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Petitioner: SONERI BANK LIMITED VS Respondent: CLASSIC DENIM MILLS (PVT.) LIMITED and 3 others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title: SONERI BANK LIMITED vs CLASSIC DENIM MILLS (PVT.) LIMITED and 3 others Case No.: Suit No,B-71 of 2008Suit No,B-27 of 2006Suit No,B-141 of 2009 Date of Judgment:2010-11-30 Reported As: 2011 CLD 408 Result: Leave application granted
Judgment ORDER ' MUHAMMAD ALI MAZHAR, J.--- The Plaintiff has filed this banking Suit for recovery of Rs,402.871 Million under the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001. It is inter alia contended in the plaint that the defendant No,1 is a private limited company and the defendants Nos.2 and 3 are the directors/guarantors and the defendant No,4 is shareholder/guarantor of the defendant No,1. Initially, the defendant No,1 was a partnership firm, thereafter it was converted into a private limited company. The defendant No,1 was enjoying the following finance facilities from the plaintiff:- (a) ERF/I/II/RF Rs.95 Million (b) Running Finance- AdditionalRs.50 Million (c) Term Finance Rs.120 Million (d) Letter of Guarantee Rs. 10.122 Million (e) Letter of Credit (Foreign) Rs.30 Million (f) Letter of Credit (DA) Rs. 180 Million (g) IFB Overdue Sight (F) Rs.53.353 Million (h) IFB Overdue DA (F) Rs.7.548 Million (i) IFB Overdue DA (L) Rs.43.783 Million (j) FBP Rs. 142.796 Million (k) IBP Rs.45.780 Million
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' In order to substantiate the enjoyment of aforesaid facilities, the plaintiff has attached different offer/sanction letters with the plaint. The defendants Nos.2 to 4 also executed certain financing/charge documents. After conversion from a partnership firm to a private limited company, the account was changed into a private limited company. The plaintiff has also attached a copy of change of status of "Classic Denim Mills" into "Classic Denim Mills (Pvt.) Ltd". It is further alleged that at the time of conversion of the defendant No,1, the total outstanding liability of the defendants including fund based and non-fund based facilities were Rs,674,750,000. Upon request of the defendants Nos.2 to 4, such finances were renewed from time to time and in the last sanction letter dated 29-5-2007 the facilities were renewed as under:--- (i) RF and/or ERF Part I & II Rs.95 Million. (ii) Term/Demand Finance Rs. 170 Million (iii) FBP(L/C DA/DP) Rs.100 Million (iv) LC(Sight) Foreign Rs.30 Million (v) L/C(DA)Foreign/Local Rs. 190 Million (vi) IBP(1/C DA)Local Rs. 100 Million (vii) LG Rs.17.438 Million ' At the time of extension/renewal of finance, the plaintiff required additional securities to secure its repayment obligations from the defendants. In response to this requirement, the defendants created certain charges in favour of the plaintiff on their properties including land, building, plant and machinery, furthermore, the defendant No,2 also created registered and equitable mortgage over its Bungalow No,4-A, Sunset Street, Phase-II, D.H.A., Karachi in favour of the plaintiff. In order to secure repayments obligations, the defendants Nos.2 to 4 executed various financing/charge documents in favour of the plaintiff which are more particularly described in paragraph No,11 of the plaint. It is further stated that the defendant No,1 availed all facilities but defaulted in its repayment, therefore, all the defendants are equally liable to repay to the plaintiff entire outstanding amount. The plaintiff tendered legal notice for payment, but no response was received from the defendants, therefore, the plaintiff was left with no other option but to institute the present suit for recovery. Along with plaint, the plaintiff has attached statement of accounts and in order to fulfil requirement of subsection (3) of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the plaintiff in paragraph No,18 of the plaint has mentioned amount availed, amount paid by the defendants and the outstanding amount liable to be paid by the defendants to the plaintiff. In paragraph No,22, it has been stated that the suit has been signed, verified and filed through Mr. Nasim Ahmed Siddiqui and Mr. Khalid Mohiuddin, who have been appointed duly constituted attorneys by virtue of power of attorneys dated 23-7-2004 and 13-5-2006, respectively. ' After notice, all the defendants filed a joint leave to defend application with separate verifications by each defendant. In the leave to defend application, the defendants have taken preliminary legal objections that in the power of attorney attached with the plaint, Mr. Nasim Ahmed Siddiqui is not allowed to institute the present suit singly. It is further submitted that the plaintiff has not filed the complete and correct statement of account with the plaint and the plaintiffs claim is based on various documents which were obtained by suppression of facts and were blank which have been filled-up by the plaintiff on its own choice for the exaggerated amounts and dates and without any authority of the defendants. The figures mentioned in the documents are contradictory to the plaintiffs' own claim. It is further submitted that the plaintiff has included an exaggerated amount of mark-up in the principal amount which is neither permissible nor the same is allowed by the State Bank of Pakistan. Under the purchase and sale agreement, the defendant No,1 is indebted to the plaintiff only for repurchase price. Besides these preliminary legal objections, the defendants have also raised question of law inter alia that the statement of accounts is not in accordance with
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section 9 of the Ordinance, 2001 and the same is not certified in accordance with Bankers' Book Evidence Act. In order to justify the requirement of subsection 4 of section 10 of the Ordinance, 2001, the defendants have shown amount availed, the amount paid but shown liability nil and the entire claim of the plaintiff is said to be disputed amount. ' Heard learned counsel for the parties. Mr. Khaleeq Ahmed, the learned counsel for the defendants in support of leave to defend application argued that the present suit is not maintainable. In the plaint, it is mentioned that the suit has been filed by Messrs Khalid Mohiuddin and Nasim Ahmed Siddiqui being the attorneys of the plaintiff, but only one attorney has verified the plaint signally but nobody has signed the plaint on behalf of the plaintiff. It was further contended that the plaintiff also failed to file complete statement of accounts which is a mandatory requirement of law. The plaintiff brought the statement of accounts on record through statement which is not permissible under the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001. Learned counsel further argued that the banking court usually grant the defendant leave to defend the suit if on consideration of contents of plaint, the application for leave to defend and reply thereto, it is of the view that substantial question of law and fact have been raised in respect of which evidence needs to be recorded. He further contended that under the settled principle of law, the plaintiff has to prove its case even in the ex parte proceedings and the onus to prove always lies upon the plaintiff. In the instant case, the plaintiff has failed to produce charge documents and complete statement of accounts duly certified under the Bankers' Book Evidence, 1891 as required under section 9 of the Ordinance, 2001, thus, the plaintiff has failed to discharge his obligations. ' The claim of the plaintiff relates to the finance granted in the year 2002 but the plaintiff has neither pleaded said transactions specifically nor brought on record any document in support of its contentions to substantiate its claim for the said period. It is further argued by learned counsel that facilities so disbursed under the finance agreement dated 29th May, 2007 has been fully repaid. The plaintiff in the statement of accounts has not disclosed repayment of the sale proceeds of the bungalow, therefore, no presumption of truth can be attached to it which is neither complete nor certified as required under the law. The claim of the plaintiff is based on renewals, role over and rescheduling, which includes markup on markup with various miscellaneous charges and unless and until, leave to defend is granted unconditionally, it is not possible to ascertain the truth without recording the evidence in the matter. Learned counsel further argued that in view of the newly inserted Article 10-A in the Constitution of Islamic Republic of Pakistan, the defendants are entitled to a fair trial and due process. In support of his arguments, learned counsel for the defendants relied upon the following case law:--- (1) Unreported judgment of Sindh High Court in a Banking Suit No,B-27 of 2006, (Messrs Standard Chartered Bank Pakistan Limited v. Messrs MAK Dyeing and Finishing Mills Limited). In this matter, learned single Judge of this Court held that one of the attorneys was not authorized to institute the suit on behalf of the plaintiff and the defendants have raised substantial question of law and fact which requires recording of evidence. The defendants were granted leave to defend. (2) Unreported judgment of Sindh High Court, in Banking Suit No,B-141 of 2009 (United Bank Limited v. Pak Leather Crafts Limited). In this matter, the learned single Judge of this Court held that if the principal continues to act through agent on the basis of power of attorney despite objection, being raised by the other party is deemed to have been ratified by the principal. Despite objection, replication was filed by the same attorney, the previous act was ratified whose very sub-power was challenged by the counsel for the defendants. The upshot of the discussion would therefore, be that at best, the counsel for the defendant can thrash out the authenticity of the sub-power of attorney at the time of trial, therefore, case for leave was made out by the defendants on this ground. .(3) Munir Hussain v. Muhammad Aslam PLD 2003 (AJ&K)
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16. In this judgment, it was held that where a power is delegated by a principal jointly to more than one agent for performance of the acts on his behalf, then single agent cannot do any act without joining the other. Where a power is given to joint agents, presumption is that such power has been granted on the consideration of the personal nature and their act can bind the principal only if the agents act jointly. (4) National Bank of Pakistan v. Karachi Development Authority PLD 1999 Kar. 260. In this matter, the learned Single Judge of this Court held that the suits were filed by Authorized Officer on behalf of the plaintiff. Authorized attorneys were not examined as witnesses. Burden to show that the suits had been filed by authorized attorneys were upon the plaintiffs. Mere existence of clause in the power of attorneys empowering the attorneys to initiate proceedings, in the absence of Articles of Association and exercise of authority in terms thereof was not sufficient. Suits instituted by the plaintiffs were not maintainable in circumstances. (5) Citibank N.A. v. Judge Banking Court-IV 2001 CLD 171. In this matter, the learned divisional bench of Lahore High Court held that suit filed by bank was dismissed being incompetent simply on the ground that power of attorney was not annexed with the plaint. Requirement of law was to the plaint along with statement of account and that requirement was fulfilled by the plaintiff. Plaint though was to be filed by duly and lawfully authorized person, but section 9 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 had not provided that if copy of power of attorney was not filed along with plaint, the plaint would be rejected and suit would be dismissed. Absence of copy of power of attorney at best could have been a ground for consideration while deciding question of leave to defend the suit but suit could not be dismissed straightaway due to non filing a copy of power of attorney. Whether or not suit was instituted by a duly authorized person, would be a question of fact, which could not be decided without proper evidence. Court could have allowed time for filing of power of attorney and attended to question thereafter by granting opportunity of evidence. Dismissal of suit in summary manner and that too in violation of rules of natural justice, was neither proper nor permissible in law. Judgment of trial Court was set aside. (6) Kinza Fashion (Pvt.) Ltd. v. Habib Bank Ltd. 2009 CLD 1440. In this judgment, the learned divisional bench held that banking court dismissed leave to defend application in a hasty manner without examining in detail, the defence put up by the defendant and absence of any material with regard to availing the FATR facility. Judgment and decree passed in favour of plaintiff bank was set aside and case was remanded to banking court. (7) C.M. Textile Mills (Pvt.) Ltd. v. Investment Corporation of Pakistan 2004 CLD 587. In this matter. The learned divisional bench of Lahore High Court held that suit for recovery of finances unaccompanied by statement of account. Suit was remanded to banking court for deciding the same afresh in accordance with law with direction that judgment and decree of Banking Court was set aside. Application for leave to defend suit. Was granted to the defendant. It was further held that in absence of statement of account showing all debits and credits and dates thereof, no presumption of admissibility in terms of Bankers' Books Evidence Act, 1891 can be given to schedule of balances. No presumption of truth on correctness could be attached to schedule/certificate of balances to be admissible in evidence and to become basis of a suit or decree. ' Learned counsel for the defendants concluded his arguments that so many questions of law and fact are involved in this matter and the Plaintiff also failed to file cottiplete statement of accounts along with plaint, but by way of replication, lacuna of non filing the complete statement of account was filled up, which is not permissible under the law, therefore, defendants arc entitled to unconditional leave to defend the suit and unless issues are framed and evidence is recorded, controversy between the parties cannot be resolved.
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' In rebuttal, Mr. Nafees Siddiqui, the learned counsel for the plaintiff argued that the defendants have filed a joint application for leave to defend which is not maintainable. The defendants have also failed to fulfil requirement of subsection (4) of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, therefore, leave to defend application is liable to be dismissed. He further argued that the defendant No,1 is private limited company, but in the year 2002, the defendant No,1 was partnership firm and opened their account in May, 2002 in the name of Classic Denim Mills and the defendants No,2 to 4 were partners: In the year 2005, the said partnership was converted into a private limited company, whereby it took over the liabilities of partnership firm. And continued to enjoy the financial facilities. At the tithe of conversion, they have also accepted the outstanding liability of Rs,726.372 Million as on 1-10-2005. In the year, 2007, the defendants requested for re-alignment/enhancement of financial limit, therefore, the bank issued sanction letter on 29-5-2007 which was accepted by the defendants. In order to secure repayment, the defendants have also signed and executed finance agreement, promissory note and personal guarantees besides executing memorandum, confirming the deposit of title deeds. In the month of April, 2003, property was mortgaged and registered mortgage deed was also executed. In addition thereto, letter of hypothecation of movable and receivable was also executed. He further argued that statement of account attached with the plaint is duly certified in accordance with the Banker's Book Evidence Act. Learned counsel further argued that Mr. Nasim Ahmed, attorney of the Bank could sign the plaint severally since he is the Bank Manager. So far as no signature on the plaint is concerned, same is mere irregularity and not illegality and can be easily cured with the permission of the Court. Furthermore, the permission to sign the plaint now by this Court will in no way prejudice the defendants. Learned counsel further argued that the entire financial facilities mentioned in the plaint are reflecting true position and the defendants have availed different financial facilities accordingly, but the defendants have defaulted in payment. The plaintiff issued legal notice but no response was received, therefore, the plaintiff had left with no other option but to institute the present suit. As per books of accounts, defendant No,1 is liable to pay an aggregate amount of Rs,402.871 Millions. He further argued that in compliance of section 9 of Ordinance, 2001, the plaintiff has already reproduced proper details in paragraph No,18 of the plaint. In support of his arguments, the learned counsel relied upon the following case law:--- (1) Bank of Punjab v. Genertech Pakistan Ltd. 2008 CLD 765. In this judgment, the learned single Judge of Lahore High Court held that non compliance with the mandatory provisions of section 10(3) (4) and (5) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 would provide penalty and leave application would merit be rejected. In the same judgment, it was further held that leave application jointly filed by the defendant not meeting the requirements of law was dismissed. (2) Habib Bank Limited v. Sabcos (Pvt.) 2006 CLD 244. In this case, the learned Judge held that scheme of Financial Institutions (Recovery of Finances) Ordinance, 2001 is that the suits involving financial matters between the financial institutions and customers should be decided expeditiously in summary manner and all vexatious and mala fide pleas of defence should be curtailed so that proceedings may be completed with shortest possible time. In order to achieve the scheme, Section 10 has been framed to put check upon the defence led by the defendants. Non- compliance with the requirements mentioned in section 10 (3) (4) and (5) would entail rejection of plaint. (3) Zeeshan Energy Ltd. v. Faisal Bank Ltd. 2004 CLD 1741. In this case, it was held that the application for leave to defend the suit was to be rejected under section 10(6) of Financial Institutions (Recovery of Finances) Ordinance, 2001 for the failure of defendant to meet with the requirement of section 10 (3) and (4) of the Ordinance. Provisions are mandatory in nature.
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Cushion was available to the defendant, who failed in this behalf, to disclose sufficient cause for his inability to meet the requirements. (4) Bank of Khyber v. Spencer Distribution Ltd. 2003 CLD 1406. In this judgment, it was held that non- compliance with the provisions of section 10 (3), (4) and (5) of Financial Institutions (Recovery of Finances) Ordinance, 2001. Effect, presumption would be that no application for grant of leave to defend suit was pending. Leave application filed by defendants would be liable to be rejected as perforce of section 10(6) of the Ordinance. Provision of law couched with penal consequences would be considered as mandatory. (5) International Finance Corporation v. Sarah Textiles Ltd. 2009 CLD 761. In this matter, learned Single Judge held that statement of accounts appended. With the plaint was not in accordance with the parameters of section 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 which has been certified as required by law. Defendants did not object to any specific entry in the statement of accounts as they were required in law to raise a specific objection but it was not done. No specific objection to statement of accounts having been raised in petition for leave to appear and defend the suit, therefore, same could not be raised later on under the principle of secundum allegata et probate. (6) H.B.L. v. Crescent Soft Wear Products (Pvt.) (Ltd.) 2009 CLD 412. In this judgment, it was held that non complying with the mandatory requirement of section 10 (3), (4) and (5) of Financial Institutions (Recovery of Finances) Ordinance, 2001 in the leave to defend application. Such application would become liable to be dismissed under section 10(6) of the Ordinance. Non-filing of resolution of Board of Directors of defendant company along with leave application. Effect. Lis on behalf of company without such resolution would have no sanctity. Leave application was dismissed. (7) Habib Bank Ltd. v. Paragon Industries (Pvt.) Ltd. 2009 CLD 1346 In this matter, it was held that application for leave to defend the suit was filed by a person who had been authorized by Directors through resolution of company but no power of attorney or any authority existed in his favour on behalf of directoRs, Resolution was signed by directors of the company and not by them in their personal capacity. Except such resolution no other authority letter or power of attorney had been given by the defendants in their personal capacity, therefore, the defendants could not claim to have filed any application on their behalf. Application was considered to have only filed by company being authorized by resolution. Application for leave to defendant without fulfilling mandatory requirement of section 10 (3), (4) and (5) of the Ordinance. Such application for leave to defend was liable to be dismissed under section 10(6) of Financial Institutions (Recovery of Finances) Ordinance, 2001. (8) Siddique Woollen Mills v. AIWA Bank of Pakistan 2003 CLD 1033. In this judgment, tile 'honourable Supreme Court has held that Banking Court in exercise of its jurisdiction under section 10 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 could only entertain defence of the borrower, if prima facie a bona fide dispute had been disclosed. Since the borrowers had not denied their liability towards the Bank, therefore, Banking Court has rightly passed the judgment and decree which was maintained by High Court. (9) Ismail v. Mst. Razia Begum 1981 SCM R 687. In this judgment, the honourable Supreme Court has held that plaintiffs all along prosecuting their suit with diligence and also appearing as their own witnesses non-signing of plaint by plaintiffs at proper stage in such circumstances is a mere irregularity. District Judge entirely justified directing rectification of such irregularity. Defendant's counsel was not able to show as to how such irregularity prejudiced the defendant. Objection, hence, only technical, particularly when substantial justice done between parties. (10) Haji Muhammad Rafiq v. Shahenshah Jehan Begum PLD 1987 Kar.
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180. In this judgment, the single judge of this court held that where a plaint or a rent case was not properly signed or verified but was admitted and entered in the register of suits or rent cases, same would not cease to be a plaint or a rent case. Defects with regard to signature on a plaint or eviction application were technical irregularity relating to a matter of procedure. (11) Imtiaz Ahmad v. Ghulam Ali PLD 1963 SC 382. In this' judgment, the honourable Supreme Court held that the proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights. All technicalities have to be avoided unless it be essential to comply with them on grounds of public policy. The English system of administration of justice on which our own is based may be to certain extent technical but we are not to take from that system its defects. Any system, which by giving effect to the form and not to the substance defeats substantive rights, is defective to that extent. The ideal must always be a system that gives to every person what is his. (12) Qatar Airways PLC v. ANZ Grindlays Bank 2000 CLC 1455. In this judgment, it was held that non compliance of Rules 15 and 16 of Order VI, C.P.C. Was a mere technicality and same could be cured at a later stage. (13) Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134. In this judgment, the honourable Supreme Court has held that as a general rule, a statute is understood to be directory when it contains matter merely of direction, but pot when those directions are followed up by an express provision that, in default of following them, the facts shall be null and void. To put it differently, if the Act is directory, its disobedience does not entail any invalidity. If the Act is mandatory, disobedience entails serious legal consequences amounting to the invalidity of the act done in disobedience to the provision. ' After hearing the pros and cons of the matter, I have reached to the conclusion that though the plaint is verified by Mr. Nasim Ahmed Siddiqui, one of the attorneys of the plaintiff, but it is…
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