1. The plaintiff Bank (U.B.L.) filed a suit on 29.9.2000 for recovery of Rs, 6,69,16,000/- against the defendants under the Banking Companies (Recovery of Loans, Advances, Credits and Finances)
2. Act, 1997 before the Multan Bench of this Court. It was averred in the plaint that the defendant Company was a customer of the plaintiff having availed different credit facilities from time to time, however, it defaulted in the payment of the amounts due from it. The company vide letter dated 2.1.1999 requested the plaintiff Bank for restructuring/rescheduling its total liabilities facilitating it to liquidate its liabilities. The request of the respondent company was acceded to and its liabilities were restructured by merging/converting the same into two main accounts:--
(i) Principle amount of different liabilities of defendants company.
(ii) Total agreed mark-up payable on the aforesaid principle amount.
3. In this respect two finance facilities NIDF-I (Non Interest Based Demand Finance) and NIDF-II were granted vide agreement dated 28.8.1996. The former would include to the total principle amount i,e, Rs, 10,57,78,000/- of all the liabilities outstanding against the defendant Company, whereas, the later would comprise of the total mark-up payable by it on the principle amount. In order to secure the NIDF-I facility the following documents were executed by the defendants:--
(a) Agreement dated 28.8.1998.
(b) Agreement for financing the I.B.6A dated 16.12.1999 for the sale price as Rs, 3,27,78,000/- and by- back price as Rs, 4,40,33,000/-. The sum was payable on order before 30.9.2002 in 45 equal installments.
(c) Promissory note dated 16.2.1999 for a sum of Rs, 3,27,78,000/-.
(d) Mortgage/charge registered with the Deputy Registrar of Companies.
(e) Memorandum of Deposit of title deeds dated 16.2.1999 (the detail of the mortgaged properties has been given in the plaint).
(f) Personal Guarantees dated 16.2.1999 by the Defendants 3 to 10.
4. Similarly another agreement for financing I.B.6A dated 16.2.1999 was executed for a sum of Rs, 2,46,99,000/-. The defendants company in order to show its bonafides handed over 59 post dated cheques of Rs, 1 million each in favour of the plaintiff Bank. Out of the same only two cheques were honoured and the others bounced. The defendants defaulted in the payment of the aforementioned facilities.
5. The defendants contested the suit and filed an application under Section 10 of the Banking Companies (Recovery of Loans; Advances, Credits and Finances) Act, 1997 for grant of unconditional leave to defend the same on 2.12.2000.
6. The assets of the company were declared as 'non performing asset' and taken over under Section 18 of the Corporate and Industrial Restructuring Ordinance, 2000 by Corporate and Industrial Restructuring Corporation (CIRC), it has stepped into the shows of Bank (U.B.L.).
7. The defendants were directed vide order dated 16.12.2002 to file an amended application for leave to defend the suit under Section 10(12) of the Financial Institutions (Recovery of Finances)
8. Ordinance 2001. They filed P.I.A. No, 50-B/2003 on 8.3.2003. Another application C.M. No, 59-B/2004 was filed by the defendants alleging that the actual liability of the defendants/applicants was Rs, 1,66,34,691/-. A technical person having technical qualification be appointed to assist the Court.
2. Learned counsel for the defendants/applicants contended as under:--
(i) The plaint is not in accordance with the mandatory provisions of Section 9(3) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. The plaint failed to mention the default of the defendants. Under Section 3(2) of the aforementioned Ordinance defendants should first be declared `defaulter' and then the matter be referred to the State Bank seeking permission to file the suit.
(ii) The actual liability of the defendants is Rs, 1,66,34,691/-. Learned counsel referred to certain payments made by defendants in the chart prepared by them. CIRC can acquire/take over the 'non performing asset' exceeding Rs, 30 million, as such the take over is illegal.
9. (iii)Restructuring or rescheduling does not constitute 'finance'. There can be no novation of the contract. Reliance was placed on Habib Bank Limited vs. Al-Jalal Textile Mills Ltd. (2003 CLD 1007) and Habib Bank vs. Messrs Qayyum Spinning Ltd. (2001 M LD 1351).
(iv) The plaintiffs have no cause of action against the defendants and
(v) That a Amicus Curriae should be appointed on the technical aspects for assistance of this Court. He prayed for grant of leave to defend the suit.
10. Conversely the learned counsel for the plaintiff submitted that the amended application submitted with the amended application for leave to defend the suit is not in accordance with the format of Section 10(4) of the Ordinance, 2001. The plaint contains all the required details specified in Section 9(3) of the Ordinance. In the alternative he submitted that the suit was filed under the Act of 1997 and before the promulgation of Financial Institutions (Recovery of Finances) Ordinance, 2001. He further submitted that there is no provision in law that first there should be a finding by the State Bank of Pakistan regarding the default of the defendants. The finance facilities were restructured on the request of the defendants vide agreement dated 28.8.1998 and this fact was acknowledged by the defendants in their letter dated 1.2.1999. Learned counsel urged that the defendants have enjoyed the benefit of the agreement and got four properties released. A party to a contract who has enjoined a benefit under it cannot say that he is not bound by its terms. Reliance was placed on Dr. Muhammad Munir-ul-Haq and others vs. Dr. Muhammad Latif Chaudhry and others (1992 SCMR 215), Bolan Bank Limited through Attorneys vs. Baig Textile Mills (Pvt.) Limited through Chief Executive and 6 others (2002 CLD 557), Banque Indosuez vs. Banking Tribunal for Sindh & Balochistan and others (1994 CLC 2272) and Habib Bank Ltd vs. Sarmast Cooking Oil Ltd. (2000 CLC 1502).
2. I have considered the arguments of the learned counsel for the parties and perused the record.
11. The agreement dated 28.8.1998 which is signed by the five Directors of the defendant Company discloses that request for rescheduling/restructuring was made and the same was acknowledged by the defendant Company vide letter dated 1.12.1999, that too was signed by the five Directors. It is admitted in para 1 of the aforementioned agreement that before the rescheduling an amount of Rs, 49.223 million alongwith mark-up of Rs, 15.845 million (total Rs, 65.068 million) was outstanding against the defendant Company. It was divided into two categories.
12. Principle amountRs, 35.778 million Mark-up Rs, 13,445 million Total Rs, 49.223 million The principle amount of Rs, 35.778 million was converted into NIDF-I (Non-Interest Demand Finance) which was repayable in monthly installments of Rs, 1 million each effective from January 1999. Down payment of Rs, 3 million as to be made out of which a sum of Rs, 2.614 million had already been paid NIDF-II comprises of mark-up amounting to Rs, 13.445 million repayable in monthly installments of Rs, 1 million. In case of default of any two installments or delay in the payment of any three installments by the defendant Company, the given package shall be withdrawn by the Bank and it shall be entitled to recover all the debt outstanding in its books.
13. Accrued mark-up of Rs, 15.845 million was waived on the condition that the company shall adhere to the repayment schedule given. Agreement for financing dated 16.2.1999 was executed between the parties regarding the principle amount of Rs, 3,27,78,000/- with by-back (marked-up) price of Rs, 4,40,33,000/-. The same was repayable on or before 30.9.2002 in 45 equal instalments. Another agreement of the same date regarding the payment of mark-up was also executed by the parties.
14. Learned counsel for the defendants has referred to certain entries in the chart prepared by the defendants about payments made by them but the same are not relevant as suit has been filed on the basis of agreements dated 28.8.1998 and 16.2.1999. The previous outstanding were admitted by the defendants in the agreement dated 28.8.1998. The defendants are estopped from challenging the same.
15. The plaint contains all the particulars specified in Section 9(3) of the Ordinance, 2001. Even otherwise the plaint was filed on 29.9.2000 and the Financial Institutions (Recovery of Finances)
16. Ordinance, 2001 was promulgated on 30.8.2001. There is no provision in it for filing the amended plaint. The defendants were to file the amended application under Section 10(12) of the Ordinance 2001. They were directed to do so vide order dated 16.12.2002 of this Court, however, ' the record reveals that the amended application for leave to defend the suit was filed on 8.3.2003. It is clearly barred by time and is liable to be ignored. The presumption would be that no application for grant of leave to defend the suit is pending. See Bolan Bank Limited through Attorneys vs. Baig Textile Mills (Pvt.) Limited through Chief Executive and 6 others (2002 CLD 557).
4. There is no provision in the Financial Institutions (Recovery of Finances) Ordinance, 2001 that the plaintiff should declare the customer as defaulter and refer the matter to the State Bank of Pakistan seeking permission to file the suit. I have gone through the provisions of Section 3 referred to by the learned counsel for the defendants but find no such mandate therein. The contention of the learned counsel, therefore, goes by the board.
17. The defendants admit the liability to the tune of Rs, 1,66,34, 691/-only and state that the assets of the company could not be declared as 'non-performing asset' because the jurisdiction of CIRC comes into play on `NPA' exceeding Rs, 30 million as such could not be acquired/taken over. The acquisition/take over by CIRC cannot be questioned in the suit for recovery of money. Even otherwise I do not agree with the learned counsel for defendants/applications that the liability of the company was only Rs, 166,34,691/-. The liability to the tune of Rs, 68.068 million was admitted vide agreement dated 28.8.1998. Rs, 15.845 million were written off and were repayable in case of default by the defendants. The said agreement shows the principal amount as Rs, 35.778 million and mark-up Rs, 13.445 million and two agreements dated 16.2.1999 to this effect were executed by the defendants in favour of the plaintiff.
18. Four properties were released for disposal which the respondent Company did for enhancing the working capital.
19. The new agreement dated 28.8.1998 between the parties was a novation of the old contract, the consideration of which was:--
(i) The agreement to extend the time for payment of the outstanding liabilities of the customer.
(ii) Waiving off an amount of Rs, 15.845 million.
(iii) The release of the four mortgage properties.
20. The case of Habib Bank Ltd. vs. Sarmast Cooking Oil Ltd. (supra) was a case under Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 it was observed as under:-- "Section 62 of the Contract Act, 1872, clearly provides that if the parties to a contract agree to substitute a new contract for the old one or to rescind or alter it, the original contract need not be performed. The original contract between the parties , required Defendant No, 1 to pay the amount on or before a specified date which Defendant No, 1 did not do and instead requested the plaintiff to substitute the old contract with a new one in which it agreed to pay the outstanding amount by 31.7.1996. There is nothing in the contract Act or in any other law which prohibits the parties or the bank from varying or altering the terms of the original contract or executing a new contract to substituted the old one. The agreement, dated 10.4.1993 in respect of Rs, 31.111 million was a novation of the old contract the consideration of which was the agreement of the bank to extend time for payment of the outstanding liabilities of Defendant No, 1."
21. See also Banque Indosuez vs. Banking Tribunal For Sindh & Balochistan and others (supra). In the instant case the contract has been restructured, a new contract has come into being with different terms and conditions. Novation takes place when for an existing contract some new contract is substituted either by the same parties or between different parties, the consideration mutually being the discharge of the old contract. When the contract is novated a fresh contract comes into existence, directly or by D implication in place of the original contract. The effect of the novation is that it extinguishes the original contract and replaces it by another. This is what has happened in the instant case. The authorities cited by the learned counsel for the defendants Habib Bank Limited vs. Al-Jalal Textile Mills Ltd. (supra) and Habib Bank vs. Messrs Qayyum Spinning Ltd.
22. (supra) are decided by the same learned Judge and are based upon the judgment of the august Supreme Court in the case Dr. M. Aslam Khaki v. Syed Muhammad Hashmi (PLD 2000 SC 225). The Hon'ble Supreme Court has set aside the judgment in the case of Dr. M. Aslam Khaki V. Syed Muhammad Hashmi (supra) and remanded the case to the Federal Shariat Court where it is still pending. The contention of the learned counsel for the defendants/applicants does not hold water.
23. The argument of the learned counsel for the defendants/applicants that a Amicus Curriae or technical expert be appointed for assisting this Court on technical matters has no merit. There is ample proof/documentary evidence on the record to decide the case.
4. For what has been stated above the application for leave to defend the suit filed by the defendants (P.L.A. No, 50-B/2003) and C.M. No, 59-B/2004 are dismissed. The case of the plaintiff stands proved by the agreements dated 16.2.1999 supported by the security documents. The suit is decreed as prayed for with costs and cost of funds as envisaged in Section 3(3) of the Financial Instructions (Recovery of Finances) Ordinance, 2001.