S. ALI ASLAM JAFRI, J.- The point in controversy in this suit which needs to be resolved at this stage appears to be the effect of non-compliance of the requirements of Section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, (hereinafter referred as "the Ordinance"), more particularly failure on the part of a defendant(s) in filing amended application(s) for leave to defend within the time specified under Section 10(12) of the Ordinance and in accordance with the mandatory requirements of sub-sections (3), (4), (a) to (d), and (5) of Section 10 of the Ordinance, and whether it shall entail penal consequences as provided under sub-section (6) of Section 10 of the Ordinance, which reads as follows:-- "S. 10(6). - An application for leave to defend which does not comply with the requirements of subsections (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."
2. It appears that the present suit was filed by the present plaintiffs (1) National Bank of Pakistan, and (2) Habib Bank Limited against as many as 16 defendants, under Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act XV of 1997. Hereinafter referred as "the Act", for "Recovery of USS 39,316,706.39, Pak Rs. 1,623,787,057/- and sale of the mortgaged/hypothecated properties". Defendants Nos. 12 to 16 are shown as proforma defendants though in the prayer clause judgment and decree has been sought against all the defendants jointly and severally, It further appears that suit was ordered to proceed ex parte against defendants Nos. 3, 5 to 9 and 14 and dismissed as withdrawn against defendant No. 10 United Bank Limited and defendant No. 11 Allied Bank of Pakistan. Suit also appears to have been struck off against defendant No 13, whereas defendants Nos. 1, 2, 4 and 12 are shown to have been barred from filing the application for leave to defend.
3. It is not disputed that an application for leave to defend under Section 10 of the Act was filed on behalf of defendants Nos 1, 2 and 4 on 30.10.1999 whereas such other application on behalf of defendant No 12 was filed on 28.10.1999. On 3.12.1999 suit was ordered to proceed ex parte against defendants Nos. 3, 5, 6, 7, 8 and 9 and consequently decreed against them.
4. Since after promulgation of Financial Institutions (Recovery of Finances) Ordinance XLV1 of 2001 on 30.8.2001, the defendants Nos. 1, 2 and 4 were required to file amended application for leave to defend within the specified period of 21 days time from the date of the coming into force of the said Ordinance, but they failed to do so for the reasons best known to them, It was, therefore, pointed out by the learned counsel for the plaintiff that in the absence of any fresh amended application under the Ordinance, the defendants stood debarred from pursuing the matter on the basis of the application filed Act XV of 1997 and as such consequences should follow.
5. I have heard Mr. Asif Fateh Shaikh learned counsel for the plaintiff. Mr Izhar Muhammad for CIRC, Mr. Mansoorul Arfin for defendants Nos. 1, 2 and 4, Mr R.F. Virjee for defendant No 12 and Mr. Khurram Bashir for defendant No 16 Mr Virjee has stated that he has filed such application and wants to argue on merits.
6. In support of his contention that provision of Section 10 of the Ordinance are mandatory in nature and in case of non-compliance of the said provision of law, the defendants stand debarred from putting up their defence or arguing the case on the basis of the application for leave to defend filed under Act XV of 1997. Learned counsel has placed reliance on the cases reported as (1)
Bankers Equity Limited and another Vs. M/s. Bentonite Pakistan Limited and 7 others (2003 CLC 931),
(2) Bank of Khyber Vs. M/s. Spencer Distribution Ltd. And 14 others (2003 CLC 1406), (3) Saudi-Pak Industrial and Agricultural Investment Company (Pvt.) Limited Vs. Mohib Textile Mills Limited Lahore and 3 others (2002 CLC 1170), (4) M/s. Crystal Enterprises and 6 others Vs. Platinum Commercial Bank Limited and 2 others (2002 CLD 868), and (5) National Bank of Pakistan Vs. First Tawakkal Modarabba, etc. (NLR 2002 UC 846), In all the above cited reports it has been held that the provisions of Section 10 of the Ordinance are mandatory in nature and non-compliance thereof shall entail consequences. A defendant who failed to file amended application for leave to defend in accordance with the requirements of sub-sections (3) and (4) to Section 10 of the Ordinance within the specified period of 21 days from coming into force of the Ordinance or from the date of first hearing thereafter, whichever is later, shall be deemed to have not filed any such application and as such application filed earlier under Section 10 of the Act of 1997 would merit dismissal.
7. Mr. Mansoor-ul-Arfin learned counsel for the defendants Nos. 1, 2 and 4 has not been able to show any cause for not filing such application but argued that noncompliance in filing of an amended/fresh application under Section 10 of the Ordinance shall not entail consequences such as debarring a defendant from putting his defence and arguing the application for leave to appeal allegedly applicable (sic), In support of the contention he has referred to an unreported judgment dated 29.1.2002 in Suit No. B-74 of 2000 (M/s. Pakistan Industrial Credit and Investment Corporation Vs. Syed Ali Azher Naqvi and others), where a learned Single. Judge of this Court has taken a different view, which is reproduced as below:- "Ms. Sofia Saeed contended that the application u/S. 10 filed under the provisions of repealed enactment cannot be considered as the same is wanting in particulars as required by sub-section
(4) of Section 10, as such, it cannot be treated as leave to defend application. I am of the view that such contention to non-suit the defendants is not justifiable in law. The defendants, who have already filed leave to defend application and have not availed the opportunity, provided under sub-section (12) and on this score, the non-suiting of such party cannot be canvassed nor justifiable The said application is to be disposed on merits."
In order to reach at a just and proper conclusion, I would like to examine the rule laid down in the cited cases by the Lahore High Court, In the case of Saudi-Pak Industrial and Agricultural Company (Pvt.) Limited (supra) after examining the provisions of Section 10(12) and Section 10(6) of the Ordinance, 2001, a learned Single Judge of the Lahore High Court reached at a conclusion that the former provision of law is mandatory in nature, as the non-compliance entail the penal consequences as provided under Section 10(6) of the said Ordinance, In the case of Bankers Equity Limited (supra) another learned Single Judge of the Lahore High Court has taken a same view and held that under subsection (12) of Section 10 of the Ordinance, 2001, it has been provided that an amended application for leave to defend in accordance with the provision of this Ordinance shall be filed by a defendant who has already filed a petition for leave to defend and sub-sections (3), (4), (5) and (6) of Section 10 of Ordinance, 2001, have been made applicable to such amended petition. Non-submission of the accounts as required as . Per sub-section (4) of Section 10 of the Ordinance shall attract penal consequences set out in subsection (6) of Section 10 of the Ordinance and as such non compliance of the said rule shall result in dismissal of the application for leave to defend filed under Act XV of 1997.
8 The nature of the provision of Section 10(6) of the Ordinance, whether being directory or mandatory ana what shall be the resuit of non-compliance was also examined m the case of Bank of Khyber (supra). After examining Section 10 of Ordinance 2001 the Court reached at a conclusion that the requirements envisaged therein are mandatory in nature as the non-compliance of said provision of law entails penal consequences of rejection of leave application, as clearly laid down therein. A similar view has also been taken in the case of National Bank of Pakistan (supra). Unlike Section 10 of the Act, an amended application for leave to defend under Section 10 of the Ordinance, 2001, requires that such application shall be in the form of written statement, containing a summary of substantial question of law and facts and also specifying certain particular to be furnished by defendant regarding finances i.e. Finances availed, the amount paid by the defendant and must be accompanied by all documents in support of substantial question of law and facts raised by the defendant and non-compliance thereof shall entail punishment of rejection of the application for leave to defend, thus it cannot be argued that the said provisions of law are merely directory in nature and not mandatory.
9. I have taken into consideration the view expressed by the learned Judges of the Lahore High Court in the above-cited cases as well as the view of the learned Single Judge of this Court, It appears that in the unreported case as referred to above, the scheme, spirit and language of Section 10 of the Ordinance and consequences for noncompliance have not been taken into consideration, whereas in the above cited reports from the Lahore High Court various provisions of Section 10 of the Ordinance, such as requirements for filing an amended application for leave to defend under the Ordinance within a specified time, are discussed at length and thereafter the same have been held to be mandatory and not mere directory. I find myself in agreement with the view taken by the learned Judges of the Lahore High Court in the above cited cases and have no hesitation to hold that as a result of careful examination of Section 10 of the Ordinance, no other view can be taken but to hold that the compliance of the requirements for filing an amended application for leave to defend under the Ordinance are mandatory in nature, as non-compliance thereof shall be visited with penal provisions viz. Rejection of the application for leave to defend.
Since the defendants Nos. 1, 2 and 4 who have failed to file the amended application for leave to defend, and there is no plausible explanation for the same, hence they stand relegated to the same position as that of a defendant who has failed to file such application.
10. The plaintiffs are directed to file the statement of account showing the liability of the said defendants within two weeks from today. For arguments on merits on the amended application filed by Mr. R.F. Virjee on behalf of defendant No. 12 and further proceedings, adjourned to 14.9.2004.