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Petitioner: NATIONAL BANK OF PAKISTAN and others VS Respondent: KARACHI DEVELOPMENT JUDGMENT
Court Name: Sindh High Court Judge(s): Mushtaq A. Memon Title:NATIONAL BANK OF PAKISTAN and others vs KARACHI DEVELOPMENT
JUDGMENT
Reported As: PLD 1999 Karachi 260 Result: Suits dismissed Judgment JUDGMENT ' The common facts involved in the twenty suits, proposed to be disposed of through this judgment, as stated in the plaint, are that the defendant No,1- KDA proposed to undertake completion of the third phase of its project known as "Greater Karachi Bulk Water Supply Scheme" hereinafter referred as "the Water Project" at an estimated cost of Rs,749.90 million. The local currency component, then estimated at Rs,630.00 million, . Was to be met from bank borrowings. During the year 1976, the defendant No,!, for the purpose of securing finances for the water project, approached five banks namely: (i) National Bank of Pakistan (NBP), (ii) Habib Bank Limited (HBL), (iii) United Bank Limited (UBL), (iv) Muslim Commercial Bank (MCB) and (v) Allied Bank of Pakistan Limited (ABL), (collectively referred herein as 'the Syndicate') for loan and debenture financing to the extent of the local currency component of the estimated cost. The Syndicate agreed to grant the financial facility by way of nine loans/debenture series carrying interest at the rate of 2-1/2% above the bank rate with mininum of 12-1/2% per annum repayable in ten biannual instalments. During the period from 22-9-1976 to 11-6-1981 nine sets of loan agreements, assigned series in alphabetical order, were executed between the defendant No,1 and each of the five banks constituting the Syndicate. The total amount disbursed under the liine sets of loan agreements came to Rs,785.40 million out of which Rs,196.55, each, were disbursed by the NBP, HBL and UBL whereas Rs,117.65 million and Rs,78.575 million were granted by MCB and ABL, respectively. Towards acknowledgement of the loan amount and as security for repayment, every member of the Syndicate was given (i) Promissory Note for the disbursed amount with agreed interest and (ii) Allotment Letters for issue of debentures of the face value corresponding to the disbursed amount. The Government of Sindh,
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too, had executed guarantees for repayment of the disbursed amount with interest thereon within ninety days of demand upon failure of K.D.A. To make repayment. The defendant No,1 had partly repaid its liability but upon commission of default despite repeated calls, Legal Notice dated 19th December, 1985, was caused to be issued demanding payment of the balance outstanding amount. Similar demand was made from the defendant No,4, as well, in terms of the guarantee executed by it. All the calls, however, remained unresponded leading to the present proceedings which were initiated on 12-11-1985. The defendants No,2 and 3 namely Karachi Municipal Corporation/Karachi Metropolitan Corporation, hereinafter referred to as 'K.M.C.', and Karachi Water and Sewerage Board, hereinafter referred to as 'K.W.S.B.', have been sued on account of devolution of interest upon them by reason of Chapter 16 added through Sindh Ordinance II of 1983. It is asserted that the. Four defendants are jointly and severally liable for the dues to the members of the Syndicate. Every member of the Syndicate had initially filed nine suits claiming therein different amounts under the respective loan agreements. Upon promulgation of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, only twenty suits out of the forty-five cases remained for adjudication before this Court under . The Banking jurisdiction whereas the remaining twenty-five suits were transferred to the Banking Courts exercising pecuniary jurisdiction up to Rs,30 million. Suits Nos.934 to 939, all of 1985 are filed by NBP, Suits No,943 to 948, all of 1985 are filed by HBL, Suits Nos.952 to 957, all of 1985 are filed by UBL and Suits Nos.962 and 966 both of 1985 are filed by M.C.B. (i) Suit No,934/1985: This suit is filed by NBP for recovery of Rs,32,028,170.60 under Debenture Series 'D' and Loan Agreement dated 29-8-1977 whereunder a sum of Rs,20 million was disbursed. (ii) Suit No,935/1985: This suit is filed by NBP for recovery of Rs,53,059.364.87 under Debenture Series 'E' and Loan Agreement dated 18-7-1978 whereunder a sum of Rs,30 million was disbursed. (iii) Suit No,936/1985: This suit is filed by NBP for recovery of Rs,45,017,818.11 under Debenture Series 'F' and Loan Agreement dated 30-1-1979 whereunder a sum of Rs,19.90 million was disbursed. (iv) Suit No,937/1985: This suit is filed by NBP for recovery of Rs,45,522,712.00 under Debenture Series 'G' and Loan Agreement dated 21-4-1979 whereunder a sum of Rs,20 million was disbursed. (v) Suit No,938/1985: This suit is filed by NBP for recovery of Rs,38,570,590.72 under Debenture Series 'H' and Loan Agreement dated 22-4-1979 whereunder a sum of Rs,20 million was disbursed. (vi) Suit No,939/1985: This suit is filed by NBP for recovery of Rs,81,309,876.72 under Debenture Series 'I' and Loan Agreement dated 11-6-1981 whereunder a sum of Rs,47.90 million was disbursed. (vii) Suit No,943/1985: This suit is filed by HBL for recovery of R$.33,465,473.00 under Debenture Series 'D' and Loan Agreement dated 29-8-1977 whereunder a sum of Rs,20 million was disbursed. (viii) Suit No,944/1985: This suit is filed by HBL for recovery of Rs,50,913,392.00 under Debenture Series 'E' and Loan Agreement dated 18-7-1978 whereunder a sum of Rs,30 million was disbursed. (ix) Suit No,945/1985: This suit is filed by HBL for recovery of Rs,45,017,818.11 under Debenture Series 'F' and Loan Agreement dated 30-1-1979 whereunder a sum of Rs,19.90 million was disbursed. (x) Suit No,946/1985: This suit is filed by HBL for recovery of Rs,43,087,843.00 under Debenture Series 'G' and Loan Agreement dated 21-4-1979 whereunder a sum of Rs,20 million was disbursed. (xi) Suit No,947/1985: This suit is filed by HBL for recovery of Rs,44,291,627.00 under Debenture Series 'H' and Loan Agreement dated 22-4-1979 whereunder a sum of Rs,20 million was disbursed. (xii) Suit No,948/1985: This suit is filed by HBL for recovery of Rs,80,937,157.00 under Debenture Series 'I' and Loan Agreement dated 11-6-1981 whereunder a sum of Rs,47.50 million was disbursed. (xiii) Suit No,952/1985: This suit is filed by UBL for recovery of Rs,35,416,413.15 under Debenture Series 'D' and Loan Agreement dated' 29-8-1977 whereunder a sum of Rs,20 million was disbursed. (xiv) Suit No,953/1985: This suit is filed by UBL for recovery of Rs,53,356,756.46 under Debenture Series 'E' and Loan Agreement dated 18-7-1978 whereunder a sum of Rs,30 million was disbursed.
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(xv) Suit No,954/1985: This suit is filed by UBL for recovery of Rs,38,883.269.92 under Debenture Series 'F' and Loan Agreement dated 30-1-1979 whereunder a sum of Rs,19.90 million was disbursed. (xvi) Suit No,955/1985: This suit is filed by UBL for recovery of Rs,44,778,952.15 under Debenture Series 'G' and Loan Agreement dated 21-4-1979 whereunder a sum of Rs,20 million was disbursed. (xvii) Suit No,956/1985: This suit is filed by UBL for recovery of Rs,44,072,314.82 under Debenture Series 'H' and Loan Agreement dated 22-4-1979 whereunder a sum of Rs,20 million was disbursed. (xviii) Suit No,957/1985: This suit is filed by UBL for recovery of Rs,82,638,609.57 under Debenture Series 'I' and Loan Agreement dated 11-6-1981 whereunder a sum of Rs,47.50 million was disbursed. (xix) Suit No,962/1985: This suit is filed by MCB for recovery of Rs,33,238,136.00 under Debenture Series 'E' and Loan Agreement dated 18-7-1978 whereunder a sum of Rs,18 million was disbursed. (xx) Suit No,966/1985: This suit is filed by MCB for recovery of Rs,49,073,398.00 under Debenture Series 'I' and Loan Agreement dated 11-6-1981 whereunder a sum of Rs,28.50 million was disbursed. ' In all the cases the plaintiffs have claimed interest at 14-1/2% per annum with quarterly rests from the date of suit till payment besides mortgage decree for recovery of decretal amount through sale of the properties of the Water Project and costs of the proceedings. ' The defendant No,1-K.D.A., in its written statement, has disputed maintainability of the proceedings for want of notice under Article 131 of K.D.A. Order, 1957 and its liability by virtue of devolution of all the rights and liabilities in relation to bulk water supply upon defendants Nos.2 and 3. It is averred in the written statement that the liability for repayment of Debenture Loans stands transferred to the defendants No,2 and 3 after promulgation of Sindh Local Government (Amendment) Ordinance (Ordinance No, II of 1983). The liability for the repayment of the claim amount is also disputed alleging that the amount already repaid by it had not correctly been accounted for in the statement of account. The disbursement of loan in the sum of Rs,785.400 million has, however, been admitted. ' The defendants Nos. 2 and 3 namely K.M.C. And K.W.S.B. Have filed joint written statement pleading limitation besides other technicalities. It is averred in the written statement that the liability for repayment of the claim amount did not devolve upon the said defendants. As to claim for charge over the subject properties, it is averred that the loan in question had been obtained in relation to Phase III of the Water Project. Resultantly, the plaintiff can make claim to the extent of the properties, subject-matter of Phase III, alone. The maintainability of the proceedings, for want of authority in the attorneys, who have filed the suit, is also disputed. ' The defendant No,4, Government of Sindh, in its written statement has taken the defence that after promulgation of Sindh Local Government (Amendment) Ordinance, 1983, the liability for repayment of the loan, in question, is to be discharged by the- defendant No,2 who had entered into memorandum of understanding with the defendant No,4 undertaking such liability. The extent of liability has, however, been disputed. The execution of gurantee for repayment of the outstanding liability is admitted by the defendant No,4 but it is averred that the guarantee did not become effective for non-issuance of debentures by defendant No,1 . The creation of floating charge or mortgage in relation to the properties of the Water Project have also been disputed. ' On the pleadings of the parties, the following identical issues were settled by this Court on 25-11- 1986: (1) Whether the suit is maintainable? (2) Whether the suit is barred by limitation? (3) Whether section 147(2)(v) of the Sindh Local Government (Amendment) Ordinance, 1983 creates any privity of contract between the plaintiff and defendants Nos.2 and 3 for repayment of loans? (4) Whether the suit has been instituted by an authorised person and the plaint has been-signed and verifidd by authorized person?
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(5) Which of the defendants are liable to the amount in suit and to what extent? (6) Whether defendant No,1 failed/refused to issue Debenture Certificates? If so, what is the effect on the guarantee furnished by defendant No,4 as to its validity and enforceability? (7) Whether the alleged guarantee stands discharged by operation of section 147(2)(v) of the Sindh Local Government Ordinance, 1979 and Memorandum of Understanding executed by K.M.C. On 19-12-19F2? (8) Whether liabilities and loans of defendant No,1 in respect of the Capital water works have been transferred to defendants Nos.2 and 3 in law as well as under loan agreement? If so, whether such transfer completely absolves defendant No,1 from liabilities including repayment of loan? (9) If the suit incompetent and bad in law for want of valid legal notice as strictly required under Article 131 of the K.D.A. Order (President's Order No,5 of 1957). (10) What should the decree be and against which of the defendants? ' In support of their respective claims, N.B.P., the plaintiff in Suits Nos.934 to 939, all of 1985, has examined one Akhtar Hussain Kazi, Exh.5, who has produced the loan agreements and other charge documents besides the statement of account and the legal notice. By consent of the parties, the above evidence was treated as common in all the cases filed by N.B.P. In Suits Nos.943 to 948, all of 1985, one Syed Farhat Abbas Rizvi, Exh.5, has been examined on behalf of the plaintiff who has produced the loan agreements and the various charge documents pertaining to the suits filed by H.B.L. The evidence of Syed Farhat Abbas Rizvi, by consent, has been treated as common evidence in Suits Nos.943 to 948, all of 1985. U.B.L., the plaintiff in Suits Nos. 952 to 957, all of 1985, has examined one Shahabuddin M. Megani, Exh.5, as its sole witness who has produced the loan agreements and the charge documents obtained by U.B.L. For disbursement of the loan. The evidence of Shahabuddin M. Megani has been taken as common to Suits Nos.952 to 957, all of 1985. For the remaining two cases being Suits No,962 and 966, both of 1985, the plaintiff-M.C.B. Has examined Muhammad Ali Manji, Exh.5, who, too, has produced the loan agreements and charge documents executed in favour of M.C.B. The evidence of Muhammad Ali Manji has been recorded as common evidence in the two suits of M.C.B. Significantly, the defendants have not led any evidence and after their side was closed argument were heard. ' I have heard the learned counsel in support of their respective contentions. The learned counsel for the plaintiff, on 16-1-1998, had partly argued the matter but mainly with reference to Issues No,1 to 4. The learned counsel, during his submissions, presented summarized statements of account in all the suits showing break-up of the claim amount. The matter was adjourned for further hearing to 20th January, 1998. On the last-mentioned date adjournment was sought on the ground that the learned counsel for the plaintiffs was unwell. With consent of the learned counsel and at the suggestion from the plaintiffs' side, hearing was fixed for 22-1-1998 with note of caution that in case Mr. Anwar Mansoor was unable to appear, alternate arrangement would be made by the plaintiffs. The matter, however, came up thereafter on 18-3-1998 when after a brief hearing adjournment was again sought by the learned counsel for the plaintiffs which was granted subject to payment of costs and the next date of hearing was fixed on 25-3-1998, as suggested by all the learned counsel. On 25th March, 1998, the learned counsel for the plaintiffs again abstained from the proceedings and preferred to proceed for attending some professional work at Lahore. For the reasons recorded in the order dated 25-3-1998, request for adjournment was declined. The counsel holding brief for Mr. Anwar Mansoor refused to proceed with the matter. Consequently, the 'learned counsel representing the defendants Nos.2 and 3 were heard. Mr.Mansoorul Arfeen preferred to make submissions in relation to Issues Nos.1 to 4 on the ground that the learned counsel for the plaintiffs, after referring to the facts involved in the matters, had made his detailed submissions only in relation to Issues No,1 to 4. On 26-3-1998, Mr.Mansoor Ahmed Khan himself appeared for the plaintiffs but did not advance any further arguments not made even a motion for permission to
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argue the other issues in detail. On the said date of hearing viz. 26-3-1998, the learned Assistant Advocate-General was heard on behalf of defendant No,4 and on 31-3-1998 arguments of the learned counsel for defendant No,1 were heard. Finally, on 1-4-1998, Mr.Anwar Mansoor submitted his reply to conclude the arguments. Thus, all the learned counsel chose to concentrate on Issues Nos.1 to 4 only. With regard to the remaining issues, practically, no arguments were advanced except the narration of facts in general and submission of the. Summarized statement of account. Issue No,4: ' This issue being fundamental is taken up first. The objection pertaining to the authority to institute the proceedings has been raised only in the written-statement of defendants Nos.2 and 3. The issue, itself, consists of two parts. The first part pertains to the authority to sue whereas the second portion relates to the authority to sign and verify the plaint. The law pertaining to the signatures and verification of pleadings on behalf of a body corporate is contained in Order XXIX, Rule 1, C.P.C. Which is as follows: "1. Subscription and verification of pleading.--In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case." ' The plaint in all the suits, proposed to be disposed of through this judgment, is signed by the Principal Officers and Attorneys of the four banks. At the time of institution of proceedings, the powers of attorney of the concerned officers were shown to the officers of this Court before whom the matters are presented and after retaining photostat copies, the powers of attorney, in original, were returned. The powers of attorney in none of the cases have, however, been produced by the witnesses and have not been marked exhibit numbers. Such omission on the part of the plaintiffs raises the question if the copies of powers of attorney can be looked into, at all. The other aspect of this issue pertaining to the authority to institute proceedings has been agitated with greater force by all the learned counsel appearing herein. Mr.Anwar Mansoor, appearing for the plaintiffs, has urged that the various issues were settled on the basis of written-statements filed by the defendants which have been marked exhibit numbers in view of the amendment brought. About through Law Reforms (Amendment) Ordinance, 1972, requiring verification thereof on Oath. Nevertheless, the defendants having failed to adduce any evidence and offer any one for cross- examination, hence the written-statements, filed in the present proceedings have lost their evidentiary value. Reliance for such proposition has been placed upon judgments in Mst. Khair-ul- Nisa and others v. Malik Muhammad Ishaque and others PLD 1972 SC 25 and Nazir Ahmed Khan and others v. Muhammad Ashraf Khan and others PLD 1975 Kar. 598. The position of written-statement is not different from the statement made by a witness during his examination-inchief after such witness declines to stand the test of cross-examination. According to the learned counsel for the plaintiffs, the present cases, are of no evidence from the defendants' side. The legal objections raised in the written-statements, therefore ought to be discarded and the suits be decided on merits. The learned counsel had further urged that notwithstanding the non-production of the powers of attorney, the contents of paragraph-3.14 of the plaint be accepted as unchallenged and unrebutted with the result that the authority to initiate the proceedings and to sign and verify the contents of the plaint is to be assumed as valid and existing. It may be noted that paragraph No,3.14, in all the suits, is couched in identical words with difference of the names of attorneys and is as follows: "3.14. That Mr... ... ..Son of... ......, both Muslims, adults, are and each of them is a Principal Officer and Attorney of the plaintiff-bank, well and sufficiently conversant with the facts of the case and able to depose to the same and are empowered to institute, commence, persue and carry on the present legal action and any that may arise out of or under it and one of them has verified the contents of the plaint on solemn affirmation."
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' In reply, Mr. Mansoorul Arfeen, appearing for the defendants Nos.2 and 3, has contended that a legal objection, pertaining to maintainability of the proceedings, can be urged at any stage and the burden is primarily upon the plaintiff to establish that the proceedings were competent. The question of jurisdictional error going to root of the matter, according to the learned counsel, has to be examined by the Court, itself. A defendant, when raising question of maintainability, merely points out a defect in the preceding which ought to have been examined by the Court, itself. The non-examination of any witness by the defendants, therefore, is not fatal and this Court is obliged to examine if the proceedings have competently been filed. The learned counsel has referred to the case of M/s. Muhammad Siddiq Muahmmad Umar v. The Australasia Bank Limited PLD 1966 SC 684 and Abdul Rahim and others v. M/s. United Bank Limited of Pakistan PLD 1997 Kar. 62. It is urged that by virtue of the principle laid down in the cited judgment, while authorisation to sign and verify the pleadings in terms of Order XXIX, Rule 1, C.P.C., even if wanting, could be termed an irregularity hence curable, want of authority in and competence of a person to institute legal proceedings on behalf of a corporate body is incurable, hence fatal. This is a substantial question in issue herein. The question about authorization of Directors/Officers of a corporate body to sign and verify the contents of the pleadings and to initiate or to submit the same has been subject- matter of consideration in a number of cases. Most of the cases wherein the issue has been considered and decided find mention in the Division Bench judgment of the Court reported in PLD 1997 Kar 62. Two more judgments relating to the same proposition have come to be reported subsequently in 1997 CLC 795 (Board of Control for Cricket in Pakistan vs. Karachi Development Authority and others) and PLD 1997 Kar 276 (Sirajuddin Paracha and others v. Mehboob Elahi and others). In the later judgment views expressed by Adbul Qadeer Chaudhry, J., as he then was, in the case of Abubakar Saley Mayet v. Abbot Laboratories and another (1987 CLC 367) holding that Order XXIX, Rule 1, C.P.C. Comes into operation only after the proceedings have validly started and by Z.H. Mirza, J., as he then was, in Dumez Borie v. International Forwarders Limited NIR 1983 UC 18) that even a constituted attorney must have express authority from the Board of Directors of the Company to institute a suit. Have also been referred. The principles emanating from the various judgments have been summarized in paragraph 37 of the Division Bench judgment of this Court in the case of Abdur Raheem (supra) as follows: 37. From the analysis of the above decision the following principles can be extracted:-- (i) Order 29, Rule 1,Q.P.C. Only deal with signature and verification of pleadings by the persons mentioned therein. The said rule is competently irrelevant to gauge a person's competence or authority to institute a suit on behalf of a company; (ii) for a suit to be valid it had to be shown that firstly, it was verified and signed by the proper person in terms of Order 29, Rule 1, C.P.C. And secondly, it was instituted by a competent person having the power and authority to do so; (iii) in case there is default in compliance of Order 29, Rule 1 the same is not a fatal defect and can be cured even after the suit has been instituted (See All India Reporter Limited v. Ram Chandar Dhondo Datar, AIR 1961 Born. 292); (iv) however, in case there is any defect in institution of the suit i,e, it is instituted unauthorizedly and incompetently the said defect remains incurable even by a subsequent ratification (See Punjab Livestock and Saleh Hayat, referred supra). (v) there appears to be some inconsistency as to how competence/authority of a person to institute a suit 'has to be determined. In Muhammad Siddiq a Full Bench of the Supreme Court clearly stated that it is the articles of the company which have to be seen to assess as to whether a person filing the suit was properly authorized, while the requirement to produce a resolution of the Board of Directors could be dispensed with. In Iftikhar Mamdot, the earlier case of Muhammad Siddiq not referred therein, a Full Bench of the Supreme Court took the view that in case a
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resolution from the Board of Directors is not passed and proved after a duly convened meeting, a suit filed even by a Director-incharge is to be taken as an incompetently instituted suit. In the subsequent case of Central Bank of India the learned Judge of a Division Bench of the Supreme Court followed Muhammad Siddiq, however, no reference was made to Iftikhar Mamdot. In Central Bank of India it was emphatically stated that there was no requirement of law to prove resolution passed by the Board of Directors. In Green Garments a learned Single Judge of this Court made an attempt to reconcile Muhammad Siddiq and Iftikhar Mamdot by holding that in case a suit is filed in consequence of a power of attorney no resolution of Board of Directors is required. With due respect we cannot subscribe to this distinction or reconciliation as the same is not borne out from the principles of law extracted in the two decisions…
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