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Petitioner: INDUSTRIAL DEVELOPMENT BANK. OF PAKISTAN, REGIONAL OFFICE LAHORE through Vice-President, I.D.B.P VS Respondent: M/s. CRYSTAL CHEMICALS LTD. REGISTERED OFFICE, LAHORE through its Director and others
Court Name: Lahore High Court Judge(s): Mian Saqib Nisar Title:INDUSTRIAL DEVELOPMENT BANK. OF PAKISTAN, REGIONAL OFFICE LAHORE
through Vice-President, I.D.B.P vs M/s. CRYSTAL CHEMICALS LTD. REGISTERED OFFICE, LAHORE through its Director and others Case No.: COS No, 66 of 2000 and C.M. No, 420-B of 2005 Date of Judgment:2008-11-26 Reported As: PLJ 2010 Lahore 552 Result: Application allowed Judgment ORDER M/s. Crystal Chemicals Limited etc. (judgment debtors under the compromise decree with IDBP dated 30.03.2004) filed the instant application under Section 47 read with Section 151 CPC in COS No, 66-2000, initially numbered as CM. No, 300-B-2005, subsequently amended to CM No, 420-13- 2005. The relief sought by the judgment debtors herein is for this Court to determine the share of the decree holder bank in the forced sale value of the assets of the judgment debtor's project, assets held jointly under its charge with the ICP and in light thereof, to determine whether the said share of the IDBP is limited to 54.6% already paid by the judgment debtors to the decree holder bank, thereby satisfying the compromise decree in full. The undisputed facts are briefly recounted as follows: 2. A compromise agreement dated 29.3.2004 was signed between both the parties for a total sum of Rs, 174.040 million to be paid by the judgment debtors in full and final settlement of their total liabilities towards IDBP in terms of the State Bank of Pakistan settlement scheme promulgated through BPD Circular 29 dated 15.10.2002. As per the terms of Paragraph 9 (c) (iii) of the Circular, the total amount due was calculated by IDBP on the basis of forced sale value of the mortgaged properties and project assets under: (1) its exclusive charge and (2) under its joint pari passu charge, shared with Investment Corporation Pakistan (ICP), another creditor of the judgment debtor and a proforma defendant in the suit. The forced sale value of the securities in both the above categories was jointly settled by the parties on the basis of the evaluator's report. The said compromise agreement was given sanction of the Court vide compromise decree dated
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30.03.2004. 3. The mortgaged securities under the exclusive charge of IDBP were evaluated at Rs,76 million for the immovable properties and Rs,2.3 million for the pledged goods. As regards the pledged goods, their value was not included in the initial calculations of the total liability by IDBP hence the sum of Rs, 2.3 million was to be paid in addition to Rs, 174.04 million. 4. The forced sale value of the properties (project assets of the judgment debtors) under the joint pari passu charge of IDBP and ICP, was determined at Rs, 114 million. IDBP determined its share of the forced sale value of the jointly held securities as 86%, while it calculated ICP's share to be 14% of the same. The relevant clauses of the compromise decree are reproduced as follows: H. That out of the agreed liability the Bank has determined its share at the rate of 86% of the FSV of the project assets being held under the joint charge of the Bank and ICP. In case where the Bank and ICP were to resolve their shares different to 86:14 any differential will be settled by the Bank without any liability on the Borrowers Customers." Clause 3. "That the Borrowers Customers shall be entirely responsible for the adjustment/settlement of its any other financial liability towards other Bank/DFI/Creditor." 5. As per the terms of the compromise, decree, the judgment debtors admittedly made payment of Rs,78.3 million, the agreed upon value of the assets held exclusively under IDBP's charge. Upon receipt of the same, IDBP lifted its charge, releasing the mortgaged properties and the pledged goods held by it. 6. Subsequent thereto, a dispute arose between the IDBP and the ICP regarding their respective shares in the project assets held jointly under their pari passu charge. The ICP refuted the IDBP's contention in Clause H of the compromise decree, that its respective share ratio in the jointly held assets was 86%: 14%. According to the ICP, the correct sharing ratio was (IDBP) 54.6%: (ICP) 45.4%. Furthermore, in order to protect its interests, the ICP rejuvenated winding up proceedings filed by it against the judgment debtors, Crystal Chemicals Limited and filed CM No, 356 L of 2004 before this Honourable Court stating that the compromise decree was not binding upon it. The said application was accepted by this Court, confirming the same, as ICP was neither a party to the compromise agreement nor the decree. 7. As per the above-reproduced terms of the compromise decree (Clause 3), it was agreed between the parties that the judgment debtors were directly responsible for settling other creditors such as the ICP. Therefore the dispute arising between the IDBP and the ICP led the judgment debtors to hold investigations to find out the actual agreed pari passu ratio between IDBP and ICP. It was imperative for the judgment debtors to hold independent investigations to determine the correct position as the differential in the sharing ratio would affect the liability of the judgment debtors towards other creditors, such as the ICP. Furthermore if the IDBP were to obtain or receive a share in FSV beyond its lawful entitlement as per BPD Circular 29, it would also reduce the financial capacity of the judgment debtors to clear their dues towards other creditors. 8. The judgment debtors commissioned a complete report from the Securities and Exchange Commission of Pakistan, placed on the Court's record, which established that the agreed sharing ratio between IDBP and ICP, as per registered pari passu charge was 54.6% and 45.4%, respectively. Consequently, a new payment arrangement was worked out between the IDBP and the judgment debtors whereby it was agreed that the judgment debtors would pay the undisputed amount of Rs, 62.244 million representing 54.6% of the forced sale value of the project assets, which was reduced to Rs, 54.779 million after a rebate of Rs, 7.465 million for prompt payment. 9. As a result thereof, an application bearing C.M. No, 231-2004 was filed in COS No, 66-2000, the prayer of which being important, is reproduced below:-- "It is most respectively prayed that the petitioners may be allowed to pay and IDBP be directed to accept a payment of 54.6% of the FSV of the Company's assets under the joint charge of IDBP and
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ICP subject to a discount of 6% on all the amounts paid to it i,e, on the sum of Rs,58.596 million paid on 29.03.2004 and Rs, 62.244 million to be paid now. In addition, as agreed by IDBP, if any further payment is found due against the petitioners and the same is made within 30 days of its so being found. IDBP will allow the discount of 6% on the such payment if made in lump sum. Further, the petitioners may graciously be allowed to settle independently with the ICP, in accordance with clause 3 of the Consent Decree." 10. This application was filed on 08.07.2004 as an urgent matter. It was listed for and heard on the next day, 09.07.2004. IDBP's learned counsel, Sardar Mashkoor Ahmad, Advocate, appeared without a formal notice at the motion/urgent stage and with his consent duly recorded therein; the following order was passed by this Honourable Court, to dispose of C.M. No, 23143-2004: "The learned counsel for the IDBP has appeared and concurred to the petition in hand. It appears that the ICP also has some claims in the amount payable under the decree dated 30.03.2004. Since the petitioner is paying only 54 percent of the undisputed share to IDBP, this petition is allowed subject to just and legal exceptions. This petition is disposed of. 11. Subsequent thereto, the judgment debtors wrote a letter dated 14.7.2004 to the IDBP, in response to which the IDBP wrote on July 22, 2004, Memo bearing No, LHR/SAM/222 slating that:-- "In compliance of the Court order dated 09.07.2004 the Bank is agreeable to receive its undisputed share of 54.6% in the FSV of the project assets of Rs, 114.000 million worked out by ICP on provisional basis which works out to Rs,62.44 million. Further the amount payable by you after allowing rebate on the payment of Rs, 76.000 million already made by you on 30.03.2004 and proposed to be made (62.244 million) net payable amount works out to Rs, 54,986,824.00 (including per forced charges incurred/to be incurred after 30.09.2002 detailed as under:-- Total value of project assets 114,000,000.00 Total value of collateral 76,000,000.00 IDBP share in project assets (undisputed 54.696)62,244,000.00 Value of collateral (100%) 76,000,000.00 Total 138,244,000.00 10% down payment not eligible for discount13,824,400.00
Amount eligible for discount 124,419,600.00 Discount @ 6% 7,465,176.00 Amount payable net of discount including 10% down payment 130,778,824.00 Less amount already remitted by the Borrowers76,000,000.00 Balance amount payable 54, 778,824.00 Perforce charges incurred to be incurred After 30.09.2002208,000.00 Total payable 54,986,824,00 12. The decree holder, IDBF', thus demanded the payment of the undisputed amount of. Rs,54,986,824/- from the judgment debtors. The amount was admittedly paid by them and duly received by the IDBP. While accepting payment of the undisputed sum, IDBP sought confirmation that subsequent to resolution of the dispute with the ICP, the judgment debtors would have to make any additional payment in lump sum within 30 days in order to avail 6% rebate on the payment excluding the 10% not eligible for the same. In the event the judgment debtors chose not
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to pay in lump sum, the IDBP would provide a new schedule of payments to them, on which no rebate would be allowed. 13. The judgment debtors sent the payment of Rs, 54,986,824 under cover of letter dated 23.07.2004, which provided that:-- "The payment now being made will extinguish all liabilities of the company towards IDBP insofar as its undisputed share is concerned. However, if it is found that IDBP is entitled to any additional share i,e, beyond 54.6% we will make that payment when so determined either in lump sum within 30 days of the final determination subject to 6% discount on 90% of the amount or in installments as per worked out schedule." 14. At that point in time, that is, until 23.7.2004, the judgment debtors had admittedly paid a total sum of Rs, 133.079 million to the IDBP with a grant of rebate of 7.485 million for lump sum payment. Matters were thus left in a state of flux until final resolution of the question of the share ratio between IDBP and ICP. Subsequent exchanges and communications between the IDBP and the judgment debtors led to a deadlock situation, wherein the judgment debtors claimed that they had extinguished their total liability towards IDBP whereas IDBP refuted their contention, demanding further payment in line with whatever share ratio was determined afresh between the IDBP arid ICP, respectively. Unable to resolve matters amicably, the judgment debtors approached the Court on 15.9.2004 and filed the instant application, originally numbered as. C.M. No, 300-B-2004, later amended and renumbered as C.M. No, 420-B-2005. The IDBP and ICP have both participated in the proceedings and replied to the instant application. 15. In the meantime, during continuing correspondence between the parties, IDBP set out its final position regarding the new sharing ratio with ICP and corresponding further liability of the judgment debtors. The letter dated 14.02.2005 read as under: ".....you were allowed to pay undisputed share of IDBP in the FSV of the project assets subject to the condition that after settlement of sharing dispute with ICP you will make payment of the balance amount in lump sum within 30 days on which the Bank will allow 6% rebate and in case you remain unable to pay the balance amount in lump sum the Bank will convey repayment schedule for the same without rebate. In this regard we are pleased to inform that dispute regarding sharing ratio has been resolved with ICP and your liability with IDBP under. SBP Guideline has been re- determined at Rs, 166.167 million instead of Rs, 174.040 million against which you already have paid Rs, 133.079 million net of rebate of Rs, 7.465 million. At present balance liability of Rs,26.073 million plus, perforce/legal charges of Rs, 0.228 million incurred/to be incurred after 30.09.2002 till settlement of loan liability in full is payable. Since dispute regarding calculation of sharing ratio has been resolved, you are requested to pay Rs,26.301 million within 30 days hereof in terms of our above referred letter dated 22.07.2004. However, in case you opt to pay this amount in installments, it is submitted that as per compromise, the liability under Circular No, 29 was to be re-paid in 12 quarterly installments w,e,f, 30.06.2004. Since the due date of 3 quarterly installments have passed, therefore, the balance liability of Rs,26.073 million is to be paid in 9 quarterly installments of Rs,2.173 million payable w,e,f, 30.03.2005 and complete the documentation formalities as advised by the Bank's Legal Counsel. You will also pay Rs, 0.228 million legal charges in cash." 16. The judgment debtors contended that the ratio of the jointly mortgaged property between IDBP and ICP had already been settled at 54.6% and 45.4% respectively, according to which, the agreed liability of the judgment debtors had been fully paid and adjusted. Furthermore, that the IDBP had no right to claim more than its share from the FSV. 17. While the instant application remained pending, the judgment debtors filed another C.M. No, 244-B-2005 on 28.05.2005 seeking that the applicant/judgment debtors be allowed to deposit a Bank Guarantee for the demanded sum of Rs,26.073 million and charge of IDBP on the project
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assets be ordered to be released on the furnishing of such Bank Guarantee. The application was allowed, while IDBP was directed to release its charge over the project assets. Consequently, a bank guarantee of Rs, 26.073 million was provided by the judgment debtors to the IDBP and accepted by it, while it released its charge over the project assets. The judgment debtors then substituted the bank guarantee with a cash payment. The said sum of Rs,26.073 million was paid subject to the decision of the Court in the instant application CM. No, 420-B-2005. 18. Learned counsel for the applicant/judgment debtors has made the following submissions in support of his application:-- (i) The judgment debtors are entitled to make the instant application, as the "Court executing a decree" includes proceedings initiated by the decree holder and the judgment debtor. He has relied on Erusappa Mudallar v. Commercial and Land Mortgage Bank Limited (1899 Madras Series Volume 23.) (ii) Under Section 47 CPC, the executing Court has the exclusive jurisdiction to look into the execution, discharge and satisfaction of the decree and settle any questions related thereto. Section 47 (1) provides that: "All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree, shall be determined by the Court executing the decree and not by a separate suit." He has relied on Wali Muhammad and 3 others v. Muhammad Nawaz Khan and another (PLD 1993 (Peshawar) 197), Riaz Hussain v. Muhammad Akbar (2003 SCMR 181), Haji Abdul Wali Khan and another v. Muhammad Hanif and another (1991 SCMR 2457) and Muhammad Saeed v. Yasin and another (PLD 1996 Karachi 308) to establish that the provisions of Section 47 must be liberally interpreted in order to avoid the necessity of a fresh suit to adjudicate upon questions relating to execution of the decree so as to accord relief finally, cheaply and speedily to the parties. (iii) In the alternative, he also relied on Toor Gul v. Mst. Mumtaz Begum (PLD 1972 Supreme Court 9), NWFP Government, Peshawar through Collector Abbottabad and another (PLD 1993 Supreme Court 418), Emirates Bank International Limited v. Adamjee Industries Limited Karachi and 14 others (1993 CLC Karachi 489) and Bajrang Rai and others v. Ismail Mian and others (AIR 1978 Patna 339) to argue that the Court has inherent powers under S. 151 CPC to further the ends of justice and where specific provisions do not meet the requirements of the case, the Court may make such orders as are necessary. (iv) Agreements arrived at between decree holders and judgment debtors, even subsequent to the decree, are binding and can be duly implemented by the Court executing the decree. Learned counsel for the judgment debtors relied on Oudh Commercial Bank Ltd., Fyzabad v. Thakurain Bind Basni Kaur and others (AIR 1939 (Privy Council) 80) and Allah Diwaya and others v. Allah Diwaya and others (1996 CLC 1399). (v) In the exercise of its jurisdiction under Section 47 CPC, -the Executing Court can take into consideration subsequent events even after passing of the decree. Fakir Abdullah and others v. Government of Sindh (PLD 2001 Supreme Court 131) was relied on in this regard. (vi) Interpretation of the decree is amongst the powers of the executing Court. Muhammad Inayat v. Ghulam Murtaza (PLD 1987 Lahore 537) was relied on to establish that in exercise of its power of construction, the executing Court may look at the pleadings, documents, evidence on the record, or even fresh evidence in addition to the decree. (vii) In case of any doubt, the ambiguity is to be resolved in favour of the judgment debtor. Gokaran Singh v. Mangli and others (AIR 1921 Oudh 138) was relied on. 19. Learned counsel for the judgment debtors argued that Paragraph 9 (iii) (c) of BPD Circular 29 was the basis of the compromise agreement and decree, therefore the same has to be enforced within its parameters. Paragraph 9 (iii) (c) provides that the amount to be paid to a creditor is to
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be determined on the basis of the forced sale value of the securities under its charge compared to the disbursed loan amount. If the disbursed loan amount is greater than the forced sale value of the assets under the creditor's charge, then the debtor will pay the forced sale value of its assets in full and final settlement of its liabilities. This was precisely the settlement arrived at between the IDBP and the judgment debtors under the Circular, reflected and recorded in the compromise decree. The maximum liability of the judgment debtors was fixed at Rs, 174.04 million, which comprised the forced sale value of the securities under the exclusive charge of IDBP together with its share in the project assets jointly held with ICP. The forced sale value of the assets exclusively under the IDBP's charge has admittedly been paid to the IDBP. In addition, the sharing ratio confirmed and authenticated by the search report from the Securities and Exchange Commission of Pakistan with respect to the joint pari passu registered charge held by IDBP and ICP over the project assets is 54.6%: 45.4%. This ratio of the first and pari passu charge of 54.6.% and 45.4%, respectively, has neither been denied nor questioned by IDBP. A sum of Rs,54,778,824, equivalent to its share of 54.6%, has also been paid by the judgment debtors to IDBP, with its concurrence before the Court. The amount of Rs, 26.073 million demanded in excess thereof is admittedly being so demanded on the basis of disbursements and not as per registered charge, which determination runs contrary to the Circular and the decree. It is proved by. the search report that the securities under the valid charge of the IDBP are limited to 54.6%, after which IDBP issued an NOC in favour of ICP, which thereafter created a pari passu charge in its favour. No other charge was validly registered in favour of IDBP. Therefore; the IDBP is entitled only to the amount of Rs, 133,078,824 already paid to it, which extinguishes the judgment debtor's total liability towards it under the compromise decree. 20. It was further emphasized that the bonafides of the judgment debtors are evident by their conduct as they have also paid the additional amount of Rs, 26.073 million demanded by the IDBP, albeit subject to the final disposal of the instant application. 21. The learned counsel for the judgment debtors also contended that the decree holder unilaterally modified the compromise decree. It re-determined the liability of the judgment debtors under BPD Circular No, 29 at Rs, 166.617 million in place of the decretal amount of Rs, 174.040 million and on adjusting payments and rebates, it finally claimed the balance at Rs,26.073 million. Therefore, it is an accepted position that the earlier calculation by IDBP that a share of 86% was due to it in respect of its jointly held assets with ICP was incorrect. The new amount of Rs, 26.073 million, claimed in writing by it (through letter dated 14.2.2005), was described as reflective of the fresh determination of its sharing ratio with ICP, at 77.53% instead of 86%. 22. The learned counsel for the judgment debtors concluded his arguments by submitting that the fundamental provisions of the compromise decree, that is, the total liability, the balance due and IDBP's 86% share in the forced sale value of the jointly held assets with ICP were unilaterally varied by the IDBP, hence ceased to be binding upon the parties in their original content. In light of subsequent events, correspondence between the parties and position taken before the Court in the current proceedings, it was clear that the decree had been varied and was to be construed accordingly. The final understanding between the parties apparent from the record was that the liability of the judgment debtors towards IDBP under the compromise decree was fully and finally settled and all dues cleared with the last payment of Rs, 54,778,824 made to it as per its confirmed share of 54.6% in the forced sale value of the jointly held assets. Therefore, the total payment of Rs, 133,078,824 to the IDBP extinguished all liabilities under the compromise decree and the IDBP was not entitled to the payment of Rs, 26.073 million made in excess thereof, and may be directed to reimburse the same to the judgment debtors. 23. The counsel for the judgment debtors as a parting submission made reference to the provisions of S.33B of the Banking Companies Ordinance 1962. He emphasized that BPD Circular 29 under
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which the settlement between the decree holder bank and the judgment debtor was arrived at, was for the benefit of the borrowers and the customers of the bank. Meaning thereby, that any benefit that could come in the way of the judgment debtor under the Circular ought to be allowed to them. Interpretation of the provisions, of Para 9. (c) (iii) of the Circular when made keeping in mind the said S. 33B, would establish that the decree holder bank could not demand amounts in excess of its share in the value of the security under its valid charge. 24. The learned counsel for the decree holder bank contended that there was no variation in the compromise decree and/or the sharing ratio between the IDBP and the ICP; the new amount demanded was simply the earlier amount after deduction of rebate at 6% on 90% of the said amount. He elaborated that there had been no re-determination of liability. The amount agreed to be paid between the decree holder, and the judgment debtors was Rs, 174.04 million with a discount of 6% against lump sum cash payment on 90% of this amount. The letter dated 14.02.2005 written by the IDBP to the judgment debtors merely deducted the rebate of Rs, 7.465 million out of the agreed liability of Rs, 174.04 million. Accordingly, the balance payable worked out to be Rs, 166.539 million, which is almost the same as the amount of Rs, 166.617 million conveyed through IDBP's letter dated 14.02.2005. 25. He further submitted that the sharing ratio between the IDBP. and the ICP in respect of the forced sale value of the project assets of the judgment debtors, relates solely to the IDBP and the ICP, the pari passu charge holders and bears no relation to the judgment debtors. Whether IDBP has a share of 86% or less is a matter to be decided between the two charge holders to the exclusion of the judgment debtors. Furthermore, as Rs, 166.617 million, the new sum demanded by the IDBP, remains within the agreed limit of Rs, 174,04 million, IDBP is entitled to receive the same. 26. The learned counsel for the decree holder further contended that the share of IDBP is dependant upon the liability of the judgment debtors based upon disbursements made to them and not upon the registered charge on the assets of the judgment debtor company. Therefore, the instant application is misconceived and merits dismissal. 27. The Court has heard the arguments and examined the record. 28. This petition raises interesting and important issues. These may be summarized as…
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