ALI NAWAZ CHOWHAN, J. - This is a Regular First Appeal arising from the Judgment dated 30.06.2003, given by the learned Single Judge of this Court This was a suit for recovery of Rs.
98,172,423/- filed by a consortium of these banks: M/s. Habib Bank Limited, Allied Bank of Pakistan and Muslim Commercial Bank, It was said that the defendant now respondent was a Public Limited Company who through a communication addressed to the Chairman Pakistan Banking Council, dated 24.11.1983 offered to purchase M/s. Fauji Cotton Mills, Hassan abdal, which belonged to the Fauji Foundation. The offer included an undertaking to assume, amongst others, the liability to pay the debts of the Fauji Foundation, which at the relevant time stood at approximately Rs. 57.351 millions. That the defendant agreed to take over the control, management and possession of the Fauji Foundation Mills, amongst other liabilities while also agreeing to assume the total responsibility with respect to loan, overdrafts and advances etc. Payable to the consortium of banks i.e. Plaintiffs. The present defendant (Mr. Mehboob Elahi) was to act there, as a Director of the Company, for purposes of negotiations and settlement with the consortium.
2. Precisely speaking it was said that on 26.03.1984,-it was decided to transfer all the loans and advances outstanding against Fauji Cotton Mills to the defendant Taxila Cotton Mills Limited in consonance with the decision taken by the Pakistan Banking Counsel. The plaintiffs, therefore, wrote to Fauji Foundation to transfer the said project known as Fauji Cotton Mills Hassan abdal to M/s. Taxila Cotton Mills i.e. Defendant Certification was issued with respect to the amount of Rs.
57.351 million outstanding against Fauji Cotton Mills, the details of which have been provided in paragraph 10 of the plaint itself.
3. Reference is also made to the agreement which came about on 28.03.1984. In paragraph 11 of the plaint reference is made to the execution of the documents like promissory written letter of guarantee etc. In fulfilment of the terms of the agreement.
4. The break up of the borrowings is given in paragraph 13 of the plaint and is an extract from resolution dated 20.01.1985 said to have been accepted by the defendant. A memorandum was signed on behalf of the defendant Company and properties were mortgaged and repayment schedule was submitted for payment of the dues to the consortium.
5. Paragraph 15 of the plaint further makes mention of the outstanding liabilities as( on 04.06.1992.
In paragraph 16 of the plaint the factum about re-scheduling of payment is mentioned in terms as elucidated in paragraph 16 Paragraph 20 makes mention of further documents, which were executed inter se the parties whereas paragraph 22 gives the break up of the money due against different members of the consortium as on 30.06.2000.
6. Upon what has been inter alia stated above, the plaintiffs asked for a decree against the defendant jointly and severally for a sum of Rs. 98,172,423/- being the outstanding dues with a further prayer that until full payment was made interest accruing be also paid and that the remaining amount be ordered to be recovered from the other assets of the defendant.
7. Against this plaint, defendant M/s. Taxila Textile Mills filed its written statement which also included an application for leave to defend. Wherein some preliminary objections were taken relating to the question of limitation and the form of this suit, It was further stated that the suit was not maintainable besides it was said that it was based on interest based agreement against which a decree cannot be issued.
8. In paragraphs Nos. 4, 5, 6 and 7 of the written statement, it was stated as follows:- "That without prejudice to the above, the answering defendant has filed a suit titled "M/s. Taxila Cotton Mills v. Allied Bank of Pakistan Limited" before the Banking Court, Rawalpindi, In the said suit M/s. Allied Bank of Pakistan has filed a written statement and on behalf of the other Banks, the written statement is also being filed. Since the question of the payment of the liabilities mentioned in the present suit is already a subject-matter being adjudicated by the competent forum, the filing of the present suit is an after-thought, unwarranted and is in the contradiction to the stands taken by the plaintiff Banks before the Banking Court and as such the present suit is not proceedable before this Honourable Court in the given circumstances."
"That the suit has been filed on an accumulated claim when as per the record the answering defendants have paid more than the due amounts and the suit for the rendition of accounts along with the claim of the answering defendant is pending before the competent Court, the filing of the present suit is unjustifiable. The answering defendants, in the year 1984-85 became assignees of a loan tendered by the plaintiff Banks for Rs. 43.351 million. The said facility was transferred in the name of the plaintiffs from Fauji Cotton Mills."
"That the answering defendant vide correspondence addressed to the Plaintiff Banks, requested for the conversion of the interest based loan to the Islamic Mode of Financing (Annex-B) for application Of markup laws prevailing under Circular No. 13, dated 20.06.1984.
In furtherance a second Circular No. 32 (Annex-C) was issued in the year 1984 by the State Bank of Pakistan, which all in all called for the conversion of all the interests based finances to the mark-up based and further directed the Banks not to change mark-up on mark-up, i.e. Compounding of mark-up was prohibited.
"In exercise of the powers vested in it under the Banking Companies Ordinance, 1962, the State Bank of Pakistan is pleased to direct that as from the 1st January, 1985; interest, wherever charged by a banking company/development finance institution in any of the items of bank charges, shall be replaced by a non-interest mode considered appropriate by it. Moreover, overdue/penal interest or mark-up on mark-up shall not be charged by a banking company/DFI as from that date, instead, it may take legal steps for recovery of the overdue finance".
"Reliance on P.L.D. 1998 Kar.400, also 1992 CLC 1906."
"In pursuance of the said correspondence, the Plaintiff/Banks advised the answering company to submit authorization to allow for the conversion of the said advanced facility from the interest based to the non-interest based system. The answering defendant was obliged to submit the same. The relevant copies annexed (Annex-I)."
"That in spite of the said conversion arrangement, the. Plaintiff/Bank intentionally being at a dominant position went onto create reschedule agreement in the years 1992 and 1995, whereby the liability was arbitrarily rescheduled and without placing any disbursement or any deduction in the principal factor the said rescheduling is as ab-initio against the law, shall be deemed to. Be non- existent and any such claim on the basis of the said agreement is illegal and not sustainable, as such, the Plaintiff/Bank has no cause of action against the answering defendants to file the ^present suit, hence the suit Js liable to be dismissed with costs."
9. In paragraph 8, it was further stated as follows:- "That the claim of the Plaintiff Banks is misconceived, the fact of the matter is that the plaintiffs had provided several types of finances, as Consortium Loan, Long Term Loan, Syndicate Loan, Cash Credit, Letters of Guarantees and PADs. Detail annexed 'E'. The Consortium Loan and the Cash credit provided to Taxila Cotton Mills Ltd. By the plaintiffs have duly been paid and cleared. The only continuing facility remaining was a long-term loan of Rs. 43.351 million against fixed assets. As the Consortium loans stands repaid, the plaintiff has no cause of action to file the suit, without prejudice to the above submission."
10. In paragraph 10 of the written statement the answering defendant mentioned about the payment, already made in the following words:- "That the answering defendant owed Rs. 43.351 million against which a payment of Rs. 89.867 million stands paid. The certificate to this effect is annexed."
11. It was prayed that the plaint was liable to be rejected on the basis of above citation and, therefore, the defendant prayed that he be allowed permission to defend the suit. Along with petition for leave to appeal, important document (which is at page 35) was also attached.
Reference is also particularly made to a letter dated 23rd July, 1997 which is attached and is placed at page 61-of written statement. According to the learned counsel for the appellant at page 62 of this letter a consolidated syndicate statement is given, which provides sufficient fulfilment against the provisions of Section 10(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
12. Now we come to the Judgment impugned where the learned Single Judge observed in paragraph 6 as follows:- "I find that the said application filed by the defendants does not contain the said specific statement. Leamed Counsel for the defendants when confronted is unable to state any reason as to why the said mandatory provision for which a penalty stands prescribed, has not been complied with. Needless to state that there is nothing in the said application to disclose any cause much less sufficient cause for non-compliance of the said requirement. Leamed Counsel for the plaintiffs further rely bn the Judgments in the case of Bolan Bank Limited through Attorneys v. Baig Textile Mills (Pvt.) Limited through Chief Executive and 6 others (2002 C.L.D. 5t57) and National Bank of Pakistan v. First Tawatial Modaraba through Tawakal Management (Pvt.) Ltd. And 5 others (2002 C.L.D. 1018)."
13. After making these observations, the learned Single Judge rejected the PLA and ordered proceedings in terms of Section 10(11) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 and also passed a decree in terms referred to in paragraph 7 of the order.
14. Mr. Khalid Anwar, Advocate for the appellants, stated that perhaps the consolidated syndicated schedule appended with the written statement missed the attention of the learned Single Judge otherwise, it provided all the details as required under the provisions of Section 10(4) of the Ordinance.
15. Reference was also made to the case of Messrs C.M. Textile Mills Limited v. Investment Corporation of Pakistan (2004 C.L.D. 587) where in paragraph 9, the observations were as follows:- "Before deciding the suit, it is the duty of the Court to , consider and examine the plaint as well as the documents relied and sued upon by the plaintiff forming basis of the pleadings. A decree cannot be passed by a Court in routine or in a cursory manner just because a defendant fails to file a written statement or a defendant, in suit under Order XXXVII, C.P.C, or the suits by a Banking Company, fails to file an application for leave to defend. Or is unable to raise a triable issue and his application for leave is rejected."
16. The learned Counsel stated that the matter involved was of a very serious nature and before taking any action in straightaway rejecting the PLA the learned Single Judge ought to have questioned the learned Counsel appearing on behalf of the defendant to show as to whether the consolidated syndicated statement or any other statement In the nature of a statement required under the provisions of Section 10(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 was appended with the PLA and that perhaps this was the reason that in the plethora of documents which had been filed, this document was lost from the sight of the Hon'ble Single Judge and, therefore lost from mind, while the Judgment was being given.
17. Section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 reads as follows:- "Subject to Section 11 the Banking Court shall upon an application made by a defendant within twenty-one days, give leave to defend the suit, if a serious and bone fide dispute is raised thereby: Provided that where service has been validly effected "only through publication in the newspapers the Banking Court may extend the time for filing an application for leave to defend if. Satisfied that the defendant did not have knowledge thereof.
18. According to Section 10(6) in case of failure in complying with the requirements of Section 6(3), 6(4) and 6(5) the petition for leave to defend is to be rejected. But there also a proviso in the words that in case of defendant discloses a sufficient cause explaining his inability to comply with such requirement the application u/s. 10(6) is not to be rejected summarily. This obviously means that a Court has not to come to the conclusion with respect to the non- fulfilment of the conditions laid in Section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 on the basis of what may be prima-facie but has also to look at the defendant's sufficient cause.
19. In the Civil Procedure Code where suits are instituted upon bills of exchange, promissory note etc, and under the provisions of Order 37 the procedure for leave to defend a suit is given in Order 37, Rule 3 which lays down the requirement both legal and formal for this purpose by referring to the form as given in the appendix to the Civil Procedure Code.
20. The Financial Institutions (Recovery of Finances) Ordinance, 2001, does borrow the idea of a summary trial in financial matters from Civil Procedure Code. But its author, failed to persevere in providing a format to be followed on the procedural side for purposes of filing a leave to defend.
Consequently, it was left for the case-law to fill in the needs as the law developed. This is the main reason why we have to view the provisions of "sufficient cause" reflected in Section 10(6) of Ordinance most seriously.
21. Incidentally it may be, said that the stage when a leave to defend is being sought is not a stage where an action is being tried. A Court at such a stage is required to see whether there was a bona fide allegation of a triable issue, which was not illusory and was plausible.
22. One cannot attribute an intention to the legislature of creating a discrimination between Banking Company and a borrower on lying down conditions as are required u/s. 10(3) and 10(4) with a blind fold because the intention of the legislature is manifest and its purpose clear in curbing the trail of illusory sham and frivolous allegations now quite common in our litigious system. The legislature gave a prescription for weeding out this at the very outset in financial matters because a major portion of financial transaction as covered by Financial Institutions (Recovery of Finances) Ordinance, 2001 was to be backed by proper documentation.
23. Therefore, at the stage of leave to defend whereas, the Court has to be guided by main rationale behind the law. It is not to oust a defendant from the trial when he has an arguable case.
24. Consequently, if there is any dearth of material or lapse on the part of a serious contender of an arguable case we feel in the absence of any format of an application for leave to defend the dictates of Justice will require that he be confronted with the question of showing a sufficient cause and if he does not a Court is then obliged to proceed in refusing to grant the leave, but not otherwise.
25. In this connection we may seek guidance from the following case laws:-
(1) PLD 1963 SC 163 (Fine Textile Mills Ltd., Karachi v. Haji Umar)
(2) 1989 M.L.D. 171 (Muhammad Anwar v.
Lahore Hoechst Pharmaceutical Pakistan (Pvt.) Ltd. And others)
(3) , 1991 C.L.C. 442 (Muhammad Arif v. Abdul Karachi Qayyum) .(4) N.L.R. 1994 AC 658! (Sarangv. Haji Mahmud)
(5) PLD. 1991 SC 976 (Messrs ARK Industrial Management Ltd. v. Messrs Habib Bank Limited)
26. 27. #tbs
28. (Messrs National' Security Insurance Company Limited and others - v. Messrs Hoechst Pakistan Limited and others)
29. (M/s. Kohinoor Textile Mills Limited v. M/s. Gharo Textile Mills Limited)
30. (Fateh Lai v. Sunder Lai)
31. (Anil Gupta v. M/s. Sant Ram Dhuper & Co. & another).
32. (Snatosh Kumar v. Bhai Mool Singh)
33. (K.V. Periyamiyana
34. Marakayar & Sons v. P.K. Subramania Aiyar and
35. Others).
36. #the
37. 38. #tbs
39. PLD. 1986 Karachi 157(2)
40. . AIR 1980 Rajasthan
41. 220
42. AIR 1977 Delhi 164
43. AIR 1958 Supreme
44. Court 321 (V. 45
45. Complainant 52)
46. AIR 1924 Madras 612
47. #the
48. 49. #tbs
50. 1992 S.C.M.R. 718
51. #the
26. The question which arises before us after all this discussion is whether the learned Single Judge acted as we expect in view of our observations afore-mentioned or not. The answer is not in the positive. And as the learned Single Judge had passed a decree without fulfilling the envisaged judicial requirements in requiring the defendant to show a sufficient cause. We are constrained to set aside the decree and, are directing that the defendant be allowed-the leave to defend and are remitting the case to the learned Single Judge for proceeding further on merits and in accordance with law.