SH. AZMAT SAEED, J.---This appeal under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is directed against the judgment and decree dated 2-10-2004 passed by the Banking Court No.II, Lahore, whereby the suit filed by the respondent No.1-Bank against the appellants and respondents Nos.2 to 6 was decreed.
2. Brief facts leading to the filing of this appeal are that the respondent No.1 Bank filed a suit against the appellants and respondents No.2 to 6 for the recovery of Rs.1,05,07,813.93. It was contended in the plaint that the appellant No.1 is a sole proprietorship of respondent No.2 which had applied for and was sanctioned, granted and availed of a financial facility from the respondent No.1 Bank for a sum of Rs.8.900 million. The said facility was for the purchase of locally manufactured machinery i.e. Semi-automatic brick kiln. It was contended that the said finance was repayable in nine years through equal quarterly instalments with one year grace period. The facility was subject to a mark- up of 8% per annum and in the eventuality that any part of the facility was availed by the appellants before the refinance facility under the State Bank of Pakistan's scheme for purchase of locally manufactured machinery is effected then the respondent No.1 Bank would be entitled to a mark-up @ paisas 48/Rs.1,000 per day. In this behalf an agreement dated 13-2-1992 was allegedly executed by the appellants in favour of the respondent No.1-Bank. Respondents Nos.2 to 6 were impleaded as guarantors and/or mortgagors. Pursuant to a notice from the Banking Court seized of the matter the appellants filed their application for leave to defend the suit. However, no application was filed on behalf of respondents Nos.2 to 6. After hearing the appellants the Banking Court dismissed the application for leave to defend the suit and decreed the same in favour of respondent No.1 Bank against the appellants and respondents Nos.2 to 6 for a sum of Rs.1,05,07,813.93 along with costs and costs of funds vide the impugned judgment and decree dated 2-10-2004.
3. The learned counsel for the parties have been heard and the record requisitioned from the trial Court has been perused.
4. It is contended by the learned counsel for the appellant that the machinery in question was purchased from the funds made available by the respondent No.1-Bank. The said machinery was insured with Royal Exchange Insurance Company. The machinery after delivery to the appellant, it is contended, was stolen in the night of 9/10 April, 1993. The factum of such theft was reported to the local Police and an F.I.R. No.94 of 1993 dated 10-4-1993 was lodged at Police Station Manga Mandi, Lahore. In this context, it is contended on behalf of the appellants, that they are not liable for the amount and the respondent No.1-Bank should recover the amount claimed from the Insurance Company. It is further contended by relying upon the State Bank Circular No.13 that the facility granted to and availed of by the appellants was a refinance facility of the State Bank of Pakistan governed by the aforesaid Circular No.13 in terms whereof the respondent No.1-Bank was not entitled to charge any mark-up but only a service charge, hence, the claim of the respondent No.1 Bank, it is contended, is illegal. The learned counsel adds that in terms of the agreement between the parties a debt equity ratio of 60/40 was required to be maintained, hence, the respondent No.1 Bank is liable to cover the loss for its share of the equity. It is further contended that the respondent No.1-Bank had a right to dispose of the property and having failed to do so are estopped from claiming the amount, hence, the suit was liable to be dismissed.
5. The learned counsel for the respondent No.1-Bank has controverted the contentions raised on behalf of the appellants.
6. It is contended that the fact that the machinery in question was insured in rio manner releases the appellants from their liability. Adds that the mark-up charged was strictly in accordance with the agreement between the parties and Circular No.13 of the State Bank of Pakistan. No excess markup, it is contended, has been charged or claimed. It is further added that the debt equity ratio pertains only to the minimum investment required to be made by the appellants in the project and in no manner cast any liability upon the respondent No.1Bank. In the above circumstances the counsel prayed for dismissal of this appeal.
7. A perusal of the record including the pleading of the parties and the documents filed reveal that the appellants have admitted the sanction of the loan in question vide sanction letter dated 13-12- 1991 and the agreement of finance dated 13-2-1992 the execution whereof is also admitted. None of the documents sued or relied upon by the respondent No.1-Bank have been denied. It is also admitted by the appellants that the finance facility in question was availed and funds thereof paid to the supplier of the machinery. It is also admitted that the machinery in question was in fact delivered to the appellants. It is the case of the appellants that the said machinery was stolen on the night of 9/10 of April, 1993. A perusal of the admitted finance agreement dated 13-2-1992 reveals that Article 6.10 thereof clearly provides that after delivery entire risk of any loss or damage thereto shall be to the count of the appellants. The preceding sub-Article also lay the responsibility of all risks of damage or loss to or by the machinery with the appellants, thus, in the instant case theft of the machinery after delivery as alleged is not only on account of the appellants but also the same in no manner mitigates the liability of the appellants towards the respondent No.1-Bank in respect of the finance in question. Article 6.04 of the Finance Agreement requires that the said machinery shall be insured but nothing in the sub-Article or any other Article of the said agreement of finance dated 13-2-1992 envisages the extinguishment of the liability of the appellants on account of any loss of the machinery whether it was insured or not. The learned counsel for the appellants at the bar has been unable to point out any such provision of the said agreement or any other document on the record. In the instant case an application under Order I, rule 10 of the C.P.C. Was filed by the appellants seeking that the Insurance Company in question be impleaded as a party to the proceedings before the trial Court. The said application was allowed vide order dated 1-5-1995 which was challenged before this Court in a constitutional Petition which was accepted vide order dated 5-11-2003 whereby the order dated 15-1-1995 impleading the Insurance Company was set aside as the said Insurance Company was not a borrower or a customer as defined by law.
8. No doubt in terms of the arrangement inter se the parties the appellants were required to maintain a debt equity ratio of 60/40. However, covenant to this fact only cast a responsibility on the appellants to invest a minimum specified proportion of the project cost. This responsibility of the appellant obviously does not de-track from its liability to the respondent No.1 Bank for the finance availed under the admitted finance agreement dated 13-2-1992. Similarly the right of the respondent No.1-Bank to take possession of the machinery in question also does not de-track from the liability of the appellant. Much emphasis has been made by the counsel for the appellants or Circular No.13 issued by the State Bank of Pakistan to contend that the respondent No.1-Bank could only receive a service charge in addition to the principal amount. We are afraid that the counsel has misunderstood the said Circular and the nature of the facility availed by the appellants. It is an admitted fact on the record that the facility in question was a re-finance facility of the State Bank of Pakistan to purchase of locally manufactured machinery. It is .Apparent both from Circular No.13 as well as the sanction advice and the agreement of finance that the funds for the said facility are to be made available by the State Bank of Pakistan to the respondent No.1-Bank and the said amount is to be disbursed to the appellants. The State Bank of Pakistan makes available the said funds at a reduced rate of mark- up and the bank in question can charge the said reduced rate of mark-up plus a service charge. In the instant case as is apparent from the agreement of finance that the appellants have been charged mark-up 8% per annum which includes the mark-up to be paid by the respondent No.1 Bank on the refinance funds made available by the State Bank of Pakistan in terms of the said scheme plus a service charge thereupon. Had the funds been made available by the respondent No.1-Bank from its own, sources then the rate of mark-up would have been paisas 16/ Rs.1000 per day as is evident from the agreement of finance which provides such rate of mark-up that penalties that may be paid to the State Bank of Pakistan by the respondent No.1Bank on account of default by the appellants. The plaint is supported by a statement of accounts. The learned counsel for the appellants has been unable to point out any debit entry of mark-up which is over and above the stipulated rate of mark-up in terms of Circular No.13 and agreement of finance sued upon. It may be noticed that in terms of the agreement to finance (Article 2) the sale price to be paid by the Bank to the appellants has been scribed as Rs.8.9 million while the purchase price to be repaid by the appellants to the respondent No.1 Bank has been noted as 13.226 million. The respondent No.1-Bank filed a suit for the recovery of Rs.1,05,07,813.93 including principal and mark- up. The impugned judgment and decree appears to be in accordance with law. In the facts and circumstances no plausible defence has been put up by the appellants. There was no triable issue.
Learned counsel has been unable to point out any illegality in the judgment so as to persuade us to interfere therewith. This appeal is without any merit and is hereby dismissed. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.