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Petitioner: APOLLO TEXTILE MILLS LTD. through Chief Executive and Director and 3 others VS Respondent: SONERI BANK LIMITED through Manager/ Principal Officer
Court Name: Sindh High Court Judge(s): Mushir Alam, Aqeel Ahmed Abbasi Title:APOLLO TEXTILE MILLS LTD. through Chief Executive and Director and 3
others vs SONERI BANK LIMITED through Manager/ Principal Officer Case No.: Special High Court Appeal No, 40 of 2010 Date of Judgment:2011-06-20 Reported As: 2011 CLD 1655 Result: Appeal dismissed Judgment ORDER ' AQEEL AHMED ABBASI, J.---Instant Special High Court Appeal arises from the impugned order dated 4-1-2010 passed by the learned Single Judge of this Court in Suit No,B-58 of 2008, whereby the application for leave to defend filed by the appellants/defendants was dismissed. 2. Briefly the facts for the purposes of disposal of the instant Special High Court Appeal, as noted by the learned Single Judge, are that the respondent/plaintiff filed the instant suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as ("Ordinance 2001") seeking recovery of Rs,559,534,188 from appellant No,1, a limited liability company and principal debtor, appellants Nos.2 and 3 its directors and guarantors to the extent of Rs,.850,000 million and appellant No,4 a mortgagor with liability upto Rs,150,000 million. 3. The respondent/plaintiff claims to have advanced following finance facilities to appellant No, 1 detailed in para 24 of the plaint in terms of subsection (3) of section 9 of Ordinance 2001:-- .Running Finance Facilities (Pledge/Hypothecation) Principal amount Rs. 136,094,537.25 Amount repaid Nil Principalamount outstanding as on 16-7- 2008Rs. 136,094,537.25 Accruedmarkupfrom1-1-2008to 16-7-2008Rs. 5,762,926.00 Totalamount due and payable as on 16- 7-2008Rs. 141,857,763.25 II.FE-25 (PRE-SHIPMENT FACILITY)
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Amount disbursed in US $ US$ 11,148,000.00 Amount repaid/adjusted US$ 6,956,115.47 Principal amount outstanding in US$ on 16-7-2008US$ 4,191,884.53 Outstanding US$ 4,191,884.53 equivalentinPakrupeesason16-7-2008Rs. 291,335,973.45 Accrued markup as on 16-7-2008 Rs. 14,148,689.61 Total outstanding as on 16-7-2008 Rs. 305,484,663.00 III.FE-25 (POST-SHIPMENT FACILITY) Amount disbursed in US$ US$ 1,023,764.00 Amount repaid/adjusted US$ 920,374.00 Principal amount outstanding US$ 103,390.00 Outstanding US$ 103,300 equivalent to Pak rupees as on 16-7-2008Rs. 7,185,605.00 Accrued markup as on 16-7-2008 Rs. 583,517.07 Total outstanding as on 16-7-2008 Rs. 7,769,122.07 IV.Terms Finance Facilities (a)TF-I Amount disbursed Rs. 25,471,022.00 Amount repaid/adjusted Rs. 22,923,916.00 Principal amount outstanding as on 16-7- 2008Rs. 2,547,106.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 282,147.00 Total amount outstanding as on 16-7- 2008Rs. 2,829,253.00 (b)TF-II Amount disbursed s. 14,697,884.00 Amount repaid/adjusted Rs. 11,758,304.00 Principal amount outstanding as on 16-7- 2008Rs. 2,939,580.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 273,711.00 Total amount outstanding as on 16-7- 2008Rs. 3,213,291.00 (c)TF-III Amount disbursed Rs. 16,732,303.00 Amount repaid/adjusted Rs. 11,712,700.00 Principal amount outstanding as on 16-7- 2008Rs. 5,019,603.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 404,887.00 Total amount outstanding as on 16-7- 2008Rs. 5,424,490.00 (d)TF-IV Amount disbursed Rs. 10,000,000.00
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Amount repaid/adjusted Rs. 5,000,000.00 Principal amount outstanding as on 16-7- 2008Rs. 5,000,000.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 415,675,00 Total amount outstanding as on 16-7- 2008Rs. 5,415,675,00 (e)TF-V Amount disbursed Rs. 50,000,000.00 Amount repaid/adjusted Rs. 16,667,001.00 Principal amount outstanding as on 16-7- 2008Rs. 33,332,999.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 2,738,841.00 Total amount outstanding as on 16-7- 2008Rs. 36,071,840.00 Summary of T.F. Facilities: Amount disbursed Rs. 116,901,209.00 Amount repaid/adjusted Rs. 68,061,921.00 Principal amount outstanding as on 16-7- 2008Rs. 48,839,288.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 4,115,261.00 Total amount outstanding as on 16-7- 2008Rs. 52,954,549.00 V.FIM FACILITY Amount disbursed Rs. 45,630,088.00 Amount repaid/adjusted Nil Principal amount outstanding as on 16-7- 2008Rs. 45,630,088.00 Accrued markup from 1-1-2008 to 16-7- 2008Rs. 2,88,086.00 Total amount outstanding as on 16-7- 2008Rs. 48,518,174.00 VI.EBP (Foreign Bills Purchased Facility Amount disbursed in US$ 43,610 equivalent of Pak rupeesRs. 2,950,217.00 Amount repaid/adjusted Nil Total amount outstanding Rs. 2,950,217.00 Grand total of outstanding liabilities (I + II + III + IV + V + VI)Rs. 559,534,188.00 4. The appellants/defendants without denying the facilities, responded to the aforesaid claim in the following terms:-- "The contents of paragraph No,24 are denied as the agreements relied upon by the Bank, which have been addressed hereinbefore in detail, are void on the grounds of being contrary to mandatory provisions of law. Furthermore the contents of paragraphs Nos. 3 to 9 are reiterated
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and it is submitted that it is the Bank which is liable to pay Apollo and the defendant Nos.2 to 4, a sum of Rs, 3,145, 128,891 (paragraphs 3 to 18, plus paragraph 42) as damages for the losses incurred by them (as explained in the paragraphp) including Rs,36,551,430 cash deposit lying with the bank which must be returned to Apollo." 5. The appellants/defendants further in terms of subsection (4) of section 10 of Ordinance 2001, while giving the detail of the finance facilities "availed", "repayable" and "disputed" in Para 47 of their application seeking leave to defend stated as under:-- (a) The amount of finance availed by the defendant from the Banks is as stated in the plaint which particulars the Bank is requited to disclose under section 9(3) of the FIRO. (b) The amounts and dates and repayments made by the defendants are as contained in the statement of accounts filed by the Bank as per the particulars to be disclosed by the Bank under section 9(3)(b) of the FIRO in the plaint. (c) No amount is repayable by the defendants to the Bank for the reason set out in the above, which in summary form include the following: (i) All amounts detailed to the account of the defendants by the Bank in relation to the FE-25 transactions by the Bank because of the violation of the SBP regulations and Prudential Regulations. (ii) The repeated conduct of the Bank in debiting excess amounts allegedly by way of markup, which in fact was markup on mark up and also all markups debited at rates in excess of KIBOR. Thus the total claim for markup is illegal. (iii) Damages suffered by the defendants because of the above illegal acts of the Bank and also the totally unjustified termination of financial facilities which has led to the virtual paralysis of the operations of the defendants and caused massive losses to it. (iv) Misappropriation by the Bank and/or its employees and/or muqaddam of the goods pledged and handed over to the physical control, custody and possession of the Bank. It may be noted that the Bank has itself filed documents evidencing physical possession of the defendants' goods by the Bank and/or its muqaddam. This is tantamount to a legal admission of liability by the Bank. (v) It may be clarified that the above incorrect/legal/(sic) unjustified entries by the Bank as evidenced by the documents filed by it, are in excess of the amount claimed in suit. Hence nothing is due and owed by the Bank. 6. Learned counsel for the appellants/defendants while arguing the matter before the learned Single Judge referred to prayers clause contended that since the respondent/ plaintiff is claiming "cost of fund" from the date of default till realization, therefore, are bound to disclose the source from which the funds were so advanced for the purposes of ascertaining the cost of fund. Per learned counsel, it may be a case where funds advanced are available with the respondent/defendant on account of collections from Current Account holder to whom no return is paid. Consequently, the Bank may not be found entitled to the cost of fund, therefore, the cost of fund cannot be ascertained unless evidence is adduced. Learned counsel while referring to the provisions of Rule 3 of Order XXXVII, C.P.C, section 7 of The Banking Companies (Recovery of Loans) Ordinance, 1979 and section 10 of The Banking Companies (Recovery of Loans, Credits and Finances) Act, 1997 has contended that earlier the conditions for the grant of leave were more stringent, whereas subsection (8) of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 200 makes it incumbent upon the Banking Court to grant leave if on consideration of the contents of the plaint, the application for leave to defend and the reply thereto, it is of the view that "substantial question of law and facts" have been raised in respect of which evidence needs to be recorded. It is next contended by the learned counsel that the plaint is not supported with complete Statement of Account as the Statement of Account annexed with the plaint commence from January, 2007 with outstanding balance; therefore, all such amounts are liable to be
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deducted. It has been further contended that the entire Statement of Account does not reflect any entry of markup which goes to prove that the markup was added while disbursing the amount without being separately reflected and in order to sift such markup evidence is required to be adduced. Learned counsel while referring to the Agreement for Financing for Short/Medium/ Long Term Mark-up Basis dated 14-3-2007 (annexure "F" at page 85 in suit file) contended that since para 3 of the Agreement which provides for the date of repayment and the number of installments is .Blank, therefore, not admissible under section 18 of the Ordinance, 2001. Learned counsel further while referring to the Agreement of Finance dated 14-3-2007 (Annexure "F" at page 85 and Annexure "F/2" at page 89 in suit file) contended that the defendant/plaintiff had agreed to provide Running Finance Facilities of Rs,500 Million under this head, which was not provided in full resulting in losses. While referring to the Letter of Buy Back of Exports/Inland Bills under the head of Foreign Bill Purchased (Annexure "R/6" at page 283-A in suit file) was contended that the defendant/plaintiff is claiming a sum of Rs,2,950,217 and consequently the evidence is required to be led in order to show as to whether any amount has been received by the respondent/plaintiff on such count. It was next contended that the respondent/plaintiff as evident from para-11 of plaint admits pledge of raw cotton bales and/or yarn to the extent of Rs,385 Million, which according to the Nazir's report admittedly were not found and even macadam was not able to pinpoint the place where such pledged goods were kept and such removal of pledged goods can only be determined after adducing evidence. Learned counsel while referring to para 43 contended that since the appellants/ defendants are claiming setoff in the sum of Rs,3, 145, 128, 891 against damages, therefore, are entitled to the leave of this Court to defend the suit. In support of his contention that damages can be treated as set off and incorrect statement of account cannot be made basis of liability. Learned counsel for the appellants/defendants placed reliance on the following judgments:-- (1) Government of Sindh and 2 others v. Amir Muhammad through his Legal Heirs (1988 MLD 18) (2) Allied Bank of Pakistan v. Masood Ahmad Khan (1994 MLD 1431) and (3) Messrs Muhammad Siddiq Muhammad Umar and another v. The Australasia Bank Ltd. (PLD 1966 Supreme Court 684) 7. Conversely, learned counsel for the respondent/ plaintiff while arguing the matter before the learned Single Judge, referred to para-47(a) of the Leave to Defend Application has contended that firstly the appellants/ defendants have admitted the suit amount by stating that the amount of finance availed by the appellants/defendants from the Bank is as stated in plaint and secondly appellants/ defendants failed to provide-the details of availed facilities in terms of subsection (4) of section 10 of the Ordinance, 2001, the appellants/defendants further have not pointed out/ disputed any debit or credit entry, therefore, no case for grant of leave to defend is made out and the application is liable to be dismissed summarily. Regarding cost of fund learned counsel while referring to section 3 of the Ordinance, 2001 has contended that cost of fund being a statutory grant, therefore, does not require ascertainment by adducing evidence. In response to the claim of damages setup as setoff on account of alleged removed of pledged goods. Learned counsel while referring to various Stock Reports (annexure "T-3" to "T-8" from pages 293 to 303) contended that the pledged goods were stored in the factory of appellant/ defendant No,1 and were forcibly removed as acknowledged in the Stock reports, therefore, granting leave to the appellants/defendants to defend the suit would amount to paying premium on their wrongs. It was further contended that even otherwise leave to defend the suit cannot be granted merely on the ground that the appellants/defendants have claimed damages, setoff or has counterclaim. In support of his contention learned counsel placed reliance on the following cases:-- (1) Messrs Ansari Cotton Ginning and Pressing Factory (Pvt.) Ltd. Through Directors and 5 others v. Habib Bank Limited 2006 CLD 1220)
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(2) Siddique Woollen Mills and others v. Allied Bank of Pakistan 2003 SCMR 1156 = 2003 CLD 1033 (3) American Express Bank Ltd. v. Adamjee Industries Limited (1995 CLC 880) (4) Messrs Razzaq and Company v. Messrs Riazeda (Pvt.) Ltd.(sic.) and (5) International Finance. Corporation v. Sarah Textiles Ltd. And 3 others (2009 CLD 761). 8. The learned Single Judge, after hearing both the parties and examining the material available on record, has declined the leave to defend application filed by the appellants/defendants and disposed off the same in the following terms: - - "The examination of plaint and documents annexed therewith clearly spell out the liability duly guaranteed by the defendants Nos.2 and 3 and secured by creation of mortgage in respect of their properties as detailed in paras 6 and 12 of the plaint with restricted liability of defendant No,4 upto the extent of Rs,150 million. The plaintiff has given up its right to claim mark up and after deleting all entries of mark up the suit is decreed in the sum of Rs,527,920,448 as prayed, however, the liability of defendant. No,4 would be restricted upto Rs,150 million as undertaken by ,her in deposit of title deed with cost of funds as certified by the State Bank of Pakistan from the date of default till realization. Let a final decree accordingly be prepared." 9. Learned counsel for the appellants/defendants while making his submissions before us has reiterated the contention raised before the learned Single Judge and submitted that the learned Single Judge was not justified in law and facts to decline leave to defend application filed by the appellants. It has been further contended by the learned counsel that substantial questions of law and fact have been raised by the appellants in the leave to defend application which could only be determined by recording evidence, therefore, summarily disposal by the learned Single Judge was not justified under the facts and circumstances of this case. To summarise his arguments, learned counsel argued that statement of account filed by the respondent does not start from zero, however, reflected outstanding balance which, per learned counsel, did not reflect the true statement of account hence could not be relied upon. Learned counsel further argued that cost of fund cannot be allowed unless evidence in this regard is recorded by the parties. Per learned counsel, whereas damage and loss was caused at the hands of the muqqadam appointed by the bank whereby the pledged goods were removed from the godowns, therefore, such damage and loss was required to be adjusted and set off against outstanding liability, as to protect the pledged goods is the responsibility of the bailee. Learned counsel further argued that in order to verify as to who is responsible for the loss of goods the matter required evidence, hence leave to defend application was to be allowed under the facts and circumstances of this case. In support of his contention, learned counsel has placed reliance on the following judgments:-- (1) Trading Corporation of Pakistan (Pvt.) Ltd. v. Murshad Enterprises PLD 2004 Karachi 407 (2) Messrs Foremost Trading Company v. Galedonian Insurance Company Ltd., Karachi PLD 1981 Karachi 540 (3) Sri Narasimhaswa mi, Namagiri Amman and Sri Ranganathaswami Temples by its Executive Officer, P. Rangaraju v. Muthukrishnalyengar AIR 1962 (Madras) 244 (4) Messrs Mahendrakumar Chandulal, Ahmadabad v. Central Bank of India Ahmadabad AIR 1984 (NOC) 113 (5) UCO Bank v. Hem Chandra Sarkar AIR 1990 SC 1329 (6) Messrs Taxila Cotton Mills Ltd. v. Allied Bank of Pakistan 2005 CLD 244 10. Conversely, learned counsel for the respondent has vehemently opposed the maintainability of the instant High Court Appeal and supported the impugned order passed by the learned Single Judge of this Court on the ground that since suit for recovery of the amount along with cost of funds under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 was filed by the respondent after complying with the provisions of section 9 of the Ordinance, 2001, whereas neither finance facilities availed by the appellants were disputed nor any objection regarding
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statement of account was filed by the appellants. It has been further argued that principal amount and repayments have also been admitted by the appellants. Per learned counsel, by filing leave to defend application the appellants attempted to create fictitious grounds as to the statement of account showing outstanding balance instead of zero balance, removal of the pledged goods from the godowns and alleged damage and injury caused in this account, which as per learned counsel for the appellants, is to be adjusted and set off towards outstanding liability of the appellants. Learned counsel further submitted that none of the requirements of section 10 of the Ordinance, 2001 were met by the appellants while filing leave to defend application as no substantial question of law and fact was raised by the appellants. It has been further argued by the learned counsel for the respondent that instant High Court Appeal is otherwise not maintainable as the appellants did not file the decree, copy of plaint, leave to defend application and its annexures along with instant appeal. It is further contended that the appellants have already filed Suit No,58 of 2008 before this Court seeking damages against the loss of pledged goods, which is pending disposal before this Court. Learned counsel further submitted that the grounds raised before this Court were not raised before the learned Single Judge, which besides being frivolous cannot be raised at this stage. In support of his contention, learned counsel has placed reliance in the case of Abdul Majeed and 6 others v. Mst. Haleema and 18 others 1987 CLC 2331. 11. Learned counsel for the appellants, while exercising his right of rebuttal, submitted that there is no estoppel against law, therefore, what is really due is to be determined by law. Learned counsel argued that such proposition of law is also attracted in banking cases. In support of his contention, learned counsel has placed reliance on the following case-law:-- (1) Haji All Khan and Company, Abbottabad and 8 others v. Messrs Allied Bank of Pakistan Limited, Abbottabad PLD 1995 SC 362 (2) Messrs Qureshi Salt and Spices Industries, Khushab and another v. Muslim Commercial Bank Limited, Karachi through President and 3 others 1999 SCMR 2353 (3) Agricultural Development Bank of Pakistan v. Messrs Modern Leathers and others 2007 CLD 1424. 12. It is further contended by the learned counsel for the appellants that the objection relating to maintainability of the instant High Court appeal is misconceived as the copy of the decree was filed by the appellants at later stage, whereas such requirements are directory and not mandatory. It is further contended that if decree is filed subsequently it amounts to sufficient compliance. In support of his contention, he has placed reliance on the case of Basheer Ahmed Siddiqui v. Shama Afroz 1988 SCMR 892. It has been further submitted that even otherwise no prejudice has been caused to the respondent. Learned counsel further argued that neither office objection was raised nor any formal objections were filed by the respondent, whereas his objection was raised at the time of hearing of instant appeal. Per learned counsel, Courts prefer disposal of the cases on merits instead of technicalities. In support of his contention, learned counsel has placed reliance on the case of Rasheed Ahmad v. Province of Punjab through District Collector, Vehari and another 2004 SCMR, 707 and Sherin and 4 others v. Razal Muhammad and 4 others 1995 SCMR 584. 13. We have heard both the learned counsel and perused the record as well as impugned order passed by the learned Single Judge. 14. 14. It is pertinent to note that suit for recovery of the outstanding amount was filed before the learned Single Judge of this Court under the banking jurisdiction in terms of section 9 of the Ordinance, 2001, which provides for self-contained special procedure for Banking Courts. The Financial Institutions (Recovery of Finances) Ordinance, 2001 i.e. a special law, therefore, every provision contained therein has to be strictly construed and meticulously adhered. Section 4 of the Ordinance, 2001, provides overriding effect to the provisions of the Ordinance, 2001 to all other laws
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for the time being in force. As per scheme of the Ordinance, 2001, if a customer commits a default or fails to fulfil obligations to financial institution such default in discharge of obligation not only incur cost of funds under section 3(2) of the Ordinance, 2001 but is also actionable under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. In section 9 of the Ordinance, 2001 entire procedure has been provided for the purposes of recovery of the outstanding liability against a customer or financial institution, who commits a default in fulfilment of any obligation with regard to any finance. In terms of subsection (2) of section 9, it is incumbent upon the plaintiff to support the contents of plaint by filing statement of account and also other relevant documents relating to the grant of finance, whereas in terms of subsection (3) of section 9 of the Ordinance, 2001, in case of a suit for recovery instituted by a financial institution, it shall specifically state: -- (a) the amount of finance availed by the defendant from the financial institution; (b) the amounts paid by the defendant to the financial institution and the dates of payment; and (c) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit. 15. From perusal of the plaint filed by the respondent seeking recovery of Rs,559,534,188 with cost of funds under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, it appears that the respondent has spelt out entire chronology of the events including the amount of finance availed by the appellants, amounts paid by the respondent to the appellants with the dates of payments, and the amount of finance and other amounts relating to finance payable by the appellants upto the date of institution of the suit . It further appears that the claim was also accompanied with the relevant documents as required to be filed along with the plaint in terms of Section 9 of the Ordinance, 2001 including the statement of account in respect of finance facilities advanced by the respondent to the appellants. All the details of running finance facilities i.e. (Pledge/ Hypothecation), FE-25 (Pre-shipment facility), FE-25 (Post-shipment facility), Terms finance facilities, (a) TF-I, (b) TF-II, (c) TF-III, (d) TF-IV, (e) TF-V, Summary of T.F. Facilities, V. FIM Facility, VT. FBP (Foreign Bills Purchased Facility) have been given in para 24 of the plaint, which has also been reproduced by the learned Single Judge in his order. The detail of liability duly guaranteed by the appellants Nos.2 and 3 and secured by creation of mortgage in respect of their properties has been given in paras 6 and 12 of the plaint with restricted liability of appellant No,4 upto the extent of Rs,150 million. All the relevant documents have duly been exhibited along with the plaint including statement of account showing credit and debit…
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