ZIA PERWAZ, J.-Plaintiff instituted suit for declaration, permanent injunction, redemption of mortgaged properties, rendition of accounts, recovery of excess amount of Rs.53,421,606, and damages of Pak Rupees 350 Million and in addition consequential relief under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as the Ordinance, 2001). Plaintiffs also seek interim relief through applications under Order XXXIX, rules 1 and 2 read with section 151, C.P.C., under section 94, C.P.C. Read with section 151, C.P.C.
2. On service of notice defendant moved application cum written statement under section 10 of the Ordinance, 2001 seeking leave to defend. In his application defendant opposed this suit. Counter- affidavit to the plaintiffs applications are also filed by the defendants. Plaintiffs filed their replication to the application moved under section 10 of the said 'Ordinance.
3. Plaintiff No.1 claims to be carrying on business as proprietor under the name and style of (i) Pak International Exports, (ii) Worldwide International Exporters, and (iii) BS Exporters. Plaintiffs having meritorious export performance on 4-7-2003 requested for availing following facilities:-
(i) Export Re-Finance Facility (Parts-I and II) of Rs.220 Million on markup basis.
(ii) Running finance Facility of Rs.500 Million.
4. Defendants extended the credit facility of export refinancing of Rs.220 Million repayable within a period of 180 days from the date of disbursement or by way of adjustment through realization of the amount against surety by way of equitable mortgage by deposit of title of various properties comprising of residential flats, office premises, sikni plots, residential bungalows, houses, open plots of land, details whereof are set forth in paragraph 9 of the plaint. The amount was further secured by (a) hypothecation of stocks and (b) lien over the Export Firms contracts or export bills sent for collections. The plaintiffs have pleaded that the defendant recovered the amount of Rs.2,660,383 on account of markup beyond the contracted period of 180 days which plaintiff is entitled to recover.
5. Earlier the plaintiff claims to have availed finance facilities from time to time, made surplus payments on account of markup on various transactions as set forth in paragraphs 13 to 33 of the plaint and claims to be entitled to recovery of a sum of Rs.16,021,600 on account of excess markup charged from him in addition to claim of interest at the rate of 14% from the date of payment till realization of the amount.
6. Vide letter dated 7-3-2005, photocopy whereof is filed as Annexure B to the plaint, the defendants renewed the facility of export refinance in the sum of Rs.160,000,000 against the securities including, amongst others, equitable mortgage of immovable properties, already held by the defendant. In addition the condition for replacement of securities specified in Part 'B' and release of properties as per details under paragraph 'C' subject to effect perfection of collateral of the properties set forth at 'A' was issued against confirmed orders. The repayment was provided as follows:-- "Repayable in 180 days from the date of disbursement, to be adjusted through realization of export bill/ negotiation, or on demand."
7. Export was effected by plaintiff No.6 on collection basis. Documents covering the exported goods were forwarded through the defendants Bank for collection to Messrs Habib Bank Limited, Dubai.
8. Heard the learned counsel and perused the record. Learned counsel have also filed synopses of arguments.
9. Mr. Saalim Salam Ansari, learned counsel for the plaintiffs, referring to the sale notices and documents has contended that in respect of some properties no mortgage money is mentioned in the Memorandum of Deposits of Title Deed and thus the same can neither be sold in auction nor even the same can be determined in terms of section 15 of the Ordinance, 2001. He further contended that the addresses of mortgagors are not mer tioned in the auction notice and so also the words 'outstanding dues' mentioned in the notice cannot be termed as outstanding mortgage money and in the absence of the amount of outstanding mortgage money, as provided under section 15(4) of the Ordinance 2001, therefore, the same is liable to be set aside. He contended that in pursuance of section 126 of the Contract Act, 1872 the mortgagers or guarantors cannot be held liable to pay the amount in excess to that mentioned in Mortgage Deed. While referring to section 18 of the Ordinance, 2001, learned counsel contended that the Bank could not take signatures on blank documents as has been done in the instant case. Learned counsel contended that as only in respect of two properties out of 14 the mortgage is created and hence this Honourable Court can grant injunction restraining the sale as provided under section 15(12) (a) of the Ordinance, 2001.
10. Mr. Ansari further argued that the documents pertaining to the export made by the plaintiff No.1 constitutes discharge of the obligation for payment by the plaintiffs as the documents amongst others included the negotiable bill of exchange which was forwarded for collection to Habib Bank Limited, Dubai. In case of non-recovery of payment, the defendant was obliged to return the documents in original to plaintiff No.
1. Unless such documents are returned the defendant has no legal justification to demand payment of the outstanding amount advanced under the Export Re-Finance Scheme. In the alternative Mr. Ansari argued that in case of non-payment by the foreign purchaser it was the obligation of the defendant as a Banker to take proper measures for recovery of the amount at Dubai from the Exporters. In the instant case neither the original bill of Exchange has been returned nor defendants instituted any proceeding for recovery of the amount against the Exporter. Holding of the bill of Exchange amounts to satisfaction of the claim therefore, without return of the bill of Exchange no amount can be claimed. The non-realization of proceeds was attributable to acts of the defendant for which the plaintiff was not liable. Learned counsel further argued that the amount as claimed by the defendant cannot be recovered without prior adjudication and any action taken by the defendant without first seeking prior adjudication of the claims by a competent Court of law is illegal. In support of his claim he has placed reliance on the cases of Abdul Sattar Shah., Zaidi v. University of Karachi 1993 CLC 2026; Khawaja Muhammad Akbar v. Khawaja Fateh Muhammad 1993 MLD 76; Nasimuddin Siddiqui v. United Bank Limited 1998 CLC 1718; National Bank of Pakistan v. Khalid Mehmood 2002 CLD 658; Mian Munir Ahmed v. The State 2004 PCr.LJ 2012; Abdul Shakoor Kaloodi v. The State SBLR 2002 Sindh 1263; Asim Textile Mills Ltd. v. National Accountability Bureau PLD 2004 Karachi 638; Agricultural Development Bank of Pakistan. v. Sanaullah Khan PLD 1988 SC 67; Abdul Latif v. The Government of West Pakistan PLD 1962 SC 384; Mrs. Mussarat Shaukat All v. Mrs. Safia Khatoon 1994 SCMR 2189; United Bank Limited v.
Messrs Azmat Trading Co. 2001 CLC 1172; Nazimuddin v. The Bank of Khyber 2005 CLD 647; Habib Bank Limited v. Ahmed Food Industries 2002 CLD 668; Aslam Industries Ltd. v. Pakistan Edible Corporation 1993 SCMR 683; Mrs. Aziz Fatima v. Mrs. Rehana Chughtai 2000 CLC 863; National Bank of Pakistan v. Shahyar Textile Mills Ltd. 2003 CLD 1370 and on an order passed by this Court in case of National Bank of Pakistan v. Messrs Fateh Apparel and others in Execution No.32 of 2001.
11. Mr. Aziz-ur-Rehman, learned counsel for the defendant while refuting the above contentions argued that the defendants are entitled to the recovery of the amount legally due from plaintiff No.1 and in case of their failure to discharge their obligation the defendant is legally empowered to exercise the powers under section 15 of the said Ordinance. He argued that the case of plaintiffs Nos.2 to 8 who are the mortgagers of the properties is entirely different from cases of guarantors.
He explained that the case-law cited by the learned counsel pertains to guaranties furnished to the Banks and do not pertain to mortgages. Further elaborating this aspect. Learned counsel proceeded to argue that the case of mortgage of properties by deposit of title deeds is a transaction of special nature and such mortgage is created by mere fact of deposit of title deeds. Such being the nature of transaction at best even if memorandum of deposit of title deeds drawn, the transaction is only acknowledged further by execution of documents which are sufficient to authorize and empower the defendant to dispose off the properties. The amount thus secured being the value of property offered for mortgage can be recovered against sale of such properties. In this regard learned counsel laid emphasis on the duty, of the customer as envisaged under section 3 of the said Ordinance. He elucidated difference between sale of properties by the. Financial Institution in exercise of powers conferred under section 15 of the said Ordinance, as different from sale in execution of decree of a Banking Court under section 19 of the said Ordinance. Mr. Aziz argued that the export against Letter of Credits (L.Cs.) is entirely different from export made on collection basis. Transactions through an irrevocable L.C. Constitute an undertaking by one Bank to another. This undertaking has no bearing on the financial relationship and payment of amount by the Importer to his Bank, which is altogether a separate and independent transaction. In such transaction the Bank cannot refuse to honour its commitment. Such documentary credits are part of International Banking Transactions controlled by the Uniform Customs and Practice for Documentary Credits, 1993 Revision as provided under ICC Publication No.500 and adopted by banks in Pakistan. However, the rules are not attracted to the exports by the plaintiff No.1 made on collection basis. Exports made on collection, consignment or deferred payment basis attract an entirely different set of rules applicable to collections. Therefore, codified as ICC Uniform Rules for collection URC 522. Under these Rules the documents forwarded to corresponding Bank creates no obligation to either a collection or any collateral undertaking by the other bank to ensure collection or any remittance.
The Collecting Bank, Remitting Bank and the drawee are different parties under Article 3 of URC 522.
In such cases the Banks are not required to ensure any payment to the defendants as no credit has been extended by the Bank on behalf of the foreign importer. The bill of Exchange accompanying the commercial documents is dealt with under Article 7 and liabilities and responsibilities are provided under part 'D' extending from Articles 9 to 15. The protest regarding failure in event of non-payment or nonacceptance attracts Article 24 of the URC 522.
12. In support of the action for auction of the mortgaged properties Mr. Aziz-u,r-Rehman argued that no property at Lahore is being auctioned. He contended that the claim of the defendant is duly established on the strength of the documents executed by the parties with respect to the export effected against which the remittance has not been received. It is the obligation of the plaintiff No.1 to procure remittance against exports made and failure to do so entails both criminal liabilities and action under the Foreign Exchange Regulations Act, 1946 providing for criminal prosecution on failure of the exporter to repatriate the sale proceed of exported goods within the specified period. In addition the settlement of claim of defendant is the liability of plaintiff No.1 for payment. Of outstanding amount against such transaction. The liability of the exporter is clearly defined under the law which cannot be shifted. Repatriation of the amount follows discharge of the financial obligation of plaintiff No.1 in the present suit. Failure in repatriation of the amount calls for exercise of powers of the defendant to effect recovery through the auction of the mortgaged properties offered as securities by the defendant against the amount that was liable to have been credited to his account with the defendant in case of repatriation of the foreign exchange, therefore, leave to appeal may be granted to the defendant to defend the case in addition to permission for exercise of powers of the defendant for auction of the mortgaged properties as provided under section 15 of the said Ordinance. He further contended that the claim pertains to past and closed transactions which have already been finalized while the properties were tendered as security for the advance under Export Refinance Scheme which is a separate and distinct transaction with its specified period of settlement. In support of his contentions, he has placed reliance on the cases of Muhammad Irshad v. Deputy Director Adjudication 2003 CLD 917; East West Trading Company v.
State Bank of Pakistan 2000 MLD 15; Sh. Abdul Sattar Lasi v. Federation of Pakistan 2006 CLD 18; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Dr. Tariq Nawaz v. Government of Pakistan 2000 SCMR 1956; Messrs Chawla International v. Habib Bank Limited 2003 CLD 956; Lips Records (P.) Ltd. v. Hadiqa Mahmood Kiani PLD 2002 Karachi 141; Muhammad Abid v. Nisar Ahmed 2000 SCMR 780; Ghulam Hassan v. Jamshaid All 2001 SCMR 1001; market Committee v.
Cantonment Board 2000 MLD 396; Managing Director Ravi Rayon Limited v. Province of Punjab 2001 MLD 577; Shakil Waaqas v. General Manager/Marketing P.R. PLD 2001 Karachi 185; Hala spinning Mills Ltd. v. International Finance Corporation 2002 SCMR 450; Valuegold Limited. V. United Bank Limited PLD 1999 Karachi 1; Bolan Beverages (Pvt.) Limited v. Pepsico Inc. PLD 2004 SC 860; Nizamuddin v. Central Government of Pakistan 1983 CLC 924; The Agricultural Development Bank of Pakistan v. Messrs Chaudhry Harvesting Company Lahore PLD 1993 Lahore 328; Javed Iqbal Khan v. Federal Employees B. & G.I. Funds 2002 SCMR 557; Industrial Development Bank of Pakistan v. Saadi Asmatullah 1999 SCMR 2874: Chairman, Minimum Wage Board v. Fayyaz Khan Khattak 1999 SCMR 1004; chief Land commissioner v. Maula Dad 1978 SCMR 264; Habib Bank Limited v. Messrs Pazhong Traders 1986 CLC 1086; Zubair Muhammad v. United Bank Limited 2004 CLD 112; Bank Alfalah Limited v. Iftikhar A. Malik 2003 CLD 363; Messrs M.A. Majeed Khan v. Karachi Water and Sewerage Board PLD 2002 Karachi 315; Messrs Al-Madan Coal Company (Pvt.) Ltd. v.
Regional Development Finance Corporation 2005 CLD 287; Muhammad Sharif v. Muhammad Hashim Paracha PLD 1987 Karachi 76; United Bank Limited v. Messrs Blessed International (Pvt.)
Limited 2003 CLD 39; United Bank Limited v. Central Cotton Mills Ltd. 2001 MLD 78; Pakistan Industrial Credit and Investment Corporation Limited v. Government of Pakistan 2002 SCMR 496; MCB v. Syed Ahmad Saeed Kirmani 1991 CLC 140; National Bank of Pakistan v. Shahyar Textile Mills Ltd. 2003 CLD 1370; United Bank Limited v. Azmat Trading Co. 2001 CLC 1172; Rashid Ahmad v. The State 2003 YLR 2432; Polymer International v. Bolan Bank Ltd. 2005 CLD 1129; Islamic Republic of Pakistan v.
Muhammad Zaman Khan 1997 SCMR 1508 and on an unreported order passed by D.B. Of this Court in Abdul Saleem v. Federation of Pakistan and others CP No.D-195 of 2006.
13. Contention of Mr. Saalim Salam Ansair that the Bill of Exchange is a negotiable instrument as defined under section 5 of the Negotiable Instruments Act and is required to be returned prior to any action for recovery of amount as held in the case of Shahyar Textile Mills Ltd. (Supra) is indeed attracted to transactions where payment is backed by a credit established by the importers Bank under Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication No.500 applicable to all documentary credits.
14. Transactions against irrevocable L.Cs. Are bank to bank transactions so far as the question of rights, obligations and payment is made by one bank to another. They enjoy the sanctity of the transactions between the Bank to the Bank, in the course of international trade pertaining to terms covering the Irrevocable L.C., the matter has been examined in detail by the Honourable Supreme Court in the case of Haral Textiles Limited v. Banque Indosuez Belgium 1999 SCMR 591. The effect of Irrevocable L.C. Has been held to substitute the issuing Bank in place of a buyer. The issuing Bank thus undertakes to buy the shipping documents. This undertaking is absolute and so long as the documents of title to the goods conform to the terms and conditions of the contract as specified in the L.C., it is an obligation of the Bank to accept the documents regardless of any dispute between the seller and the buyer as to the quality of goods shipped under the L.C.. This transaction between two Banks is independent of any dispute between the seller and the buyer.
International Commerce involving transactions based on 'L. C. Are carried on the footings that conform credits by Bankers of that charter. They do not call for any interference by the Court of law and derive their strength based on recognized banking practices, such charter does not involve interference by the Court of law except only in exceptional circumstances where a clear case of fraud is involved challenging the validity of L.C. On a ground akin to fraud or concealment of material facts. As to the question of the Holder of Bill of Exchange in due course executed in aspect of L.C.; it stands on higher pedestal than a simpliciter beneficiary under a L.C., so that the interest of innocent parties, who may hold drafts drawn upon the L.C. Is protected. The importance and significance of transactions of such nature cannot be overemphasized suffice to quote the observations of the Honourable Supreme Court:- "It would be a bad day in the business world, if for every breach of contract between the buyer and the seller, a party may come to a Court of equity and enjoin payment on drafts drawn upon a Letter of Credit issued by a Bank which owes no duty to the buyer in respect of the breach."
15. However, the instant case does not pertain to a transaction of export under an Irrevocable Letter of Credit attracting the principles laid down in the case of Azmat Textile Mills (supra). In the present case goods were exported on collection basis and not under an Irrevocable Letter of. Credit. Such 'transactions attract Article of ICC Uniform Rules for URC 522 as set forth under ICC Publication No.522. This publication provides a separate set of rules entirely different from the set of rules contained in ICC Publication 500. While under an Irrevocable L.C. The Bank is obliged to make payment at site within the stipulated period for negotiation and reimbursing the Bank with the amount in pursuance of Articles 8 and 9 of UCP 500. As is apparent from a bare reading of the Articles, Article 1(b) specifically provides that Banks shall have no obligation to handle either a collection or any collection instruction or subsequent related instructions. Collection is defined under Article 2(a) while Article 2(b) provides the meanings of Financial Documents which reads as under:-- Article 1 Application of URC
(a) The Union rules for Collections, 1995 Revision, ICC Publication No.522, shall apply to all collection as defined in Article 2 where such rules are incorporated into the text of the (collection instruction) referred to in Article 4 and are binding on all parties thereto unless otherwise expressly agreed on contrary to the provisions of a national, State or local law and/or regulation which cannot he departed from.
(b) Banks shall have no obligation to handle either a collection or any collection instruction or subsequent related instructions.
15-A. In such transactions the collecting bank does not extend any guarantee or assurance to make any payment and the possibility of dishonour of the negotiable Bill of Exchange on presentation exists. Even provision has been made for such a situation as to protest. Article 24 shows that in the absence of specific instructions regarding protest in the event of nonpayment or non-acceptance, the Bank concerned with the collection has no obligation to have the documents protested for non-acceptance. The collecting Bank is, under the circumstances, under obligation either to follow up the recovery or to take any step until clearly so instructed and that too only to the extent of protest. Article 24 is reproduced as under:-- Article 24. Protest.
The collection instruction should give specific instructions regarding protest (or other legal process in lieu thereof) in the event of non-payment or nonacceptance. In the absence of such specific instructions, the banks concerned with the collection have no obligation to have the document(s) protested (or subjected to pther legal process in lieu thereof) for non-payment or nonacceptance.
Any charges and/or expenses incurred by banks in connection with such protest, or other legal process, will be for the account of the party from whom the collection instruction was received.
16. In the instant case learned counsel has not referred to any document to show any further steps taken by the Exporter/plaintiff to seek recovery or any instruction for return F of documents. Under the circumstances the defendant in absence of instructions is not expected to act in any manner as the same would amount to acting without instructions.
17. Collection for amount and remittance of payment attracts the provisions of section 12(1) of the Foreign exchange Regulation Act, 1947 which makes it obligatory upon the plaintiff to repatriate the Foreign Exchange within the stipulated period and failure to do so entail penal action. The repafriation of foreign exchange also have the consequence of G settlement of the outstanding liability .Of the plaintiff w I h the defendant bank. Under the circumstances, the conditions laid down in UCP 522 and the provisions of Foreign Exchange Regulation Act, 1947 being the special law pertaining to export made on collection/consignment basis are attracted. These provisions of the law applicable and are totally different. Frpm transaction is covered by ICC Publication 500. In the instant case after the dishonour of the bill of exchange the documents inclusive of the Bill of Exchange are to be dealt with in accordance with the instructions of the plaintiff No.1 who may exercise the option to take steps to effect recovery. It is for the plaintiff to take appropriate measure's in view of his undertaking with the State Bank of Pakistan to repatriate the amount in foreign exchange. In case of failure in receipt of remittance in foreign exchange, the amount advanced by the defendant Bank is duly secured by way of mortgage of properties to keep the defendant secured in the event of failure of any receipt of the amount. Under the circumstances the case of Azmat Textile Mills (supra) relied upon by Mr. Saalirn Salam Ansari could not be attracted to the present case where the defendant is neither holding the Bill of Exchange nor has received any consideration for the same and it is to be dealt with under instructions of plaintiffs.
18. In fact the Habib Bank Dubai is the collecting agent who is holding the Bill of Exchange for collection and after collection for subsequent disbursement in pursuance of the instructions as the collecting agent of plaintiff. The defendant neither has any power, possession or control over the said bill of exchange except to act in pursuance to the instructions of plaintiffs within the scope of ICC 522 as such the bill of exchange is for all practical purpose, under the constructive possession of the .Plaintiff held by the collecting agent/bank which in the instant case is the Habib Bank at Dubai.
19. The question of grant of injunction and the powers of the Bank to exercise the option of sale of properties has been considered at length in the case of Abdul Sattar Laasi and referred to the approval by the Division Bench of this Court in an unreported case of Abdul Saleem v. Federation of Pakistan and others (supra) wherein it has been held as under:-- 'The provisions of section 15 neither innovation or novel as similar provisions already exists in a number of statutes, such as; section 60 of Transfer of Property Act, 1882, wherein a mortgagee can sell mortgaged property without intervention of the Court and he may not file a suit for that purpose in a Court of law, but this does not mean that it cannot be done at all. If he finds any difficulty in proceeding without assistance of the Court, he may take a decision to go to a Court of law, but it is 'a decision of the mortgagee and at this stage no quasi-judicial function is involved.
Similar provisions are also available in section 40 of the Industrial Development Bank of Pakistan Ordinance, 1961, empowering the Bank to take over the management of hypothecated goods etc., in case the industrial concern makes any default in payment or fails to comply with the terms of its agreement with the Bank."
20. In the said judgment it has also been held that though a customer can file a suit against the financial institution in the Banking Court but neither the Banking Court nor High Court shall grant an injunction restraining the sale or proposed sale of mortgaged property, unless it is satisfied that no mortgage in respect of the immovable property has been created or all moneys secured by mortgage of the property have been paid or the mortgagor or objector deposited in Banking Court in cash outstanding mortgaged money.
21. The case-law cited by Mr. Saalim Salam Ansari as to the specific amount of mortgage pertains to guarantees for payment of amounts which does not extend to cases involving recovery by way of foreclosure of mortgage by exercise of special powers conferred upon the Banks to effect recovery of their outstanding amounts as held in the case of Abdul Sattar Last (supra) as discussed above.
22. The recovery in the instant case pertains to the amount already settled and disclosed in the documents covering the export and mentioned in the documents forwarded to collection. It is, therefore, specified/ascertained sum, which was payable by plaintiff No.1 to the defendant. Under such circumstances, no prior adjudication is called for. Likewise a prima fade case involving failure of repatriation of amount due to non-remittance of the amount in foreign exchange, as is required under the provisions of Foreign Exchange Act, appears to be there on bare reading of documents involved. The contention of the learned counsel for the defendant that the defendant is not proceeding with any action pertaining to past and closed transaction but the present action only pertains to the amount advanced under the Export Refinance Scheme duly backed by mortgage of properties as collateral in case of non-realization of the export proceeds, finds support from the documents on record. Under the circumstances, the question of granting restraining orders does not arise as held in the case of Abdul Sattar Lasi (supra) and the same view found favour before the Division Bench of this Court in C.P. No.195 of 2006 (Abdul Saleem v. Federation of Pakistan and others).
23. In view of the above position, the action of the defendant is not violative of any provisions of law and is prima facie within the framework of power conferred upon the defendant under the provisions of Financial Institutions (Recovery of Finances) K Ordinance, 2001 which is a special law to provide speedy recovery to ensure the proper economic health of financial institutions.
24. Accordingly, C.M.A. No.3878 of 2006 and No.3879 of 2006 are dismissed while application under section 10 of Financial Institutions (Recovery of Finances) Ordinance, 2001 (C.M.A. No.4504 of 2006) is allowed, which may be treated as written statement. With the consent of the learned counsel the office objections have been overruled and suit has already been numbered vide order dated 13-6- 2006 in view of the fact that the question as regards the court-fee is already under consideration before a larger Bench of this Court.