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Petitioner: BANK OF PUNJAB through Lawful Attorney VS Respondent: Messrs GAS NATURALE (PVT.) JUDGMENT
Court Name: Lahore High Court Judge(s): Shahid Karim Title:BANK OF PUNJAB through Lawful Attorney vs Messrs GAS NATURALE (PVT.)
JUDGMENT
Reported As: 2017 CLD 959 Result: Suit decreed Judgment JUDGMENT ' SHAHID KARIM, J.---This is a suit for the recovery under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (Ordinance, 2001) of an amount of Rs,1,629,507,809.75 as outstanding on 22.08.2009. The cost of the suit and the cost of funds have also been prayed to be decreed in favour of the plaintiff and against the defendants. 2. Application for leave to defend was filed on behalf of the defendants Nos.1 to 5 under section 10 of the Ordinance, 2001 for the grant of unconditional leave to defend the suit which is being decided through this judgment. Relevant Facts: 3. The plaintiff is a banking company, established under the Bank of Punjab Act, 1989 and is a financial institution for the purposes of Ordinance, 2001. The defendant No,1 is a private limited company incorporated under the Companies Ordinance, 1984 (Ordinance, 1984) with its registered office at 17-C/II, M.M. Alam Road, Gulberg III, Lahore. It maintains an account with the plaintiff at the main branch situated at 1st Floor, .7-Egerton Road, Lahore. The defendants Nos.2, 3, 4 and 5 have been arrayed as guarantors for the grant of finance facilities to the defendant No,l. It has been averred in the plaint that the defendants Nos.2, 3, 4 and 5 having executed personal guarantees and corporate guarantees in favour of the plaintiff-Bank and are jointly and severally liable along with defendant No,1 for the suit amount. 4. The objects of defendant No,1/Company include the manufacture and supply of Liquefied Natural Gas (LNG) and re-gasified LNG (RLNG). The defendants Nos.2 and 3 are the Directors of the Company as also its sponsoring shareholders too. From the contents of the plaint, it has been
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brought forth that the defendant No,1 has been the customer of the plaintiff-Bank since the year 2006 and upon a request by the defendant No,1, approved and provided various finance facilities to the Company for the Liquefaction of Natural Gas Project (the Project). Primarily, three finance facilities were approved for the Project upon the request of the Company. The TF-I (Terms Finance) facility was an amount of Rs,60.00 million whose expiry, according to the last facility offer letter, was to be on 13.7.2014. The second facility viz. TF-III is a Musharika financing facility of Rs,659 million with an expiry date of 21.12.2014. The third facility TF-II is a sub-limit of the second facility and is a letter of credit of Rs,1122.428 million with an expiry date of 8.3.2015. These facilities were approved vide offer letter dated 28.9.2006 upon an application form submitted by the defendant No,1 Company. The offer letter is at page 102 of the plaint. By the offer letter on 28.9.2006, the approval was with regard to a fresh Term Finance for Rs,60 million which was an advance payment against import L/C Line II. L/C Sight (Inland/Foreign) facility for 1000 million was also approved. It also envisages a Musharika demand facility of 116 million in order to finance the capital expenditure. The finance agreement for TF-I is at page 123 with the plaint and the date of the finance agreement is 24.9.2006. The facility had a span of eight years from disbursement and was to last till 13.7.2014. As stated above, an L/C Sight (Inland/Foreign) facility of Rs,1000 million was also approved which was modified to TF-II facility as a sub-limit of Line II. In terms of the change brought about in this facility, the facility was reduced to 920 million. The finance agreement to this effect is at page 132 with the plaint and is dated 19.12.2006. The Musharika facility (TF-III) was for an amount of Rs,116 million as mentioned above and the finance agreement to this facility is annexed at page 362 of the plaint and is dated 21.12.2006. The expiry period of this facility was 21.12.2014. A structure of security documentation also accompanied the approval of these facilities and the execution of finance agreements and reference in this regard has been made in the plaint and the documents have also been appended with the plaint. Nothing much turns on this aspect. 5. The defendant No,1-Company applied for the enhancements and in certain cases reduction in the original finance facilities. This application was approved and granted vide offer letter dated 27.4.2007 which is at page 117 of the plaint. In terms of the second facility offer letter an enhancement in the LC-Sight (Inland/Foreign) facility was made from 1000 million to 1202.428 million. The TF-II facility which is a sub-limit of Line-II was enhanced from Rs,920 million to Rs,1122.428 million. Likewise, an enhancement in the Musharika demand finance facility was brought about from Rs,116 million to Rs,659 million. It is the case of the plaintiff that no documents were executed with regard to LC-Sight (Inland/Foreign) facility and, therefore, no claim has been made in this suit with regard to this facility. It has been alleged in the plaint that the defaults in the obligations cast upon the defendants, on account of the terms of finance agreement, has given rise to the cause of action to the instant suit. In the final analysis, an amount of Rs,67,933,649/- has been claimed with regard to TF-I facility; an amount of Rs,685,595,936/- in respect of TF-III Musharika financing facility and Rs,875,978,224,75 in respect of TF-II facility has been claimed as outstanding against the defendants for which the defendants are liable jointly and severally. Baseline Question: 6. An objection was taken by the defendants which gives rise to a baseline question regarding the maintainability of this suit and the entitlement of the defendants to the unconditional grant of leave to defend on the basis of this question. The question has its provenance in the suit (C.O.S. No,178 of 2009) which was filed by the plaintiff on 06.10.2009 and encapsulated the same cause of action and the matter in issue was directly and substantially the same as in the present suit. Also the suit was between the same parties and was filed before a Court having jurisdiction to grant the relief claimed. On these facts, the parties are on common ground. The learned counsel for the defendants has made a frontal attack on the maintainability and filing of the instant suit as according to him the earlier suit was withdrawn by the plaintiff-Bank under Order XXIII, Rule I of the
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Code of Civil Procedure (C.P.C.) without permission having been sought to file a fresh suit and, therefore, present suit is barred by section 12 of the C.P.C. Section 12 of the C.P.C. reads as under: "12. Bar to further suit.--(1) Where a plaintiff is precluded by rules from instituting a further suit in respect of any particular cause of action, he shall not be entitled to institute a suit in respect of such cause of action in any Court to which this Code applies. (2) Where a person challenges the validity of a judgment, decree or order on the plea of fraud, mis-representation or want of jurisdiction, he shall seek his remedy by making an application to the Court which passed the final judgment, decree or order and not by a separate suit." 7. In a nub, the learned counsel for the defendants contends that: A plaintiff having instituted a suit and having sought permission to withdraw that suit unconditionally, cannot file a fresh suit as that would make Order XXIII, Rule 2 as redundant and without purpose. Order XXIII, Rule 2(a) and (b) is an exception to the general rule and must be construed strictly by the Courts. What cannot be achieved directly cannot also be achieved indirectly. 8. The facts with regard to the filing of the earlier suit and its withdrawal are admitted between the parties. As stated above, C.O.S. No,178 of 2009 was filed and an objection was taken by the defendants to the authority of the persons who had filed the suit on behalf of the plaintiff-Bank. The lack of authority and its sufficiency in law was conceded to by the plaintiff-Bank and C.M. No,658-B of 2010 was filed on 11.12.2010 through which the earlier suit was sought to be withdrawn. This application was under Order XXIII, Rule 1, C.P.C. On 28.4.2011, this Court while allowing the application, passed the following order: "Learned counsel for the plaintiff states that this suit has been incompetently filed without proper authorization and an objection in this behalf has been taken by the opposite side, which is conceded, hence he wishes to withdraw the suit as he has already filed another suit against the defendants i,e, C.O.S. No,138/2010. Consequently this suit is dismissed as withdrawn." ' Another fact on which the parties are not at variance is that while the earlier suit was pending, the present suit was filed on 12.8.2010. As noted above, the earlier suit was withdrawn on 28.4.2011. Therefore, the ineluctable fact is that the present suit had already been instituted when the earlier suit was withdrawn on 28.4.2011. 10.The learned counsel for the defendants does not deny the fact that when the earlier suit was withdrawn, the fact regarding the filing of the instant suit was already in the knowledge of the defendants. This fact was also disclosed in the application C.M. No,658-B of 2010 in paragraph 2 as under; "2. That the Defendants in the titled suit have raised an objection as regards the authority under which the titled suit has been instituted. Since the Applicant/Plaintiff concedes the formal defect in the authority to institute the titled suit, the Applicant/Plaintiff seeks to withdraw the titled suit, having already instituted a fresh suit bearing C.O.S. No,138/2010 under valid authority against the Defendants on the same cause of action. C.O.S. No,138/2010 is also pending before this Hon'ble Court." 11. From a reading of the paragraph, reproduced above, it was duly informed by the plaintiff-Bank that the earlier suit was being withdrawn on account of a technicality and a formal defect in the authority to institute the suit with full disclosure that the present suit had already been instituted and was pending before the same Court and on the same cause of action. The substantial facts, therefore, lend themselves to some simplification and the proposition of law canvassed by the learned counsel for the defendants can be analyzed in the backdrop of these facts. 12.For facility, Order XXIII, Rule 1 is reproduced in extenso: 1. Withdrawal of suit or abandonment of part of claim-(1) At any time after the institution of a suit
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the plaintiff may, as against all or any of the defendants, withdraw his suit or abandon part of his claim. (2) Where the Court is satisfied -- (a)that a suit must fail by reason of some formal defect or (b)that there are other sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim, it may, on such terms as it thinks fit, grant the plaintiff permission to withdraw from such suit or abandon such part of a claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of a claim. (3)Where the plaintiff withdraws from a suit, or abandons part of a claim, without the permission referred to in sub-rule (2), he shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim. (4)Nothing in this rule shall be deemed to authorize the Court to permit one of several plaintiffs to withdraw without the consent of the others. 13.The learned counsel for the defendants by invocation of section 12 of the C.P.C. submits that clearly Order XXIII, Rule 1(2)(3), C.P.C. precludes the institution of a fresh suit in respect of such subject matter or such part of the claim which was involved in the suit which was withdrawn without the plaintiff having been granted permission to institute a fresh suit. Section 12, C.P.C. by its terms bars the institution of a fresh suit where such institution is precluded by rules in the C.P.C. Section 12 is merely a reiteration of the prohibition contained in Order XXIII, Rule 1(3) of the C.P.C. As if it was not enough to have provided the prohibition in sub-rule (3) as a general rule, it was further provided in section 12 to apply to all cases where the plaintiff is precluded from instituting a fresh suit in respect of any particular cause of action. Section 12 as a general rule serves two purposes in my opinion. Firstly, it precludes the plaintiff from instituting a fresh suit in respect of any particular cause of action in case the plaintiff is precluded by rules in this respect. Therefore, section 12 does not lay down any fresh or new prohibition but merely echoes the prohibitions which are contained in any such rule. However, the second part of subsection (1) of section 12 is of some significance. It prohibits the institution of a fresh suit on the same cause of action in any Court to which the Code applies. (Underlining is mine). The only significance in enacting the underlying portion of subsection (1) of section 12 is perhaps to prohibit and preclude the institution of a further suit in any Court to which the Code applies. Therefore, it may not necessarily be the same Court to which the preclusion has been mandated by rules but by the terms of section 12, C.P.C. the prohibition extends to any other Court to which the Code applies. However, this question is not in issue in the objection taken by the defendants and therefore, this issue may not detain us any further. 14. Upon a dissection of Rule I of Order XXIII, C.P.C., it becomes evident that in terms of sub-rule (1) the plaintiff may withdraw his suit A or abandon part of his claim and for this purpose no permission of the Court is required. However, it is the terms of sub-rules (2) and (3) which have been invoked by the learned counsel for the defendants to urge that the present suit is caught by the mischief of these provisions and is, therefore, barred. Sub-rule (2) gives the power to the Court, upon its satisfaction, to permit the withdrawal of a suit or to abandon part of a claim with liberty to institute a fresh suit in respect of the subject matter of such suit or such part of a claim. This permission shall be granted to the plaintiff upon the plaintiff requesting such a permission and the Court may while doing so attach such terms as it thinks fit. By sub-rule (3), any plaintiff who withdraws from a suit without the permission referred to in sub-rule (2) shall be precluded from instituting a fresh suit in respect of such subject matter. Thus there is a bar on the filing of a fresh suit in case an earlier suit has been withdrawn without the permission having been sought from the Court. At first blush, it may be noticed that sub-rules (2) and (3) of Rule I of Order XXIII, C.P.C., relate to the seeking of a permission for withdrawal of a suit and thereafter filing a fresh suit in respect of
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the same subject matter or part of the claim. The entire concept, therefore, is with regard to a permission to withdraw a suit in order to file a fresh suit. It does not relate to a situation where a permission to withdraw a suit has been sought while a fresh suit has already been filed and is pending adjudication before a competent Court of law. According to the learned counsel for the defendants, these two situations are synonymous and it makes little difference that the subsequent suits had already been instituted when the earlier suit was withdrawn and if this course was permitted to be followed, this would be tantamount to playing fraud on the provisions of Order XXIII, Rule 1, C.P.C. This submission of the learned counsel for the defendants is flawed and has no legal legs to stand upon. 15. In the first instance, from the terms of Order XXIII, Rule 1, C.P.C., it is difficult to cull out the proposition sought to be urged by the learned counsel for the defendants. I am not prepared to read into Order XXIII, Rule 1 any such thing as the learned counsel for the defendants invites this Court to do. Order XXIII, Rule 1 simply concerns itself with the withdrawal and adjusting of suit. The permission that is sought by the plaintiff and granted by the Court relates to the institution of a fresh suit in respect of the subject matter of the pending suit and no occasion for such a permission would arise in case a suit had already been instituted for it would be otiose for a plaintiff to seek permission to withdraw the suit in order to file a fresh suit if that fresh suit has already been instituted. The intention of the law is not that in both the situations a permission be sought because that would be making a mockery of the law. In this regard, a reference to section 10, C.P.C. may also be made. Section 10 is to the following effect: 10. Stay of suit-- No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in Pakistan having jurisdiction to grant the relief claimed, or in any Court beyond the limits of Pakistan established or continued by the Central Government and having like jurisdiction, or before the Supreme Court. 16.Section 10 encapsulates the principle of res sub judice. Section 10 provides that a Court shall stay its hands in proceeding with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties. For, what section 10 prescribes is for a Court not to proceed with the trial of any such suit. Therefore, it may happen that two suits be filed in which the matter in issue is directly and substantially the same and which suits are between the same parties and are pending in either the same Court or any other Court in Pakistan having jurisdiction to grant the relief claimed. Therefore, the law contemplated a situation where two such suits may be pending at the same time. In my opinion, the present is a situation which has a closer nexus to the situation referred in section 10. If the arguments of the learned counsel for the defendants were accepted, that would in fact, make the provisions of section 10 as redundant and superfluous. In the instant case, had the two suits been pending, at worst the latter suit would have been stayed by the Court. Also the law does not envisage a bar on the course of action which was adopted by the plaintiff in instituting a fresh suit and thereafter seeking the withdrawal of the earlier suit. If the law does not create a bar or prohibit the adoption of this modus operandi, no such prohibition can be read into the C.P.C. The provisions of Order XXIII, Rules 1(2) and 3 cannot be stretched to cover a situation of the kind which we are concerned with in this matter. Since the plaintiff did not require permission to institute a fresh suit having already instituted that suit, the prohibition contained in Order XXIII sub-rule (3) read with section 12, C.P.C., cannot be applied to the instant suit. 17.Let us consider the array of scenarios which would confront the plaintiff if the earlier suit had not been withdrawn. That plaint, in all probability, would be rejected under Order VII, Rule 11, C.P.C. However, by rule 13 of Order VII, rejection of plaint would not have precluded the plaintiff from
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presenting a fresh plaint. Also had the earlier suit not been withdrawn, the subsequent suit (the instant one) would have to be stayed in terms of section 10, C.P.C. Upon the rejection of the plaint of the earlier suit, the instant suit would be resurrected and proceeded to be tried without any legal objection presenting itself. The point that needs to be driven home is that rejection of plaint does not operate as res judicata and a fresh plaint can be presented on the same cause of action. 18.The learned counsel for the plaintiff-Bank submits that the withdrawal of the earlier suit was made by acknowledging that a defect had crept into the authority to file the earlier suit and which constrained the plaintiff-Bank to withdraw that suit. It was also informed that the plaintiff had already instituted a suit on which notices had been issued by this Court. 19.The learned counsel for the defendants has relied upon a cluster of judgments in support of the proposition that the instant suit is barred by the terms of Order XXIII, Rule 1, C.P.C. The first of these judgments is Anjuman Masjid New Town through Secretary and another v. Muhammad Shahid Zaki and 12 others (PLD 2011 Karachi 550). This is a Single Bench judgment and it was held that the withdrawal of the earlier suit by the plaintiff was barred by the terms of Order XXIII, Rule 1, C.P.C. although the fresh suit had already been instituted when the plaintiff withdrew the earlier suit. A reliance was also placed on section 12, C.P.C. in coming to the conclusion that such a course was precluded by rules. However, this judgment is per curiam, in that, it does not take into consideration the various judgments of the superior courts and in particular the dilation of the Supreme Court of Pakistan on the subject. In Karamat Ali Khan and another v. Sardar Ali and 29 others (PLD 2001 SC(AJ&K) 30), the learned counsel has relied upon the following observations of the AJ&K Supreme Court: "...In the instant case the subsequent suit was filed during the pendency of the former suit and the prayer for withdrawing the first suit was made after so may years. Even the prayer was for withdrawal of suit not to reinstitute the fresh suit but to introduce an amendment in the subsequent suit. The principle which we have laid down that in presence of first suit the subsequent suit without the permission of Court to reinstitute the first suit on the basis of formal defects squarely applies to cases which are being withdrawn. The provisions of Order XXIII, sub- rule (3) cannot be defeated by instituting a fresh suit before withdrawing the previously filed suit. It is well-settled principle of law that what is not allowed to be done directly cannot be allowed to be done indirectly. Therefore, sub-rule (3) mentioned above applied to the present case." 20.It may be seen that the AJ&K Supreme Court arrived at the conclusion that the withdrawal of the earlier suit after the fresh suit having been instituted would be tantamount to defeating the provisions of Order XXIII, sub-rule (3). However, the precedents relied' upon by the Supreme Court of AJ&K did not, in fact, lay down any such rule and were distinguishable on facts. Moreover, it is difficult to subscribe to the conclusion drawn by the Supreme Court of AJ&K that such a course of action will defeat the provisions of Order XXIII, sub-rule (3) since as stated above, Order XXIII, sub- rule (3) merely concerns itself with the permission to withdraw a suit for filing a fresh suit and there is no prohibition in the entire length and breath of C.P.C. with regard to the filing of a suit during the pendency of an earlier suit and thereafter withdrawing the earlier suit. It is a recognized canon of law that what is not prohibited is deemed to be permitted. Also the effect of section 10 was not considered by the AJ&K Supreme Court. 21.The learned counsel for the defendants laid great stress on the observations of the Supreme Court of Pakistan in Muhammad Ali and others v. Province of Punjab and others (2009 SCMR 1079), which read as under: "...Moreover, it was evident from the record that the third suit was filed by the petitioners during the pendency of the second one and was as such liable to be stayed in view of the mandatory provisions of section 10 and could proceed only after the disposal for the second one. The moment petitioners abandoned their claim and unconditionally withdrew the second suit they
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could be held barred from pursuing the third suit on the same cause of action in terms of the spirit of Order XXIII, Rule 1. With profound respects in our humble opinion the provisions of section 10, ought to be read along with Order XXIII, rule 1 because otherwise the object of the latter could possibly be defeated. Nevertheless since a somewhat contrary view appears to have been taken by a two Member Bench of this court in the case of Jeewan Shah v. Muhammad Shah and others reported (PLD 2006 SC 202) we would avoid entering this controversy and leave it to a larger Bench to resolve the same in an appropriate case." 22.It can be seen from the above that the matter was left to be determined in another case and for a future day by the Supreme Court of Pakistan in the precedent cited by…
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