JUDGMENT CH. IJAZ AHMED, J.-- The brief facts out of which the present appeal arises are that the appellants have been availing financial facilities from the respondent- bank by executing various agreements since 1992. The last agreement was executed between the parties qua the financial facility secured by the appellants from the respondent-bank on 26.7.1996. The respondent-bank had also provided running finance facility to appellant No. 1 vide agreement dated 26.7.1995 against, inter alia, hypothecation of appellant No. Is stocks of polypropylene, polythene, inks and nylon block plates etc. The respondent-bank sanctioned advice qua the loan facilities in favour of the appellants on 18.6.1995 on the basis of which the aforesaid agreement was executed between the parties and the letter of hypothecation was also executed between the parties on 26.7.1995. The hypothecated goods to be ensured for full value against i.e and theft by the appellant No. 1 in the name of the respondent-bank and with an Insurance Company approved by the respondent- bank. The hypothecated goods were duly ensured upon payment of premium by appellant No. 1 in the name of respondent-bank for Rs. 10,00,0007- for the period from 12.9.1995 to 12.9.1996 through insurance policy dated 12.9.1995 which was issued by Crescent Star Insurance which was nominated by the respondent- bank. The said insurance policy included the bank mortgage clause whereunder any money become due under the policy was payable to the respondent-bank only. The hypothecated stocks worth about Rs. 10,00,000/- lying at appellant No. Is godown were totally destroyed during the night of 15/16.6.1996 due to electric short circuiting. The appellants informed the respondent-bank about the said incident. The respondent-bank agreed with the appellant that it had suffered a loss of Rs.8,52,500/-. The respondent-bank did not make any effort to recover the said amount from the said Insurance Company. The respondent-bank filed a suit for recovery amounting to Rs.6,72,000/- on 9.10.1997 along with compensatory charges, cost and liquidated damages under Section 9(1) of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 before the Banking Court No. 3, Lahore. The appellants filed following two application:-
(1) application for leave to appear and defend the suit;
(2) application under Order 1, Rule 10, CPC for impleading Crescent Star Insurance Company as a party.
The learned Banking Court dismissed both the application and decreed the suit of the respondent- bank vide order dated 11.8.1998. Hence the present appeal.
2. Learned counsel of the appellant submits that sanction advice of the respondent-bank contained various conditions including condition No'. 2 which prescribes stocks to be ensured by an Insurance Company on the banks approved list against all necessary risks with banks mortgage clause inserted therein. Finance facility agreement was also executed between appellant No. 1 and the respondent-bank which also contained clause 5(d) which wold have to be fulfilled by the appellant which reads as under:- "5. The Customer hereby further covenants as follows:- (a)
(a) (0 [Vol. IX
(d) To keep the hypothecated/pledged goods duly insured with an insurance Company approved by the Bank for a sum not less than the amount of purchase price due and payable to the Bank and deliver to the Bank copies of receipts evidencing payment of premium."
Insurance Fire Policy also contained the following condition which was agreed between the parties:- "Upon any moneys becoming payable under this policy the same shall be paid by the Company to the Bank and such part of any money so paid as may relate to the interest of other parties ensured hereunder shall be received by the bank as agents for such other parties."
Learned counsel of the appellant submits that the learned Banking Court erred in law not to implead the said Insurance Company as respondent which is proper and necessary party in view of the aforesaid clauses of the various documents. He further submits that in the presence of the insurance policy the bank could select the appellant for enforcing recovery of the outstanding which is not in consonance with the laid down by the Superior Court, In support of his contentions he relied upon an unreported judgment dated 13.1.2000 passed in RFA No. 264/1999.
3. Learned counsel of the respondents submits that insurance agreement relates to the goods which has no nexus with the finance facilities secured by the appellant from the respondent-bank.
He further urges that no insurance policy was issued or agreement was executed between the parties qua the loan secured by the appellant from respondent-bank. He further submits that unreported judgment is distinguished on facts and law as the Division Bench of this Court decided the case qua the loan facilities secured by the loanee for the purchase of vehicle under City Bank Car Scheme and the vehicle in the cited cases was in the name of the City Bank.
4. Learned counsel of the appellant in rebuttal submits that Insurance Company is proper and necessary party, therefore, the learned Banking Court erred in law to dismiss the application of the appellants to implead the Insurance Company as respondent in the suit of the respondent-Bank.
He summed-up his arguments that Insurance Company is proper and necessary party in view of Section 2(c) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997.
5. We have given our anxious consideration to the contentions of learned counsel of the parties and perused the record ourselves.
6. It is better and appropriate to reproduce the relevant clauses of sanctioned advice, finance facility agreement dated 26.7.1995, Insurance Fire Policy and Section 2(c) of the aforesaid Act, to resolve the controversy between the parties:- SANCTION ADVICE
(1) -----
(2) Stocks to be insured by an insurance company on the Bank's- approved list against all necessary risks, with Bank's mortgage clause inserted therein.
FINANCE FACILITY AGREEMENT
5. The Customer hereby further covenants as follows:- (a)
(b)
(a) (b) To keep the hypothecated/pledged goods duly insured with an insurance Company approved by the Bank for a sum not less than the amount of purchase price due and payable to the Bank and deliver to the Bank copies of receipts evidencing payment of premium."
FIRE POLICY "Upon any moneys becoming payable under this policy the same shall be paid by the Company to the Bank and such part of any money so paid as may relate to the interest of other parties ensured hereunder shall be received by the bank as agents for such other parties."
Banking Companies (Recovery of Loans. Advances. Credits and Finances) Act, 1997 2(c) "Borrower" means a person who has obtained a loan under a system based on interest from a banking company and includes a surety or indemnifier.
Mere reading the aforesaid clauses Insurance Company is not proper and necessary party, in view of the law laid down by the Hon'ble Supreme Court in Khan Abdul Wali Khan's case (PLD 1976 SC 57).
7. Order 1, Rule 10, CPC was interpreted in similar circumstances by the Allahabad High Court in Oum Prakash Te. Wari v. State Bank of India and others (AIR 1949 Allahabad 313).
"It is significant that one of the very necessary principal in all these cases for impleading a party is that only such parties should be impleaded whose presence is necessary to settle all the questions involved in the suit, In the present case all the questions which will be raised between the Bank and the applicant, the Insurance Company will in no way be of any assistance or the person who would be required for adjudication between the two. The Bank, as per para 8 of the Agreement, in case the decree is passed and the amount which is to be realized is not realized from the loanee, could realize the same from the said Insurance Company the amount which is realizable by the loanee from the said Insurance Company towards the loan advanced. The question of payment by the Insurance Company to the loanee is by way of separate contract which has nothing to do with dispute between the applicant and the Bank arising out of a separate contract, In case the Insurance company or the said loanee raises any dispute regarding the contract, then such dispute could not be decided in the present case."
Section 2(c) of the said Act was interpreted by the Division of Karachi High Court in case M/s. United Bank Limited v. Adam Jee Insurance Company Limited reported as PLJ 1988 Kar. 490. This case was also reported in the following Law Journals:- M/s. United Bank Limited v. M/s. Aiamgir Insurance Co., 1988 CLC 1660; United Bank Ltd. v. Adam Jee Insurance Co. Ltd., etc. NLR 1988 Civil 554.
In which principle was laid down that Insurance Company is not covered by definition of "borrower" in Section 2(c) of the said Act. Relevant observation is as follows:- "In our view, the provisions of the Ordinance are to be construed strictly and the same cannot be extended to a case unless it is covered by the provisions of the Ordinance. We are inclined to hold that an Insurance Company, which may have issued a Marine Insurance Policy in respect of the goods, which were to be imported against the L/C opened by a banking company on behalf of a borrower is not covered by the definition of "borrower" as given in clause (b) to Section 2 of the Ordinance, It is true that the Insurance Company is an indemnifier but it is not an indemnifier in the sense in which it has been used in the definition of the word 'borrower' in above-quoted clause (b).
The Insurance Company is an indemnifier for any losses, the insured may sustain through the agency of the < sea risks insured against i.e. Any loss occurring by means of any of the perils insured against and not in relation to the loan contract.-:- Furthermore, the liability of an Insurance Company is no co-extensive with the liability of a borrower. If the borrower had obtained a loan of rupees i.e lacs from a banking company for opening L/C and say that the goods in transit were damaged resulting into loss say that the goods in transit were damaged resulting into loss say of Rs.20,000/- only, the Insurance Company would be liable under the Marine Insurance Policy to the extent of Rs.20,000/- and not to the above amount of loan with interest thereon etc."
The judgment of the Division Bench was also followed by this Court in EFU General Insurance Company's case reported as PLD 2001 Lah. 313. We are also fortified by the following judgments:- National Bank of Pakistan and 5 others v. Punjab Road Transport Board through Managing Director and 3 others (2003 PCTLR (Lah) 859); Juna Bunder Joint Venture, Karachi v. Board of Trustees of Port of Karachi, etc. (PLD 1982 Kar. 13).
8. Para (a) clause 1 of Insurance Fire Policy contained "upon any money become payable under this policy", which means "he amount must be determined by a competent forum. Mere submitting a claim by the appellant to the respondent-bank does not entitle the appellant to claim the said amount be adjusted qua the outstanding liabilities of the appellants against the outstanding of the respondent-bank, In fact it is an independent agreement between the parties which has no nexus to discharge the liabilities of the respondent- bank by the appellants on the basis of loan agreement executed between the parties on 26.7.1995.
9. The unreported judgment cited by learned counsel of the appellant is distinguished on facts and law which clearly reveals that finance agreement was executed between the City Bank and the Loanee in pursuance of the City Bank Car Scheme with joint investment. The vehicle was purchased which undeniably stands in the name of the Bank whereas in the present case there is no joint investment, therefore, unreported judgment dated 13.1.2000 passed in RFA No. 264/1999 is distinguished on facts and law. It is settled principle of law that each and every case has to be decided on its on facts and circumstances, therefore, judgment relied upon by learned counsel of the appellant has no relevancy and nexus to resolve the present controversy between the parties.
The appellant admitted liabilities of the respondent-bank on merits and learned counsel of the appellants did not raise any objection qua the merits of the case wherein the liabilities of the respondent-bank has been admitted by the appellants.
In view of what has been discussed above. We do not find any infirmity or illegality in the impugned order of the Banking Court. The appeal has no merits and the same is dismissed.