' MUHAMMAD SAIR ALI, J.---Agricultural Development Bank of Pakistan, on 4-4-1998, filed a suit for recovery of Rs.4,10,592 against the appellants. The plea of the respondent-Bank was that Ch. Fazal Hussain the predecessor in interest of the appellants, on 14-3-1989, availed of finance under Islamic System of Banking for the purchase of tractor and potato seeds respectively for Rs.1,51,500 and Rs.20,000. And that the customer i.e. Ch. Fazal Hussain executed lance agreement, security and charge documents. And that he defaulted in repayment of the finance wherefor as per Bank's Statements of Account, an amount of Rs.3,42,192 became due from him as of 30-6-1997. And that on death of Ch. Fazal Hussain, the appellants became liable to pay the defaulted finance. An amount of Rs.68,400 at the rate of 20% was also claimed by the respondent-Bank as liquidated damages to seek a decree for a sum of Rs.4,10,592. Two Statements of Account, Customer's application for finance and ADBP's sanction advice dated 14-3-1989 were relied upon and filed by the respondent-Bank along with the plaint. On summons, the appellants filed an application for leave to defend the suit.
2. The learned Judge Banking Court, Sialkot rejected appellants leave application and through judgment and decree dated 9-2-1999 decreed the suit for Rs.3,42,192 with future mark-up and costs. Respondent's claim for liquidated damages was, however, disallowed. Through the present appeal, the appellants have challenged the above said judgment and decree dated 9-2-1999.
3. Having heard the learned counsel for the parties and having examined the record, we note. That the respondent-Bank on 14-3-1989 accepted appellant's loan application and issued sanction Advice No,101970/89/ 18670 approving finance of Rs.1,71,500 under the trade related modes of financing respectively for the purchase of the tractor at Rs.1,51,500 and potato seeds at Rs.20,000.
The basis of finance as stated in the sanction advice was the sale and purchase of property with buy-back arrangement". In Article 9 of the sanction advice a recovery schedule was prescribed whereunder the total recoverable amount inclusive of mark-up was specified as Rs.2,30,280 till 7-1- 1997. In consonance with the sanction advice, Agreement for Finance dated 14-3-1989 was also made by the parties incorporating therein the above referred terms of the finance. Adequate to mention that Article 23 of the finance agreement stipulated the total recoverable amount of finance at Rs.2,30,280 on expiry of the tenure by 7-1-1997.
4. The aforesaid recoverable amount of Rs.2,30,280 was admittedly arrived at by the parties by addition in the disbursed finance of Rs.58,780 as the mark-up for the period of Agreement from 14- 3-1989 to 7-1-1997. As such, on expiry of the period of finance, the respondent-Bank under the Islamic Mode of Financing and BCD Circular No,13 dated 20-6-1984 was not competent to charge mark-up on the agreed marked up price of Rs.2,30,280. Any addition on the above agreed repayable amount on account of mark-up was the levy of mark-up on compared basis. Such levy and charge of mark-up on mark-up being contrary to the Islamic System of financing was expressly prohibited through various circulars and notifications issued by the State Bank of Pakistan including BCD Circular No,13 dated 20-6-1984, BCD Circular No,27 dated 26-11-1984, BCD Circular No,37 dated 10-12-1984 and BCD Circular No,23 dated 25-5-1985. The principles that mark- up beyond the period of finance and over and above the agreed amount/price is prohibited under the Islamic System of Finance, were reiterated in the cases of "National Bank of Pakistan v. Messrs West Pakistan Tanks Terminal (Pvt.) Limited" 2000 CLC 896 and "ICP v. Messrs Chiniot Textile Mills Ltd." PLD 1998 Karachi 316. The sanction advice and the agreement for financing made on "buy- back arrangement" thus visualized total recoverable marked .Up price of Rs.2,30,280 against the availed finance of Rs.1,71,500.
' The learned counsel for the respondent-Bank was unable to explain the entries of debit made in the Statements of Account for mark-up beyond the agreed dated of 7-1-1997 and over and above the agreed marked up amount of Rs.2,30,280. We have thus no option but to hold that the respondent-Bank was not competent to charge mark-up over the agreed sum of Rs.2,30,280 from the appellants.
5. In view of what has been held above, this appeal is partly allowed. The impugned judgment and decree dated 9-2-1999 are modified. The amount of decree is reduced to Rs.2,30,280 and the suit filed by the respondent-Bank is decreed accordingly with the costs of the suit. As the respondent- Bank claimed an exaggerated amount in the suit, therefore, its claim for the future mark-up is declined. The appellants shall pay the decretal amount of Rs.2,30,280 along with costs of the suit within a period of three months. In case of non-payment of the decretal amount by the appellants, the same shall be recoverable by enforcement of the securities in accordance with law.
6. The appeal is accepted in above terms with no orders as to costs.