution of Islamic Republic of Pakistan will any way affect the proceedings pending before this Hon'ble Court under the provisions of Ordinance, 2001. It is further submitted that this amendment will have no effect to the proceedings of this suit. The Defendant has miserably failed to raise any question that requires recording of evidence. Therefore the application is not maintainable and liable to be dismissed with cost and any assertions contrary to the above are denied. 16. On 21.10.2015, when C.M.A. No.28114 of 2014 [under section 10(2), 12 and 24(1) of F.I.O., 2001 and C.M.A. No.1701 of 2014 [under section 10 of F.I.O., 2001], came-up before the Court then the following order was passed: "21-10-2015 Mr. Waqar Ahmed, Advocate for Plaintiff. Mr. Adnan I. Chaudhry, Advocate for Defendant. 1) By means of this Application under sections 10(2), 12 and 24(1) of F.I.O., 2001, the defendant is seeking condonation of delay if any in filing of the leave to defend application bearing C.M.A. No.1701/2014. Learned counsel for the plaintiff today made a categorical statement that if learned counsel for defendant proceed with his leave to defend application today, then he will have no objection to the grant of this application. 19. The plaintiff, as contended by Mr. Adnan Iqbal Chaudhry, had in response, learned counsel for the defendant shown his willingness to proceed with his leave to defend application today. Under circumstances, the application bearing C.M.A. No.2828/2014 [wrongly mentioned by the office as C.M.A. No.28114/2014] is. granted. Learned counsel for defendant argued the case for one hour, however, due to other cases, this case is adjourned to 26.10.2015 for further arguments of the learned counsel for defendant. Sd/- Judge" 17.Due to change in roster, subsequently, the above suit, under the administrative order of Hon'ble Chief Justice passed on 12.02.2016, was ordered to be fixed as per roster. On 02.05.2017, accordingly when the above matter came-up before the Court' for hearing of Defendant's Leave-to-Defend Application [C.M.A. No.1701 of 2014], then I heard Mr. Adnan Iqbal Choudhry, learned counsel for the Defendant who while, reserving the right of rebuttal, concluded his arguments on Leave-to-Defend. Thereafter, on 11.05.2017, Mr. Waqar Ahmed, learned counsel for the Plaintiff argued the case partly. Finally, on 23.05.2017, both the learned counsel for the parties concluded their arguments and order/judgment was then reserved. 18.Mr. Adnan Iqbal Choudhry, learned counsel for the Defendant at the very outset while, referring to BPD Circular No.14 of 2004 dated 18.5.2004 submitted that under the said circular, State Bank of
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Pakistan [in short SBP], had introduced a kind of facility for "Long Term Finance of Export Oriented Projects" [in short `LTF-EOP Scheme'], actually meant for facilitating import of plant and machinery by the textile sector at concessional rates of markup. The said LTF-EOP Scheme, per Mr. Adnan Iqbal Chaudhry, was in pursuance of the Trade Policy of the Federal Government and was aimed to assist textile exporters in the national interest. Per learned counsel, under the LTF-EOP Scheme, as introduced by State Bank of Pakistan, only the eligible borrowers/customers were entitled to avail finance from Financial Institutions, re-payable in a period of 7 years and 6 months. The 'concessionary rate' of markup under the said Scheme was 7.9% per annum. The repayment of the principal amount under the said scheme was to commence after 1 year 6 months from the date of disbursement. According to Mr. Adnan, since. Defendant was to set-up to manufacture and exports socks, as such, to achieve the said purpose. Defendant shown its desire to import plant and machinery for its factory, as it was, eligible for finance under the LTF-EOP Scheme also represented/ensured the Defendant, the provision of Finance Facility under the said LTF-EOP Scheme. 19. The Plaintiff, as requested by Defendant sanctioned a finance of Rs.120,000,000/- i.e. Finance Facility-I. The Finance Agreement-I, dated 13.6.2007, admittedly, is/was pursuant to BPD Circular No.14 of 2004 dated 18th May, 2004 read with SMED Circular No.15 of 2006, as is evident from 'clause B' Finance Agreement of 13.06.2007 [Annexurp 'B/1' to the Plaint]. Under the Finance Agreement-I, the plaintiff, according to Mr. Adnan, thus had committed to provide Rs. 120,000.000/- to the defendant under the LTF-EOP Scheme at the rate of 7.9% per annum. The rate of 7.9% was reduced to 6.9% as is evident from SMED Circular No.15 of 2006 dated July 14, 2006. The facility thus availed by Defendant was payable by the Defendant in 7 years and 6 months. Moreover, the repayment of the principal amount, was to commence after a grace period of 1 year and six months from the…
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