JUDGMENT MIAN HAMID FAROOQ, J.- On 8.12.1999, the defunct National Development Finance Corporation (now amalgamated and succeeded by National Bank of Pakistan, Banking Company, incorporated under National Bank of Pakistan Ordinance XIX of 1949 substituted in place of NDFC vide this Court's order dated 31.1.2002), claiming to be a Company, under the provisions of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, (hereinafter referred to as plaintiff) through its Principal Officers and duly Authorized Attorneys, statedly, fully conversant with the facts of the case, instituted, a suit for the recovery of Rs. 53.639 M as on 31.10.1999, with mark-up, interest, liquidated damages and service charges etc. Against M/s. EFFEF Limited (defendant No. 1), Public Limited Company incorporated under the Companies Ordinance, 1984 (hereinafter referred to as Company), while defendants Nos. 2 to 11 were arrayed as those defendants statedly, furnished the guarantees to the plaintiff as security for the liability of the Company, whereas defendant No. 12 has been joined as party in the present suit as being a person interested in the mortgage security, although no relief has been claimed against defendant No. 12.
2. It has stated in the plaint that the plaintiff, at the request of the Company, and the guarantees of defendants Nos. 2 to 12, granted three financial facilities namely loan of Rs. 4.400 M, Financial Facility-I of Rs. 5.970 M and Financial Facility II of Rs. 20 M, details of which are given below:- I. LOAN OF RS. 4.400 M.
According to the contents of the plaint, pursuant to passing of a Resolution dated 19.10.1983, the plaintiff granted an interest bearing loan for a sum of Rs. 4.400 M to the company for the purchase of locally manufactured machinery, which was payable by 12 half yearly instalments, In token of acceptance of the terms of the sanctioned letter, the same was signed by defendant No. , also executed a credit agreement dated 21.11.1983 and in consideration and in acknowledgement of the said loan facility a promissory note dated 21.11.1983 for a sum of Rs. 4.400 M was also executed. The said loan facility was rescheduled, at the request of defendant No. 1,-which stood at Rs. 4.377 M and was allowed to be repaid in six half yearly . Instalments commencing from 28.2.1990. In acknowledgement and to secure the and rescheduled loan, defendant No. 1 executed certain documents, as mentioned in para 7.3 of the plaint. This loan facility was again rescheduled in September, 1991 and amount of Rs. 2.448 M was allowed to be repaid by three half yearly instalments and defendant No. 1 signed second supplemental credit agreement dated 8.9.1991.
According to the plaintiff, defendant No. 1, in acknowledgement and to secure the afore-mentioned loan facility executed different documents, favouring the plaintiff which have duly been mentioned in para 11.2 of the plaint.
II. FINANCE FACILITY NO. 1 RS. 5.970 M. (LMM).
Contract price Rs. 5,970,000.00 mark-up price Rs. 10,137,150.00. At the request of defendant No. 1, the plaintiff, reportedly, granted to defendant No. 1, a financial facility on mark-up basis in the form of LLM for Rs. 5.970 M for purchase of locally manufactured machinery, which was payable in 10 half yearly instalment. Consequent to the above, defendant No. 1 signed sanctioned letter dated 6.8.1991, thereby accepting terms and conditions of the sanctioned letter and also executed an agreement of finance dated 8.9.1991 and different demand promissory notes, in acknowledgement of financial facility. In order to secure the said financial facility, defendant No. 1 executed certain documents, including memorandum of deposit of title deeds, which documents have duly been mentioned in para 11.3 of the plaint.
III. FINANCE FACILITY NO. II - RS. 20 M (WORKING CAPITAL).
Sale price is Rs. 20 M marked-up price Rs. 24.400 M. According to the contents of the plaint, this facility was granted to defendant No. 1 as a result of its request contained in resolution dated 29.4.1993 for working capital purposes. In acknowledgement thereof, defendant No. 1 executed finance agreement dated 10.6.1993 in token of acceptance of the terms and conditions of finance facility and also executed demand promissory note dated 10.6.1993. In order to secure the said financial facility for the purposes of working capital, defendant No. 1 executed memorandum of deposit of title deeds dated 20.7.1993.
3. Additionally, defendant No. 1 created equitable mortgage of its- properties through the execution of memorandums of deposit of title deeds, as, according to the plaintiff, defendant No. 1 had already deposited the original documents of title of the properties with defendant No. 12, as security for some other loan and the equitable mortgage was created in favour of the plaintiff after having obtained the requisite NOC and confirmation of holding of the documents of title to the properties from defendant No. 12. Furthermore defendant No. 1 created hypothecation of its plant, machinery, spare parts, accessories and electrical and other equipment etc. And other moveables by means of documents mentioned in para 13-1 of the plaint. According to the plaintiff, defendant No. 1 created floating charge over all its properties and assets by means of documents i.e. Deeds of floating charge dated 23.9.1991 and 10.6.1996. In addition to that defendant No. 1 got the charges of mortgage, hypothecation and floating charges recorded in favour of the plaintiff with the Registrar of Companies, who issued the requisite certificates dated 30.11.1983 and 10.10.1991. It has been averred in the plaint that defendant No. 1 also executed 'further documents, mentioned in para 17 of the plaint, defendant No. 1, later on, approached the plaintiff Bank, with an intend to avail benefits under State Bank of Pakistan Incentive Scheme for the settlement of its over-due liabilities and while acknowledging its liabilities, defendant No. 1 made certain payments towards the partial adjustment of the liabilities, but the total liabilities were never liquidated.
4. It has been stated in the plaint that defendants Nos. 2 to 11, in .Consideration and in acknowledgement of loan/finance facilities, furnished their personal guarantees enumerated as under:-
(i) Guarantee dated 23.9.1991 for Rs. 4.400 M by the defendants Nos. 2, 4, 5, 7, 8 and 9. (Annex. J/1) for the loan of Rs. 4.400 M.
(ii) Guarantee for Rs. 4.400 m by defendants Nos. 2, 4, 5, 6 and 9 (Annex. J/2) for the loan of Rs.
4.400 M.
(i.e) Guarantee dated 23.9;1991 for Rs. 10.137 M by defendants Nos. 2, 3, 5, 7, 8 and 9 (Annex. J/3) for the Finance Facility No. 1 of Rs. 5.970 M.
(iv) Guarantee dated 10.:6.l993 for Rs. 24.400 M by defendants Nos. 3, 5, 6, 10 and 11 (Annex. J/4) for Finance Facility No. II Rs. 20.000 M.
5. According to the plaintiff, the defendants failed to discharge their liabilities and neglected to liquidate the amounts falling due against them in all the aforesaid loans/Financial Facilities despite various demands made by the plaintiff from time to time through issuance of letters etc. The case of the plaintiff is that on account of acts and omissions of the defendants, they have become defaulter with the result that a sum of Rs. 53.639 M fell due, against the defendants jointly and severally in the following manner:--
(i) Loan. Rs. 6.400 M
(ii) Finance Facility No. I. Rs. 5.394 M (i.e) Finance Facility No. II. Rs. 41.845 M Total: Rs. 53.639 M According to the plaintiff, inspire of repeated demands, the defendants failed/neglected to pay the outstanding amounts of loan and financial facilities and their failure to adjust the liability despite various efforts made by the plaintiff and its functionaries, thus necessitated the filing of the present suit, under the provisions of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997.
6. In response to the summons issued by this Court, through all the modes of service, provided under the law prevalent at that point of time, defendants Nos. 1, 5 and 6 filed PLA No. 4-B/00, defendants Nos. 2, 7 and 8 filed PLA No. 8-B/OO, defendant No. 9 filed PLA No. 7-B/00, while defendants Nos. 10 and 11 filed PLA No. 5-B/00 seeking leave to appear and defend the suit. As defendants Nos. 3, >4 and 12 neither appeared before this Court nor filed any such application, as such they were proceeded ex parte vide order dated 14.1.2000. I find from the record that only defendant No. 3, on 8.7.2000, filed an application seeking setting aside of ex parte order dated 14.1.2000 (C.M. No. 457- B/00) together with an application under Sections 5 and 14 of the Limitation Act (C.M. No. 458-B/2000) seeking condonation of delay in filing the application, however, order sheet does not show that any notice of this application was issued to the plaintiff Bank and that may be the reason why no reply was filed on behalf of the said plaintiff. However, as regards defendants Nos.4 and 12, they are still out of the scene, as no application was ever filed by the said defendants. Fact remains that defendant No. 3 even up til now has neither filed any application seeking leave to defend the suit nor any amended application for leave to defend the suit has been filed on his behalf.
7. On 30.8.2001, Financial Institutions (Recovery of Finances) Ordinance, 2001, was promulgated and per force of Section 29 of Ordinance, 2001, repealed Act XV of 1997. However, according to Section 7(6) of this latest Ordinance, 2001, all proceedings pending in any Banking Court, including suit for recovery, shall stand transferred or deemed to be transferred and heard by the Banking Court established under the latest Ordinance of 2001. The present suit, which was pending before the Banking Court constituted under Act XV of 1997, after the promulgation of latest Ordinance and per force of Section 7(6) of the latest Ordinance was deemed to be pending for decision before this Court, established under Section 5 of Ordinance XLV1 of 2001. As afore-noted application for the grant of leave to defend, filed on behalf of different sets of defendants, were pending in this Court, before coming into force of Ordinance XLV1 of 2001, promulgated on August 30, 2001, therefore, when the case came up for hearing before this Court, for the first time, this Court on 17.9.2001, per force of Section 10(12) of the latest Ordinance allowed the defendants a period of 21 days for filing the amended petitions for leave to defend the suit. Pursuant thereto defendants Nos. 1, 5 and 6, 2, 7 and 8 and defendant No. 9 filed amended applications for leave to defend, while defendants Nos.
10 and 11 choose not to i.e any such amended application. As noted above, defendant No. 3, did not i.e any application seeking leave to appear and defend the suit and felt contended only after filing an application seeking setting aside of ex parte order.
8. During the pendency of the suit pursuant to the amalgamation of N.D.F.C, into National Bank of Pakistan, the latter filed an application in the capacity of a transferee Bank, thereby praying for the substitution of National Bank of Pakistan in place of N.D.F.C., which application was accepted by this Court on 31.1.2002 and name of National Bank of Pakistan was allowed to be substituted in place of N.D.F.C, and consequent thereto amended memo, of parties was filed by substituting name of National Bank of Pakistan.
9. Now the admitted position, which has emerged at the present juncture is that C.M. No. 457- B/2000 and 458-B/2000 (filed by defendant No. 3), amended PLA No. 4-B/2000 (filed by defendants Nos. 1, 5 and 6), amended PLA No. 8-B/2000 (filed by defendants Nos. 2, 7 and 8), amended PLA No. 7-B/2000 (filed by defendant No. 9) and un-amended PLA No. 5-B/2000 (filed by defendants Nos. 10 and 11) are pending awaiting decision which applications I propose to decide separately, one by one, as under:-- C. M. No. 457 and 458-B/00.
10. These two applications have been filed on behalf of defendant No. 3, former application seeks setting aside of an ex parte order dated 14.1.2000, while the latter has been filed with a prayer that the delay in filing the afore-noted application may be condoned. Upon the examination of both the applications, it is evident that the contents of both the applications are identical, rather one is photo-copy of the other, It has been asserted in the application that the suit has not been duly instituted and summons to defendant to appear and defend the claim can only be issued after a suit has been duly instituted. Para two of the applications is reproduced as under:- "That the instant suit, admittedly has only been filed before this Hon'ble Court on the ground that the defendants who are the key persons behind all the operation of the defendant No. 1 company, reside at Lahore. But no application praying grant of leave for filing the suit against the other defendants who reside at Rawalpindi and Karachi has been filed by plaintiff Bank. Until and unless such application is filed and leave is granted the suit cannot proceed."
It appears from the record that the plaintiff filed the suit, which came up before this Court on 9.12.1999 and this Court issued summons to the defendants through all the modes of service, prescribed under Act XV of 1997. On 14.1.2000 as defendant No. 3 neither appeared nor filed any application seeking leave to defend the suit, therefore, the said defendant was proceeded ex parte.
Subsequently these two applications appears to have been filed on 8.7.2000, but the order sheet shows that these applications were never put up before the Court, inasmuch as no notice was issued to the plaintiff Bank on these applications, although Mr. Khalid Mahmood Ansari, Advocate had been appearing on behalf of defendant No. 3 on different dates along with the other defendants till on 1.2.2002, the learned counsel addressed the final arguments on the said applications and reiterated the stance taken in the said applications.
11. The perusal of these applications shows that it has neither been asserted that the applicant was hot served with any summons nor any "sufficient cause" for the non-appearance of the said or any reason for non-filing of application for leave to defend has been shown. This is not the case of the said defendant in the application under discussion that he was prevented from "sufficient cause" either from appearing in this Court or filing a requisite application within the stipulated period. His stance is that as the suit has not been properly instituted and summons to the defendant could only be issued after a suit has been properly instituted. However, learned counsel for the said defendant was not able to substantiate his said assertions during the arguments. These applications are also silent on the point that when did the said defendant came to know either about the filing of the suit or about the passing of the ex parte order. The present application is not maintainable under Section 12 of the Act XV of 1997, which empowers the Banking Court, only, to set aside the decree passed against the defendants under sub-section (4) of Section 9 of the said Act.
Admittedly no such decree was passed against the applicant/defendant No. 3 and only an ex parte order was passed. I am of the considered view that under the facts and circumstances of the present case, provisions of Section 12 of Act XV of 1997 are not at all attracted in this case as such the said provision of law will be of no avail to them, hence the present application is not tenable under Section 12 of Act XV of 1997.
12. Now the question arises that which provision of Act XV of 1997 caters for the situation faced by the present applicant. Admittedly, there is no provision in the said Act, which provides for setting aside of an ex parte order passed by the Banking Court, in the event the defendants failed to appear and also did not i.e an application, seeking leave to defend the suit within the stipulated period, after the service of summons. Section 7 of Act XV of 1997, provides that the Banking Court shall exercise all the powers vested in the Civil Court under the Code of Civil Procedure.
Furthermore, Section 3 of the said Act also provides that the provisions of Act XV of 1997 are in addition and no in derogation of any other law for the being enforce, thus, I am of the view that the said ex parte order dated 14.1.2000 was passed by this Court, while resorting to the provision of CPC.
In the said perspective, I am of the considered opinion that whenever the provisions of the said Act are contrary to the provisions of CPC then of course former will override the latter and the provisions of Act XV of 1997 will be applicable to the exclusion of the provision of CPC. However, when the provision of said law (Act XV of 1997) are silent about the given situation or does not provide any remedy to a party then to that extent Act XV of 1997 will give way to the provisions of CPC and the same would be applicable, In arriving the said conclusion, I am fortified by reported case titled Hudaibia Textile Mills Limited and others Vs. Allied Bank of Pakistan Limited and others (PLD 1987 SC 512). Having said that, as this Court passed the orders under the provisions of CPC, therefore, it would be construed, although no provision of law has been quoted by the said defendant, that the present applications have been filed under the provisions of Code of Civil Procedure.
13. Now adverting to the merits of the applications, the applicant has failed to show any cause, what to talk of "sufficient/good cause" for his non-appearance when the case was taken up for hearing. There is a complete black out in the applications under discussion regarding the said material aspect of the case, It is a matter of record that even up til now the said defendant failed to i.e any application seeking leave to defend the suit. As noted above, the only ground taken is that the suit has not been properly instituted, but the said alleged plea was never considered to be sufficient for setting aside an ex parte order within the parameters of law. Even the signatures of the said defendant on the affidavits filed in support of these applications are doubtful. The applicant/defendant No. 3 failed to show "sufficient cause", within the parameters of law warranting setting aside of an ex parte order. Even in the application seeking condonation of delay, no cause/ground for not preferring an application within the limitation period, within the purview and scope of Sections 5 and 14 of the Limitation Act, has been shown, In the above perspective, I am of the considered .
View that the applicant has comprehensively failed to make out any case either for setting aside of ex parte order or for the condonation of delay in filing the requisite application. Both the applications are mis-conceived, appears to have casually been filed without adhering to the provisions of law in this regard, therefore, they are devoid of any merits, thus, I am constrained to dismiss both the applications.
P.L.A. No. 4/B/2000 filed bv defendants Nos. 1, 5 and 6.
14. Mr. Ghulam Murtaza Bhatti, Advocate, representing defendants Nos. 1, 5 and 6 has, out rightly, admitted the availment of all the financial facilities namely, loan of Rs. 4.400 million, financial facility No. (i) for Rs. 5.09 M and the financial facility No. Ii for Rs. 20 M by defendant No. 1, has also acknowledged the execution of all the documents and the signatures of the said defendant, on all the documents, relied upon by the plaintiff in support of his claim on the basis of which the suit has been filed by the plaintiff. However, in support of his application for the grant of leave to defend, the learned counsel has submitted that so far as the loan facility of Rs. 4.400 million is concerned, there is no by back agreement, which will entitle the plaintiff to recover the mark-up on this loan facility.
According to the learned counsel, there is only a credit agreement dated 31.10.1983 (page 26-27 of the record) which formed basis for the sanctioning and the availment of said loan facility No. 1 which was admitted to be re-scheduled twice in the years 1989 and 1991. In this perspective, he has submitted that after the introduction of B.C. No. 13 circular by State Bank of Pakistan no Financial Institution can undertake any transaction, which is based on interest. He has further submitted that defendant No. 1 has liquidated all the amounts in the said loan facility inasmuch as the principal as well as the interest has duly been paid. So far as the next facility is concerned, the stance of the learned counsel is that although the said facility of Rs. 5.09 million was availed by defendant No. 1 on the strength of an agreement (page-69) yet the said facility was completely liquidated in the year, 1999, as an amount of Rs. 71,78,410/- was repaid by defendant No. 1. Similarly the stand of the learned counsel is that the entire amount falling due in the third account of working capital has also been repaid by defendant No.1, In the above backdrop, the learned counsel has submitted that as all the financial facilities have completely been liquidated and now nothing is outstanding against defendant No. 1 as such, the suit has been filed with mala i.e intention and for the said reasons, at this stage, at least, defendants Nos. 1, 5 and 6 are entitled to the grant of unconditional leave to defend the suit. Conversely, the learned counsel) for the plaintiff has raised preliminary objections to the maintainability of the amended application filed by the said defendants for the leave to defend the suit, In this regard, he has submitted that all the amended applications filed on behalf of different set of defendants, filed to fulfil the requirements of subsections (3), (4) and (5) of Section 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001, therefore, the said applications are liable to be summarily rejected under Section 10(6) of the said Ordinance. He has further contended that the application under discussion is neither entertainable nor maintainable on behalf of defendant No. 1, which is a public limited company, as no resolution of the Board of Directors, authorizing the person, who has signed, verified and filed the amended leave application, was either passed or placed on record, thus, the said application has unauthorizedly been filed on behalf of defendant No. 1 which deserves to be dismissed out rightly, In this context, he has further submitted that the said leave application has only been signed by defendant No. 5 and he is the only person, who has filed an affidavit in support of the leave application. He elaborated that defendants Nos. 1 and 6 have neither signed the leave application nor verified its contents inasmuch as defendants Nos. 1 and 6 failed to i.e an affidavit in support of the contents of the leave application. As regards the merits of the case, the learned counsel has submitted that the complete statements of all the accounts would vouched the fact that the amounts, which had been paid by defendant No. 1, duly stood credited in its account and after credited the amount, the suit amount became due. He has added that as neither the availment of the facilities nor the execution/signatures of all the charged documents have been denied by this set of defendants, therefore, they are not entitled for leave to defend the suit. He has further contended that the personal guarantee of defendants Nos. 2 to 11 are on record which has not' been denied by the said set of defendants and they have not challenged any entry in the statement of accounts.
15. As regards the first preliminary objection, raised by the learned counsel for the plaintiff to the maintainability of the application under discussion, the contention of the learned counsel of the plaintiff has substance. Upon the examination of the leave application, I find that the said defendants failed to give amount of finance availed by the defendants; the amount paid by them; the dates of payment; amount of finance and other amounts relating to the finance payable by the defendants to the financial institutions; the amount of finance and other amounts, which the defendants dispute as payable to the financial institution, thus, the said defendants have comprehensively failed to adhere to the provisions of Section 10(4) of Ordinance, 2001. In the above backdrop, now the pivotal question, which has arisen for determination by this Court is as to whether the latest amended application, filed by the said set of defendants, is a sufficient compliance of the provisions of Section 10(12) of Ordinance, 2001, and if not as to whether the said application is liable to be rejected summarily. Perusal of Section 10(12) of Ordinance, 2001, manifests that where an application for leave to defend has been filed before coming into force of the afore-noted Ordinance, 2001, the defendants shall be allowed a period of 21 days for filing an amended application for leave to defend the suit in accordance with the provisions of this Ordinance (period of 21 days was allowed to the defendants in the present case), It flows from the perusal of Section 10(12) of Ordinance, 2001, that the defendants are required, through the filing of an amended petition, to sufficiently comply with the provisions of Section 10(3), (4) and (5) of Ordinance, XLV1 of 2001. These provisions of law, inter alia, provide that the amended application for leave to defend shall be in the form of a written statement, containing summary of substantial questions of law and facts, and also giving certain particulars to be furnished by the defendants regarding the finance, i.e. Finance availed, amount paid by the defendants etc. And that such an application must be accompanied by all the documents in support of substantial questions of law and facts raised by the defendants. If the afore-noted provisions of law are placed in juxta-position with the contents of the application, filed by the afore-mentioned set of defendants, the only irresistable conclusion which can be drawn is that the said defendants did not comply with the afore-said provisions of law. In the above perspective, I am constrained to hold that the said defendants have comprehensively failed to i.e an amended application within the parameters of Section 10(12) of Ordinance, 2001 and they have not complied with the requirements of Section 10(3), (4) and (5) of Ordinance XLV1 of 2001, thus, the defendants failed to i.e an amended application in accordance with the provisions of the said Ordinance.
16. Now the next question, which arises for determination is as to whether the provisions of Section 10(12) are mandatory or directory. The basic principle for the interpretation of statutes is that when a provision of law is couched with the penal consequences then the said provision of law would be considered as a mandatory provision of law and where no penal consequences entail to the non- compliance of a provision of law, in that case the said provision of law would be taken as directory.
Applying the said yardstick, now if any of the provisions of this Ordinance of 2001, provides a penal consequences for the noncompliance of the provisions of Section 10(12) of the Ordinance, 2001, then the said provision would be considered as mandatory provision of law otherwise the same will be treated as directory. To solve this question one has to go to sub-section (6) of Section 10 of latest Ordinance, which is reproduced below:- "10(6) An application for leave to defend which does not comply with the requirements of sub- sections (3), (4) where applicable and (5) shall be rejected, unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement."
Undoubtedly, it has been provided in Section 10(6) of latest Ordinance [ibid) that an application for the grant of leave, which does not comply with the requirements of sub-sections (3), (4) and (5) of Section 10 of Ordinance, 2001, the same shall be rejected, unless the defendant is able to show sufficient cause for his inability to comply with any such requirement, In this, case, although defendants Nos. 1, 5 and 6 have filed an amended application, the same does not fulfil the requirements of sub-sections (3), (4) and (5) of Section 10 of Ordinance, 2001. Additionally, they have not been able to show any cause, what to talk of sufficient cause, for their inability to comply with such requirements.
17. In the above perspective, having gone through Section 10(12) and Section 10(6) of Ordinance, 2001, I am of the considered view that the former provision of law is mandatory in nature, as the non-compliance of said provisions of law entails the penal consequences, as provided under Section 10(6) of Ordinance, 2001. In the present case, despite the grant of period of 21 days, which is statutorily fixed, the defendants failed to i.e the amended application thereby failing to comply with the requirements of Section 10(3), (4) and (5) of the Ordinance, 2001, therefore, presumption would be that no application for grant of leave to defend the suit is deemed to be pending and the present application for leave to defend is liable to be rejected per force of Section 10(6) of Ordinance, 2001.
18. As regards the next contention of the learned counsel for the plaintiff, I did not find from the record any resolution passed by defendant No. 1 thereby authorizing the defendant No. 5 namely, Brig. Retd. M.M. Mehmood, to i.e the amended application, seeking leave to defend the suit on behalf of defendant No. 1. It is pertinent to mention here that when original PLA No. 4/B/2000 was filed on 11.1.2000, even with that application, no such resolution was filed. Admittedly, there is neither any resolution nor authorization on record, which would go to show that before filing either the original leave application or the amended leave application, any resolution was passed by the Board of Directors of the defendant-company thereby authorizing defendant No. 5, either to i.e such application or to defend defendant No. 1. Under the law, in case of companies/corporate bodies, such a resolution is necessary before initiating or defending any proceedings by or against the defendant company. In this respect, following case-laws can be referred:--
(i) Khan If tikhar Hussain Khan of Mamdot (represented by 6 heirs) Vs. Messrs Ghulam Nabi Corporation Ltd., Lahore (PLD 1971 S.C. (PAK) 550),
(ii) Abubakar Sa/ey Mayet Vs. Abbot Laboratories and another (1987 CLC 367), (i.e) Bankers Equity Ltd. Through Attorney and 5 others Vs. Sunflo Cit-Russ Ltd. (Formerly known as Sunflo Juices Ltd.) through Managing Director (PLD 1999 Lahore 450),
(iv) Government of Pakistan Vs. Premier Sugar ' Mills and others (PLD 1991 Lahore 381) and
(v) M/s. Standard Hotels (Pvt.) Ltd. Vs. M/s. Rio Centre and others (1994 CLC 2413).
In view of the above, I am of the considered view that the original application as well as amended application, purported to have been filed on behalf of defendant No. 1 was unauthorizedly filed, which does not deserve any consideration in view of the enormous case-law, thus, on legal plain there is no application for leave to defend the suit on behalf of defendant No. 1 which can be said to be pending before this Court.
19. So far as another aspect of the case, which cannot be ignored at this juncture, is that from the perusal of the amended application, purportedly filed on behalf of defendants Nos. 1, 5 and 6, I find that the amended application has only been signed and verified by defendant No. 5, while defendants Nos. 1 and 6 have neither signed nor verified the contents of the leave application.
Further I find from the record that in support of the application, under discussion, only defendant No. 5 has filed an affidavit and similarly defendants Nos. 1 and 6 have failed to i.e any affidavit in support of the contents of the purported leave application. Similar was the position, when from the very inception, leave application was filed on-behalf of defendants Nos. 1, 5 and 6, as I find from the record that defendants Nos. 1 and 6 neither signed nor verified their initial leave application nor the said defendants filed any affidavit in support of the averments contained in the said leave application.
20. Now coming to the merits of the case, as noted above, the learned counsel representing said defendants has conceded availment of the loan/financial facility, signatures of the said defendants on all the documents and the execution thereof, by the said defendants, on the documents annexed and relied upon by the plaintiff in support of its claim. Furthermore, the learned counsel for the said defendant has not raised any objection to the statement of accounts, furnished by the plaintiff, nor any entry in any of the statement of accounts have even been challenged, In the said back drop, now coming to the first contention of the learned counsel I am of the view that the said plea is not only mis-placed but also misconceived. From the documents on record, it is evident that when initially the loan facility of Rs. 4.400 M was granted in the year 1983, even according to the stance of the defendants, the first credit agreement was executed between the parties on 21.11.1983, execution whereof has specifically been admitted by the said defendants.
Obviously the said credit agreement was executed betwe6n the parties before the introduction of Circular No. 13, dated 20.6.1984, therefore, the defendants could not take the plea that the original sanctioned facility could not have been granted, more so when defendant No. 1 has duly availed the said facility and according to their stance the same has been repaid. I find from the record two other supplemental credit agreements, which were executed on 15.8.1989 and 8.9.1991, the execution whereof has again been admitted by the said defendants, It appears that the learned counsel has raised this plea in complete oblivion of the fact and completely forgetting that after the year 1983, no fresh loan facility was either granted by or renewed by the plaintiff on the basis of interest. As regards the afore-mentioned two supplemental credit agreements, wherein it has not been mentioned that the Bank has either renewed the financial facility or granted a fresh loan facility. However, through the execution of credit agreement dated 15.8.1989, facility was rescheduled and that too at the express request of defendant No. 1, as on account of consistent defaults, they could not be able to repay outstanding loan facility according to the stipulated programme as undertaken by them through the repugnant schedule. The case of the defendant No. 1 does not fall within the scope of Circular No. 13 and it appears that defendant No. 1, seeing no defence, has come up with this illusory defence, which is on the face of it, is frivolous and sham.
Another aspect of the case, in this regard, is that the said stance is even contrary to other limb of argument of the learned counsel, wherein defendant No. 1 has contended that the said financial facility has completely been liquidated by making payments to the plaintiff, In view of this, this argument of the learned counsel is of no avail to the said defendants and hereby repelled.
20. Now coming to the next limb of argument of the learned counsel viz. That although defendant No. 1 availed the loan/financial facility, yet the same has been repaid. Under the law after admitting the availment of financial facilities and execution of charge documents, onus shifts upon the said defendants to prove that they have paid the entire outstandingamounts due against them, which they have prima facie failed to discharge. The defendants have failed to prove or place on record any document, even to prima facie prove, that they have completely liquidated their outstanding dues to the bank. Mere bald assertion in this regard would be no avail to the said defendant unless some cogent proof in this regard is placed on record. If defendant No. 1 has paid any amounts, those must have been received by the plaintiff against the valid receipts and those receipts should have been in possession of these defendants, It was the basic requirement, to succeed on the strength of this argument, that the respondents should have annexed the receipts of payment along with the PLA, which legal requirement, is conspicuously absent in this case, In the absence of any cogent proof, mere oral assertion of the learned counsel without support of any documentary evidence, cannot be acceded to, more so when the colossal amount is, statedly, outstanding against the defendants. From the perusal of the statement of accounts, it is evident that whatever amounts were deposited by the defendants, they have been duly credited in the accounts of defendant No. 1 and thereafter the present suit has been filed. As noted above, the defendants have not raised any objection to the statement of accounts and even not a single entry has been disputed by these defendants. Statements of accounts have duly been verified in accordance with law, which forms prima facie proof of the outstanding liabilities against the defendants, It is amazing on the part of the defendants that on the one hand they are admitting the entries of the statement of accounts and the other hand they are asserting that the entire outstanding liabilities have been repaid, of course, without support of any documentary evidence.
22. Upon the examination of the record, I find that there is a chain of correspondence exchanged between the parties ranging from 30.6.1997 to 20.8.1999 (1-1 to L-T3, on pages 243 to 261), through/Which the parties have been negotiating for an amicable settlement and defendant No. 1 appeared to be anxious to liquidate the outstanding dues after the availment of incentive scheme introduced by the State Bank of Pakistan. However, it appears that the said negotiations could not materialize into a concluded contract which resulted into filing the present suit, which was instituted on 8.12.1999. This change of available correspondence between the parties, which has not been denied by learned counsel, is ample proof to falsify the contention raised by the learned counsel that the entire loan facilities have been liquidated, on the other hand, it proves to the hilt that after 30.6.1997, certain amounts were outstanding against defendant No. 1, for the liquidation of which defendant No. 1 was endeavouring to settle the matter, It also constitutes admission on the part of the said defendants regarding the outstanding amount. These facts have duly been incorporated by the plaintiff in para 18 of the plaint, which have not been controverted by the said defendants, It has been proved on record that defendant No. 1 in acknowledgement and to avail the loan/financial facility have been executing relevant/requisite documents from time to time mortgaging the properties and also created a charge over the assets of the company, which was duly registered, at its behest, with the Registrar Joint Stock Company and the requisite certificates, issued by the said department, are on record, It is discernable from record that apart from the execution of available documents at each and every stage, on behalf of the company by the authorized Chief Executive/Director of the Company, rest of the defendants had also been executing the requisite documents from time to time thereby securing said financial/loan facilities.
The defence raised by these defendants appears to be a crude effort in order to wriggle out of their contractual obligations and desperate attempt to save themselves from liquidating financial liabilities incurred by them through the execution of the documents. After admitting the execution of these documents and availment of loan/financial facilities and having raised no objection to the statement of accounts, now it does not lie in the mouth of said defendants to assert that they are entitled to the grant of leave to defend the suit.
23. As regards defendants Nos. 5 and 6, they have been arrayed as defendants in the suit in the capacity of Directors/Guarantors. It is visible from the documents on record that the said defendants signed and executed different documents favouring the plaintiff. These defendants have executed their personal guarantees and undertook that in case of default by defendant No. 1, they would be liable to pay the outstanding loan to the plaintiff. Defendant No. 5 executed four personal guarantees dated 23.9.1991 for Rs. 4.400 M (J-1), 1.8.1984 for Rs. 4.400 M (J-2) dated 23.9.1991 (J-3) and 10.6.1993 (J-4). Similarly defendant No. 6 executed guarantees dated 1.8.1989 (J- 2) and 10.6.1993 (J-4). As noted above, neither execution of these guarantees have been denied by the said defendants nor they have disputed their signatures on these documents. As a matter of fact, they have admitted execution of these documents, It is settled law that the liabilities of the principal debtor and the guarantors are co-extensive and they are jointly and severally liable to pay the outstanding amount to the creditor, In view of the execution of the personal guarantees, the defendants Nos. 5 and 6 could not shrik from liquidating their liabilities and they are jointly and severally liable to liquidate the liabilities of defendant No. 1, under the provisions of the Contract Act.
24. In view of the above discussions and reasons defendants Nos. 1, 5 and 6 failed to raise substantial question of law and facts to be tried by this Court in respect of which vide needs to be recorded. Furthermore, the said defendants have failed to i.e an amended application under Section 10(12) of Ordinance, on both the counts, the present application i. e. PLA No. 4-B/2000 is devoid of any merits and is hereby dismissed.
PLA No. 8-B/2000 (On behalf of defendants Nos. 2, 7 and 8).
25. Miss Aisha Malik, Advocate, representing defendants Nos. 2, 7 and 8, while admitting the signatures of the said defendants and the execution of the personal guarantees dated 23.9.1991 (J- 1)/ dated 1.8.1989 (J-2) and guarantee dated 23.9.1991 (J-3) has vehemently asserted that even according to the stance of the plaintiff, these defendants did not execute any personal guarantees in the financial facility of Rs. 20 M (working capital), therefore, contention of the learned is that at least to the extent of facility of working capital, no liability can be created on the said defendants.
She has further submitted that defendant No. 2 resigned from the Directorship of the Company from 23.6.1992 and defendant No. 7 resigned on 24.1.1993, while defendant No. 8 resigned on 26.4.1993, therefore, those defendants cannot be held liable to liquidate the dues of defendant No. 1 on the basis of afore-mentioned personal guarantees. She has next contended that although the afore-mentioned guarantees were executed by the said defendants, but later on, on 2.9.1997, an agreement was entered into between the bank and the Company, therefore, per force of Section 133 of the Contract Act, the original terms of the agreement were changed, therefore, the said defendants stood discharged and as such cannot be made liable to pay the suit amount. She has added that in any case if any amount was due, the same has been repaid. Conversely the learned counsel for the plaintiff has conceded that defendants Nos. 2, 7 and 8 did not execute the guarantees in the financial facility of Rs. 20 M (Working Capital) and, therefore, said defendants are not liable to liquidate the dues, outstanding in the said account. However, he has contended that since the defendants have admitted the execution of the rest of guarantees, in the first two accounts, therefore, at least to that extent of the suit amount these defendants are liable to pay. He has submitted that no agreement was entered into between the Company and the Bank and the alleged agreement dated 2.9.1997 referred to by learned counsel of the said defendants, is simply a letter and on the basis of said letter no concluded agreement was entered into between the parties and, therefore, Section 133 of the Contract Act is not applicable. He has further submitted that these defendants have not complied with the provisions of Section 10(4) of the Ordinance, 2001, PLA has only been filed on behalf of defendant No. 2 and that no other person has filed affidavit in support of the contents of the present PLA, except the affidavit of defendant No. 2, therefore, their application is liable to be dismissed.
26. According to the on showings of these defendants, they resigned from the Directorship of the Company and allegedly sold their shares ranging from the period from 23.6.1992 to 26.6.1993, while the personal guarantees were executed by these defendants on 23.9.1991 and 8.9.1991. It is obvious from the above narrative that when the personal guarantees, the execution whereof has been denied and acknowledged by said defendants were executed and delivered to the plaintiff, they were the Directors of the Company and as such in that capacity they executed the said documents. Even otherwise, it is not necessary that a person, who is not a Director of the Company, cannot execute his personal guarantee for the loan to be availed by the Company, In this case, these defendants executed personal guarantees, when, even according to their on stance, they were Directors of the Company, In view of this contention of the learned counsel is without any force and is hereby repelled. So far as the next contention of the learned counsel regarding the applicability of Section 133 of the Contract Act, I have examined alleged agreement dated 2.9.1997 (L-5) exchanged between the Company and the plaintiff, It is evident that the said document cannot be construed, under any stretch of imagination, a concluded contract or even an agreement. Bare perusal of this document shows that this is a simple letter written by the plaintiff to the Chief Executive of the defendant No. 1, thereby giving some offers/proposals for the settlement of the dispute between the parties. This letter was written with reference to a letter dated 28.6.1997 by the plaintiff showing their willingness to resolve their dispute, through availing the incentive scheme. The contents of this letter amply show that this was written by the plaintiff to defendant No. 1, thereby offering to settle the matter and the same was never reduced into a concluded agreement, therefore, I am Of the view that Section 133 of the Contract Act is not at all attracted. With the communication of this letter, it cannot be urged that the personal guarantee, executed by these defendants, stood discharged. This argument of the learned counsel is devoid of any merits.
27. So far as the argument relating to the repayments of all the financial facility by defendant No. 1 is concerned, I have elaborately discussed this matter while deciding PLA No. 4-B/2000, therefore, on the basis of said reasons and findings, this plea of the learned counsel is also repelled.
28. As the present set of defendants have admitted the execution of the guarantees, mentioned hereinbefore, therefore, they are liable to liquidate the said amount only to the extent of the outstanding dues falling in these accounts, It may be clarified that since the learned counsel of the plaintiff has admitted that no personal guarantee, for securing financial facility-ll (Working Capital), was executed by these defendants, therefore, these defendants are not liable to pay any amount falling due in financial facility-ll (Working Capital) and they will be only liable to liquidate the liabilities to the extent of loan facility and financial facility-1, in which they have admittedly executed the personal guarantees. The contention of the learned counsel of the plaintiff is that the present application has only been filed by defendant No. 2 and that defendants Nos. 7 and 8 have neither signed this application nor filed any affidavit in support of the said application. I find from the record that defendants N6s. 7 and 8 have executed a power-of-attorney in favour of defendant No. 2 and the latter has signed the instant application on their behalf as well acting as attorney of the said defendants, In the same capacity he has furnished affidavit, wherein he has specifically mentioned that he is duly authorized attorney of defendants Nos. 7 and 8. In view of this contention of the learned counsel of the plaintiff is without any force and is hereby rejected.
28. In view of the above reasons and discussions, defendants Nos. 2, 7 and 8 have failed to raise substantial question of law and fact to be tried by this Court in respect of which evidence needs to be recorded, thus, the present application filed on their behalf is rejected.
PLA No. 5-B/2000. (Filed on behalf of defendants Nos. 10 and 11).
29. Although defendants Nos. 10 and 11 initially filed this application seeking leave to appear and defend the suit, yet, although a period of 21 days was of anted to the said defendants for filing an amended application, the said defendants choose not to i.e the amended application which fact was recorded by this Court in its order dated 15.10.2001. Nobody entered appearance on their behalf to argue the present application, with the result that this PLA was dismissed on 18.2.2002. Even thereafter nobody attended this Court in order to prosecute the case. As the said defendants failed to i.e an amended application as provided under the provisions of Section 10(12) of Ordinance, 2001, despite the grant of period of 21 days, therefore, per force of Section 10(6) of the Ordinance, the present application is hereby rejected, in view of the reasons and discussion on this issue, while deciding PLA No. 4- B/2000, wherein this Court having gone through Section 10(12) and 10(6) of Ordinance, 2001 came to the conclusion that the provisions of Section 10(12) are mandatory, In the present case as no amended application has been filed, therefore, the presumption would be that no application for the grant of leave to defend- the suit is deemed to be pending, morose, when nobody has entered appearance to prosecute the erstwhile application, therefore, the same is dismissed on these two counts.
PLA No. 7-B/2000 from defendant No. 9.
30. Mr. Pervaiz Ahmad Burki, Advocate, representing defendant No. 9, in support of the present application has contended that she did not execute the guarantee and the alleged execution of the guarantee by defendant No. 9,, who is a house were, has nothing to do with the running of the Company or its finances and had no role to play in the affairs of the Company, was out of question, more so when she is a 'pardah nashin' lady. The learned counsel of the plaintiff while refuting aforesaid contention, raised by learned counsel of the said defendant, has submitted that personal guarantees were executed by the said defendant in two accounts i.e. Loan account and financial facility-l and after the execution of these guarantees, the said defendant cannot take the plea that she did not. Execute the guarantees. However, it has been conceded by the learned counsel for the plaintiff that defendant No. 9 did not execute any guarantee to secure financial facility-ll (Working Capital), therefore, she is not liable for the amounts falling due in the said financial facility and that she would be only liable for the recovery of the amounts regarding the accounts wherein the said defendant had executed her guarantee.
31. Defendant No. 9 has simply denied her signatures on the letter of guarantee without placing on record any prima facie proof, which could furnish a valid ground for the grant of leave to defend the suit to her. I am of the view that mere bald denial of signatures on the documents is not sufficient ground for the grant of leave, unless it is prima fact shown that the documents had been forged and fabricated. According to the plaintiff, defendant No. 9 executed guarantees dated 23.9.1991 (J-1), 1.8.1989 (J-2) and 23.9.1991 (J-3). Upon the examination of these guarantees, I find that the signatures of defendant No. 9 are identical on all the guarantees except slight variations.
No further document has been placed on record by the plaintiff, which bear the signatures of the said defendant, In this regard judgment rendered by Division Bench of this Court reported as Ghazaia Arif Vs. Union Bank Ltd. (now Emirates Bank International), Lahore (2000 CLC 1201), can be referred wherein this Court in similar circumstances repelled the contention raised by a person who denied the execution of documents, the relevant portion would be advantageous to be reproduced below:- "We are not impressed by this contention of the learned counsel. The bare denial of signatures on the letter of guarantee without any prima facie proof would not furnish a ground for the grant of leave to appear and defend the suit. If the arguments of the learned counsel that in all cases, where signatures on the documents are denied, leave must be granted is accepted, it would result in defeating the very purpose for which the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 has been promulgated."
Another aspect of the case is that it had no-where been denied by defendant No. 9 that she was not the Director of defendant NO. 1 at the time of execution of these guarantees, as such the presumption would be that at the relevant time the said defendant was a Director of the Company.
The said defendant failed to assert or bring on record any material to show that either the guarantees were forged 'by the plaintiff or by defendants, It has nowhere been alleged by the said defendant that her guarantees were forged by the plaintiff Bank or its functionaries, It has nowhere been denied that defendant No. 1 did not avail the financial facility. Mere vague denial of the execution of the documents would not absolve the said defendant from liquidating the liabilities incurred by her through the execution of personal guarantees and other documents. Needless to mention that defendant No. 9 has no; challenged the statement of accounts appended alongwith plaint neither any entry in any of the statements of accounts has been disputed.
32. In view of the aforesaid discussion, defendant No 9 has also failed to raise substantial question of law and facts to be tried by this Court in respect of which evidence needs to be recorded.
Furthermore, the said defendant has also failed to i.e an amended application, thereby complying the provisions of Section 10(3)(4) and (5) of Ordinance, 2000, therefore, present application is devoid of any force and the same is also dismissed.
MAIN CASE.
33. Although none of the defendants have raised any objection, yet from the examination of the record, I, find that the plaintiff has charged an amount of Rs. 6.974 M, in the statement of account, filed in the account of Financial Facility-ll (Working Capital) as liquidated damages at the rate of 20%. The plaintiff is not entitled to recover amount of liquidated damages as per principle laid down in judgment reported as Allied Bank of Pakistan, Faisalabad Vs. Aisha Garments etc. (PLD 2001 Lahore 937), wherein it has been held that the plaintiff Bank is not entitled to recover the amount of liquidated damages, thus the plaintiff in the instant case is also not entitled to claim liquidated damages, as such I am constrained to deduct the said amount of Rs. 6.976 M from the said account.
34. With the dismissal of the afore-noted applications, filed by the defendants, for the grant of leave to defend the suit, under the law, the allegations made in the plaint shall be deemed to be admitted. The plaintiff has produced photo-copies of all the documents along with plaint, on the basis of which, it has filed the instant, suit, the signatures and the execution whereof have been admitted by the said defendants. Furthermore, the statement of accounts are duly verified/certified under the Banker's Book Evidence Act, 1894, which have not been challenged by any of the defendants and even not a single entry has been disputed, therefore, the said statement of accounts shall deem to be admitted by the defendants, more so when the presumption of correctness is attached to such statement of accounts, except the deletion of an entry of Rs. 6.974 M as indicated above. Additionally there is no rebuttal of the afore-mentioned documents on record.
35. In view of the above findings and conclusions:-
(i) ' A decree for the recovery of sum of Rs. 46.665 M is passed against defendant No. 1.
(ii) As defendant No. 5 executed and furnished his personal guarantees, to secure loan facility of Rs.
4.400 M, financial facility No. 1 Rs. 5.970 M and financial facility No. II for Rs. 20 M (Working Capital), therefore, a decree for the recovery of sum of Rs. 46.665 M is also passed against defendant No. 5 jointly and severally with defendant No. 1.
(i.e) As defendants Nos. 2, 4, 7, 8 and 9 executed and furnished their personal guarantees only against the loan facility for Rs. 4.400 M and financial facility for Rs. 5.970 M obtained by defendant No. 1 and the said defendants did not execute and guarantee for securing the financial facility-ll (Working Capital), therefore, ; a decree for recovery of Rs. 11.794 M is passed against defendants Nos. 2, 4, 7, 8 and 9, jointly and severally.
(iv) As defendants Nos. 3, 6, 10 and 11 did not execute any guarantee to secure the loan facility of Rs.
4.400 M and Rs. 5.970 M, and the said defendants have only executed a guarantee dated 10.6.1993 for Rs. 24.400 M to secure financial facility No. II, (Working Capital), therefore, a decree for a sum of Rs. 34.871 M is passed against defendants Nos.
3, 6, 10 and 11 jointly and severally.
(v) The plaintiff shall also be entitled to recover costs of funds to be determined by State Bank of Pakistan under Section 3(2) of Ordinance XLV1 of 2001.