The plaintiff filed a suit for recovery of US $ 3,557,143 and Pak Rs.10.973,000 with costs against the defendant. It is contended in the plaint that the plaintiff entered into an agreement with a Spanish Company (Messrs Isolux Wat), for construction of two grid stations. That at the behest of the said Spanish Company the defendant issued two letters of guarantee dated 30-11-1995 amounting to US $ 1,778,571.50 plus Pak Rs.5,486,500 and US $ 1,778,571.50 plus Pak Rs.5,486,500 respectively. It is alleged that the Spanish Company failed to perform its obligations and as the consequence thereof the plaintiff was constrained to invoke the guarantees and seek their encashment and notice in this behalf was served upon the defendant which failed to honour its obligations. The plaintiff has now filed a suit for recovery of the amount.
2. The defendant-Bank entered appearance and filed a petition for leave to defend. The defendant is seeking leave to appeal inter alia on the ground that this Court has no jurisdiction to adjudicate upon the matter as the plaintiff is not a customer of the defendant nor issuance of guarantee in favour of the plaintiff constituted finance as defined by the section 2 of the Ordinance, 2001. It is further contended that there is a dispute between the plaintiff and the Spanish Contractor which is sub judice and the allegations of default on behalf of the Spanish Contractor are factually incorrect.
3. The plaintiff filed a reply to the said petition for leave to defend and has seriously controvered the contentions of the defendant-Bank.
4. The learned counsel for the parties have been heard.
5. It is contended by the plaintiff that the letters of guarantee are unconditional. Even otherwise it is contended that it is settled law that the contract of the guarantee and the obligations created thereby are independent of the main contract and any dispute arising therefrom does not preclude the encashment of the guarantee. And the pendency of the litigation before the Spanish Court does not constitute a defence as there is no reciprocal treaty between Spain and Pakistan.
6. However, the primary issue raised by the defendant-Bank requiring consideration is whether the relationship inter se the parties is that of finance and whether the plaintiff is in fact and in Iaw a customer of the defendant. Learned counsel for the defendant has drawn attention of this Court towards section 2(C) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the definition of the term "customer" which reads as follows:-- "(C) "customer" means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier."
6. Learned counsel contends that the customer would be a person on whose behalf the guarantee has been issued and not the person in whose favour such a guarantee is issued by a Bank.
7. Learned counsel for the defendant contends that all disputes between financial institutions and third party do not necessarily fall within the jurisdiction of this Court. Learned counsel relies upon the judgments reported asp Karachi Electric Provident Fund v. National Investment (Unit) Trust and others 2003 CLD 1026; National Electric Company of Pakistan (Pvt.) Limited v. Prime Commercial Bank Limited 2003 CI,D 856; Messrs National Motors Ltd. v. Messrs Muslim Commercial Bank Ltd., Karachi 1982 CLC 236.
8. Learned counsel `for the plaintiff, on the other hand, has placed reliance upon the judgment reported as Qatar Airways PLC v. ANZ Grindlays Bank 2000 CLC 1455 upheld in appeal by the Division Bench of Honourable Sindh High Court vide judgment dated 30-5-2000 (H.C.A. No.38 of 2000).
9. In the aforesaid case, the suit was filed by the plaintiff on the basis of guarantee issued in its favour by the defendant-Bank/financial institution. When objection to the jurisdiction was raised by the defendant on the ground that plaintiff was not a customer and the relationship was 'not finance, the said objection was overruled by the Honourable Sindh High Court and the suit entertained. The suit in Qatar Airways PLC v. ANZ Grindlays Bank case was instituted under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and the relevant portion of the judgment of learned Single Bench is as follows:-- "11. It will be seen that the term "finance" as defined under section 2(c) of the Act, 1997 includes all possible transactions being conducted by the commercial banks. It also includes credit cards, charge cards, guarantees. indemnities and other obligations, whether fund based or non-fund based. It also includes the phrase "any accommodation or facility" extended to any person who is real beneficiary of such accommodation or facility whether it stands in the name of such person or not. The definition of finance is so exhaustive that it includes bank guarantees no matter in which' form they are issued including performance bonds and mobilization advance bond."
11. The present suit has been filed under the Financial Institutions (Recovery of Finances) Ordinance, 2001. It has been noticed that in the definition of term "customer" or the phrase is the real beneficiary of such finances is conspicuous by its absence. The said phrase has been relied upon by the Honourable Sindh High Court in the Qatar Airway's case supra to hold that a person in whose favour a guarantee is issued is also, a customer. With the change in law this aspect of the matter needs to be examined. While defining customer it has been specifically mentioned that it includes a person on whose behalf a guarantee is issued and person in whose favour such guarantee is given is omitted. In this view of the matter substantial questions of law and facts have been raised by the defendant entitling him to leave to defend the suit.
12. During the course of the arguments counsel for the plaintiff has raised the issue that the defend'ant-Bank is in the process of winding up of its affairs in Pakistan. This fact has been candidly accepted by the counsel for the defendant-Bank who in the circumstances on instructions stated that the defendant is prepared to give its own guarantee to the satisfaction of the. Court for due satisfaction of any decree that may be passed and when and if the defendant proposes to wind up its affairs from the jurisdiction of this Court it shall prior thereto submit a bank guarantee of a local Schedule Bank for due satisfaction of any decree that may be passed by this Court.
13. In view of the aforesaid the PLA is accepted. Leave is granted to the defendant subject to furnishing its own guarantee ensuring the satisfaction of any decree that may be passed against it- within 14 days. Such guarantee shall be substituted by another guarantee of a scheduled local bank before the defendant-petitioner winds up its business in Pakistan.
14. The defendant is directed to file his, written statement within 30 days. Now to come up on 25-5- 2005 for framing of issues.