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Petitioner: Messrs DADABHOY CEMENT INDUSTRIES LIMITED and others VS Respondent: Messrs NATIONAL DEVELOPMENT FINANCE CORPORATION
Court Name: Sindh High Court Judge(s): Mushir Alam, Sayed Saeed Ashhad Title:Messrs DADABHOY CEMENT INDUSTRIES LIMITED and others vs Messrs
NATIONAL DEVELOPMENT FINANCE CORPORATION Case No.: Special High Court Appeals Nos.159 to 162 of 2001 Date of Judgment:2001-09-19 Reported As: 2002 CLC 166 Result: Appeals dismissed Judgment ORDER ' SAIYED SAEED ASHHAD, C.J.--- All the aforesaid four Special High Court Appeals have been filed by Messrs Dadabhoy Cement Industries Limited and others against Messrs National Development Finance Corporation. Two of the appeals are against orders, dated 18-6-2001 dismissing two applications under section 12(2), C.P.C. Numbered as J.M. No,29 of 2000 and J.M. No,30 of 2000 and two Miscellaneous Applications in Execution Nos.110 of 2000 and 137 of 2000. As common questions and issues of facts and law are involved in all the aforesaid Special High Court Appeals they will be disposed of by this common order. ' The facts as stated by the appellants in the memos. Of appeals are that the respondent in 1982 granted several loan/finance facilities to the tune of Rs,584,065,920 to Messrs Dadabhoy Cement Industries Limited (hereinafter referred to as DCIL) to make payment of a total sum of Rs,1,013,066,026 towards the repayment of the above loan facility. The above loan facilities were secured by way of mortgage of the properties of DCIL and after making payment of the aforesaid amount, DCIL filed a suit against the respondent for redemption of mortgage being Suit No,416 of 1996, whereas the respondent filed a suit against DCIL being Suit No,1430 of 1997 for recovery of the amount allegedly outstanding in respect of the aforesaid loan facilities. In Suit No,416 of 1996, the parties filed an application under Order XXIII, Rule 3, C.P.C. (hereinafter referred to as the Compromise) for disposal of the suit in terms of the compromise. As the appellants have vehemently challenged the legality and propriety of the compromise and had prayed for its cancellation, it will be appropriate to reproduce the same in extenso as under:--
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"It is submitted on behalf of the parties in the above suit that pursuant to a memorandum of understanding, dated 19-12-1997 (Annexure 'A') executed between Dadabhoy Cement Industries ('DCIL') the plaintiff No,1 herein and NDFC the defendant a settlement has been arrived at including the dispute to the present suit encompassing all the disputes in relation to the accounting of various facilities provided by NDFC to. DCIL and rescheduling/ restructuring of their loads/facilities including the dispute in the present suit. The dispute involved in the present suit has been resolved on the following terms and conditions:--- (1) That it has been agreed between the parties that the interest-based loan facilities and mark- up-based finance facilities specified in Annexure 'B' offered by NDFC tb DCIL shall be treated as withdrawn/cancelled in all respect as if the said facilities as to each and every one of them was never offered by NDFC to DCIL. (2) That it has been agreed between the parties that out of the amounts from time to time paid by or for the account of DCIL to NDFC and received by NDFC up to 1-9-1997 on account of various interest-based term loan facilities as well as mark-up-based term finance facilities, an aggregate amounts of Rs,948.10 million (Rupees nine hundred forty-eight million one hundred thousand only) received from DCIL (in cash, through adjustment of certain loan amounts disbursements, amounts reimbursed by the local banks and Rs,10.36 million received from Asian Development Bank) shall be deemed to have been received and appropriated by NDFC in part payments of amounts owing from DCIL on account of the interest-based term loan facilities and in payment of the mark-up- based term finance facilities provided to DCIL. (3) That on the basis of the appropriation as stated in para.2 thereof, the account of interest-based term loan facilities shall be deemed to be restated, resulting in an aggregate amount of Rs,717,000,000 (Rupees seven hundred seventeen million only) owing and payable in respect of the aforesaid facilities which shall be paid by DCIL to NDFC in the manner stated hereafter. (4) That it is further agreed between the parties that the mark-up-based term finance facilities (with the exception of working capital facilities which is subject-matter in Suit No,1430 of 1997 and for which a separate compromise application has been moved) shall be deemed to have been settled and finally closed for all intent and purposes. (5) That as a result of the settlement so arrived at between the parties DCIL is liable to pay to NDFC an aggregate amount of Rs,717,000,000 as on the effective date i,e, 1-9-1997 which DCIL, has agreed to pay to NDFC in the following manner. (6) That on execution of the aforesaid memorandum of understanding, dated 19-12-1997 DCIL has paid to NDFC the sum of Rs,two (2) million and the balance of Rs,715,000,000 (Rupees seven hundred fifteen million only) payable on account of interest-based term loan facilities shall, from the effective date i,e, 1-9-1997, bear interest @ 15% per annum on daily balance and on the basis of a 360 days year with quarterly rest until full payment of principal and interest is made to NDFC. The aforesaid sum of Rs,715,000,000 shall be payable by DCIL to NDFC within 15 years from the effective date i,e, 1-9-1997 in 60 (sixty) equal quarterly instalments payable on or before 1st January, 1st April, 1st July and 1st December in each calendar year together with interest accrued at the rate aforesaid up to the date of payment of each such instalment as detailed in Annexure 'C' with the first such instalment shall be payable on or before 1-4-1998. (7) That in the event of default in payment of any instalment, as agreed upon the entire principal and interest accrued thereon then remaining unpaid, shall become immediately due and payable by DCIL to NDFC without any notice. In such an event DCIL shall be liable to pay to NDFC an,additional interest @ 4% per annum with "semi-annual rest on the entire amount of overdue principal, and interest in addition to the 15% interest per annum on daily balances, as stated in para.6 hereof. (8) That it is agreed that the following shall constitute an even of default:
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(i) If DCIL shall default in making any payment due to NDFC or shall be in breach of any provision of the said MOU, dated 19-12-1997 or of any agreement, as modified by the said MOU, governing any interest-based term 'loan facility or of any compromise decree of this Honourable Court or of any document creating or evidencing security in favour of NDFC whether alone or together with others for money owing from DCIL to NDFC. (ii) If DCIL shall suffer any petition for its winding up to be filed or any resolution for its winding up to be passed or any decree for money to be passed or any receiver or administrator or manager to be appointed in respect of the business of DCIL or any of its assets on income in or over which NDFC has a security interest. (iii) If in the opinion of NDFC any security held by it for the indebtedness of DCIL is adversely affected, whether on account of actions taken or threatened by one or more creditors against the assets of DCIL in or over which NDFC has a security interest for money owing from DCIL. (iv) If DCIL fails to fulfil any one or more of its obligations including the disposal of the various cases filed by DCIL and NDFC against each other pending in this Honourable Court in pursuance of the settlement arrived at through the aforesaid memorandum of understanding. (9) That it is clarified and fully understood by the parties that notwithstanding the execution of the aforesaid MOU, all the credit agreements and security documents executed by DCIL in favour of NDFC and personal guarantees given by the plaintiffs Nos.2 to 7 shall remain valid binding and enforceable. However, the terms and conditions of the credit agreements, security documents including personal guarantees shall be deemed to have been modified pursuant to the execution of the aforesaid MOU. ' It is, therefore, prayed that this Honourable Court may be pleased to dispose of the above suit in terms of compromise as stated hereinabove with no order as to costs. ' The compromise was allowed vide order, dated 18-2-1998 and it will also be useful to reproduce the order as under:-- 18-2-1998. Mr. Arshad Mohsin alongwith Nayyear Karim Company Secretary of the plaintiff. ' Mr. Afsar Abidi, Advocate for defendants. ' The parties have jointly filed application under Order XXIII, Rule 3, C.P.C. Seeking disposal of the suit in terms of the compromise recorded therein. The application is signed by all the plaintiffs and their learned counsel. On behalf of the defendants one Talat Behzad and the learned counsel for the defendants have signed the application. The signatures are duly verified by the learned counsel who admit execution of the application by their respective clients. I have examined the terms of the compromise which appear to be lawful and within the scope of the suit with the exception that in para.7 of the application, the plaintiffs have burdened with liability to pay to the defendant additional interest at the rate of 4% per annum with bi-annual rests on the entire amount of over- due principal and the interest. The last mentioned term amounts to imposition to penal interest which cannot be allowed. In the circumstances, such term is modified and it is ordered that para.7 of the application shall be incorporated in the decree as follows:-- 7. That in the event of default in payment of any instalment, as agreed upon, the entire principal and interest accrued thereon then remaining unpaid, shall become immediately due and payable by DCIL to NDFC without further notice. In such an event, NDFC shall be entitled to file execution application seeking payment of the entire amount as above from the plaintiffs. ' With the above modification, the application is granted and the suit is decreed accordingly with no order as to costs. (Sd.) Judge ' Suit No,1430 of 1997 filed by respondent NDFC was also disposed of in terms of the above compromise and consent order.
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' According to the above compromise and the order, dated 18-2-1998, DCIL had undertaken to repay a sum of Rs,715,000,000 together with interest at 15 per cent. Per annum on daily balance with quarterly rest. This amount was to be repaid within fifteen (15) years effective from 1-9-1997 in sixty (60) equal quarterly instalments payable on or before 1st January, 1st April, 1st July and 1st December and first such instalment was payable on 1-4-1998. According, to paragraph 7 of the compromise, on default in payment of any instalment on the part of DCIL, they would become liable for payment to NDFC of the entire principal amount and the interest accrued thereon immediately without any notice. DCIL defaulted in the payment of quarterly instalments after making payment of four (4) quarterly instalments. Thereafter, DCIL filed application under section 12(2), C.P.C. In June, 1998, whereas the respondents filed execution applications in both the aforesaid suits. Application under section 12(2) filed in Suit No,416 of 1999 was registered as J.M. 30 of 1999 whereas such application in Suit No,1430 of 1997 was registered as J.M. 29 of 1999. Both the aforesaid J.M. Petitions and the two miscellaneous applications in the two execution applications being Execution Applications Nos.110 of 2000 and 137 of 2000 were disposed of by order, dated 18-6- 2001, whereby the learned Single Judge refused to recall the order, dated 18-2-1998 and dismissed both the J.M. Petitions Nos.29 of 1999 and 30 of 1999. Feeling aggrieved and dissatisfied with the aforesaid order, the appellants have filed the aforesaid four (4) Special High Court Appeals. ' We have heard the arguments of Mr. Syed Sharif-ud-Din Pirzada, the learned counsel for the appellants and Mr. Khalid Anwar, the learned counsel for the respondent. We have also perused the material on record, the relevant provisions of law and have gone through the case-law relied upon by -the learned counsel in support of their respective arguments. ' It was agreed upon by the learned counsel for the parties that all the four Special High Court Appeals may be disposed of finally at the stage of Katcha Peshi, if need be after admitting them to regular hearing. ' Mr. Syed Sharif-ud-Din Pirzada assailed the compromise as well as the order, dated 18-2-1998 allowing the said compromise and disposing of Suit No,430 of 1996 in terms of the contents of the above compromise on the following grounds:-- (a) That MOU was based on misrepresentation, suppression of facts, deliberate and gross miscalculation on the part of the respondents with the intention to coerce Pcil to make payments of the amounts in excess of the amounts legally due and payable and recoverable from DCIL which the respondents were prohibited by Banking Control Department's (hereinafter referred to as BCD) Circulars Nos.13 and 32 of State Bank of Pakistan and that the original amount of loan was blown up by respondent NDFC out of proportion by addition of interest, penal interest and markup over mark-up which was prohibited by law in the form of B.C.D.'s Circulars Nos.13 and 32; (b) that the aforesaid facts not only constituted commission of fraud as contemplated by section 12(2), C.P.C. But also amounted to jurisdictional defect inasmuch as any action in clear disregard of law cannot be said to be an action or order according to the jurisdiction vesting in the authority and would- amount to unlawful order for want of jurisdiction as contemplated in section 12(2), C.P.C.; (c) that the said order was also defective and illegal as the learned Single Judge failed to take into consideration the provisions of Corporate and Industrial Restructuring Corporation Ordinance, 2000 (hereinafter referred to as CIRC Ordinance L of 2000 LVIII of 2000) which provided an expeditious legal remedy for recovery of outstanding loan payable to the Bank or financial institution by a non-performing asset by referring the same to State Bank of Pakistan for calculation of the actual amount due by the Verification Committee. ' Mr. Sharif-ud-Din Pirzada further submitted that MOU and the consent decree suffered from misrepresentation as narrated above and had been obtained by fraud and further that such a consent decree/compromise could be set aside on the ground that it was obtained by fraud if the
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aggrieved party could establish fraud or illegality. Further argument of Mr. Sharif-ud-Din Pirzada was that a consent decree did not stand on a higher footing or pedestal than an ordinary decree and could be set aside or recalled if it could be proved that the same was obtained by practising fraud on the Court and/or was against any express provision of law in support of this above contention, he placed reliance on the following cases : -- (1) Zafar Ahmad and 5 others v. Government of Pakistan through Secretary, Ministry of Production, Islamabad and 6 others 1994 MLD 1612, (2) Government of Sindh through the Chief Secretary and others v. Khalil Ahmed and others 1994 SCMR 782, (3) Union Carbide Corporation and others v. Union of India and others (1991) 4 SCC 584; and (4) State of Punjab (now Haryana) and others v. Amar Singh and another (1974) 2 SCC 70. ' He further submitted that there was no such principle that a party who was aggrieved by a consent decree having been obtained by fraud or was contrary to law was estopped from challenging the consent decree on the ground that there was no estoppel against law. In support of his above contention he placed reliance on the following cases:-- (1) Ruby Sales and Services (P.) Ltd. And another v. State of Maharashtra and others (1994) 1 SCC 531, (2) Pir Sabir Shah v. Shad Muhammad Khan, Member, Provincial Assembly, N.-W.F.P. And another PLD 1995 SC 66, (3) Malik Asad All and others v. Federation of Pakistan through Secretary Law, Justice and Parliamentary Affairs, Islamabad and others PLD 1998 SC 161, and (4) Muhammad Ayub Khan v. The Custodian of Evacuee Property and others PLD 1963 Kar. 551. ' Another ground on which the impugned order, dated 18-6-1991 was assailed was that the application under section 12(2), C.P.C. Was vigorously contested by the parties inasmuch as counter-affidavit and affidavit-in-rejoinder were filed by the aforesaid parties and in view of the controverted and disputed issues and questions of facts and law, it was incumbent upon the learned Single Judge to enter into an investigation and inquiry and the learned Single Judge in dismissing the application under section 12(2), C.P.C. Without holding an inquiry and investigation into the disputed questions of facts and issues committed an illegality as a result of which his order has been rendered unlawful and is liable to be set aside. In support of his above contention, he placed reliance on the following cases:-- (1) Ghulam Muhammad v. M. Ahmad Khan and 6 others 1993 SCMR 662, and (2) Abdul Razzaq v. Muhammad Islam and 3 others 1999 SCMR 1714. ' Mr. Khalid Anwar, the learned counsel for the respondent objected to the maintainability of the aforesaid appeals and submitted that they were hopelessly time-barred but the appellants by circumvention of law proceeded to initiate the proceedings, which they were not legally entitled to initiate, with a view to obtain orders from a Court of law which could provide them fresh period of limitation for filing the aforesaid appeals. Elaborating his arguments, he submitted that the order, dated 18-2-1998 was passed on the compromise, the contents of which were reduced to writing with the agreement and consent of both the contesting parties and both of them had full knowledge and awareness as to the contents thereof as well as the implication of the contents. In the circumstances, there was no occasion of the compromise being based on misrepresentation; miscalculation and concealment/suppression of facts or that the order, dated 18-2-1998 was obtained by way of fraud as a result of which the grounds of fraud and misrepresentation mentioned in section 12(2), C.P.C. Would not be available to the appellants. He further submitted that mere mention by the aggrieved party that the compromise application contained statements and figures based on misrepresentation, concealment of facts and miscalculation was not
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sufficient to warrant maintainability of an application under section 12(2), C.P.C. On the basis of fraud and misrepresentation and it was necessary for the appellants to have mentioned in detail the particulars of the misrepresentation, concealment of facts and miscalculation of the figures. In support of his above contention, he placed reliance on the following cases:-- (1) Muhammad Umar v. Muqarab Khan and another 1968 SCMR 983, (2) Mst. Sahib Noor v. Haji Ahmad 1988 SCMR 1703, (3) Ghulam Muhammad v. M. Ahmad Khan and 6 others 1993 SCMR 662; and (4) Kunjabehari Chakrabarty v. Krishnadhone Majumdar AIR 1940 Cal. 489. ' With regard to want/lack of jurisdiction as envisaged in section 12(2), C.P.C., it was submitted by Mr. Khalid Anwar that the making of an order by a Court in violation or in ignorance of any provision of law though amounted to an illegality yet such an order could not be said to be an order without jurisdiction or lacking in jurisdiction so as to bring the same within the scope of the words "want of jurisdiction" and the same could not be challenged by an application under section 12(2), C.P.C. But only by means of an appeal. In support of the above, he placed reliance on the following cases:-- (1) Muhammad Khan and another v. Massan and others 1999 SCMR 2464, (2) Rehmat Ali v. The. Additional District Judge, Multan and others 1998 SCJ 761, (3) Mst. Naseem Akhtar and 4 others v. Shalimar General Insurance Company Limited and 2 others 1994 SCMR 22, (4) Muhammad Usman v Pehlwan and 4 others 2000 YLR 2324; and (5) Saifuddin v. Zainuddin and others 1992 MLD 631. ' He further submitted that in the circumstances, the order, dated 18-2-1998 was required to be challenged by way of an appeal under section 21 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (hereinafter referred to as the Act of 1997) but the same was not pressed into action and no appeal was filed against the above order within thirty (30) days as provided in section 21(1) of the Act of 1997 on which the order attained finality and the appellants were precluded from challenging the same by way of application under section 12(2), C.P.C. In support of his above contention, he placed reliance on the case of Mst. Naseem Akhtar and 4 others v. Shalimar General Insurance Company Limited and 2 others 1994 SCMR 22 (supra). ' The arguments advanced by Mr. Khalid Anwar on the basis of which he had objected to the.Maintainability of these appeals are the same which were advanced by him while arguing the merits of the appeals. In the circumstances, it will be appropriate to proceed with the appeals on merits as the question of maintainability of the appeals being inter-linked with the objections and the grounds raised by Mr. Khalid Anwar would automatically decide the fate of the appeals with regard to their maintainability. 'It is without any dispute that the Courts possess inherent power to set aside their own judgment, decree or final order which had been obtained fraudulently by way of misrepresentation and concealment/ suppression of facts or collusively. This subsection provides an aggrieved person with a right to file an application for recalling or setting aside -a decree, final order or judgment which had been obtained by fraud or misrepresentation. The essential requirement for such an application is that full particulars of the fraud and misrepresentation must be given in the application. Fraud includes untrue statements by one who did not believe it to be true and active concealment of facts. It is also pertinent to note that the provisions of this section will not be attracted when the alleged fraud or misrepresentation was not in connection with the proceedings but prior to their initiation. A party alleging commission of fraud or misrepresentation in obtaining the decree, judgment or final order has to state facts and circumstances which could warrant a presumption or the possibility of commission of fraud or misrepresentation. Mr. Sharif-ud-Din Pirzada has vehemently relied on the case of Abdur
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Rehman Khan v. Muhammad Altaf and 3 others 1997 CLC 1260 wherein this Court pronounced that "where allegation of fraud was made during the course of judicial proceedings then it was the duty of the Court to investigate and inquire into the matter to find out as to whether the impugned order or action was the result of fraud or misrepresentation and without making a detailed inquiry and investigation, the allegation of fraud ought not to have been rejected. We are in agreement with the observations made by this Court in. The aforecited case. However, from a careful perusal of the aforecited case, it transpires that it had been maintained that the allegation of fraud or misrepresentation must be supported by the attending circumstances and facts of the case and a ' presumption relating to the possibility of commission of fraud should be forthcoming before any investigation or inquiry could be ordered and on mere allegation without there being any material to lend support or substantiate the commission of fraud or making of misrepresentation would not require commencement of any investigation or inquiry. This Court has further pronounced that there ought to be specific and definite allegation of fraud. It will also be pertinent to note that the definition of the fraud and the discussion as to what amounted to fraud in the aforecited case would make it difficult to infer that in the presence of the facts and circumstances of the case it could be held that respondent NI3FC had committed fraud as the main ingredient of fraud namely, intention to deceive or to induce the person by misrepresentation to enter into a contract on a false believe would be found lacking inasmuch as the MOU did not contain any statement which was in suppression of what was true or a representation of a false fact. The action of respondent NDFC in including/adding the amount of interest/mark-up in the principal amount and then charging further interest or mark-up thereon was neither a misrepresentation nor a statement by way of concealment or suppression of the true state of affairs in view of the fact that the alleged illegal statements/ representations by Messrs NDFC were already within the knowledge of the appellant. ' Amongst the various essential grounds which a party is required to establish for invoking…
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