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Petitioner: M/s. MAKMA STEEL CRAFT (PVT.) LTD. and 13 others VS Respondent: ALLIED BANK LIMITED
Court Name: Lahore High Court Judge(s): Shahid Karim Title: M/s. MAKMA STEEL CRAFT (PVT.) LTD. and 13 others vs ALLIED BANK LIMITED Case No.: C.O.S. Nos. 46 of 2002 and 24 of 2004 Date of Judgment:2016-03-09 Reported As: PLJ 2017 Lahore 677 Result: Suit dismissed
JUDGMENT
JUDGMENT This judgment shall decide COS No. 46/2002 and COS No. 24/2004. COS 24/2004 has been filed by Allied Bank Limited (ABL) for the recovery of an amount of Rs. 94,844,797/- under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (Ordinance, 2001). COS No. 46/2002, on the other hand has been filed I by M/s. Makma Steel Crafts (Pvt.) Ltd. against ABL and in which the plaintiffs-company has sought the following prayer: "In view of the submissions it is, therefore, respectfully prayed asunder:-- The defendants be directed through a decree to return the Stocks of 3739 M.T imported under the Letters of Credit opened under the agreement August 1999 as the Plaintiffs have paid the amount of all Letters of credit. It be declared through a decree that amount of Demand Finance of Rs. 67.448 Million created under the agreement August 1999 are payable subject to release of pledge goods available at the time of entering in to agreement and in case the defendants are not in a position to release the goods they are bound to pay the price of goods amounting to Rs. 112,860,000/- after deducting the amount of demand finance of Rs. 67.448. Million. A decree for recovery of Rs. 22,785,558/ be passed against the defendants being the amount of Custom duty wrongly debited to the account of the Plaintiff. Costs of the suit be also award. Any other and further relief which this Hon'ble Court may deem fit and proper in the circumstances of the case be also awarded." 2. In COS No. 46/2002, leave was granted on 06.03.2003. On 28.03.2003 the following issues were struck by this Court out of the pleadings of the parties:
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1. Whether the suit insofar, as it pertains to matters that are covered in the Deed of Compromise executed in August 1999 and on the basis of which consent decree(s) were passed in the suits instituted by the Defendant Bank, is not maintainable by virtue of Section 47, CPC and the plaint in respect thereof is liable to be rejected? GPD. 2. Whether the relief of declaration, on the terms sought in the plaint cannot be granted ? GPD. 3. Whether the suit has been instituted and filed by a duly authorized person? OPP. 4. Whether an amount of Rs. 22,758,558.00 paid by the Plaintiff as custom duty other duties was wrongly debited by the defendant Bank to the Plaintiffs account? OPP. 5. Whether the Plaintiffs have paid the entire amounts of the letters of credit established by the Defendant Bank after the execution of the Compromise Agreement dated August 1999. If so, what is its effect ? OPP. 6. Whether the Plaintiffs are obliged to repay the amounts to the Defendant Bank mentioned in paragraph 8 of "Basic Submissions" of the petition for leave to defend/written statement? OPD. 7. Whether the pledged goods have been misappropriated by the Plaintiff? OPD. 3. Initially six issues were framed to arise from the pleadings of the parties. Later on the ABL (hereinafter referred to as the defendant-Bank) filed an application CM No. 499-B/2002 seeking an amendment in the written statement filed by the defendant-Bank in COS No. 46/2002, which was allowed vide order dated 03.11.2003. As a consequence thereof, an additional Issue No. 7 was framed and which has been brought forth above. 4. Evidence was led pro and contra by the parties in COS No. 46/2002 and report of the local commission was duly filed upon recording of the entire evidence. Vide order dated 16.06.2015, an order was passed in COS No. 24/2004, which is reproduced as under: "By the concurrence of the parties, it is agreed as follows: (1) The defendants are granted leave to defend the suit unconditionally. (ii)This suit upon grand of leave to defend is consolidated with the Suit No. 46/2002, titled "M/s. Makma Steel Crafts (Put.) Ltd. vs. Allied Bank Ltd., which has been filed by the defendants against the plaintiff bank. (iii)The counsel for the parties agree that the issues framed in COS No. 46/2002, shall be considered to be the issues in the instant suit as well and the evidence recorded in the said suit shall also be read as evidence in the present suit. 2. This course is expedient in order to avoid conflict in judgments and multiplicity of litigation. Since the evidence has been completed in the consolidated suit COS No. 46/2002, the matter is now set down for final arguments on both the consolidated suits for 03.07.2015." 5. As is evident from the order reproduced above, the suits were consolidated and were ordered to be tried together and the parties agreed that the issues framed in COS No. 46/2002 were the same issues which arise out of the pleadings of the parties in COS No. 24/2004 and thus, the issues framed and the evidence led by the parties was sufficient to be considered for the decision of both the suits upon consolidation. 6. I sball now take up the issues in seriatim and my findings on the said issues are as follows: ISSUE No. 1 Whether the suit insofar as it pertains to matters that are covered in the Deed of Compromise executed in August 1999 and on the basis of.which consent dccree(s) were passed in the suits instituted by the Defendant Bank, is not maintainable by virtue of Section 47, CPC and the plaint in respect thereof is liable to be rejected? GPD. (i)The learned counsel for Makma Steel Crafts (Pvt.) Limited and M/s. Al-Shamsher Engiheering (Pvt.) Limited (hereinafter referred to as the plaintiffs) submitted at the outset that the subject matter of the suits relates to the period between August, 1999 to the year 2002 when a number of
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letters of credit were opened by the defendants and is not related to the events prior thereto. This submission of the learned counsel for the defendants can be viewed in the historical perspective of these cases. Suffice to state that in a previous round of litigation between the parties; a deed of compromise was executed between the parties in August, 1999 which is Ex.P.28. By the said deed of compromise, which was made part of the decree by this Court, three finance facilities were granted by the defendant-Bank to the defendants in terms of the compromise and certain facilities were re-scheduled. As brought forth above, the defendants concede that the subject matter of these suits only relates to post-compromise issues and does not raise a dispute regarding the default committed by either of the parties in terms of the compromise agreement. It, therefore, follows that Issue No. 1 is to be decided in favour of the defendant-Bank and against the plaintiffs -and it is held that the instant suits do not pertain to matters that are covered in the deed of compromise executed in August, 1999. I am, therefore, left to dilate upon the issues arising out of events which took place after the deed of compromise and the facilities which were extended by the defendant-Bank to the plaintiffs in the form of letters of credit. ISSUE No. 2 7. This issue arises from the prayer in the plaint (COS 46/2002) to the effect that the defendant- Bank be directed through a decree to return the stocks of 3739 M.T imported under letters of credit opened under the agreement dated August, 1999 as the plaintiffs had paid the amount against all letters of credit. The learned counsel for the plaintiffs agree that this issue has become moot and such a decree can perhaps not be granted anymore in the changed circumstances of the case. In any case, the prayer is not based upon any legal proposition or a provision of law which can entitle such a prayer to be granted by way of decree to the plaintiffs. The precise submission of the learned counsel for the plaintiffs is that the pledged stock was ordered to be sold by order dated 29.11.2002. By the said order the pledged stock was auctioned and the bid was confirmed and by the consent of the learned counsel for the parties, the only issue that remained to be determined was regarding the payment of the customs duty. It is also pertinent to niention that the entire auction of the pledged stock was done with the mutual consent of the learned counsel of the parties and the auction was conducted accordingly. Therefore, the relief of declaration of the term sought in the plaint, having become moot, cannot be granted and the issue is decided against the plaintiffs. ISSUE No. 4 8. The precise submission of the plaintiffs is that the amount of customs duty was paid by the plaintiff and which was required to be paid by the bank. However, that amount has not been excluded from the claim of the bank and in case the said amount is excluded from the said claim, nothing would be due to the bank from the plaintiffs. The onus to prove the said issue was on the plaintiff's. 9. In this regard, the first document which was referred to was the sanction advice at page 1623 of paper book III Ex.PW.6/40. The relevant clause in the sanction advice is reproduced as under:-- "Against FIM the goods will bein. Godowns at factories premises under Bank's Lock and Key and under Bank's approved Muqaddam after payment of concessionary Custom Duty by the Bank." 10.The arrangement, according to the learned counsel for the plaintiff was that the customs duty was to be paid by the bank and it was debited in the statement of accounts relating to FIM facility and correspondingly credited in the plaintiffs current account. 11.In this regard, the primary document on which both the learned counsels relied upon is Ex.PW.3/8, which depicts a chart of the details of the customs duty paid by the company but debited by the bank to the account of the company. This document can be found at page No. 1224 of paper book III. The learned counsel for the plaintiffs does not dispute these entries as also that these depict the customs duty debited to the FIM account of the plaintiff and in turn credited to the plaintiffs current
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account. However, the entries which are disputed by the plaintiff are at Serial Nos. 17, 23 and 34. The learned counsel has referred to page 343 and to the statement of PW.3 in this regard to contend that the witness admitted these entries. 12.Jamil Ahmad, Manager ABL appeared as PW.6. He was called as a witness-by the plaintiffs. The following extract from his cross-examination is relevant:-- "It is incorrect to suggest that the plaintiffs made payment of customs duty according to Exh.PW- 3/8. Actually some of the payments were made by the party and the rest were made by the Bank. The party also claimed refund with regard to the payments made by them towards customs duty. The following payments were made by the party which are mentioned in the following Serial Nos. in Exh.PW-3/8: Serial Nos. 1, 3 to 17 and 27" "...The following vouchers bear my signatures and were issued by me. Photo copies are compared with the originals, found correct and photo copies are allowed to be placed on the file as Exh.PW- 6/82 to 98. I also produce vouchers which were prepared and signed by colleague of my. They are compared with the originals..." 13.'It will be seen that PW.6 was called by the plaintiffs as its witness although he was an employee of the defendant bank. In his statement, the said witness has verified the payments made by the plaintiffs reflected in the document Ex.PW.3/8. These payments are at S. Nos. 1, 3 to 17 and 27. The learned counsel for defendant bank however says that the 17 has been mentioned as a result of typographical error and in fact the witness did not mean that entry 17 was also paid by the plaintiffs. The learned counsel for the plaintiffs also relied upon the evidence of PW.4 Azhar Ali, the proprietor of Zia & Co., Clearing and Forwarding Agency. He referred to the following portion of the examination of the statement of the said witness: "I conduct business in the name of Zia & Co. I have a clearing and forwarding agency. I am on the approved panel of Allied Bank of Pakistan. I ha'e been getting the goods of AlShamshair (Evt) Ltd. (one of the plaintiff) cleared from Customs Department and. I also handle the work of Makma Steel Crafts (Pvt) Ltd.. by forwarding the goods to Gadoon Amazai after getting them cleared from Customs Department." "... The Bank never paid the customs duty. It was always the party which get the goods cleared ..." 14.From the above statement, the learned counsel for the plaintiffs invited this Court to conclude that PW.4 was a reliable witness and since he was conducting the entire business of clearing of the goods from the Customs Department, his statement and the evidence brought forth should be given weight and is worthy of credence. However, an analysis of the statement of the said witness would show that apart from a bald assertion by the said witness, no documentary proof is forthcoming which would substantiate the evidence given by the witness. Certainly, if the customs duty was paid by the plaintiffs and not by the defendant bank then there must be unimpeachable and reliable evidence in the shape of documents to bring home the said assertion. No such documents are forthcoming and none was produced in the evidence. A mere assertion without more by the said witness will not suffice as the transaction relating to the clearance of goods and the payment of customs duty are all documented and ought to have been produced in evidence. 15.The learned counsel for the plaintiffs in order to establish that the payments of customs duty as given in Ex.PW.3/8 were made by the plaintiffs referred to the current account statement maintained by the defendant bank with regard to the plaintiff. At page 218 of Vol-1 is the entry with regard to payment' of Rs. 2690073.00/- by way of customs duty. The entry shows that the said amount was transferred from the current account statement of the plaintiffs. It may be stated that basically it is a two-tier transaction and the second transaction as reflected in the current account statement is merely an adjustment of the FIM liability. This is the amount (one of which is the entry referred to by the learned counsel at page 218) which is now being claimed by the plaintiff as the
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customs duty paid by it and which is sought to be adjusted against the claim of the bank. 16.As stated above, these amounts which are now being claimed by the plaintiff having been paid by the plaintiff itself by way of customs duty were required to be brought home and established by the plaintiffs since the onus of the said issue was placed on the plaintiff. The learned counsel for the defendant bank has taken this Court through the various documents by which it has been established that the said payment against the customs duty was made by the defendant bank and in this regard, by way of an illustration, the learned counsel has referred to the delivery order issued on 24.1.2001 which is of the same date as the entry at page 218. The learned counsel for the defendant bank retorts that the bank paid the customs duty, debited the FIM account and credited the current account. According to the learned counsel, the plaintiffs had sought the release of the goods which goods were in fact released and the same amount was credited to the FIM account. He has in this regard referred to Ex.PW.6/131 at page 862. Once again, it is emphasized that the onus to prove this issue was on the plaintiffs and the learned counsel for the defendant bank has rightly pointed out that these amounts are not being claimed by the defendant bank and, therefore, it was not required to file the Statement of accounts with regard to these entries. Once again, the learned counsel for the defendant bank has referred to the FIM statement of account of letter of credit 2448 at page 984 of COS No. 24 of 2004 to drive home the contention that the amounts were paid by the bank and the goods were released. The release of goods could only have taken place after these payments were paid by the plaintiffs and thereafter the delivery orders were issued. The delivery orders with regard to such payments have been produced in evidence by PW.6 who although an employee of the bank was a witness of the plaintiffs and was summoned as such by the plaintiffs. 17.It would bear repetition that the plaintiffs are asking for the refund or adjustment/ set off of the customs duties purportedly paid by the plaintiff company with regard to the entries at S. No. 1, 17, 23 and 24 reflected in Ex.PW.3/8. However, as explicated above, these transaction have been explained in paragraph 10(a) of COS No. 24 of 2004 which is the suit of the bank and with regard to which no denial has been made by the plaintiffs. The vouchers as also the call deposits have all been, produced and exhibited as EX.PW.6/82 to Ex.PW.6/98 and therefore, nothing turns on the claim that these payments of customs duty were made by the plaintiffs. The learned counsel for the defendant bank has referred to a series of documents produced in evidence which are vouchers showing that the payments were'paid by the bank and the goods were got released by the plaintiffs. The learned counsel for the plaintiffs takes serious issue with the fact that these entries of the payments made by the bank are not shown as debit entries in the statement of accounts and, therefore, they cannot be claimed. The simple answer to this argument of the learned counsel is that the bank in fact admits that there is no statement of account and the plausible reason which has been, put forth is that these amounts are not being, claimed by the, bank as these were adjusted by the plaintiffs and the goods were duly released. The evidence is woefully lacking in reliability and cogency and the plaintiffs have failed to establish or discharge the onus which was placed an the plaintiffs with regard to. Issue No. 4. 18.With regard to entry at 17 in Ex.PW.3/8 and which too is being claimed by the plaintiffs, the learned counsel for the defendant has invited this Court to discard, the said assertion as a typographical error, He has referred to the following portion of the statement of the evidence of PW,3:-- "...I did not personally deposit the amount of custom duty mentioned in Exh, PW.3/8. The entries of customs duty mentioned in Exh.PW-3/8 were paid to the customs Department through -Demand Draft/Pay Order.The documentary evidence showing the deposit of customs du mentioned in Exh. PW-3/8 are in possession of both the companies. It is correct that the amount of Rs. 26,90,073/- appearing as transfer entry dated 27.1.2001 in Exh. PW-3/3 corresponds with the amount of customs
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duty mentioned against LC No. 2448 in Exh. PW-3/8." ".... It is correct that the amounts mentioned against entries Nos. 1, 3 to 13 and 27 in PW-3/8 were refunded back to the company as illustrated by the transfer entries mentioned in Exh. P'W-3/3. I have not gone through the loan statements of both the plaintiff companies. I am not aware of the details of litigation going on in the present case." 19.Once again, a reading of the portion of the statement of PW.3, reproduced above, would show that firstly the amount of customs duty was not deposited by the said witness. He has stated that the customs. duty was paid through demand draft/ pay order and which documents were in possession of the company. This shows that there were allegedly documents which ought to have been produced in order to substantiate the claim of the plaintiffs which were not, in fact, produced and the inference can only be drawn against the plaintiffs that there were, in, fact, no such documents and the amount of customs duty was not paid by the plaintiffs. Secondly, it is evident that the said PW.3 does not mention the Entry No. 17 as the amount which had to be refunded to the companies. In fact, he has stated that the amounts at entries Nos. 1 , 3 to 13 and 27 were refunded to the company. The Issue No. 4 is, therefore, decided against the plaintiffs and in favour of the defendant bank. 20.The Issue No. 5 and 6 are inextricably linked with Issue No. 7 and these are thus dealt with together. ISSUE Nos. 5 & 6 5.Whether the Plaintiffs have paid the entire amounts of the letters of credit established by the Defendant Bank after the execution of the Compromise Agreement dated August 1999. If so, what is its effect ?OPP. Whether the Plaintiffs are obliged to repay the amounts to the Defendant Bank mentioned in paragraph 8 of "Basic Submissions" of the petition for leave to defend/written statement? OPD. (i)These issues together with Issue No. 7 are the pivotal issues between the parties and a finding thereupon should be sufficient to determine the respective liabilities of the parties. In a nub, the defendant-Bank alleges certain amounts to be outstanding against .the plaintiffs on the ground that the plaintiffs have defaulted on the terms of the finance facilities which were extended to the plaintiffs and are thus liable to make over the said amounts and the defendant-Bank is entitled to a decree for the recovery of the said amount. On the contrary, the plaintiffs deny any amount to be due to the defendant-Bank and it has been averred without equivocation by the plaintiffs that no amount is due to the defendant-Bank as the plaintiffs have not fallen in default of the terms of the finance facilities. The controversy, therefore, narrows down and revolves around the true construction of statement of accounts as the availing of the facilities is not denied by the defendants. (ii)As brought forth above, the subject matter of these suits relates to 89 letters of credit at site which was established by the defendant-Bank on behalf of the plaintiffs commencing in the year 1999 and ending in the year 2001 for the import of raw-material. It is the case of the defendant- Bank that upon the arrival of the goods under the letters of credit and after debiting the bank charges, the amount was debited to Payment Against Documents (PAD) account and the defendants were intimated about it. Further that the amount due under the letters of credit/PADs were adjusted through FATR (Finance Against Trust Receipts) and FIM '(Finance Against Imported Merchandize) and in some cases through cash payment by the plaintiffs. The amounts of FIM, FATR and PAD were paid by the plaintiffs through their current accounts. It is the case set up in the plaint (COS 24/2004) by the defendant-Bank that the goods imported under the letters of credits were subject to concessionary customs duties by virtue of SRO No. 357(1)/2002 dated 15.6.2002 and in terms of which the plaintiffs were obliged to consume the imported goods within a period of one year. It has been mentioned in the suit by the defendant-Bank that there are a number of letters of
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credit which were adjusted through FIM and FATR facilities and which are the subject matter of the suits. The details of these letters of credits have been given in the body of the plaint. In order to secure the finance facilities, certain properties were mortgaged by the plaintiffs as well as other charge documents were executed such as DP personal guarantees and letters of pledge. Two finance agreements dated 27.10.2000 and 19.9.2001 were executed between the parties and memorandum of deposit of title deeds were also executed as a security for the finance facilities. The route which the transaction took has been explicated in paragraph 9(a) of the plaint in COS 24/2004. A chart depicting the amount disbursed, the principle (and mark-up) repaid and the respective dates have been brought forth in the above suit. This has been done in respect of both the plaintiffs separately, and in respect of each facility availed by them. (iii) During the pendency of COS No. 46/2002 filed by the plaintiffs, legal notices were sent on 17.5.2002 by the defendant-Bank to the plaintiffs for the repayment of the dues of the defendant- Bank. Upon the failure of plaintiffs to make the payment of dues demanded by the defendant- Bank, an advertisement was issued by the defendant-Bank for the sale of the pledged stocks in the newspapers. This constrained the plaintiffs to file an application in COS No. 46/2002 for the stay of the sale of pledged stocks but this Court refused to grant that stay to the defendants. In short, the sale of the pledged stocks took place and M/s. Muhammad Waheed & Company and M/s. A.D Services were declared the highest bidders on 4.11.2002 for having offered the highest bids for the pledged stocks of the plaintiffs. As a result of the proclamation, pledged stocks weighing 427.680 M. Tons was auctioned and an amount of Rs. 11,034,144.00 was paid to the defendant-Bank by M/s. A.D Services. Similarly, M/s. Muhammad Waheed & Co. lifted the pledged stocks weighing 482.185 M. Tons and paid an amount of Rs.…
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