PLA No,73-B of 2006 ' SYED HAMID ALI SHAH, J.---Defendants have jointly filed instant application for grant of leave to defend the suit, on the ground that the suit has not been filed by a competent person; that blank documents were procured by the bank and were filled subsequently to initiate the proceedings against defendants; that letter of guarantee, statedly signed and executed by defendants Nos.2 and 3, was without consideration and guarantee was issued pertaining to agreement dated 19-7- 2003 and has no nexus with the instant loan; that finance was rolled over for a further period, which is not permissible under law; that sureties/guarantors are absolved of their responsibilities under sections 133 and 135 of the Contract Act, 1872, as the plaintiff bank and principal debtor (Company) subsequently varied the terms of original agreement; that sureties have made the payment of outstanding amount; that memorandum of deposit of title deed is not the memorandum, rather it is an agreement of mortgage, which requires registration; that title deeds were deposited with regard to the agreements, which are void, therefore, same are not enforceable under law; that no amount is outstanding; that finance statedly disbursed to the applicants/defendants offends BPD circular No,13 dated 20-6-1984; that documents are void and mark-up on mark-up has been charged; that sale price was not disbursed to the defendants; no amount is due, liabilities have already been discharged and entries in the statement of account do not reflect true picture of transaction between the defendants and the plaintiff. Statement of accounts has not been prepared and signed according to the Bankers Books Evidence Act, 1891 and the plaintiff has failed to make out an open and shut case, therefore, applicants are entitled to leave to defend the suit.
Besides, it was also contended by learned counsel for the applicants/defendants that suit of the plaintiff is barred by limitation.
2. Mr. Munawar-ul-Islam, Aavocate for applicants has submitted that power of attorney, filed with the suit, shows that attorney was executed by the Managing Director and two. Other Directors, in favour of Shaheen Nazar Qureshi. It has not been shown how the executant/Managing Director with two of his Directors, has derived this authority. He submitted further that extract of minutes of 75th meeting of the Board of Directors and power of attorney do not confer the authority upon Shaheen Nazar Qureshi to sign and verify the pleadings. Learned counsel supported his contention by referring to the case of 'Messrs Ittefaq Industries (Regd.) through Managing Partner and 2 others v.
Bank of Punjab through Duly Constituted Attorney" 2004 CLD 1356 and an order passed in R.F.A.
No,683 of 2001. Learned counsel has submitted that according to paras. 4 and 5 of the plaint, the loan was statedly based on repayment of fund based counter guarantees of consortium bank, to the extent of Rs,85 million. Learned counsel added that financial assistance, subject matter of suit, accorded to the applicants, is not the facility on the basis of counter guarantee. Referring to borrower basic fact sheet (Annexure 'E') it is submitted that facility, availed by the applicants, is non-fund based and fund based loan facility. Learned counsel has referred to IB-6 dated 30-6- 2001, where sale price has been mentioned as Rs,100 million, while purchase price as Rs,120 million.
The period of transaction, as agreed in the said document, is upto 30-6-2002. The agreement was subsequently superseded by another agreement dated 19-7-2003, where the sale price of Rs,100 million was to be repaid as purchase price to the tune of Rs,114 million and the mode of payment, as mentioned in the agreement, is through 47 instalments uptill 15-3-2009. Learned counsel has submitted that agreement nowhere stipulates how and when the purchase price is to be paid in instalments. According to learned counsel, this shows that time was not essence of the contract and the parties had not agreed for any schedule of payment. Learned counsel has submitted that payment schedule was revised subsequently and period of repayment was extended till 15-8-2001 instead of 2009. Learned counsel emphasized that memorandum of deposit of title deed, pertains to a financial assistance of consortium banks. The moment liability of the consortium banks, stood discharged. The memorandum of deposit of title deed has become unenforceable. Learned counsel has submitted that the fact sheet (Annexure 'E') reflects that the mortgage stood redeemed, as in the relevant column of existing security, the word incorporated is "Nill. While referring to the memorandum of deposit of title deed dated 30-6-2001, it is submitted that no title deeds were delivered as the memorandum itself stipulates that documents were deposited with Emirates Bank, Allied Bank and the same were required to be deposited with the, plaintiff bank, after their redemption from Emirates Bank. It was added by learned counsel that certain documents are mentioned in Schedules 1 and 2 of the said documents. These documents were never deposited with the plaintiff-Bank. Another lender bank i,e, Muslim Commercial Bank has issued no objection certificate conditionally. Learned counsel, after having discussed the defects in mortgage, went on to argue that statement of accounts pertains to current accounts, while the loan disbursed to defendant No,1, was running finance, which subsequently converted into demand finance. Learned counsel has submitted that statement of accounts does not reflect the source of entries and the amounts which were adjusted towards the liability. Statement of accounts, according to learned counsel, does not reflect true picture of transaction. Learned counsel submitted that an amount of Rs,40,585,496, was payable, which the defendants have paid. Learned counsel referred to the case of "National Bank of Pakistan v. Al-Asif Sugar Mills Limited and other" 2001 MLD 1317 and submitted that suit of the plaintiff is premature. Learned counsel has submitted that petitioner has not filed plaint according to the requirements of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Thus any plaint deviating from the prescribed procedure is not valid and no decree can be passed on the basis of defective pleadings. Learned counsel supported his contention by referring to the cases of "Habib Bank Ltd. v. A.M.B. Graner (Pvt.) Ltd and others" PLD 2001 Karachi 264 and "City Bank N.A.,A Banking Company through Attorney v. Riaz Ahmed" 2000 CLC 847. Learned counsel summed up his arguments by submitting that statement of accounts, which is not in accordance the provisions of Bankers Books Evidence Act, 1891. It was contended that according to the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001.
The plaint must be supported by statement of accounts, but the plaint in the instant suit do not meet the requirement of special statute and such plaint is liable to be rejected. To support this contention, the cases of "Bankers Equity Limited through Principal Law Officer and 5 others v. Messrs Bentonite Pakistan-Limited and 7 others" 2003 CLD 931; "Messrs C.M. Textile Mills (Pvt.) Limited through Chairman and 5 others v. Investment Corporation of Pakistan" 2004 CLD 587 and "Habib- ur-Rehman and another v. Judge Banking Court No,4 Lahore and another" 2006 CLD 217 were referred.
3. Learned counsel for the plaintiff, on the other hand, submitted that defendants have raised vague objections as to the filing of the suit. The suit was filed by Shaheen Nazar Qureshi, who is duly authorized by resolution Board of Directors dated 28-4-2006 and he holds a valid power of attorney, on behalf of the plaintiff bank. The power of attorney has been executed in his favour by Managing Director and two Directors of the plaintiff-Bank. While referring to section 9 of the Financial Institutions (Recovery of Finances), Ordinance, 2001, learned counsel has submitted that an authorized officer, in whose favour a power of attorney has been executed, can institute the suit.
He has submitted further that leave to defend the suit without compliance with provisions of subsections (3), (4) and (5) of section 10, merits dismissal, as envisaged in subsection (6) of section 10 of the Ordinance, 2001. Learned counsel has submitted that defendants have wrongly contended that documents were procured in blank. He has referred to letter dated 24-6-2002 of Manager Advances, addressed to Chief Executive of the defendant company, wherein mark up for first quarter of 2002 was demanded and in response thereto, defendants replied through letter dated 7-10-2002 and requested for renewal of the finance facility. Another letter was addressed to Chief Manager of the Bank of Punjab on 15-10-2002, where request for adjustment of payment of due mark up towards the liability of Running Finance was made and two cheques for amounts of Rs,2,555,000 and 2,700,000 were delivered. Again defendants requested for conversion of running finance into demand finance through letter dated 21-42003 and offered certain terms. The letter reflects the admission of the defendants regarding principal amount and their undertaking to make the payment of the said amount. Learned counsel drew attention to page 88, where defendants offered a repayment schedule of demand facility. Bank acceded to the request of the defendants and the defendants now cannot back out and take altogether a new stance that no facility was availed from the plaintiff bank. While referring to the approval of debt restructuring letter dated 9-7-2003, it was contended that payment schedule, which the defendants had submitted to the plaintiff bank, was accepted in the same manner and certain documents were required to be executed by the defendants. The documents were signed, when plaintiff and defendants finalized the matter through various communications. Referring to letter dated 19-7- 2003 of the defendants, it is contended that defendants admitted, acknowledged and accepted the finance facility. Loan agreement (IB-6) dated 19-7-2003 was signed consequent upon approval and acceptance of the defendants. Learned counsel has submitted that personal guarantees of defendants Nos.2 and 3 were furnished in view of acceptance of conditions through letter dated 9- 7-2003. Condition No,3 pertains to personal guarantee of these Directors. Learned counsel has submitted that letter of personal guarantee dated 19-7-2003 transpires that guarantee was executed for consortium loan. Defendants have offered on the expiry of each facility, for financial assistance, which had been accorded under the relevant provisions of law. Learned counsel has contended that running finance facility was a facility independent of the issuance of counter guarantee. The running finance facility was availed by the defendants in year 2001 and made offer, which was accepted by the plaintiff-Bank. He has submitted further that the same facility was converted into demand facility, on the request of the defendants, who fulfilled certain conditions and made payment. All the documents have been signed, after acceptance of the offer, by the defendants and no document in blank, was ever signed or procured by the plaintiff. Learned counsel referred to the case of "Muhammad Arshad and another v. City Bank N.A. Al-Falah Building, Lahore" 2006 CLD 1011, to contend that an agreement qua rescheduling of the loan, which has been acted upon, is a valid and authentic document. Law recognizes such agreement. Learned counsel has submitted that company, main borrower is un-represented. There is no special resolution on behalf of the company and application to that extent is not competent and the same merits dismissal. Learned counsel has shown original documents of title to prove valid mortgage (which are returned to learned counsel after perusal).
4. Heard learned counsel for the parties and record perused.
5. The application for leave to defend the suit on its perusal, reflects that applicants/defendants have not complied with the mandatory provisions of subsections (3), (4) and (5) of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Non-compliance provides for penalty. A leave application merits rejection, when requirements of subsections A (3), (4) and (5) of section 10 of the Ordinance, 2001 have not been complied with. The PLA was filed on 15-7-2006.
Applicants have neither sought amendment of PLA nor have shown any sufficient cause for inability to comply with the mandatory requirements of law. Application, therefore, merits dismissal on this score alone. There is plethora of case law on the subject reference in this respect can be made to the cases of "National Bank of Pakistan through Vice-President, Zonal Chief, Multan v. Effef Industries Limited and 11 others" 2002 CLD 1431; "Bolah Bank Limited through Attorneys v. Baig Textile Mills (Pvt.) Limited through Chief Executive and 6 others" 2002 CLD 557; "Siddique Woollen Mills and others v. Allied Bank of Pakistan" 2003 CLD 1033; "Bank of Khyber v. Messrs Spencer Distribution and 14 others" 2003 CLD 1406; "Zeeshan Energy Ltd. And 2 others v. Faisal Bank Ltd." 2004 CLD 1741; "Allied Bank of Pakistan Ltd. Through Iftikhar-ul-Haq and Khalid Ishaq v. Mohib Fabric Industries Ltd.
Through Chief Executive" 2004 CLD 716 and "Habib Bank Limited v. Messrs SABCOS (Pvt.)" 2006 CLD 244.
6. Besides the above defect, leave petition has been filed on behalf of company, without a valid resolution or authority of the company. The application for leave to defend on behalf of the company, on this score alone, cannot proceed. Leave application jointly filed by the defendants do not meet the C requirements of law and as such, is dismissed. <>Main suit
7. Dismissal of leave application does not absolve the plaintiff of its primary responsibility to prove its case.
8. Plaintiff has instituted instant suit for recovery of Rs,96,298,948. To establish its claim, the plaintiff has to show within contemplation of section 9 of the Ordinance, 2001 that) the averments of the plaint are duly supported by statement of accounts. Plaintiff has asserted in the plaint that originally, E counter guarantee of Rs,190 million on behalf of consortium banks comprising of Bank of Punjab, Muslim Commercial Bank, and Askari Commercial Bank was issued. The counter guarantee was discharged and it has now become past and closed transaction. It is evident from the plaint that defendant No,1 requested for a facility of working capital in the form of Running Finance, which was accorded and the security in favour of consortium banks agreed to continue to remain with mortgages. The running finance facility continued from 30-6-2001 till 19-7-2003.
Defendants executed agreement of finance, DP note, delivery letter and letter of continuity dated 30-6-2001 in favour of the plaintiff. Statement of accounts at page 243 shows the disbursement, in response to. Agreement of finance dated 30-6-2001, to the tune of Rs,1,577,000.00 on 9-7-2001. The finance facility, being cash finance, was disbursed on frequent intervals to the defendants till 19-7- 2003. The statement of accounts reflects an outstanding balance in the account to the tune of Rs,98,499,343.00 as on 16-6-2003. This amount is reflected from the balance confirmation slip, signed and executed by defendant No,1 dated 30-6-2003 (page 90). Defendant No,1 has acknowledged correctness of account and admitted existing liability to the tune of Rs,100,986,284 and mark-up at Rs,2,486,941. Defendants requested the plaintiff for conversion of running finance facility to demand finance facility, vide letter dated 21-4-2003 (page 87). Defendants appended this request with repayment schedule. Company passed a resolution on 28-6-2003 for approaching the plaintiff for conversion of running finance facility into demand finance facility.
Plaintiff through letter dated 9-7-2003, acceded to the request, converted running finance into demand finance and also accepted the repayment schedule, exactly in the manner as it was proposed to the plaintiff bank. On acceptance of request of the defendants by the plaintiff, agreement of finance dated 19-7-2003 was signed and executed by the parties, which reflects a sale price of Rs,100 million and buy back price as Rs,140,000,000. The period of repayment, in 47 instalments, is till 15-3-2009, which is described in the repayment schedule. Letter of instalments dated 19-7-2003 has also been signed by the company with its seal and it also reflects repayment schedule in 47 instalments. Repayment in 47 instalments till 15-3-2009 was proposed by defendant No, 1 and accepted by the plaintiff. The Schedule has been signed by the defendants, along with agreement of finance.
9. Statement of accounts at page 244 reflects that the transaction in the same account continued even on conversion from running finance to demand finance. Entry of Rs,98,499,343 of the balance amount has been shown on 16-6-2003. Two credit entries of Rs,15,00,000 are incorporated on 15-6- 2003 and 15-8-2003. Outstanding balance entries in the statement of accounts show the same picture as is seen from repayment schedule. It transpires that defendants have made payment of Rs, 15,00,000 on 15,6-2003 and 15-8-2003 in response to the agreement dated 19-7-2003. Letter dated 9-7-2003 (page 91) reflects that the demand finance facility was approved as per request of the defendants on certain conditions. Condition No, 3 is the requirement of personal guarantee of sponsoring Directors namely Jehangir Elahi and Tanvir Elahi. Letter of guarantee dated 19-7-2003 has been signed by these guarantors, which is witnessed by two witnesses. The approval of conversion of the running finance facility into demand finance facility, signing of the repayment schedule and conditions of furnishing of the guarantees stand proved, when the defendants had made payment of two instalments strictly adhering to the repayment schedule. The parties while negotiating for restructuring of overdue obligations, exchanged various letters, but request for rescheduling could not culminate into a concluded contract. Defendants have failed to prove that repayment period was extended.
10. Defendant No,1 mortgaged the property by signing the memorandum of deposit of title deed dated 28-6-2002, wherein as per clause 4, plaintiff bank with other consortium banks, was part passu security partner for the property mentioned in schedules 1 and 2 of the memorandum of deposit of title deed. The charge on the mortgaged property is also created under section 129 (3) of the Companies Ordinance, 1984 in a prescribed form XVI. Charge certificate was issued by security and Exchange Commission of Pakistan on 2-7-2002.
11. Adverting to the mortgage of the property on the basis of memorandum of deposit of title deed, defendant Nd.1 originally mortgaged the property vide deposit of title deed dated 30-6-2001. When the equitable mortgage was created to secure running finance facility. Subsequently second supplemental memorandum of deposit of title deed was signed and executed on 28-6-2002. In view thereof, defendant No, 1, being mortgagor through supplemental memorandum of deposit of title deed, mortgaged and secured the loan to the tune of Rs,123,000,000. It is settled law that to create equitable mortgage, a valid mortgage in the eyes of law is one, which is in present i,e, disbursement of loan, signing of memorandum and delivery o the deposit of title deed has taken place at one and the same time. Here in the case in hand, the agreement of finance was signed and executed on 19-7-2003, while memorandum was signed on 28-6-2002. The mortgage does not cover agreement dated 19-7-2003 and the same is not a valid mortgage. The property is, however ,under charge, as a charge has been created and registered with SECP, therefore, the property will remain encumbered.
12. For the foregoing, the plaintiff has established its claim. Suit amount is reflected in the statement of account and outstanding amounts are mentioned in the repayment schedule. Various documents and letters, prove the existence o loan facility and the disbursement of loan. The suit is decreed G for the suit amount i,e, Rs,96,298,948 along with costs and costs funds. Defendants will make payment of the decretal amount, within a period of one month' from today, failure thereof will result into execution forthwith, without an application.