FAISAL ARAB, J.---This order disposes of plaintiff's interlocutory application seeking amendments to the plaint as well defendant No. l's objection as. To the maintainability of this suit on the banking side of this Court.
2. Brief facts of the case are that plaintiff entered into an agreement with Shamsi Traders for supply of pampers. The price of such supply was secured by the purchaser Shamsi Traders in the shape of six local irrevocable Letters of Credit issued by defendant No.1-Bank in favour of the plaintiff. The plaintiff then made supplies to Shamsi Traders and sought payments under the six Letters of Credit from defendant No.1Bank through the advising Bank i.e. The defendant No.2. The defendant No.1- Bank however, refused to make payments as according to it there were discrepancies in all the six Letters of Credit. Though the discrepancies according to the plaintiff were minor and were removed yet payments were refused. Such refusal led to the filing of the present recovery suit under the provisions of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
3. The defendant No.1 Bank which issued six. Letters of 'Credit on behalf of Shamsi Traders filed leave to defendant application. In paragraph 13 (iv) of its leave to defend application, the defendant. No.1 Bank took an objection that in the plaint the plaintiff has failed to value its suit and therefore, the plaint lacks an essential requirement of law.' An objection as to the maintainability of the suit on the banking jurisdiction was also taken as according to defendant No.1 Bank, the plaintiff does not fall within the definition of 'customer' as defined in section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and therefore, cannot invoke the provisions of the said Ordinance, On account of the first objection, as to the absence of valuation of the suit in the plaint, the plaintiff moved Civil Miscellaneous Application No.1591 of 2006 under Order VI, rule 17, C.P.C., seeking insertion of valuation clause through amendment of the plaint. In the said application the plaintiff also sought addition in the prayer clause in the shape of a direction to defendant No.1 Bank to make payment of Rs.150 million to the plaintiff.
4. I shall first deal with the application seeking amendments to the plaint.
5. As to the prayer for addition of valuation clause through amendment, suffice is to add that such amendment is sought on the basis of defendant No. l's own objection which it raised in paragraph B (iv) of its leave to defend application wherein it is stated that the plaint does not contain valuation clause. As such an omission can be provided through amendment in the plaint, the defendant No.1 cannot now raise any objection to the insertion of valuation clause and the plaintiff is fully justified in seeking amendment to that effect. The opposition to such amendment is therefore, unwarranted.
6. With regard to the objection to the proposed second amendment it was contended by Mr. Abdul Sattar Lakhani, learned counsel for defendant No.1 Bank that in the entire body of the plaint no amount has been quantified against the defendant No.1 Bank and yet an amendment is being sought in the prayer clause of the plaint containing direction to defendant No.1 Bank to pay a sum of Rs.150 million.
7. I have read the contents of the plaint. It is quite evident that the suit is based on refusal of the defendant No.1 Bank to honour six Letters of Credit issued by ft in favour of the plaintiff. From the contents of paragraphs 5, 7 and 8 of the plaint also it is evident that the plaintiff supplied the goods to Shamsi Traders on the basis of six Letters of. Credit issued by defendant No.1 BanK in favour of the plaintiff. Thereafter the plaintiff sought payments under the said Letters of Credit from defendant No.1 Bank, which was refused on the ground that there were certain discrepancies in the letters of credit. Furthermore, in paragraph 17 of the plaint it is clearly stated that the .Cause of action arose to the plaintiff when the defendant No.1 Bank established six irrevocable Letters of Credit. Even in the prayer clause declaration is sought to the effect that defendant No.1 Bank has no right to withhold the payment that became due under the Letters of Credit. As undisputedly the beneficiary of these six Letters of Credit issued therefore, the argument of the learned counsel for defendant No.1 Bank that no relief has been sought against defendant No.1 Bank is misconceived.
The opposition to the' second amendment is also not justified. This Court therefore, finds no legal justification to refuse the grant of C.M.A. 1591 of 2006. The plaintiff is allowed to make both the amendments to the plaint within fourteen days. by defendant No.1 Bank on behalf of Shamsi Traders is the plaintiff and plaintiffs suit for recovery is also directed against the defendant No.1 Bank on the basis of six Letters of Credit,
8. I shall now proceed to examine the objection with regard to maintainability of this suit on the banking side.
9. In support of the objection as to the maintainability of the suit on the banking side, Mr. Abdul Sattar Lakhani argued that a beneficiary of Letter of Credit does not fall under the definition of 'customer' as defined under section 2(e) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 and as under section 9 of the said Ordinance suit on the banking jurisdiction can only be filed by a financial institution or its customer, this suit cannot proceed on the Banking Jurisdiction of this Court and has to be converted into an ordinary civil suit.
10. Mr. Aziz A. Sheikh learned counsel for the plaintiff on the other hand argued that as the transaction in question pertained to six Letters of Credit which is one of the modes of financing mention in the definition of finance provided under section 2(d) (iii) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 therefore, the plaintiff being beneficiary of these Letters of Credit was fully justified to invoke the banking jurisdiction of this Court. In support of his argument Mr. Aziz A. Sheikh has relied upon the case of Qatar Airways PLC v. ANZ Grindlays Bank reported in 2000 CLC 1455.
11. Section 2(d) (iii) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 includes Letter of Credit as one of the modes of financing. It reads as follows:-
(d) 'finance' includes:- (1)
(ii)
(iii) facility of guarantees, indemnities, Letters of Credit or any other financial engagement which a financial institution may given, issued or undertake on behalf of a customer, with a corresponding obligation by the customer to the financial institution;
12. No doubt, Letter of Credit is included in the definition of "finance" under the Financial Institutions (Recovery of Finances) Ordinance, 2001, but this does not mean that all parties that may be connected in any way to any financing defined under section 2(d) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, could invoke the Banking jurisdiction of this Court. In this regard, section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is very clear, wherein parties to a Banking suit are specifically mentioned. Section 9 of the Ordinance, 2001 states that 'Where a customer or a financial institution commits a default in the fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer may institute a suit in the Banking Court.................. "
Financial Institutions (Recovery of Finances) Ordinance, 2001, being a special law, its scope is to be confined to the parties, which are entitled to invoke its jurisdiction and section 9 clearly mentions that they are only two i.e. a financial institution and its customer. Other than these two if a person is connected in some way to a transaction falling under the definition of "finance", that person not being a customer of the financial institution could not invoke the jurisdiction provided under section 9 of the Ordinance, 2001 as section 9 of the Ordinance, 2001 does not authorize such person to invoke banking jurisdiction. The real test is not that a dispute has arisen in relation to a transaction defined as "finance" under section 2(d) of the Ordinance, 2001, but the real test is that dispute should have arisen between a "financial institution" and its "customer". There is no denying the fact that such dispute must relate to a financial facility defined under the term "finance" but it is also necessary that dispute should have arisen between a financial institution and its customer and no one else. A dispute relating to any of the transactions covered by the definition of "finance", if not between a financial institution and its customer; then this is not sufficient to give jurisdiction to the Banking Court to try such dispute. A party other than a financial institution or a customer can neither sue nor be sued under section 9 of the Ordinance, 2001 as there is no such room for them in section 9 of the Ordinance, 2001. Hence a person not being a customer, if has to sue a financial institution, he is to do so under the provisions of general law and not under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
13. Having come to the conclusion that only a financial institution and its customer can invoke the jurisdiction of the Banking Court under the Financial Institutions (Recovery of Finances) Ordinance, 2001, it is necessary to examine what persons could come within the definition of 'customer' as provided in section 2(c) of the Ordinance, 2001. Section 2(c) of the Ordinance, 2001 defines `customer' as follows:-- 2(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.
14. The above 'definition , of 'customer' as provided in the Financial Institutions (Recovery of Finances) Ordinance, 2001 includes three categories of persons. First category is, of the person to whom finance is extended by a financial institution, I shall say that this category means persons who avails fund based financial facility from a financial institution.
15. The second category of persons who come within the definition of "customer" are the persons, who avails non-fund based financial facility such as Guarantee or Letter of Credit i.e. The persons on whose behalf a Guarantee or a Letter of Credit has been issued by a financial institution. The persons for whose benefit such instruments are opened i.e. The beneficiary of such instruments are not included within the definition of section 2(c) of the Ordinance, 2001 as it includes within its ambit as "customer" only such person on whose behalf a Guarantee or a Letter of Credit has been issued. The persons who are entitled to receive finance from a' Financial Institution without any obligation to repay, such as a beneficiary of a Guarantee or Letter of Credit or a person who is entitled to receive payment from a financial institution in order to make supplies to a customer of a financial institution cannot be treated as a 'customer' of the financial institution. There is no room for including the beneficiary of the non-fund based facility to be included in the definition of "customer". A beneficiary cannot be treated a customer of a financial institution as financial institution is not concerned as to who is the beneficiary of its Guarantee or Letter of Credit. It may not even come in contact with the beneficiary of a Guarantee or a Letter of Credit. The beneficiary has merely figured in at the instance of the person on whose behalf the financial institution has issued a Guarantee or a Letter of Credit. Extending the meaning of the word "customer" to the beneficiary of an instrument would amount to doing violence to the provisions of section 2(c) and section 9 of the Ordinance, 2001.
16. The third and the last category of persons who fall under the definition of "customer" are those who stand surety or indemnifier before a financial institution on behalf of direct customers of financial institutions. This last category of persons though not the direct customers of a financial institution, as is the case with the first two categories of persons, but through a deeming provision of section 2(c) of the Ordinance, 2001 they too have been made customers of the financial institutions as they have taken upon themselves the obligation to discharge G the liability of a customer, who availed the financial facility from a financial institution.
17. The above analysis of the meaning of the word "customs -" as defined in section 2(c) of the Ordinance clearly leads to th conclusion that the word "customer" means and includes (a) a person to whom finance has been extended directly by a financial institution; (b) a person on whose behalf a 'financial institution undertakes to make payment to a third party e.g. Under a Guarantee or a Letter of Credit; and (c) a person who has taken upon himself the obligation to repay to the financial institution the defaulted sum in his capacity as H surety or indemnifier.
Therefore, only these three categories of persons come within the definition of ".Customer" and only they can sue or be sued under section 9 of the Financial Institutions (Recovery of Finances)
Ordinance, 2001. No person, no matter in what other capacity he is connected with a financial facility, if he does not fall within the definition of a "customer" as defined under section 2(c) of the Ordinance, 2001, he can neither sue nor be sued under section 9 of the Ordinance, 2001 and the legal remedy for and against him lies before ordinary Civil Court.
18. From the above discussion it is also evident that the definition of "customer" as provided under section 2(c) of Financial Institutions (Recovery of Finances) Ordinance, 2001 includes within its ambit only such persons against whom a Financial Institution has recourse in the event of default in repayment of finance provided by it i.e. The persons upon whom obligation is created to repay in case of default in repayment and no one else and it is for this reason that section 9 of the Ordinance envisages only a financial institution and its customer as party to a banking suit. Thus, the persons who ultimately become liable to make payment to a financial institution in case of a default in the repayment of finance are the persons who fall under the definition of "customer" and none else.
19. The case of Qatar Airways PLC v. ANZ Grindlays Bank was decided under the repealed Act of 1997 and the decision was primarily based on the definition of the word "finance" as provided under the repealed Act. In the present case not only the definition of the 'finance' is curtailed but in my view the real test is whether a person falls within the definition of 'customer' as provided under section 2(c) of the Ordinance, 2001. I therefore, with utmost respect to the said decision, differ from its conclusion.
20. In view of the above discussion, the objection as to the maintainability of this suit on the banking side is sustained. Resultantly, I convert this suit from Banking Suit to an ordinary civil suit.
The leave to defend applications bearing Nos.C.M.As. Nos.7388, 7389 and 7691 of 2006 that have been filed by the defendants are to be treated as their respective written statements. C.M.A. 7690 of 2006 filed by defendant No.2 seeking condonation of delay in filling leave to defendant application upon conversion of this suit as ordinary civil suit has become infructuous.
21. C.M.A. 1591 of 2006 seeking amendments to the plaint is allowed. The plaintiff is directed to file amended plaint within 14 days. In view of disposal of. C.M.A. 1591 of 2006 and conversion of this suit as ordinary civil suit, and conversion of leave to defendant applications into written statements, none of the listed applications remain pending. After filing of the amended plaint by the plaintiff, office is directed to fix this suit in Court for settlement of issues.