Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Lahore High Court on 2024-05-13, officially reported as 2024 LHC 2628. In this matter between Faysal Bank Limited and M/s Dynasel Limited and others, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Lahore High Court Judge(s): Shams Mehmood Mirza Title: Faysal Bank Limited vs M/s Dynasel Limited and others Case No.: COS No.28 of 2014 Date of Judgment:2024-05-13 Reported As: 2024 LHC 2628, PLD 2025 Lahore 263, 2025 CLD 369 Result: Order Accordingly

JUDGMENT

JUDGMENT SHAMS MEHMOOD MIRZA, J.- This suit is brought by the plaintiff bank under the provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance) seeking recovery of Rs.522,894,646/- from the defendants due under two finance facilities namely Finance Against Trust Receipt (FATR) facility and Running Finance (RF) facility. 2. On contest by defendants No.1 to 8 (the defendants), their application for leave to defend was partially allowed on 02.11.2017 while an interim decree was passed in the sum of Rs.108,487,916/- representing the principal amount of RF facility. Leave to defend was granted to the extent of amount due under FATR facility and mark-up due under RF facility. Defendant No.9 was also allowed leave to defend in respect of the entire amount of the suit. The reasons for which leave to defend was partially allowed to the defendants are contained in paragraphs 10 and 12 of the leave granting order which read as follows: 10. The plaintiff bank has appended a number of statements of accounts with the plaint and it is difficult to pinpoint as to which document pertains to the statement of mark up of RF account. Be that as it may, even the statement of account termed by the learned counsel to be the statement of mark up account clearly shows that after the expiry of the RF facility, the plaintiff bank continued charging mark up and also receiving the amounts from the defendants. It prima facie appears that the defendant bank has received more amount as mark up than was due to it up to the date of expiry of the RF facility. 12. The statement of account shows that there were 97 transactions carried out under the FATR facility. The manner in which statement of account of the FATR facility is prepared is not confidence inspiring. For instance, the first statement of account shows Rs.3,388,465.94 as outstanding

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balance on 28.06.2011. There is a debit entry of the similar amount on 24.12.2011 but the balance on 24.12.2011 still remains Rs.3,388,465.94. Same is the case with all the other entries in the statement of account of FATR facility. The statement of account of FATR facility in the manner it prepared cannot form basis of a summary judgment. Besides the necessary corroboration is also not available on the record in the shape of the statement of account of LC/PADS. The defendants have, therefore, made out a case for grant of leave in respect of the claim of the plaintiff bank under the FATR facility. (Emphasis Added) 3. The defendants, it may be pointed out, completely denied having availed the RF and FATR facilities. The leave granting order, as is apparent, encompassed only the amount of mark up under RF facility and the entire amount of FATR facility. Notwithstanding the complete denial of availment of the FATR and RF facilities, it is implicit in the leave granting order that the stance taken by the defendants was not accepted and a preliminary decree was passed in respect of the principal amount of RF facility. Also evident is the fact that leave was granted not on the substantive merits of the case but on the form of the documents presented before this Court which were found to be lacking clarity required for a summary judgment. The issues that were framed by this Court also bear testimony to the fact that the parties were not found to be at issue on the availing of the FATR and RF facilities and the finance documents that were executed by the defendants in respect thereof. 4. Out of the divergent pleadings of the parties, this Court on 07.03.2018 settled the following issues. 1. Whether the plaintiff bank is entitled for the recovery of outstanding amount in FATR facility? OPP 2. Whether the plaintiff bank is entitled for the mark up of the running finance facility? OPP 3. Whether this Court has territorial jurisdiction over defendant No.9 and whether a decree could be passed against him by this Court? OPD 4. Relief 5. After framing of the issues, the plaintiff bank filed C.M. No.2 of 2018 under Order VII Rule 18 CPC for placing on record additional documents relating to FATR facility for their production in evidence. This application was resisted by the defendant but this application was allowed on 24.01.2019 with the observation that the proof of the documents so produced in evidence shall be determined at the time of final arguments as also the question whether the evidence in this regard was beyond the pleadings. 6. The plaintiff bank examined Shahryar Tiwana as PW-1 who produced in evidence the documents Exh.P-1 to Exh.P-29. Defendants No.1 to 8 opted not to produce any evidence before the learned local commission appointed by this Court which aspect of the matter shall be touched upon later in the judgment. The evidence led by defendant No.9 is of no significance as the execution of corporate guarantee is not in dispute and only the legal question of territorial jurisdiction is involved. 7. This case was heard at length on various dates of hearing as is apparent from orders starting from 10.06.2021 to 27.05.2022 but the decision could not be announced for one reason or the other. 8. The findings on the issues are as follows: ISSUE No.1: (Whether the plaintiff bank is entitled for the recovery of outstanding amount of FATR facility? OPP) 9. Learned counsel for the plaintiff bank submits that all the documents relating to FATR facility including the letters of credit have been produced in evidence which duly substantiate the draw- downs by defendant No.1 under the said facility. 10. Learned counsel for defendants argued that leave to defend was granted, inter alia, on the ground that the statement of FATR facility was not properly prepared and yet the plaintiff bank did not produce in evidence a fresh statement of FATR facility. It was accordingly contended that no reliance can be placed on the statement of account of FATR facility. In regard to the concise

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statement of FATR (Mark-A) produced in evidence, it was stated that PW-1 himself admitted in cross-examination that the said document was not a proper statement of account. The defendants accordingly submit that the mode and manner of payments under the letters of credit was not substantiated in evidence by the plaintiff bank. It was also the case of the defendants that the documents produced in evidence pursuant to order dated 24.01.2019 were not mentioned in the plaint and the necessary facts in regard thereto were also not pleaded in the plaint. The implication being that the evidence produced in respect to those documents cannot be considered by this Court. 11. This Court would firstly deal with the stance put forward by the defendants in their application for leave to defend outrightly denying the availment of any amount under the FATR and RF facilities. The following paragraph from the application for leave to defend would suffice to substantiate this point. (j) That no facility pursuant to the alleged agreements dated 08-03-2011 and 07-07 2011 was ever actually provided by the plaintiff to the applicant No.1. In this regard, it is further submitted that the defendant No.1 did not avail any LC facility or FATR facility from the plaintiff bank pursuant to the said agreement Again, while providing the details in terms of section 10 (4) of the Ordinance, it was stated as under: No amount availed under the agreement dated 08-03-2011 or 07-07-2011. However, the defendants availed the facility upto 26-08-2009, which stands adjusted even according to the documents attached by the bank with the plaint. 12. The plaintiff bank in paragraph 48 of the plaint mentioned the details of the finance documents executed by the defendants. In reply to this paragraph, the defendants in their application for leave to defend gave an evasive reply by stating that "The contents of the previous paragraphs are reiterated here." The defendants, however, nowhere in their application for leave to defend specifically denied execution of the finance documents under the FATR facility. 13. In the case of Saudi Pak Industrial Limited v. B.A Rajput Steel etc 2016 CLD 465, this Court in relation to the requirements of the pleadings held as follows: 13. Notwithstanding the special requirements the Ordinance stipulates the plaintiff and the defendant need to fulfill in their pleadings, the general law on the subject is also not materially different. Order 8 Rules 3, 4 and 5 CPC deal with the manner in which allegations of fact in the plaint should be traversed in the written statement and also the legal consequences that flow from its non-compliance (see Badat & Co. v. East India Trading Co. 1964 AIR 1964 SC 538). It is clearly stipulated in the said Rules that it shall not be sufficient for a defendant to deny generally the grounds alleged by the plaintiff but he must be specific with each allegation of fact. When the defendant denies any fact stated in the plaint, Rule 4 stipulates that he must not evasively answer the point of substance. Similarly, if it is alleged in the plaint that the defendant has received a certain sum of money, it shall not be sufficient for the defendant to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received, and that if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances. It can thus be seen that Rule 4 lays down requirements that are not very different from those that are stipulated in section 10 (4) of the Ordinance. Rule 5 deals with specific denial and clearly lay down that every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted against him. In view of the evasive reply of the defendants, they shall be taken to have admitted to having executed the finance documents under the FATR facility. Needless to point out that FATR and RF facilities were granted through offer letter dated 08.03.2011 (Exh.P-1). The fact that a preliminary decree was passed on 02.11.2017 for the principal amount of RF facility militates against the position

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taken by the defendants. It may further be highlighted that the defendants did not challenge the decree passed by this Court on 02.11.2017 which has since attained finality. 14. The objections of the defendants that the necessary facts regarding the documents tendered in evidence by the plaintiff pursuant to order dated 24.01.2019 were not pleaded and that the evidence produced was beyond the pleadings cannot be accepted. Under the rules of pleadings, a party is only required to state the necessary and material facts. The plaintiff bank duly pleaded the finance facilities in the plaint availed by the defendants from time to time which included the FATR facility. According to the plaint, defendant No.1 lastly availed the said facilities through plaintiff bank's offer letter dated 08.03.2011 (Exh.P-1) which was duly accepted by defendant No.1 by appending its signatures thereon. The parties thereafter executed Master Agreement for Financing on 08.03.2011 (Exh.P-2) and Demand Promissory Note (Exh.P-3). According to the contents of the plaint, the parties thereafter further executed Master Agreement for Financing on 07.07.2011 (Exh.P- 5) and Demand Promissory Note (Exh.P-6). It is thus evident that the plaintiff mentioned all the material facts about the FATR facility and accordingly the requirements of the law were fulfilled. Beyond those facts, it was not necessary for the plaintiff to give the details of all the transactions and the documents executed under the FATR facility. FATR is a well understood term in the banking context which stands for a facility granted for payment of amounts due, amongst others, under a letter of credit after execution of the trust receipt. After the execution of the Master Finance Agreements on 08.03.2011 and 07.07.2011, the payment under the FATR facility was to be made on the terms mentioned therein. The plaintiff was compelled to adduce evidence in respect of the underlying transactions on account of the fact that the necessary corroboration in relation to the entries of the statement of account was not made and also in view of the fact that the defendants flatly denied having availed the FATR facility or disbursement of funds thereunder. 15. Let us draw our attention towards the evidence led by the plaintiff bank. PW-1 in his affidavit stated that defendant No.1 established a number of letters of credit/contracts from various banks and that at its asking the amounts thereof were disbursed under the FATR facility for repayment thereof after execution of trust receipts by defendant No.1. PW-1 deposed that FATR facility was fully utilized by defendant No.1. He also produced in evidence all the relevant documents which include the request letters by defendant No.1, the contracts executed by it, shipping documents, trust receipts. He also tendered in evidence a concise statement of account in regard to the FATR facility which on the objection of the learned counsel for the defendants was allowed to be brought on the record as Mark A. It is the case of the plaintiff that Mark A is not a statement of account rather it was meant to explain the entries of the statement of account of FATR facility (Exh.P-11). The learned counsel also submitted a chart regarding the transactions executed under the FATR facility. He submits that the plaintiff bank is placing reliance on the original statement of FATR facility (Exh.P-11) which contains all the entries of the 97 drawdowns and that the entries thereof stand corroborated by the documents (Exh.P-12 to Exh.P-21) tendered in evidence. 16. The finance documents tendered by the plaintiff bank relating to FATR facility were received in evidence without any objection by the defendants. As noted above, the plaintiff bank through its witness also tendered in evidence all the necessary documents (Exh.P-12 to Exh.P-21) relating to the various draw downs through which defendant No.1 availed the amounts of the FATR facility which include the request letters of defendant No.1 addressed to the plaintiff bank for retirement of the import documents under various contracts. These documents consisted of letters addressed to the plaintiff bank by Silk Bank Limited and Barclays Bank PLC, Pakistan informing it to retire from the proceeds of FATR facility the import documents drawn by defendant No.1 under the contracts. Just to understand the basic contours of the transaction, the details of the first draw-down may be stated. The documents regarding the first drawdown include letter dated 24.06.2011 received by the plaintiff bank from Silkbank Limited on behalf of defendant No.1 seeking payment in respect of the

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contracts under the FATR facility. On the same date, defendant No.1 also addressed letter to the plaintiff bank for remitting payment to Silkbank Limited. The documents including contract, bill of lading, packing list were also tendered in evidence. The payment of the first draw-down was accordingly made and debit of that amount was shown in the statement of account. This pattern follows in respect of all drawdowns. 17. Notwithstanding the objection on the form of the statement of account (PW-11), it was tendered in evidence and reflected an amount of Rs.273,249,111.65 due as principal and Rs.104,859,065.66 as mark up. Although section 4 of Banker's Book Evidence Act, 1891 grants presumption of truth to the entries of the statement of account, the said presumption is rebuttable. In the event leave is granted, the entries of the statement of account are required to be proved in accordance with law. In this regard, it may be stated that by virtue of Article 48 of the Qanun-e-Shahadat, 1984 entries in books of account regularly kept in the course of business have been made relevant whenever such entries refer to a matter into which the Court has to enquire but such a statement of account per se is not considered sufficient to charge any person with liability. Under the said provision, such entries though relevant are only corroborative evidence and it is to be proved by further independent evidence. The person on whom the onus lies in required producing relevant evidence in support of the entries in the statement of account (see Sri Sri Raja Lakshmi Narayan Jew and others v. The Province of East Pakistan 1969 SCMR 898). In order to substantiate the entries of the statement of account of FATR facility, the plaintiff bank also produced in evidence all the requisite documents relating to the transactions mentioned in the statement of account. Needless to mention that the defendants did not impugn even a single entry of the statement of account either in the application for leave to defend or in their cross-examination of PW-1. The plaintiff thus discharged the burden that was placed on it on Issue No.1. 18. The averment in the plaint that an amount of Rs.378,108,177.30 is due under the FATR facility was corroborated by oral evidence of PW-1 produced by the plaintiff bank coupled with the documents (Exh.P-12 to Exh.P21). The plaintiff bank is relying upon documentary evidence which demonstrates that defendant No.1 not only delivered the import documents to the plaintiff bank from Silk Bank Limited and Barclays Bank PLC Pakistan but also delivered the trust receipts in which the necessary particulars of the import documents and their value is mentioned. The contracts and bills of ladings and the amount thereof were duly mentioned in the letters of the two banks and of defendant No.1. The very fact that the import documents were delivered to the plaintiff bank by defendant No.1 substantiates payment under FATR facility to the two banks on behalf of defendant No.1. 19. The plaintiff bank having discharged the burden that was placed on it, the defendants should have led rebuttal evidence. It is settled law that parties prove the facts stated in the pleadings. The statement of account is simply the ledger maintained by the plaintiff bank reflecting the outstanding amount of a finance facility but its entries are required to be proved by the underlying documents which as noted earlier stood proved by the evidence led by the plaintiff bank. The defendants were, therefore, required to lead evidence to prove that FATR facility was never utilized or availed by them to substantiate their averment in the application for leave to defend and to negate the inference that arose out of the documentary evidence tendered by the plaintiff bank. It is apparent that the defendants deliberately opted not to produce their witnesses in order to avoid their cross-examination on the documents that the plaintiff bank tendered in evidence in respect of the FATR facility. 20. This Court in the case of Mst. Bakht Bibi v. Muhammad Aslam Khan and others 2016 MLD 1411 dealt with the issue of standard of proof as extrapolated by the definitions of "Proved", "Disproved" and "Not Proved" contained in Qanune-Shahadat, 1984. This Court cited the judgment of the Court of Appeal of Singapore in Loo Chay Sit v. Estate of Loo Chay Loo (2010) 1 SLR 286 which interpreted

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section 3 of the Singapore Evidence Act (pari materia to section 2 of the Qanun-e-Shahadat, 1984). The relevant portion of the said judgment is reproduced hereunder: In so far as the statutory definitions in section 3 of the Evidence Act are concerned, we would also add the following observations. First, where the party asserting a particular fact has discharged his burden of proof on a balance of probabilities (in civil suits) to allow the court to make the finding that a particular fact exists, that fact is "proved . Secondly, where the party seeking to challenge a particular fact sought to be proved by the opposing party adduces sufficient evidence to allow the court to make the finding that the fact does not exist, the said fact is "disproved". Now, it is equally possible that the party seeking to the challenge the particular fact, sought to be proved by the opposing party has proved a fact mutually exclusive from the fact sought to be proved by the opposing party. In this case, the fact sought to be proved by the opposing party has also been disproved. In other words, the party adduces sufficient evidence for the court to make a finding the Fact X exists and since Fact X and the fact sought to be proved by the opposing party, Fact Y, are mutually exclusive, Fact Y has been disproved. Thirdly, a finding that a particular fact is "not proved is not the same as a finding that the fact is "disproved" The finding that a particular fact has been "disproved" is an affirmative finding as to the nonexistence of that fact. Likewise, the finding that the fact has been "proved" is an affirmative finding as to the existence of the fact. It follows that the finding that the fact is "not proved' means that no affirmative pronouncement as such is made by the court as the either its existence or nonexistence.... In a case where a fact is said to be "not proved", the court is unable to say precisely how the matter stands because of a lingering doubt as to the existence and nonexistence of the fact; put simply the court is unable to decide one way or the other. The court thus refrains from making an affirmative pronouncement as to the existence or non-existence of the fact. This Court in the case of Bakht Bibi also held that the term "evidence" does not only include the testimony of the parties and the documentary evidence led by them by holding as under: 10. The definition of "proved" in Qanun-e-Shahadat, 1984 stipulates that the court must consider the matters before it. The expression matters being a term wider than "evidence", the court has to necessarily go through the entire record before it including the pleadings and the demeanour of the witnesses before arriving at its conclusions. After considering the matters before it, the court may (a) either believe that the fact exists or (b) consider its existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it exists. It appears that there are two standards of proof to be found in the definition of "proved" which would satisfy the court of the existence of the fact upon consideration of the matters before it; one is the belief of the court and the other is the standard of a prudent man which can be adopted to consider the existence of the fact so probable as to proceed on the supposition that it exists. The definition of the expression "proved", it would appear, controls the standard of proof for both the civil and criminal trials. It is also apparent that the first standard of satisfaction of the court contained in the expression "proved" would operate in a situation where the court itself believes that one of the parties has convincingly proved that the fact in issue it is required to prove exists and the second standard would operate where the evidence led by both the sides is so evenly balanced that the court has to enter into the realm of supposition and probability by adopting the standard of prudent man to consider the existence of the fact. (Emphasis Supplied) 21. In Muhammad Luqman v. The State PLD 1969 Lahore 257, this Court defined the application of the standard of proof by holding as under: Reference at this stage can be usefully made to the terms "evidence" "proved" and "disproved" as given in the Evidence Act, 1872. In spite of the juggleries that our witnesses may perform, the

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ultimate responsibility to come to the necessary findings of fact rests with the Court and when the case is not tried with the help of jurors, this responsibility is undivided and complete. The term "evidence" is defined in the Evidence Act to include oral and documentary evidence and out of the two categories more weight is attached to the documentary evidence for the unfortunate reason that men may perjure but documents may not. The definitions of the words "proved" and "disproved" however do not make the findings of the Court dependent upon "evidence" alone. The authors of the Evidence Act in their wisdom did not mention the term "evidence" while defining the words "proved" and "disproved" and according to the definition of the term "proved", a fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular…

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