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Petitioner: HABIB METROPOLITAN BANK LIMITED through Attorney VS Respondent: CENTURY 21 TEXTILE JUDGMENT
Court Name: Sindh High Court Judge(s): Nadeem Akhtar Title:HABIB METROPOLITAN BANK LIMITED through Attorney vs CENTURY 21 TEXTILE
JUDGMENT
Reported As: 2014 CLD 729 Result: Order accordingly Judgment JUDGMENT ' NADEEM AKHTAR, J.---This application has been filed jointly by the defendants under section 10 of the Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001) ('the Ordinance'), praying that unconditional leave to defend this Suit be granted to them. This Suit has been filed by the plaintiff-bank under section 9 of the Ordinance, praying for a decree against the defendants in the sum of Rs,816,140,170.51; a mortgage decree for the attachment and sale of the mortgaged properties along with all structures and assets thereon; a decree for the attachment and sale of the pledged and hypothecated goods and assets; a decree for the attachment and sale of all the movable and/or immovable properties of the defendants for recovery of the amount claimed in this Suit; and, cost of funds till realization of the decreed amount. Defendant No,1 has been sued as the principal borrower, and defendants 2, 3 and 4 have been sued as guarantors/sureties of defendant No, 1. According to the plaintiff, the defendants are its customers in relation to the finances advanced to them by the plaintiff, which are the subject matter of this Suit. 2. In their application for leave to defend, the defendants have raised a number of pleas and objections in opposition to the plaintiff's claim, which, according to the defendants, are substantial questions of law and fact requiring evidence in this matter. The averments and allegations made by the defendants are given below in brief:-- (a) The Suit has been filed by an unauthorized person; (b) The plaintiff has not complied with the mandatory requirements of section 9(3) of the Ordinance; (c) The plaintiffs claim is barred by limitation;
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(d) The plaintiff has charged markup over markup, and markup beyond the agreed period; (e) The signatures of the defendants were obtained by the plaintiff on blank papers, which are void ab initio; (f) The defendants have not committed any default in any obligation owed to the plaintiff; (g) The plaintiff has pleaded in paragraph 48 of the plaint that the total amount sanctioned to defendant No,1 is Rs,997,667,000.00, but there is no document showing disbursement of any such amount to defendant No,1; (f) The plaintiff has claimed that obligations owed to it are based on a Running Finance Facility, but no certified statement of account for any such facility has been annexed to the plaint; (g) Various penalties and fines of the State Bank of Pakistan have been illegally debited by the plaintiff from the defendant No, l's account; (h) The amounts claimed by the plaintiff are not legally due and outstanding against the defendants in view of the agreements for sale of immovable properties between the parties; (i) The Demand Finance Facility of Rs,50 million, claimed by the plaintiff, was never availed by defendant No,1; (1) The Term Finance Facility of Rs,40 million, claimed by the plaintiff, has since been fully repaid, therefore, the plaintiff is liable to release the shares pledged and the personal guarantees furnished by defendant No,1 in consideration of the said facility; (m) The securities relied upon by the plaintiff are not valid or subsisting, and the same. Are liable to be returned/redeemed as per the arrangement between the parties; (n) The personal guarantees and the corporate guarantee filed and relied upon by the plaintiff, are unenforceable and void; (o) The plaintiff had agreed to waive the compounded markup and to adjust the entire outstanding liabilities of the defendants in lump sum of Rs,395 million in full and final satisfaction against their two properties; namely, Plot No,C-55, KDA Scheme No,1, Karachi, measuring 1,113 sq. Yds. ('the KDA property'), and Plot No,B/25, Survey Sheet No,21, 35P/1-35L/13, SITE, Karachi, measuring 3.5 acres (`the SITE property'); (p) To give effect to the above arrangement, the plaintiff and defendant No,1 entered into two separate agreements to sell, dated 17-4-2010 and June 2010 for the KDA property and the SITE property, respectively, whereby the sale consideration of the KDA property was agreed at Rs,70 million, and that of the SITE property was agreed at Rs,325 million; (q) The above agreements were acted upon by the parties as the plaintiff paid the entire sale consideration of the KDA property to defendant No,1 by crediting the same to the defendant No,1's account, and in consideration thereof, conveyance deed in respect of the said property was executed by defendant No,1 on 23-7-2011 in favour of the plaintiff. For the SITE property, the plaintiff paid a substantial amount of the sale consideration to defendant No,1 in the same manner by crediting the said amount to the defendant No,1's account. As the balance sale consideration was payable by the plaintiff for the SITE property and the same was to be transferred in the plaintiffs name subsequently, it was agreed that the SITE property would be given on monthly rent by the plaintiff to defendant No,1; ' In view of the above arrangement, the Suit is barred under the principles of promissory estoppel; ' After the above arrangement, which was acted upon by the parties, the plaintiff was bound to release all other securities; (t) The plaintiff backed out from the above arrangement and committed a breach thereof, as instead of completing the sale of the SITE property, the plaintiff filed this Suit despite the fact that all the outstanding liabilities of defendant No,1 had been settled in full and final satisfaction in consideration of Rs,395 million through sale of both the aforementioned properties;
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(u) The plaintiff on the one hand has received rent from defendant No,1 for the SITE property and is claiming to be the owner of both the KDA and SITE properties, and on the other hand, the plaintiff has prayed for a mortgage decree for the sale of the said properties; (v) The KDA and SITE properties, on which the plaintiff is claiming charge as a mortgagee, have already been sold to the plaintiff; (w) Prior to the filing of this Suit by the plaintiff, the defendants filed Suit No,B-108/2011 before this Court against the plaintiff-bank, which is sub judice, inter alia for declaration that all the outstanding liabilities of defendant No,1 stand fully settled against the transfer of the KDA and SITE properties, and the plaintiff is liable to release all the securities, including the personal guarantees; and, specific performance of the agreement for sale of the SITE property; and, (x) The defendants also filed. Suit No,B-113/2011 against the plaintiff before this Court prior to the filing of the instant Suit by the plaintiff, which is sub judice, inter alia for declaration that the personal guarantees of the present defendants 3 and 4 stand discharged as the Term Finance Facility has been fully settled; and, for direction to the plaintiff-bank to release the pledged shares. 3. Mr. Arshad Mohsin Tayebaly, the learned counsel for the defendants, submitted that the defendants have raised a number of important substantial questions of law and fact which cannot be decided without allowing the parties to adduce evidence; therefore, the defendants deserve unconditional leave to defend this Suit on merits. His main thrust of arguments was that after executing the agreements for sale of the KDA and SITE properties in consideration of Rs,395 million in full and final settlement of the outstanding liabilities of defendant No,1, there was no occasion for the plaintiff to file this Suit. He pointed out that both the said agreements for sale are admitted documents, as the plaintiff has not only mentioned the same in the plaint, but has also relied upon them. He contended that as the entire outstanding liability of defendant No,1 stood settled, the defendants are not obliged to pay any amount to the plaintiff as claimed in this Suit, or otherwise. He referred to clauses 5(d) and 6(d) of the agreements for sale of the KDA and SITE properties, respectively. The learned counsel submitted that under the said clauses, in case of failure on the part of the seller (defendant No,1) to complete the sale and to fulfil its obligations under the said agreements, the purchaser (plaintiff-bank) had the right to reverse the credit of payments made under the said agreements, and further to enforce its rights as the mortgagee of the said properties in order to recover the dues owed by the defendant No,1 to the plaintiff. He argued that in case defendant No,1 had committed default, as alleged by the plaintiff, at best the plaintiff could only reverse the credit entries in the defendant No, l's account and enforce its rights against the mortgaged properties. The Suit, in any event, could not have been filed. He contended that the Suit is mala fide and is barred under the principles of promissory estoppel. It was urged that the dispute/question as to whether the defendants are liable to pay the amounts claimed in this Suit by the plaintiff, or whether the entire claim of the plaintiff against the defendants was settled in full and final satisfaction, cannot be resolved effectually and completely without evidence. It was further urged that since this dispute goes to the root of the case, the defendants are entitled for an unconditional leave to defend this Suit on this ground alone. 4. In continuation to his above submissions, learned counsel for the defendants submitted that the plaintiff-bank has also filed two Suits against the defendants under the original civil jurisdiction of this Court; one being Suit No,227 of 2012 for possession of the KDA property; and, the other being Suit No,346 of 2012 for specific performance of the conveyance/assignment of the SITE property. It was urged that in case leave is not granted to the defendants to defend this Suit and this Suit is decreed in favour of the plaintiff, it would tantamount to the dismissal of Suit No,B-108 of 2011 and Suit No,B-113/2011 filed by the defendants against the plaintiff without trial, which are sub judice before this Court, and would also tantamount to decreeing the aforementioned two Suits filed by the plaintiff-bank against the defendants without trial, which are also sub judice before this Court.
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It was further urged that this Suit cannot be decreed in the above manner without first determining the liability, if any, of the defendants. 5. In addition to the above ground based on the agreements for sale of the KDA and SITE properties, the learned counsel for the defendants raised several objections in relation to the amounts mentioned in the plaint and the statements of account filed by the plaintiff. He pointed out that in paragraph 41 of the plaint, the plaintiff has stated that a sum of Rs,345 million was adjusted towards advance payment of the KDA and SITE properties, but in paragraph 48 of the plaint, an amount of Rs,336,853,325.54 has been shown by the plaintiff towards such adjustment. He also pointed out that in paragraph 46 of the plaint, the plaintiff has claimed that it was certified by defendant No,1 on 9-7-2011 that an amount of Rs,1,093,171,639.46 was then owed by it to the plaintiff. However, the summary of accounts filed by the plaintiff as Annexure 'KK' (page 3153) reflects the same amount, but on 22-6-2011 and not on ''9-7-2011. It was contended that the plaintiff has pleaded in paragraph 48 of the_plaint that the total amount sanctioned to defendant No,1 is Rs,997,667,000.00, but there is no document showing disbursement of any such amount to defendant No, 1 . He further pointed out that the amount of Rs,345 million towards full sale consideration of the KDA property and advance part payment towards the SITE property, have been added by the plaintiff in the alleged outstanding liabilities of defendant No,1 instead of deducting the same therefrom. The learned counsel contended that there are serious discrepancies in the amounts mentioned in the plaint and in the statements of account annexed to the plaint. He further contended that the statements of account show charging of markup over markup and markup beyond the agreed period; and, various penalties and fines of the State Bank of Pakistan have been illegally debited by the plaintiff from the defendant No, l's account. No other ground was urged on behalf of the defendants at the time of hearing of this application. 6. At the very outset, Mr. Khalid Anwer, the learned counsel for the plaintiff, raised a preliminary objection regarding the maintainability of this application on the ground that the defendants have not complied with the mandatory requirements of subsections (4) and (5) of section 10 of the Ordinance. He pointed out that, under subsection (4) ibid, the defendants were obliged to- disclose the amount of finance availed by them from the plaintiff, the amounts paid by them to the plaintiff and the dates of payments, (c) the amount of finance and other amounts relating to the finance payable by them to the plaintiff up to the date of institution of the Suit, and (d) the amount, if any, which they dispute as payable to the plaintiff, and the facts in support thereof. He submitted that none of the above details have been disclosed by the defendants in their application. He also pointed out that, under subsection (5) ibid, the defendants were also obliged to file all such documents along with their application which, in their opinion, support the purported substantial questions of law and fact raised by them. He submitted that no such document has been filed by the defendants, and they have in fact relied upon the documents, including the statements of account, filed by the plaintiff along with the plaint. The learned counsel further submitted that the implications for not complying with the mandatory requirements of subsections (4) and (5) ibid are specifically provided in subsection (6) of section 10 of the Ordinance, which provides that an application for leave to defend which does not comply with the requirements of any of subsections (3), (4) and/or (5) ibid shall be rejected unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement. It was urged that the defendants have not only failed in fulfilling the mandatory requirements of subsections (4) and (5) ibid, but they have also miserably failed to disclose any sufficient cause for their inability in complying with the same. It was further urged that, as the requirements prescribed in subsections (4) and (5) ibid are mandatory, and as dismissal of the application for leave to defend is the mandatory implication under subsection (6) ibid for not complying with the same, this application is liable to be dismissed summarily on this ground alone. In support of this preliminary objection, the learned counsel for the
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plaintiff cited and relied upon the cases of (1) Apollo Textile Mills Ltd. And others v. Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, (2) Shahid Farooq Sheikh v. Allied Bank of Pakistan Ltd. Through Manager, 2005 CLD 1489, (3) United Bank Ltd. v. Prowls Pakistan Ltd., 2010 CLD 828, (4) Bank of Punjab through EVP/ General Manager v. Genentech Pakistan Ltd. Through Chief Executive and 2 others, 2008 CLD 765, and (5) MCB Bank Ltd. v. Eastern Capital Ltd. And 7 others, 2011 CLD 84. 7.. The contention of Mr. Arshad Tayebaly that the entire outstanding liabilities of defendant No,1 were agreed and adjusted in full and final settlement against the sale of KDA and SITE properties in favour of the plaintiff in Consideration of Rs,395 million, was emphatically denied by Mr. Khalid Anwer, the learned counsel for the plaintiff. He specifically referred to letter dated 9-6-2010 (Annexure 'EE' page 2991) addressed to the plaintiff by defendant No,1, and submitted that defendant No,1 had admitted therein its existing liability to the extent of Rs,832.69 million as at 9-6- 2010. It was pointed out by him that in the aforementioned letter, as well as in its letter dated 16-6- 2010 (Annexure 'F'F' page 2997), defendant No,1 had categorically agreed only about adjustment of its liabilities through sale of its properties to the plaintiff. The learned counsel also referred to Annexure 'KK' (page 3153) annexed to the plaint, wherein the defendants had admitted on 9-7-2011 their outstanding liabilities of Rs,1,093,171,639.46 as on 22-6-2011. He pointed that, in their application for leave to defend, the defendants have given an evasive reply to the said Annexure 'KK', which amounts to an admission on their part of the contents thereof. He submitted that in any event there was no question of settlement of all the outstanding liabilities at Rs,395 million through sale of the said two properties, when the outstanding liabilities were admittedly more than Rs,832 million in June 2010 when the agreements to sell in respect of both the properties were executed by the parties, and was Rs,1,093,171,639.46 on 22-6-2011 when the contents of Annexure 'KK' (page 3153) was endorsed and accepted by the defendants. 8. In response to the objections raised by the learned counsel for the defendants in relation to the amounts mentioned in the plaint and statements of account annexed to the plaint, the learned counsel for the plaintiff submitted that the plaintiff has nowhere claimed that the amount of Rs,997,667,000.00 was sanctioned or disbursed by the plaintiff to defendant No,1 through a single transaction or document. It was contended by him that it is the case of the plaintiff that the said amount was sanctioned to defendant No,1 through various finance facilities on different dates, and the amount actually disbursed was Rs,960,042,050.54 as disclosed in paragraph 48 of the plaint in compliance of section 9(3) of the Ordinance. The amounts pertaining to penalties and fines paid by the plaintiff to the State Bank of Pakistan because of the defendant No, l's default in fulfilling its obligations were shown to me in the statement of account by Mr. Khalid Anwer, which are duly supported by covering letters. In reply to the allegations made regarding charging of markup over markup and markup beyond the agreed period, the learned counsel submitted that all such allegations are baseless and misleading, as no markup has been charged by the plaintiff prior to 31-3-2006, and markup has been charged only for the agreed period and for the period subsequent to the cut-off date. He further submitted that, to show its bona fides, markup 'charged and debited by the plaintiff, at the agreed rate and for the agreed period, has been disclosed separately in respect of each finance facility in paragraph 36 of the plaint, and is also shown in the same manner in separate statements annexed to the plaint. It was specifically argued by the learned counsel that none of the accounts were disputed by the defendants till the filing of this Suit, and as soon as the Suit was filed, they came up with all kinds of objections, which shows their mala fides. He also argued that the defendants have miserably failed to point out such entries which, according to them, pertain to markup over markup or to markup beyond the agreed period; and, they have also not filed any document to rebut the amounts disclosed in the plaint or the
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statements of account filed and relied upon by the plaintiff. He pointed out that no amount of Rs,300 million has been claimed by the plaintiff in paragraph 48 of the plaint, as alleged by the defendants; but on the contrary, the plaintiff has adjusted/deducted an amount of Rs,336,853,325.54 in the said paragraph from the defendant No, l's liabilities towards the advance purchase price of the two properties. He submitted that only the amount agreed for the SITE property is shown in Annexure `KK' (page 3153) as the outstanding liability of defendant No,1 because defendant No,1 was obliged to transfer both the properties in favour of the plaintiff by August 2010, but only the KDA property was transferred, and that too after one year, and as such only the amount of Rs,70 million, being the agreed sale consideration for the KDA property, was adjusted from the outstanding liability of defendant No, 1 . It was urged in the end by the learned counsel for the plaintiff that this application for leave to defend is liable to be dismissed as no substantial question of law or fact has been raised by the defendants which may require evidence. 9. In his rebuttal, Mr. Arshad Tayebaly, the learned counsel for the defendants, denied that the defendants have failed in complying with the requirements of subsections (4) and (5) of section 10 of the Ordinance, or that this application is liable to be dismissed on this ground. In support of this submission, he relied upon the contents of paragraph 19 of the application. He conceded that the requirements of subsections (4) and (5) ibid are mandatory, but he submitted that it is not mandatory that the details required under subsection (4) ibid are disclosed in the application for leave to defend strictly in the same manner as provided in subsection (4) ibid. According to him, in order to determine as to whether such compliance has been made or not, the substance of the application for leave to defend should be seen rather than its format. It was further contended that the arrangement arrived at between the parties, for adjustment of the defendant No, l's outstanding liabilities in full and final settlement, has been specifically pleaded by the defendants in their application, which comes within the definition of "sufficient cause" mentioned in subsection (6) of section 10 ibid for the defendant's inability, if arty, to comply with the said requirement. He argued that in view of such sufficient cause disclosed by the defendants in their application, their application is not liable to be dismissed under subsection (6) ibid. In this context, the learned counsel relied upon the cases of (1) Apollo Textile Mills Ltd. And others v. Soneri Bank Ltd., PLD 2012 Supreme Court 268 = 2012 CLD 337, (2) Messrs Taxa& Cotton Mills Ltd. And 10 others v. Allied Bank of Pakistan Ltd. And 4 others, 2005 CLD 244, and (3) Messrs Soneri Bank Ltd. v. Messrs Compass Trading Corporation (Pvt.) Ltd. Throuqh Director /Chief Executive and 3 others, 2012 CLD 1302. The learned counsel submitted that the case of Apollo Textile Mills Ltd. Supra, wherein the Hon'ble Supreme Court was pleased to hold that an application for leave to defend which is not compliant of subsections (3), (4) and (5) of section 10 ibid, is liable to be dismissed, is not applicable in the instant case, as in the said authority the customer had admitted not having complied with the requirements of the said subsections. Whereas, in the present case, the defendants have not so admitted and have pleaded sufficient cause, that is, the arrangement between the parties for full and final settlement of the defendant No, l's liabilities, which is sufficient for complying with the requirements of subsection (4) ibid. 10. On the above point, learned counsel for the defendants further submitted that in case of a dispute, it is quite natural that the amounts disclosed by the defendant are different from those disclosed by the plaintiff. In such an event, or where the defendant completely denies his liability and states that he does not owe any amount to the plaintiff, it cannot be said that the defendant has not complied with the requirements of section 10(4) of the Ordinance. According to him, the mandatory requirement of disclosure by the defendant under section 10(4) ibid is fulfilled even if the amounts disclosed by him are based on his own calculation,or if he states that the outstanding liability is zero. He submitted that the defendants have duly complied with the requirements of
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section 10(4) ibid according to their own calculation based on the facts and circumstances of this case. 11. I have examined the most recent authoritative pronouncement of the Hon'ble Supreme Court in the case of Apollo Textile Mills Ltd. Supra. It has been held therein that the plaintiff institution and the defending customer have identical statutory responsibility respectively under sections 9(3) and 10(4) of the Ordinance, to plead and state clearly and particularly the finances availed by a defendant, repayments made by him, the dates thereof, and the amounts of finance repayable by such defendant, who is saddled with an additional responsibility to also specify the amounts disputed by him. It has been further held that a defending customer is obliged to put in a definite response to the bank's accounting and has under subsections (3) and (4) of section 10 of the Ordinance to compulsorily plead and answer in the application for…
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