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Petitioner: HABIB BANK LIMITED VS Respondent: ORIENT RICE MILLS LTD. and others
Court Name: Lahore High Court Judge(s): Jawwad S. Khawaja Title: HABIB BANK LIMITED vs ORIENT RICE MILLS LTD. and others Case No.: C.O.S. No,58 of 2000 Date of Judgment:2001-06-08 Reported As: 2004 CLD 1289 Result: Suit decreed
JUDGMENT
JUDGMENT ' This suit filed by the plaintiff-Bank seeks recovery of a sum of Rs,238,665,360.70 from the defendants alongwith other sums prayed for in the plaint. The defendants have submitted separate petitions seeking leave to appear, particulars of which are as under:-- ' PLA No,117-B of 2000 by defendant No,1, PLA No,118-B of 2000 by defendant No,2, PLA No,119-B of 2000 by defendant No,3, PLA No,120-B of 2000 by defendant No,4, PLA No,121-B of 2000 by defendant No,5, PLA No,122-B of 2000 by defendant No,6, PLA No,123-B of 2000 by defendant No,7 and PLA No,124-B of 2000 by defendant No,8. ' The defendant-Company has been sued as principal debtor, while the defendants Nos.2 to 8 have been impleaded in their capacity as guarantors to secure the payment obligations of the defendant-Company. 2. As per contents of para.5 of the plaint, the defendant-Company has availed the facilities mentioned in the said paragraph. The defendants have, statedly, executed the various documents, referred to in para.6 of the plaint, in respect of the aforesaid finance facilities, including finance agreements, demand promissory notes, facility letters and security documents which have been executed by the defendant-Company and personal guarantees which have been executed by defendants Nos.2 to 8. 3. Various grounds have been urged on behalf of the defendant-Company in support of its application (PLA No,117-B of 2000), seeking leave to appear. The facility-wise contentions of learned counsel for the defendant-Company and the replies thereto by learned counsel for the plaintiff- Bank are discussed below.
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4. Learned counsel for the defendant-Company has, firstly, referred to the Export Re-finance ("ERF") facility of Rs,55,000,000 in respect of which a sum of Rs,63160,719 has been claimed by the plaintiff- Bank. The finance agreement dated 30-10-1998 in respect of the ERF facility has been placed on record at page 26 of the case file. According to the said agreement, the sale price constituting the finance is Rs,55,000,000, while the defendant-Company is obliged to make repayment in lump sum of the marked-up price amounting to Rs,63,160,719 on or before 30-9-1999. It was submitted by learned counsel for the defendant-Company that the sale price of Rs,55,000,000 was never disbursed to the defendant-Company. He referred to the statement of account, at page 193 of the case file debited to the account of the defendant-Company on 16-3-1999. The defendant- Company, however, in its application seeking leave to appear, has taken the plea that the aforesaid amount had been debited to its account without any authorization and had not, in fact, been disbursed to the said company. The plaintiff-Bank has submitted its reply to the PLA and alongwith it has filed a statement in respect of the current account of the defendant-Company. The said statement of account shows that the amount of Rs,55,000,000 was credited to the current account of the defendant-Company on 16-3-1999 alongwith another credit entry for a sum of Rs,28,500 on the same date. Thereafter, a sum of Rs,56,327,200 was debited to the said current account on the same date i.e. 16-3-1999. It is argued by learned counsel for the defendant- Company that the said debit entry dated 16-3-1999 is wholly unauthorized and further that no explanation has been preferred by the plaintiff-Bank as to where that amount has gone. 5. Learned counsel for the defendant-Company has also referred to certain inconsistencies in the stance adopted by the plaintiff-Bank in relation to the ERF facility and the debits made in the account of the defendant-Company relating to the said facility. In this regard, he has firstly, pointed out that in the plaintiff-Bank's reply to the PLA, it has been stated that the aforesaid amount of Rs,55,000,000 under the ERF facility was credited to the current account of the defendant-Company on 16-3-1999, while in C.M. No,208-B of 2001 in a letter addressed by learned counsel for the plaintiff-Bank to learned counsel for the defendant-Company, it has been asserted that the ERF limit was disbursed on 3-11-1998. According to learned counsel for the defendant- Company, the first disbursement is shown in the statement of account on 16-3-1999, while the aforesaid letter of learned counsel for the plaintiff-Bank asserts that the amount was disbursed earlier on 3-11-1998. On this basis, it was contended by learned counsel for the defendants that the statement of account relating to the ERF facility was not reliable and should not be made a basis for denying leave to appear to the defendant-Company. 6. In response learned counsel for the plaintiff-Bank contended that the ERF facility had been allowed to the defendant-Company for a period of eleven months starting from the date of the agreement dated 30-10-1998. He further stated that the facility was in respect of an overall limit of Rs,55,000,000 and the defendant-Company was allowed to avail refinance for various transactions within the overall limit for which export refinance was permissible. He, therefore, explained that initially export refinance was disbursed to the defendant-Company on 3-11-1998 as stated in his letter to learned counsel for the defendant-Company. However, the said amount together with mark-up thereon, had been repaid by the defendant-Company and the Bank, as such, had no claim against the defendant-Company in respect of the first disbursement under the ERF facility. He also referred to the statement of account pertaining to the ERF facility and pointed out that no amount had been claimed from the defendant-Company in respect of the ERF facility for any amount disbursed prior to 16-3-1999. This, indeed, is correct. As such, the apparent discrepancy in the statement of account, which was pointed out by learned counsel for the deferadantCompany, stands fully explained. 7. It was next contended by learned counsel for the defendant-Company that even though the ERF facility, as per contents of agreement dated 30-10-1998, was for a period of eleven months, starting
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from 30-10-1998 and ending on 30-9-1999, the plaintiff-Bank -could only have charged mark-up for the period subsequent to the disbursement of the facility. This argument of learned counsel for the defendant-Company also stands explained as discussed in the preceding paragraph because the plaintiff-Bank has not charged or claimed any mark-up for the period prior to the disbursement made on 16-3-1999. 8. Learned counsel for the defendants next drew my attention to the statement of the ERF account at pages 193 and 194 of the file. According to him, there was a debit entry of Rs,10,800,000 in the said account on 2-9-1999 and also a further debit entry of Rs, 7,000,000 on 14-9-1999. According to learned counsel, the total limit of the Export Refinance Facility was Rs,55 million. The facility had been availed in full. However, on 2-9-1999, an amount of Rs,10,800,000 was credited to the ERF account, while on 14-9-1999 a further sum of Rs,7,000,000 was credited to the said account. 9. It was learned counsel's contention that even though there were debit entries in the Export Refinance Account in respect of the aforesaid sums of Rs,10,800,000 and Rs,7,000,000, there were no disbursements of the said amounts to the defendant-Company. This contention, however, is not entirely correct. As pointed out by learned counsel for the plaintiff-Bank, the amount debited as aforesaid, was transferred to the current account of the defendant-Company and was utilized by the said defendant as export refinance. The statement of account does bear out the assertion made by learned counsel for the Bank. Furthermore, the plaintiff-Bank has, with its reply to PLA No,117-B of 2000, submitted two specific letters of request of the defendant-Company to revolve the export refinance within the aggregate limit of Rs,55,000,000. The first request made to the plaintiff-Bank is by means of letter dated 31-8-1999 and is for a sum of Rs,10,800,000. The defendant-Company has, with its requests, furnished the requisite documents to the bank including an undertaking under the Export Refinance Scheme of the State Bank as well as a Demand Promissory Note which are on file. Likewise, by means of an undated letter, the defendant- Company has made a further request for revolving the export refinance of Rs,7,000,000. The requisite undertaking and promissory note relating to the same are also on file. It was, therefore, contended by learned counsel for the plaintiff-Bank that the aforesaid transactions were covered within the overall limit of the ERF facility and were fully documented as noted above, in accordance with the provisions of the Export Refinance Scheme of the State Bank of Pakistan. This contention of learned counsel has force and is also fully supported by the documents referred to by him. 10. It was then argued by learned counsel for the defendant-Company that each Export Refinance Transaction was required to be separately sanctioned and dealt with independently under the Export Refinance Scheme Part II of the State Bank of Pakistan. He also argued that, as a consequence, separate sanction letters and documentation was necessary for the two transactions of Rs,10,800,000 and Rs,7,000,000, respectively, which are reflected in the Export Refinance Account of the defendant-Company. These contentions of learned counsel are not material in the light of the express requests made by the defendant-Company itself seeking the aforesaid refinance. Furthermore, the said transactions have been adequately explained by the plaintiff-Bank in its reply. As noted above, the defendant-Company, after availing the export refinance limit to the full, had repaid the amounts of Rs,10,800,000 and Rs,7,000,000, respectively, thereby creating room within the total sanctioned limit of Rs,55,000,000, to enable the plaintiff- Bank to grant the requested refinance. The defendant-Company, as such, A cannot be allowed to .Raise a plea which is contrary to its own stance as reflected in its letters of request. 11. In addition to the above, learned counsel for the plaintiff-Bank drew my attention to the financial statements of the defendant-Company for the year ended 31-8-1999. The said statements have been duly audited by a firm of Chartered Accountants. The auditors have obtained all the information and explanations necessary for the purpose of their audit as submitted in their report to the members of the defendant-Company Note 5 to the audited accounts clearly shows the
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amount due by the defendant-Company to the plaintiff-Bank in respect of the ERF facility. The liability of the defendant in respect thereof for the year 1998 is shown as Rs,55,000,000 and in respect of 1999, it is shown as Rs,56,275,000. The audited accounts provide material corroboration to the statement of account filed in support of the plaintiff-Bank's claim. 12. The documents considered above do clearly show that the defendant-Company had availed the Export Refinance Facility and was liable to repay the same to the plaintiff-Bank. Learned counsel for the defendant-Company, made reference to various precedents to nullify the effect of the contents of the audited accounts and the above referred letters requesting export refinance of Rs,10,800,000 and Rs,7,000,000, respectively. He argued that the audited accounts at best, could be construed as admissions on the part of the defendant-Company which admissions were not conclusive and could be rebutted. As a statement of law there can be no dispute with the contention of learned counsel for the defendant-Company. The various precedents cited by him, which are discussed below, enunciate the same legal principle. However, the contention of learned counsel is not tenable in the circumstances of the present case. Firstly, it is to be noted that learned counsel for the defendant-Company has not been able to show any reason why the audited financial statements, which have been prepared by a reputable firm of Chartered Accountants, should be treated as an admission. Secondly, even if the audited financial statements are or can be treated as admissions, no argument has been advanced by learned counsel for the defendant- Company which would rebut the contents of the audited statements to justify that the same may be disregarded. Thirdly, the precedents cited by learned counsel for the defendant-Company are distinguishable on fact as briefly discussed below. 13. Learned counsel for the defendant-Company, firstly, referred to the case titled Ahmed Khan v. Rasul Shah and others PLD 1975 SC 311. It was held in this case that admissions are only relevant evidence and are not conclusive. This legal proposition is well-established. The facts of the cited precedent, however, show that there was plenty of relevant evidence available in that case to rebut the admission which was set up against one of the parties to the litigation. In the present case learned counsel for the defendant-Company has not been able to point to any evidence which would counter the audited financial statements of the defendant-Company. The mere verbal assertion made by the defendant-Company that facilities were not availed by the defendant-Company or were not availed to the extent claimed by the plaintiff-Bank, cannot suffice for the purpose of denying the liability of the defendant-Company. Learned counsel for the defendant-Company also referred to the case titled Barkhurdar v. Muhammad Razzaq PLD 1989 SC 749. This judgment relies on the case of Ahmed Khan v. Rasul Shah and merely reiterates the enunciation of law given in the earlier precedent. 14. Learned counsel for the defendant-Company next cited the case titled Pakistan Development Corporation Ltd. v. The Bank of Bahawalpur PLD 1960 Karachi 885. It has been held in the cited case that admissions are not conclusive and that it is always open to a person who made an admission to show that he had done so under a mistake, misapprehension or miscalculation. In the present case, learned counsel for the defendants has been unable to point to any mistake, misapprehension or miscalculation. The cited precedent, in the circumstances, goes against the argument advanced by learned counsel for the defendant-Company. 15. Finally, learned counsel referred to the case titled Mst. Hameeda Begum and others v. Khadim Hussain and others 2001 MLD 427. This is a case decided by a Bench of the Lahore High Court relying on the case of Ahmed Khan v. Rasul Shah and the case titled Barkhurdar v. Muhammad Razzaq referred to above. The material facts of the case are that an admission had been made which was contrary to the contents of the Revenue Record relating to the redemption of a mortgage. The admission related to the date of redemption of mortgage on which date the person making the admission, was ten years old. After a discussion of the evidence it Was held in the cited
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case that there was sufficient material on the record to rebut the admission so made. As noted above, in the present case there is no evidence to rebut the contents of the audited financial statements placed on record by the plaintiff-Bank. 16. Learned counsel for the defendants next contended that in actual fact the defendant-Company had availed export refinance up to a limit of Rs,25,000,000 which amount was outstanding when the limit for the said finance was raised to Rs,55,000,000. He, therefore, contended that the bank was only entitled to charge markup in respect of the enhanced amount of Rs,30,000,000. This contention, however, cannot be accepted in the light G of the agreement dated 30-10-1998 which has been executed by the defendant-Company, setting out therein its commitment in respect of the entire finance, of Rs,55,000,000. It was on the basis of the said agreement that the plaintiff-Bank was induced to grant finance. The defendant-Company, therefore, cannot be allowed to resile from its commitment. 17. The last contention in respect of the ERF facility was that under relevant State Bank circulars and also a circular dated 26-4-1994 issued by the plaintiff-Bank itself, there was no scope for any renewal of facilities or the continued charge of mark-up thereon after the expiry of the agreed period. This contention is also not well founded because the defendant-Company had itself' made a request for the restructuring of its financial obligations to the plaintiff-Bank and had also entered into the agreement in relation to the ERF facility. In these circumstances, the defendant-Company cannot be allowed to back out from its financial commitment. 18. The plaintiff-Bank has also made a claim for Rs,10,653,000 on account of cash finance (pledge). The amount due under the Cash Finance Facility as on 22-5-2000 was Rs,9,172,000 but a sum of Rs,1,480,283 has been charged thereon by way of mark-up to arrive at the sum claimed by the plaintiff-Bank. According to learned counsel for the defendant-Company, the aforesaid Cash Finance Facility was secured through pledge of rice which the bank cannot now account for. He, therefore, contended that in the absence of the pledged stocks of rice, the plaintiff-Bank could not enforce its claim in respect of the Cash Finance Facility. In support of his contention, learned counsel cited the case titled "A.M. Burq and another v. Central Exchange Bank Ltd. And others" PLD 1966(W.P.) Lahore-1. The facts of the said case are, however, distinguishable. In the cited precedent, there was no dispute between the parties that the pledgee bank was solely responsible for the destruction/disappearance of a part of the pledged goods. As such, the said bank's admitted failure to account for the missing goods was made a basis for the said judgment. 19. In the present case, however, the bank has lodged an F.I.R. Dated 2-5-1998 at P.S. Sadar Kamoki. The F.I.R. Has not been produced on record by either party. It is, however, clear from the contents of the PLA No,117-B of 2000 and the reply thereto that the responsibility, for loss of the pledged rice cannot, at this juncture, be placed on the plaintiff-Bank. Section 176 of the Contract Act empowers the plaintiff-Bank to file its suit without selling the pledged rice and to treat the pledge as collateral security only. Clearly this option has been exercised by the plaintiff-Bank. The matter relating to any shortfall in the pledged stock of rice and the responsibility therefor can be determined in execution proceedings at the time the collateral security is required to be accounted for and brought to sale. The rights and obligations of the plaintiff-Bank as pledgee and those of the defendant-Company under sections 151 and 152 of the Contract Act, which were referred to by learned counsel for the defendant-Company, can also be determined at the time of realization of the collateral security. 20. For the present it will suffice to point out that the stock statements, which are on record at pages 37 and 38 of the reply to the PLA, cannot be treated as evidence of the fact that the plaintiff- Bank was delivered possession of the stocks of rice referred to above. The said stock statements have been signed by a representative of the defendant-Company and are clearly inconsistent with the plea now being advanced on behalf of the company. It is also important to note that the
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stock statements are dated subsequent to the F.I.R. Dated 2-5-1998 but quantities of rice valuing Rs,6,484,400 have purportedly been delivered by the defendant-Company to the plaintiff-Bank and received by the Muqadam of the latter. In view of the admitted position that the stocks of rice, in fact, do not exist, no liability for loss of the same can be attributed to the plaintiff-Bank on the basis of the aforesaid stock reports. Furthermore, it is important to note that the cash finance facility has mostly been adjusted through payments made by the defendant-Company. Rs,6,000,000 in respect of the said facility has been paid subsequent to the filing of the present suit and, as a result, only a sum of Rs,3,000,000 approximately, remains outstanding' on this score. 21. The next claim in the plaintiffs suit relates to a Demand Finance Facility of Rs,65,000,000. This facility is covered by an agreement dated 11-11-1998. The amount claimed by the plaintiff-Bank in respect of the said facility is Rs,81,323,645 which includes mark-up of Rs,16,327,000. 22. It is not in contention between the parties that the aforesaid amount of Rs,65,000,000 is comprised of the following three facilities:-- (a) FAPC Rs.30,000,000 (b) Cash Finance (Hypothecation)Rs.20,000,000 (c) IDA Loan Rs.15,000 000
Total: Rs.65,000,000 23. Learned counsel for the defendant-Company has not disputed the aforesaid principal amount but has denied the liability of the defendant-Company to pay the mark-up claimed thereon amounting to Rs,16,327,000. Learned counsel for the defendant-Company has contended that in accordance with the circulars issued by the State Bank of Pakistan and by the plaintiff-Bank itself, which have referred to above, it was not permissible to the plaintiff-Bank to create a fresh Demand Finance Facility merely for the purpose of adjusting the existing liabilities of a customer of the Bank and thereafter to charge mark-up on the fresh demand finance facility created for the aforesaid purpose. 24. The above contention of learned counsel is not legally tenable. As noted above, it was the defendant-Company itself which made a request for restructuring of the various facilities availed by it. The Demand Finance Facility was then granted by the plaintiff-Bank on the specific request of the defendant-Company. In these circumstances, it is quite clear that the restructuring of facilities was done by the plaintiff-Bank on the express request of the defendant-Company which also thereafter executed relevant documents to set out its commitment to repay the restructured amount in accordance with agreed terms. The defendant-Company cannot now be allowed to resile from its commitment which has clearly resulted in the existing arrangement. The plaintiff- Bank has advanced the Demand Finance Facility and has also refrained from initiating legal action against the defendant-Company in 1998 when the restructuring request was made by the defendant-Company. In the circumstances, the defendant-Company is estopped from disputing the amount of markup which was committed by it and on the basis of which the Demand Finance Facility of Rs,65,000,000 was granted to it. 25. Learned counsel for the defendant-Company also argued that in the light of the dictum laid down in the case titled I.C.P. And others v. Messrs Chiniot Textile Mills Ltd. PLD 1989 Karachi 316, no mark-up could be charged by the plaintiff-Bank on accrued mark-up. The cited precedent does hold so. However, it is not applicable in the circumstances of the present case because the plaintiff-Bank has not charged any mark-up on mark-up. The amount set out in paragraph 22 above constitutes the claim of the plaintiff-Bank on account of the principal amount of the facilities referred to in the said paragraph. Mark-up thereon has only been charged pursuant to the express request and the agreement of the defendant-Company as noted in the preceding
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paragraphs of this judgment. The amount of Rs,16,327,000 as mark-up, therefore, constitutes a valid and enforceable claim. At this juncture, it is important to note that the sum of Rs,22,237,689, which had accrued by way of mark-up on the facilities referred to in paragraph 22 above, was adjusted, at the request of the defendant-Company, through the creation of another Demand Finance- Facility (DF-II) on which no mark-up has been charged or claimed by the plaintiff-Bank. Furthermore, there is no assertion on behalf of the defendant-Company that mark-up has been charged on the aforesaid amount of accrued mark-up. The case of I.C.P. And others v. Chiniot Textile Mills Ltd., is, therefore, inapplicable to the facts of the present case. 26. The fourth claim made by the plaintiff-Bank is in respect of the second Demand Finance Facility (DF-II) in respect of which the plaintiff-Bank has made a claim of Rs,22,237,689. There is no dispute or contention between the parties in relation to the validity of this claim. 27. The fifth claim of the plaintiff-Bank against the defendant-Company is in respect of a Running Finance Facility of Rs,40,000,000 covered by a financing agreement dated 22-12-1998. It was contended by learned counsel for the defendant-Company that the said amount had not been disbursed to it. Learned counsel for the plaintiff-Bank, however,…
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