AMANULLAH KHAN, J.---Facts giving rise to this appeal are; that (late) Qasim Khan opened an Account No.251 with the respondent-Bank on 25-3-1992, in his own personal name and in May, 1992.
Muhammad Azam Khan was also allowed to operate the Account. Thereafter, appellant No.2, Mir Alam also started operating the Account. Late Qasim Khan passed away on 28th June, 1996. The appellants continued operating the said account and at their request, the account was converted in the name and Style of M/s Qasim and Company, on 19th November, 1996. Statement of account indicates that, huge transactions were carried out in the said account operated by the appellants.
2. M/s Tameer-e-Nau Engineer and Contactors (hereinafter referred to as 'the Principal Debtors') were awarded a contract for the development of Sabsazar Housing Scheme, Phase-II, Lahore on 27-5-1995. The Principle Debtors furnished a Performance Guarantee in favour of Lahore Development Authority, which was issued by the respondent-Bank on 1st November, 1994, on behalf of the Principal Debtors. On 4th September, 1995, the LDA made a written request for encashment of the Performance Guarantee. The bank release the performance Guarantee in Favour of LDA. To secure the Performance Guarantee, the same was converted into a Running Finance, after adjustment of 10% cash Margin. To further secure the said Finance, in addition to the securities, obtained by the bank, (late) Qasim Khan personally stood Guarantor for the Principal Debtor and executed Guarantee Bond (Exh.D-13).
3. As mentioned herein above, Account No.251 was converted in the name of M/s Qasim and Company, after the death of late Qasim Khan and operated by Muhammad Azam Khan and Mir Alam Khan, the present Appellants. The appellants remitted a sum of Rupees fifty five lacs from Islamabad in their account, which was credited in their account with the respondent-Bank.
Appellants issued certain cheques which were dis-honoured by the respondent-Bank. On enquiry, they were informed that an amount of Rs.38,88,721.65 has been deducted from their Account on account of the liability towards the Principal Debtors, as late Qasim Khan stood Guarantor. A legal notice was sent by Syed Ayaz Zahoor, Advocate, on behalf of the appellants, wherein, the respondent-Bank was called upon to release the amount, but in vain. Thus instant suit was filed on 4th June, 1998, for recovery of the aforesaid amount, along with interest, at the Bank rate. The respondent-Bank filed written statement, by contesting the suit and it was averred, that the bank had a lien over the assets of late Qasim Khan, therefore, amount was appropriated by the Bank against the money belonging to late Qasim Khan, lying in his account. Out of the pleading; following issues were framed:--
(i) Whether the suit of plaintiff is not maintainable in view of preliminary objections raised in the written statement?
(ii) Whether late Qasim Khan stood guarantor for M/s Tameer-i-Nuo Engineering and Contractors for the construction work of Sabzazar House Housing Scheme Phase-II, Lahore who did not complete the work in time?
(iii) Whether transfer of Rs.38,88,721.65 from the account of the late Qasim Khan to another account is according to the banking procedure?
(iv) Whether the plaintiffs are entitled for relief claimed for?
4. In support of their contentions,. Appellants produced following witnesses:-- P.W.1 Masood Ahmad, Union Manager, Union Bank. He tendered document Exh.P/1-A i.e. The account opening application in the Union Bank by late Qasim Khan.
' P.W.2 Khawaja Jehanzaib, representative of Askari Commercial Bank Limited. He produced documents Exh.P/2-A to 2-C, being Account Opening Forms of the Late Qasim Khan with Askari Commercial Bank.
' Muhammad Azim, appellant, got recorded his statement and tendered document Exhs.P/3-A to Exh.P/3-G.
5. In rebuttal, respondents produced following witnesses:-- ' D.W.1 Abdul Rashid, tendered documents Exhs.D/1 to D/23, being the Account Opening form, pertaining to Account No.251, initially opened by the late Qasim Khan, the Bank Guarantee, executed by the bank in favour of LDA, letter of LDA, wherein request for encashment was made, application for advance by Principal Debtor, Guarantee executed by late Qasim Khan, statement of Account No.251, letter of State Bank dated 11th May, 1998, wherein reply was given on the complaint of appellants, Memorandum of deposit to title deed, reminder issued by Principal Debtors, etc. ' D.W.2 Syed Sultan and D.W.3 Javed Bilal.
Thereafter on hearing the parties, learned Additional District Judge-II, dismissed the suit vide judgment and decree dated 25-9-1999. Being aggrieved from the same, appellants filed an appeal before this Court, which was disposed of vide judgment and decree dated 4-6-2001, whereby the appeal was allowed and the respondent-Bank was directed to make payment of the amount, deducted from the account of appellants, along with interest at the rate of 10% per annum. The respondent-Bank filed a petition for leave to appeal, before the Honourable Supreme Court. After hearing the parties, appeal was partially allowed vide judgment dated 25-11-2002 and case was remanded to this Court, with the directions to determine the question of jurisdiction of Banking Court.
6. We have heard Syed Ayaz Zahoor, learned counsel for the appellant and Mr. H. Shakeel Ahmad, learned counsel for respondent-Bank at length and also perused the record with their assistance.
7. Before dilating upon the arguments of learned counsel for parties, it would be appropriate to refer to the operative portion of the judgment passed by Hon'ble Supreme Court, which reads as under:--
4. Learned counsel for the respondent argued that the Banking Court did not have the jurisdiction and the suit was rightly tried by the Additional District Judge, as a Court of original jurisdiction, following the procedure of ordinary suit.
5. Section 7(4) of the Act lays down that:-- "Subject to subsection (5), no Court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under this Act including a decision as to the existence or otherwise of a loan or finance and the execution of a decree passed by a Banking Court."
' The language employed in the above provision is clear. If the matter falls within the jurisdiction of a Banking Court, no other Court will have jurisdiction. Normally every Court, before proceeding to determine a cause, has to attend to its jurisdiction. In this case, the trial Court rejected the application under Order VII, rule 11, C.P.C. On 8-10-1998. It followed the direction of the High Court passed in Civil Revision No.193 of 1998 dated 12-8-1998 which required that after recording of some evidence the trial Court would proceed to determine the question of its jurisdiction, keeping in view the provision of the Act. The record shows that the trial Court did not advert to this question at all. In its judgment, it did hold that the suit was maintainable under Order XXXVII, C.P.C. However, it did not address itself to the question raised in the application under Order VII, rule 11, C.P.C. Which it was required to decide after recording some evidence. Even the High Court did not advert to this question. We are not in a position to hold as to whether as a matter of fact, learned counsel for the appellant-Bank raised this question during the course of hearing. We however, feel that keeping in view the provision of section 7(4) of the Act, the question is that of jurisdiction and the Courts should have proceeded to determine the same, one way or the other way.
8. Learned counsel for the appellants, raised following contentions:--
(i) The respondent-Bank was not competent to make payment to Lahore Development Authority on the basis of guarantee (Exh.D/7) and since it was an illegal act on the part of the respondent- Bank, therefore, it alone was responsible;
(ii) the guarantee was issued after obtaining security of hypothecation of stock of construction material and equitable mortgage of bungalow worth, million of rupees but no action was taken by the bank either against principal debtors or their guarantor;
(iii) that no lien was marked in the account of the appellants, and therefore adjustment/deduction by the bank was illegal;
(iv) no security was furnished by late Qasim Khan whereof bank could claim lien;
(v) the alleged guarantee (Exh.D/3) was forged documents and it was for such reason that it was never enforced in the life time of Qasim Khan;
(vi) the trial Court was under legal obligation to compare admitted signature of Qasim Khan on record with his disputed signatures and in absence of such exercise, it could not be validly held by the trial Court that guarantee was executed by late Qasim Khan;
(vii) the amount could not be recovered from the appellants without instituting a suit for recovery against the principal debtor and the guarantors, who had furnished security at the time of issuance of bank guarantee of sanction of running finance; (viii)the judgment of trial Court is result, of misreading of evidence.
9. In repudiation, learned counsel for respondent-Bank, argued as under:--
(i) Appellant cannot challenge the action of the bank in making payment to LDA, in that, Qasim Khan stood guarantor after making payment to LDA and at the time of sanction of running finance;
(ii) the signature of Qasim Khan has been proved on record, inasmuch as, the Bank Manager posted at the relevant time has appeared in Court and deposed that Qasim Khan signed in his presence and further that even the trend of cross-examination suggest that execution of guarantee by late Qasim Khan has not been disputed by the appellants;
(iii) and that action of respondent-Bank is protected by section 171 of the Contract Act, in that, it had a lien over it. He referred PLD 1982 Karachi 200, PLD 1980 Karachi 115, AIR 1960 Punjab 632 and AIR 1966 Madras 265.
10. It may be mentioned that a detailed judgment dated 28-5-2001, was passed by Mr. Justice Tariq Mehmood, as he then was Judge of the High Court; and disposed of the appeal but had not given any definite findings, regarding jurisdiction of the Court, thus, in view of the observations made by Hon'ble Supreme Court, we will confine ourselves only to the question regarding jurisdiction of Banking Court.
11. In this regard, Syed Ayaz Zahoor, learned counsel for appellants, referred to the definition of 'finance' as defined by Banking Company (Recovery of Loans, Advances Credits and Finances) Act, 1997. Further argued that the said transaction did not fall within the definition of finance or loan, thus the Banking Court had no jurisdiction in the matter.
12. The learned counsel further argued that late Qasim Khan allegedly stood Guarantor on behalf of Principal Debtor in his personal capacity and even in his life time, he had not authorized the respondent-Bank to deduct the amount from his account and after his death the account was being operated independently by the appellants, therefore, the bank had no authority to deduct the amount, nor the amount lying in the account belonged to Qasim Khan.
13. Mr. H. Shakeel Ahmad, learned counsel, argued that, amount was rightly deducted by the bank, the said action of the bank is protected by section 171 of the Contract Act and further Bank has a lien over the said amount and was rightly deducted from the said account it as a set off.
14. It may be observed that regarding jurisdiction both the learned counsel have raised two fold contention:--
(1) Contention of Syed Ayaz Zahoor, learned counsel for the appellant, that the transaction did not fall under the definition of finance and suit under section 9 was not maintainable before Banking Court.
(2) Contention of Mr. H. Shakil Ahmed, learned counsel for the respondent-Bank had lien over the said amount under section 171 Contract Act. Therefore, bank had a set off against the said amount which was rightly appropriated.
15. To determine whether the said transaction falls within the definition of Finance and whether suit lies under section 9 of the Act. It F would be appropriate to refer to the definition of Finance, which reads as follows:-- "finance" includes an accommodation or facility under a system which is not based on interest but provided on the basis of participation in profit and loss, mark-up or mark-down in price, hire- purchase, equity support, lease, rent-sharing, licensing, charge or fee of any kind purchase and sale of any property, including commodities, patents, designs, trade marks and copy rights, bills of exchange, promissory notes or other instruments with or without buy-back arrangements by a seller, participation terms certificate, musharika certificate, modaraba certificate, term finance certificate or any other mode other than an accommodation or facility based on interest and also includes guarantees, indemnities, letter of credit and any other obligation, whether fund based or non-fund based, and any other accommodation or facility the real beneficiary whereof is a person other than the person to whom or in whose name it was provided."
A perusal of the aforestated definition would indicate that the 'transaction' i.e. The act of deduction of amount by the bank from Account No.25, does not fall within the definition of 'loan' or 'finance' and further a suit under section 9 of the Act, lies before the Banking Court, with regard to the default in making payment of loan or finance.
16. Operation of the account has not been disputed, it was opened by late Qasim Khan in his personal capacity during his life time, the appellants were also allowed to operate the same. After his death, the nature of the account was changed to that of M/s Qasim Khan and Co. Operated by the appellant. It may be observed that under section 52 of the C.P.C., the legal heirs of a deceased- judgment Debtor can only be liable to the extent of the Estate left by the deceased.
17. The contention of Mr. Shakeel Ahmed, learned counsel has no substance that, since the account was opened by late Qasim Khan, therefore, the bank had a lien over the same. It is pertinent to note that neither late Qasim Khan nor the appellants had authorized the Bank to deduct the amount from their account. As observed herein above the account was operated by appellants in their personal capacity and there is nothing on record to hold that the amount was left by the deceased. Merely because they were doing business in the name of M/s Qasim Khan and Company, hence it could not be held that the amount belonged to the deceased. Thus without any hesitation, it is held that bank had deducted the amount, claimed in the suit from the said account without lawful authority, as the same did not fall within the definition of 'loan' or ' finance' and further there was neither any agreement to the extent, by late Qasim Khan, nor any authority was given to the bank by the appellants to deduct the amount. The statement of appellant Muhammad Azam went unchallenged regarding remission of the amount by them from Islamabad in their own account. Thus the question of lien did not arise and the bank could not possibly claim it as a set off, on the ground that, it belongs to Qasim Khan. Thus the very action of the bank by deducting the amount is illegal. The foregoing discussion leads us to hold, that the matter did not fall within the purview of section 9 of the Act, thus the Banking Court has no jurisdiction.
18. Adverting to the contention of Mr. H. Shakeel Ahmad, learned Counsel argued that, under section 171 of the Contract Act, the Bank had a lien over the said amount. For reference section 171 of the Contract Act is reproduced herein below:-- "171. General lien of bankers, factors, harbingers, attorneys and policy-brokers. Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect."
19. It may be pointed out that, it is well-settled by now that, where a security is delivered to a Banker for specific purpose, if it is inconsistent with the right of lien and impliedly if there is an agreement to the contrary, thus a Banker cannot exercise lien over such property. In this behalf, reference is made to case-law Chetinad Mercantile Bank Ltd., by its agent and Secretary T. Subramania Ayyar v. PLA Pichammai Achi and another (AIR 1945 Madras 447) and Fancy Investments Ltd. Karachi v.
United Bank Limited and 2 others (PLD 1982 Karachi 200).This view has been consistently followed by the superior Courts. For reference, relevant portions from both the cases are referred to. In (AIR 1945 Madras 447), it was held as follows:-- "Banker's lien is the right of retaining things delivered into his possession as a banker if and so long as the customer to whom they belonged or who had the power of disposing of them when so delivered is indebted to the banker on the balance of the account between them provided the circumstances in which the banker obtained possession do not imply that he has agreed that this right shall be excluded. Banker's lien can properly be said to arise only in respect of any securities held by the bank. If the customer deposits certain securities and ultimately there is a sum due to the bank, the bank has a lien over these securities and it could hold them against the amount due by the customer. In the case of money of the customer paid into the bank into his current or deposit account the amount ceases to be the property to the customer and becomes the property of the banker and the banker is thereafter under a contractual obligation to repay or given credit to the customer for the amount. In such a case, there is no property of the customer of which the banker has possession, the possession of the banker co-existing with his own ownership of the money. Accordingly, the essential conditions necessary to the existence of the lien are lacking."
' In (PLD 1982 Karachi 200), it was observed as follows:-- "8. From the aforestated observations it is now well-settled that where security is delivered to a banker for a specific purpose it is inconsistent with the right of lien and impliedly there is an agreement to the contrary and therefore a banker cannot exercise lien over such property. Before the lien is exercised by a banker he has to establish that he has taken possession of the security as a banker and secondly that there is no contract contrary to the lien."
20. The case of the appellant was that, amount of Rs.55.50 Million was remitted from Islamabad in their account, but the bank without lawful authority appropriated a sum of Rs.38,88,726 as set off against the guarantee executed by late Qasim Khan without notice to the appellants and the said transaction took place about after more than one and a half years of the death of late Qasim Khan and in such circumstances, the burden was upon the bank to justify the transfer. The respondent- Bank in their written statement, set up a plea that, it had a lien, and a right to appropriate the amount, but could not give any cogent reason for the same. On the contrary, the statement of appellant Muhammad Azam went unchallenged that they themselves credited the amount in their account. In such circumstances, question of Banker's lien over the amount did not arise and respondent-Bank could not appropriate the amount and claim it as a set off. The learned Counsel also could not satisfy us; as to how the said amount could be claimed as a set off, to be adjusted towards, the liability of Principal Debtor, inasmuch as the appellants were even not the Guarantors of the Principal Debtor. It would be pertinent to mention here that account was though opened by late father, but in his life time, it was also maintained by the appellant Muhammad Azam and Mir Alam and after his death it underwent a change and they started operating it in their own right. The Guarantee, though issued by late Qasim Khan was personal in nature. It is settled principle of law that if any pecuniary obligation arises out of a contract by the deceased would only bound down the legal representatives to the extent of the estate lift by the deceased. The contractual obligation has been explained in detailed by Keith in his Book in Elements of Law of Contract which reads as under:-- "Generally a contractual obligation undertaken by deceased promisor would be binding on his legal representatives to the extent of the estate of the deceased promisor in their hands as this obligation of the legal representative is not personal. However, there is one exception to this rule in case of contracts which involve personal elements, and if personal skill is the essence of the contract, the obligation under the contract can be discharged only by that party whose personal skill is involved. The legal representatives of the deceased promisor cannot be required to perform, nor can they render performance of contract involving personal skill and action. On the death of a person, on principle, the benefits and burdens of his contracts pass to the legal representatives as party of his estate."
' It was also observed that:-- "From this a general principle has arisen that a pecuniary obligation arising out of the contract by a deceased party will bind his legal representative to the extent of the estate of the deceased coming to his hands. This principle has been statutorily recognized in section 50 of the Civil Procedure Code which lays down the extent to which a decree passed against a judgment-debtor who dies before the decree has been fully satisfied, against his legal representative."
' Finally it was held that:-- "Similarly in case of money decree the liability of the legal representatives of a party who has died after the passing of the decree extends under section 52 of the C.P.C. To such property of the deceased as is proved to have come into their possession or to the extent of the property of the deceased in respect of which such legal representatives have failed to satisfy the Court that they have duly applied such property of the deceased which came to their possession. In this context of the law, without proving that any property has come into the hands of the son and to what extent in value compared with the pecuniary liability of the deceased father, it cannot be recovered from the son. This aspect was completely overlooked by the trial Court and the first Appellate Court and no such inquiry was made or any proof furnished by the appellant-Bank so as to make respondent No.1 liable for the debts of his deceased father."
21. In view of the above discussion, it is held that deduction of amount by the bank was illegal, neither the bank had a lien over the money belonging to the appellants nor they could be held responsible for the personal acts of their late father. The said transaction does not fall within the definition of 'loan' and 'finance'. Therefore the suit for recovery could be filed before the Banking Court. Thus the Banking Court had no jurisdiction and suit was rightly filed before the Civil Court.
22. During course of hearing, Mr. Shakeel Ahmad, learned counsel, attempted to argue that, suit under the provisions of Order-XXXVII rules 1 and 2 C.P.C. Was not maintainable.
23. Syed Ayaz Zahoor, learned counsel contended that, since the claim was based on negotiable instrument, as the cheques of the appellants were dishonoured, therefore, the suit was rightly filed under Order XXXVII, rules 1 and 2 C.P.C. And further stated that, even otherwise, no prejudice has been caused, as the suit, though was filed under Order XXXVII, rules 1 and 2 C.P.C., but it was treated, as a regular suit.
24. It may be observed here that, it would not affect the jurisdiction of the Court; whether the suit was filed under Order XXXVII, rules 1 and 2 C.P.C. The said provision of law, only specifies a procedure for trying such suits and though the suit was filed under Order XXXVII, rules 1 and 2 C.P.C., but it was proceeded in an ordinary manner. Thus, neither it had affected the jurisdiction of the Court nor the merits of the case. In this regard, reference is made to PLD 1988 SC 124 (Sh. Abdul Majid v. Syed Akhtar Hussain Zaidi), wherein following observations were made:-- "The decision of this Court in Siraj and Company clearly indicated that where the procedure under Order XXXVII was being claimed by a plaintiff and was not available the trial Court could proceed with the case as any ordinary suit. The High Court has not indicated any jurisdictional or procedural bar to it while determining that the decision of this Court in Siraj Din's case was obiter. In Muhammad Abdullah Sufi N. Messrs Muhammad Bux and Son and others PLD 1957 (W.P.) Karachi 445 the view taken was that where a suit was not triable by resort to the procedure prescribed in Order XXXVII, its trial could proceed as a ordinary suit. The law laid down by this Court was clearly attracted.
' As regards the contention of the learned counsel for the respondent that the rule introduced by the amendment by the Lahore High Court touched the jurisdiction and was in excess of its powers possessed under section 128 read with section 122, C.P.C. Is clearly untenable. Order XXXVII relates to the procedure and not the jurisdiction."
25. In view of the above discussion, it is held that the respondent had illegally deducted the amount from the account of appellant. Thus the appellant would be entitled to the said amount with mark- up at the prevailing Bank rate from the date of institution of the suit, till the date of realization of decretal amount. The appellants shall also be entitled to costs throughout.
26. Accordingly appeal is accepted. Office is directed to prepare the decree sheet in the above term. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.