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Petitioner: PAK OMAN INVESTMENT COMPANY LIMITED VS Respondent: CHENAB LIMITED and 9 otherss
Court Name: Sindh High Court Judge(s): Aziz-ur-Rehman Title: PAK OMAN INVESTMENT COMPANY LIMITED vs CHENAB LIMITED and 9 otherss Case No.: Suit No,B-08 of 2011 Date of Judgment:2015-10-29 Reported As: 2016 CLD 1903 Result: Plaint rejected
Judgment ORDER ' AZIZ-UR-REHMAN, J.---By means of above applications, filed under section 10 of Financial Institutions [Recovery of Finances] Ordinance, 2001 [In short F.I.O., 2001], the Defendants are seeking rejection of the plaint with an alternate prayer for granting leave to appear and defend the above suit filed by the Plaintiff through Mr. Khurram Faizab Khan son of Muhammad Faizab Khan as an authorized Attorney of the Plaintiffs Financial Institution under section 9 of F. 1.0., 2001, for recovery of Rs,191,190,736/- along with liquidated damages, costs, charges and cost of funds, till realization of the whole decretal amount, who besides well conversant with the facts of the case, is duly authorized to sign and verify the plaint, institute these proceedings and do all such acts, deeds and things which are necessary and incidental thereto. Photocopy of the 'Sub-Power of Attorney' in favour of the aforesaid officer of the Plaintiff's Financial Institution has also been filed along with plaint as Annexure 'A'. 2. Precisely, the relevant facts in the back ground are stated as follows:- 3. The Plaintiff is a company incorporated and existing under the laws of Pakistan having its registered office at 1st Floor, Tower-A, Finance and Trade Centre, Shahrah-e-Faisal, Karachi, wherefrom it is carrying on its' investment business. 4. The Defendant No,1 is a Public Limited Company incorporated and existing under the laws of Pakistan and having its' registered office. At Nishatabad, Faisalabad, Punjab. Defendant No,! Viz. Chenab Public Limited Company, is a 'Principal Customer' and Defendants Nos.2 to 10 are guarantors of Defendant No,1 as they have executed their 'personal guarantees' [annexed with plaint for and regarding to secure the liabilities of the Defendant No,1 'Principal Customer'. All the
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Defendants are thus 'customers' of the Plaintiff in terms of section 2[c] as defined in the Financial Institutions [Recovery of Finances] Ordinance, 2001 [Ordinance No,XLV1 of 2001]. 5. Per assertions made in the plaint, upon requests based on representations and warranties of the Defendants, the Plaintiff as being a Financial Institution within the meaning of section 2[a] of F.I.O., 2001, extended from time to time various Finance Facilities to Defendant No,1 including the following:- i) Finance Facility-I: ' A term finance facility of Rs,100,000,000/- pursuant to 'Term Finance Agreement' dated February, 2006 as amended by 'First Addendum' to Finance Agreement dated June 1, 2007 and 'Second Addendum' to Finance Agreement dated March 28, 2009 [Finance Agreement-I]. ii) Finance Facility-II: ' A term Finance Facility of Rs,50,000,000/- pursuant to 'Term Finance Agreement' dated March 15, 2006 as amended by 'First Addendum' to Finance Agreement dated June 1, 2007 and 'Second Addendum' to Finance Agreement dated March 28, 2009 [Finance Agreement-II]. iii) Finance Facility-III: ' A Syndicated Term Finance facility, pursuant to 'Syndicated Term Finance Agreement' dated October 20, 2003 as amended by 'First Supplemental' to 'Syndicated Terms Finance Agreement' dated December 30, 2006 and 'Second Supplemental' to 'Syndicated Term Finance Agreement' dated March 28, 2009 [Syndicate Term Finance Agreement] for an aggregate amount of Rs,160,000,000/-. Defendant No,l's share in the syndicate Term Finance Facility amount is Rs,80,000,000. 6. According to the Plaintiff, the Finance Facility-In, was subsequently 'refinanced'/'restructured' under LTF-EOP Scheme of the State Bank of Pakistan [In short SBP] vide the aforementioned 'First Supplemental' and 'Second Supplemental'. In order to secure the aforesaid finance facilities, the Defendants created 'joint pan I passu mortgage' by deposit of 'original title deeds'/'documents' pertaining and relating to all the pieces and parcels of land well described and mentioned in para 5(i) and (a) to (c) and also a joint ranking 'pan I passu charge' by way of hypothecation over the Defendant No,l's all present and future plant, machinery and equipments etc. Etc. Well mentioned/described in para 5(ii) of the plaint in favour of the plaintiff. Further, apart from 'Demand Promissory Notes', signed and executed by the Defendants No,I in the years, 2003 and 2006, the Defendants Nos.2 to 8 in their capacities as guarantors also signed and executed 'Personal Guarantees' for the amounts mentioned therein in the years, 2003 and 2006. All the relevant documents relied upon by the Plaintiff are annexed as Annexures 'B' B-1 to B-22, 'C' and `C- 1' to 'C-42', 'D', 'D-1' to 'D-4', 'E', E-1' to 'E-3'F' and 'F-1' to 'F-6' to the plaint. 7. Per version of the Plaintiff, the Finance Facilities granted to and availed by the Defendant No,1 were fully utilized, however, the Defendants in breach of the mutually agreed 'terms' and 'conditions' as per the various 'finance documents' and 'security documents', failed and/or avoided to repay the outstanding amounts to the plaintiff Financial Institution as and when it fell due from the Defendants in respect of the aforesaid facilities. 8. Despite, time and again requests for repayment of the outstanding dues, the Defendants, nonetheless, failed and/or neglected to repay/liquidate the outstanding amounts. On account of such failure, the Plaintiff's Financial Institution, consequently, did compel to recall the finance facilities granted to and availed by the Defendant No,1 through its' legal notice of August 26, 2010, clearly asking all the Defendants to pay the then outstanding amount in the sum of Rs,182,344,826/- together with 'liquidated damages' and 'cost of funds' within 14 days. The Defendants however, again failed and/or neglected to discharge their legal obligations in contravention of their commitments and as such they 'committed default' in repayment of the outstanding dues owed the Plaintiff.
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9. Per 'Para 10' of the plaint, the 'cause of action' in favour of the Plaintiff has arisen against the Defendants on various dates/occasions i.e, when the request made by the Defendants was granted for the availment of finance facility[ies] and also on several other dates when the Defendants 'signed' and 'executed' various finance and other security documents vis-a-vis the finance facility[ies] granted to and availed by the Defendant No,!. Also on dates, when despite requests, the Defendants' failed and/or neglected to honour their 'commitments /discharge their obligations and consequently they rendered themselves as defaulters. Lastly, when they were asked to make payment of the 'amounts recalled' but again they failed and/or refused to do so, hence, this suit for recovery of the amounts under section 9 of F.I.O., 2001 [Ordinance No,XLVI of 2001]. 10. On filing of the above suit on 21.01.2011, process was issued to the Defendants by all modes as 'prescribed in terms of section 9(5) of F.I.O., 2001 including publication in Newspapers i.e, Daily Dawn' English Lahore, Daily 'Jung' Karachi and Daily 'Jung' Lahore, all dated 26-01-2011. Upon service, the Defendants did come forward and filed their 'Leave-to-Defend Applications' wherein inter alia a prayer for 'rejection of the plaint' and in the alternative they have also sought unconditional 'leave- to-defend' the above suit. 11. The Defendants in their 'Leave-to-Defend Applications' have not only denied the 'averments' and 'assertions' made by the Plaintiff which they in their opinion deemed contrary to their stand but also raised 'certain crucial objections' vis-a-vis the maintainability and/or competency of the above suit. Out of the various objections, the two more relevant 'common and 'prime' objections raised by the Defendants in their Leave-to-Defend Applications read as follows:- i) That the Plaintiff has miserably failed to fulfill the requirements of section 9(3)(a) of Financial Institutions (Recovery of Finances) Ordinance, 2001 which requires the Plaintiff to specify in the plaint, the amount of finance availed. No proof of disbursement has either been attached with the suit that the requirements of section 9 of F.I.O., 2001, are mandatory in nature and same are not just the 'technicalities' or 'formalities'. The absence of compliance of section 9 of F.I.O., 2001, warrants rejection of the plaint/suit being incompetent. Likewise, the requirement of section 9(3)(b) of F.I.O., 2001 has also been violated by concealing .The material facts from this Court. The aforementioned non-compliance of law is amounting to non-providing adequate, proper and reasonable opportunity of defence to the answering defendants)/applicant(s) and plaint, is liable to be rejected. ii) That the Plaintiff has, further, violated section 9 of F.I.O., 2001, by not attaching the proper 'statement of account' with the plaint. The alleged statements of accounts attached with the plaint are deficient and aviolative of law as under:- a. Law requires that the !Statement of account' must be disclosing each and every entry/transaction including the amount disbursed to the customer. In the present case*, no 'principal amount' or the 'disbursed amount' has been shown. These violations are being done, deliberately to conceal the irregularities and violations of the alleged agreements committed by the Plaintiff. b.The alleged statements of accounts are not reflecting amount adjusted towards' the mark up and amount adjusted towards principal. The so-called entries reflected are bogus and against the alleged agreements themselves. c. The Plaintiff has even failed to mention the account numbers (being maintained with the Plaintiff) of the answering Defendant in the plaint or the documents attached. d. The statement of accounts for term finance facilities are in manner and mode of lease finance instead of term finance. e. The alleged statements of accounts are not certified as required under section 9 of Finance Institutions (Recovery of Finances) Ordinance, 2001 as well as Banker's Books Evidence Act, 1891. The
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person signing the same is neither the branch manager nor he is authorized in the regard as per the law. f. The alleged statements of accounts produced by the bank in support of the claim is just a recovery certificate to which no presumption of truth is attached under law. g. The alleged statements of accounts are even otherwise, false, fictitious and incomplete. Rather the same are not statements of accounts. h. The alleged statement of accounts themselves contradict the claim of the Plaintiff. There are serious contradiction between the statement of accounts and the alleged agreements. The said serious contradiction cannot be resolved without recording evidence for which the grant of unconditional leave to appear and defend the suit is essential. 12. Moreover, in the Leave to Defend Applications, it has also been alleged that the 'finance agreements' are 'uncertain' and this factum besides being quite evident is also reflected from the difference of the amount claimed in the suit and shown in the alleged 'statement of accounts'. The alleged 'demand promissory notes and the 'security documents' attached with the suit itself show that the Defendants have deviated from standard banking practice. Besides, under Article 10-A, inserted in Constitution of Islamic Republic of Pakistan 1973 [18th amendment] through Act X of 2010, in the Constitution of Islamic Republic of Pakistan 1973, the Defendants, in any event, are within their vested rights to have a 'fair trial' and 'due process' regarding determination of their liability, if any. And no condition whatsoever can be imposed on the rights of a Defendant who wishes to oppose and/or defend any suit/proceedings initiated. Otherwise, it would have the effect of eclipsing the constitutional right of 'fair trial' and 'due process'. Being relevant Article 10-A is reproduced herein:- "10-A. Right to fair trial---For the determination of his civil rights and obligations or in any criminal charge against him a person shall be entitled to a fair trial and due process. " 13. According to the Defendants' stand, law never intends that the dispute between the parties be decided on the basis of technicalities. Rather law is meant for 'advancement of justice', of course purely on merits. Per Defendants' stand, justice can only be done if parties are afforded a fair opportunity of being heard while also observing the principle of 'due process'. 14. Apart from the above, it has also been pleaded on behalf of the Defendants that the three separate alleged finance agreements involved in the case in hand, pertain to totally 'independent transactions'/'causes' and apparently having no relation with each other at all. These agreements, per stand of the Defendants have wrongly been amalgamated in one suit. The instant suit, on this score as well, is also 'liable to be rejected inter alia on account of 'mis-joinder' of 'causes of action' allegedly stated to have been raised in favour of the Plaintiff. Moreover, the 'finance agreements' have been signed without any 'lawful authority' thus the same are not binding on the Limited Company. The Defendant No, 1 's company, can only act or perform through its' duly authorized persons which however, in the case in hand there is none. Any undertaking given, can only be binding on the Defendant No, l's company if the 'signatories' thereon are duly authorized in that regard. There is no 'valid resolution' of BoD of Defendants No, l's company [or attached with suit] that is to say in favour of the signatories of document, hence, all the 'Finance agreements' ex-facie are without any authority as such are not binding on the Company and/or the answering Defendants and consequently, the suit is liable to be dismissed/rejected on this ground as well. 15. On service of Leave to Defend Applications, the plaintiff has also filed its' replies [Replica] under section 10(7) of F.I.O., 2001 [XLVI of 20011 wherein, all adverse allegations have been emphatically denied as being untrue, frivolous, mala fide and misconceived. The two 'prime preliminary objections' referred to hereinabove under the heading of 'Grounds'/'Preliminary objections' raised by the Defendants at sub-paras 5 and 6 of C.M.A. No,2629 of 2011, filed by Defendant Company; have been replied by the Plaintiff in the following words:-
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"That the contents of Paragraphs 5 to 8 of the Application are specifically and vehemently denied being false, baseless and misconceived. It is respectfully submitted that the Plaintiff fulfilled the requirements of Section 9(3) filed break-up as Annexures "E" to "E-2" and Statement of Account in accordance with Bankers' Books Evidence Act, 1891 as Annex "E-3". Hence the objection raised by the Defendant No,1 is not maintainable and Application under reply is liable to be dismissed with cost". [Underlining is mine]. 16. Lastly, on 06.10.2015 when the aforesaid Leave to Defend Applications came-up before me then I heard Mr. Salman J. Mirza, learned counsel for the Defendants and Mr. Aijaz Hussain Shirazi, learned counsel for the Plaintiff Company and also perused the record with their assistance. 17. Keeping in view inter alia, the above 'prime objections' regarding maintainability of the suit mainly on the touch stone of section 9(2)(3) of F.I.O., 2001 [XLVI of 2001], it would be appropriate to reproduce herein section 9 of F. 1.0., 2001, which reads as follows:- 9. Procedure of Banking Courts. ----f1) Where a customer or a financial institution commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power-of-attorney or otherwise. (2) The plaint shall be supported by a statement of account which in the case of a financial institution shall be duly certified under the Bankers' Books Evidence Act, 1891 (XVIII of 1891), and all other relevant documents relating to the grant of finance. Copies of the plaint, statement of account and other relevant documents shall be filed with the Banking Court in sufficient numbers so that there is one set of copies for each defendant and one extra copy. (3) The plaint, in the case of a suit for recovery instituted by a financial institution, shall specifically State--- [Underlining is mine]. (a) the amount of finance availed by the defendant from the financial institution; (b) the amounts paid by the defendant to the financial institution and the dates of payment; and (c) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution up to the date of institution of the suit. (4)........ (5)........ 18. Under section 9 of F.I.O., 2001 [Ordinance XLVI of 2001], as appears where a 'customer or a 'Financial Institution' commits a 'default' in fulfilment of any obligation with regard to any finance, the 'Financial Institution' or as the case may be, the 'customer', may institute a suit in the Banking Court by presenting a 'plaint' which shall be 'verified on oath', in the case of a Financial Institution by the 'Branch Manager' or such other officer of the financial institution as may be duly authoriseti in this behalf by power of attorney or otherwise. Moreover, A in terms of subsection [2] of section 9 of F.I.O., 2001, the 'plaint' shall be supported by a 'statement of account' which in the case of a Financial Institution shall be 'duly certified' under the Bankers' Books Evidence Act, 1891 [Act No,XVIII of 1891], and accompanied with all other 'relevant documents' relating to the grant of finance. In terms of subsection [2] of section 9 of F.I.O., 2001, copies of the 'plaint', 'statement of account' and other 'relevant documents' also needed to be filed with the Banking Court in sufficient numbers so that there is one set of copies for each Defendant and one extra copy. 19. Evidently, as per subsection (2) of section 9 of F.I.O., 2001, the plaint in the case of Financial Institution shall be 'duly supported by a 'certified statement of account' as being duly certified under the Bankers' Books Evidence Act, 1891 [Act No,XVIII of 18911. It is worth to note,`that the use of words 'the plaint shall be supported' preceding the words 'duly certified statement of account'
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actually rende- the compliance of section 9 of F.I.O., 2001 as 'mandatory'. In case of 'noncompliance' of this 'mandatory requirement' the 'Financial Institution' is bound to face the adverse consequences. The word, 'support' read in the mandatory perspective of the word 'shall' makes the plaint filed by the Financial Institutions as totally dependent upon the 'statement of account' duly 'certified' under the Bankers' Books Evidence Act, 1891 [Act No,XVIII of 1891]. If these 'mandatory requirements' as provided under subsection [2] of section 9 of F.I.O., 2001 are fulfilled then only the plaint may be sustained otherwise, not. In this aspect of the matter reliance can be placed on the case of Elbow Room and another v. MC Bank Limited [2014 CLD 985 D.B] wherein the Division Bench of this court has observed as follows:- "7. ... The Legislature has used the word "supported" as employed in section 9(2) of Ordnance, 2001; which means that if the suit is not supported by the Statement of Account it would not be competent. The word "support" read in the mandatory perspective of the word "shall" makes the plaint filed by a financial institution, totally dependent upon duly certified statement of account on the "support" of which a plaint may stand and sustain as per section 9(1) and (2) of Ordinance, 2001... "[Underlining is mine]. 20. Besides, reference can also be made to the case of Bankers' Equity Ltd v. Messrs Bentonite Pakistan Limited and others [2003 CLD 931] wherein, after thoroughly discussing the meaning of the word 'support', it was observed/held as follows:- "10. ... definition and nature of term 'support' subsections (1) and (2) of section 9 of the Ordinance, 2001, can safely and logically be interpreted by holding that suit of a Banking Company cannot hold, endure, sustain, stand and be instituted without life support and foundation of a duly certified Statement of Account and the said documents for the plaint, wherefor, noncompliance with express provisions of law bars a suit through a plaint unsupported by a Statement of Account duly certified under Bankers' Books Evidence Act, 1891 and the documents relating to grant of finance. 11. 1 am reinforced in my above opinion by the difference of phraseology used in provisions contained in subsections (1) and (2) of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, and the provisions of Rules 14 and 17 of Order VII of C.P.C. Said rules 14 and 17 relate to production of documents in the Court upon presentation of a plaint. These provisions read as under:-- ' Rule. 14. "Production of document on which plaintiff sues.---(1) Where a plaintiff sues upon a document in his possession or power, he shall produce it in Court when the plaint is presented, and shall at the same time deliver the document or a copy thereof to be filed with the plaint. (2) List of other documents. ---(2) Where he relies on any other documents (whether in his possession or power or not) as evidence in support of his claim, he shall enter such documents in a list to be added or annexed to the plaint." ' Rule 17. "Production of shop-book---(I) Save insofar as is otherwise provided by the Bankers' Books Evidence Act, 1891, where the document on which the plaintiff sues is an entry in a shop-book or other account in his possession or power, the plaintiff shall produce the book or account at the time of filing the plaint, together with a copy of the entry on which he relies. ' Original entry to be marked and returned.---(2) The Court, or such officer as it appoints in his behalf shall forthwith mark the document for the, purpose of identification; and after examining and comparing the copy with the original, shall if it is found correct, certify it to be so and return the book to the plaintiff and cause the copy to be filed." ' The requirement under these rules is that a plaintiff shall "produce" documents or shop-books or accounts sued upon, when the plaint is presented and the plaintiff shall at the same time deliver the document or file thelcopy thereof with the plaint. These rules visualize total independence of
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the plaint, the documents, the books of account or shop-books. The documents/accounts relied upon corn be subsequently produced with permission of the Court under Order XI, Rule 14 or under Order XIII, Rule 2 or under section 151, C.P.C. The consequence of non-production of documents along with the plaint are that the same "shall not, without the leave of the Court be received in evidence" under Rule 18 of Order VII C.P.C. Or shall not be received in evidence "at any subsequent stage of the proceedings unless good cause is shown to the satisfaction of the Court for non- production thereof under rule 2 of Order X111, C.P.C. 'The obvious distinction between the above said Rules and subsection (2) of section 9 of the Ordinance, 2001 is that above quoted Rules of C.P.C. Require "Production of documents" along with the plaint or on the first hearing of the suit while subsections (1) and (2) of section 9 of the Ordinance, 2001 provide that civil suit shall be filed through a plaint "supported" by a duly certified Statement of Accounts and documents of finance. The words "to produce documents along with the plaint" used in C.P.C. Connote meanings different from the words "plaint shall be supported by a Statement of Accounts---" under section 9 of the Ordinance. The distinction thereto is obvious, C.P.C. Allows a plaint independent of production of documents as consequence of non-filing thereto is inadmissibility of documents in evidence if leave of the Court is not obtained for subsequent production of the same. Contrarily, legislators' chose not to use the word "produced" under section 9 of the Ordinance but used the word "plaint shall be supported by a statement of Accounts and documents of finance. The freedom of subsequent production of Statement of Accounts and documents of finance (not filed with the plaint) has been taken away from the plaintiff under section 9 of the Ordinance, 2001, which require plaint, Statements of Accounts or documents of finance together to initiate a civil suit on behalf of Banking Institution. [Underlining is mine]. 21.…
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