' DR. QAMMARUDDIN BOHRA, J.---The plaintiff an exporter of rice has filed present suit against the defendants for declaration for permanent injunction, damages and recovery of Rs,601.00 million.
2. Initially, suit was filed against the National Bank of Pakistan through its President and Manager and State Bank of Pakistan through its Governor and Federation of Pakistan through its Secretary Finance. Subsequently, suit against defendants Nos.3 and 4 dropped as per Court order dated 29- 4-2007.
3. Brief facts forming background of this litigation are that the plaintiff is a registered company under Company Law and its register office at Suit No,11-14.A.K. Chamber West Wharf Road Karachi.
The plaintiff's company is dealing in export of rice and remained a leading Exporter of rice in Pakistan from the year 1995 to 1996. The plaintiff exported about 70,000 million tons of Basmati Rice to Islamic Republic of Iran. It is the case of plaintiff that he maintained the accounts with defendant No,2 and negotiated all letters of credit through the said Branch. It is further case of the plaintiff that he made thirteen (13) shipments to Islamic Republic of Iran and one shipment to Uganda all against advance payments and was given T.T. Rate. As per Exchange Control Regulations if payments are made to Exporter from the funds of opening Bank. T.T. Rate should be given being no involvement of negotiating banks funds. The details are given in the plaint. The Letters of Credit were negotiated under ACU(ECU) arrangement between the two countries Pakistan and Islamic Republic of Iran till December 1995. The rate made under this agreement was in local currencies in Pak Rupees and Iranian Tomans. From January, 1996 the arrangement was changed to US $. The exports were made only against Letters of Credit of Bank Millat Iran under ACU A/C maintained by National Bank of Pakistan, Karachi. As per ACU mechanism T.T. Buying rate is applicable, if negotiating Bank is maintaining account of opening Bank. The negotiating Bank. Shall pay the exporters with T.T. Buying rate, by debiting the opening Bank A/C with them and if they do not maintain the account of opening Bank they should claim the re-imbursement from opening bank and on receipt of reimbursement shall pay the T.T. Buying rate as per FE Circular 5, resultantly Bank is bound to pay T.T. Buying rate when re-imbursement is received under ACU arrangements as no funds of negotiating Bank are involved. According to the plaintiff his case was covered in paragraph one FE Circular No,5, likewise according to F.E. Circular No,83, which covers general exports, if no funds of negotiating banks are involved T.T. Buying rate be given to exporter. In O.D.
Buying rate the negotiating Bank charge the interest for 14 days for the funds provided to exporters and claim funds (re-imbursement) from opening Bank after making the payment from their own funds hence interest. In T.T. Buying rate no such deduction can be made being no involvement of negotiating Bank's fund. It is further case of the plaintiff that suddenly on 17th September, 1996 the exchange wing of defendant No,1 vide letter No,FEW/BTR/ACU/3988 advised their branch the defendant No,2 maintaining the account of plaintiff to recover from him the paid excess amount being the difference of T.T. Buying rate and O.D. Buying rate w,e,f, 1st January 1996 as prior to this arrangement were in local currency. On 22-2-1997 vide letter No,CST/FBP/ACU/97 the defendant No,2 served a notice on plaintiff for recovery of Rs,701,778 (Rupees seven lacs one thousand and seven hundred and seventy eight only). To the surprising of the plaintiff, he was served with another letter No,CST/EXP97/433 dated: 26-7-1997 from defendant No,2 directing him to deposit Rs,27,25,125 (Rupees twenty seven lack twenty five thousand, one hundred twenty five only) which was inclusive of the period when transactions were made in local currencies. According to the plaintiff, this was the serious conspiracy against plaintiff who were exporting rice to I.R. Iran worth US $20/25 million per annum till 1996 with full satisfaction of importers and always got appreciation certificates against their supplies. They (defendant No,2) also marked lien on plaintiff FC a/c, whereas out of 13 said shipments, 4 shipments were made by the sister concern Messrs Ali Associates of plaintiff as the L/C was in their name. For this injustice on the part of National Bank (defendant No,2) the plaintiff appealed to State Bank of Pakistan vide plaintiff's letter dated 13-8- 1997 and 19th September, 1997 to stop National Bank of Pakistan for this illegal and unjust action.
The State Bank of Pakistan immediately took action vide their letter dated 27-2-1997 and asked for detailed report from National Bank of Pakistan. The State Bank of Pakistan again sent two letters to National Bank of Pakistan on 30-9-1997 and 25-11-1997 to expedite the report without further loss of time Since then till December 1998 neither National Bank of Pakistan submitted report to State Bank of Pakistan nor requested to plaintiff to make the said payment. The plaintiff was satisfied that the matter is resolved for ever and issue is settled on intervention of State Bank of Pakistan. On 19th December 1998 after lapse of one year the plaintiff wrote the letter to National Bank of Pakistan to confirm the closure of issue so that the lien on plaintiff's foreign currency is removed which they did in very beginning but no reply was received till 27th February 1999. Again on 27-2-1999 the plaintiff reminded them for the same action but they did not reply till June, 1999. On 7th and 10th June 1999 the plaintiff received a short recovery notice from Campbell Street Branch of National Bank of Pakistan (defendant No,2) requesting the plaintiff to deposit Rs,27,25,125 only plus Rs,19,05,476 being mark-up for the period. The plaintiff immediately replied them explaining the whole position vide plaintiff's letter dated 11-6-1999, with copy to the State Bank of Pakistan, that it is quite unjustified and National Bank of Pakistan must remove the lien and withdraw the so-called recovery notice of demand. The defendant No,3 State Bank of Pakistan took immediate action and advised National Bank of Pakistan (defendant No,2) to confirm the removal of lien on foreign currency and also stop the recovery of differential amount. T.T. Buying rate and O.D. Buying rate. Surprisingly again the same authority of defendant No,3 issue a letter on 25-8-1999 which they had referred to National Bank of Pakistan and advised the plaintiff that the plaintiff's request cannot be acceded to. In fact the plaintiffs were shocked on receipt of the said letter and the Chief Executive of plaintiff approached personally the Executive Director of State Bank of Pakistan (defendant No,3) and delivered letter dated 20-8-1999 to reconsider the case in light of fact and figure but all in vain.
Lastly it came to the notice of plaintiff that Branch Manager of defendant No,2 had criminally fabricated the documents by changing the dates of receipts of export proceeds to misguide the State Bank of Pakistan, that is why State Bank of Pakistan issued the letter contrary to their earlier letter. It is further stated that the claim of exchange rate difference between O.D. Buying and T.T.
Buying rates by defendant No,2 is illegal unlawful and mala fide as exports were made to Iran under ACU account and funds of bank were not involved and plaintiff was correctly credited with T.T. Buying rate which was in accordance to F.E. Circular of State Bank of Pakistan. Furthermore the National Bank of Pakistan had given in writing to the plaintiff to give T.T. Buying rate against all A.C.U. L/Cs.
4. According to the plaintiff, regarding one shipment to Uganda, the plaintiff received Fax No,002256-41-241969 dated 16-7-1997 from Messrs MNT Importers and Distributors of General Merchandise Compala, Uganda for supply of rice (15% broken) for equivalent to US$ 90,000 and the plaintiff vide fax message dated 21-7-1997 regretted the supply required (15% broken) rice as it was not available and informed them to wait till next crop which will start after three months. Plaintiff received fax dated 22-7-1997 from their sister concern Messrs AMC General Traders informing the plaintiff that they have already dispatched the cheque of US $80,000 and requested him to clear the cheque and after receiving the money help them and make shipment of items including wheat, floor, bread sugar or any kind of rice so that he may make some profit in the months. The plaintiff after receiving cheque No,014028 deposited the said cheque/demand draft of US $80,000 with defendant No,2 and defendant No,2 sent the cheque for collection. On 1st August, 1997 defendant No,2 confirmed the realization of the cheque but credited the said amount on 13-8-1997 in Local currency in A/C No,860-1. The plaintiff has a sister concern namely Messrs Five Star International dealing the exports of commodities including rice. The plaintiff vide letter No,KH/786- 110/143/114/97 dated 6-8-1997 asked the defendant No,2 to credit the net proceeds of realized amount of US $80,000 equivalent in Pak. Rupees in A/C No,860-1 maintained in the name of five Star International as the exports were to be made by that sister concern. The plaintiff after receiving the amount in Pak. Rupees as advance amount for exporting rice or any other commodities and after confirmation of realization of net proceeds of the Cheque in favour of plaintiff by defendant No,2 on 1-8-1997 and after issuance of the proceeds realization Certificate dated 13-8-1997 the plaintiff exported superior long grain Basmati rice 2% broken to importer Messrs MNT importer and distributor the shipment was made on 15-8-1997 and was received by importer on 23-9-1997. After receiving the goods the importer vanished and disappeared. The defendant No,2 had dispatched documents directly to the importer instead of through banking channel as per banking practice. The defendant No,2 vide letter dated 18-4-1998 informed the plaintiff that cheque was forged/counterfeit instrument and further they have made lien on US$ Account of the plaintiff which was deposited under NDR PIII Scheme, on appeal of Prime Minister Islamic Republic of Pakistan. The plaintiff faxed importer to immediately resolve the problem but no reply was received from them through the fax was received by them. The plaintiff sent copy of Fax through courier service to locate their office but Courier also failed to locate their office. The plaintiff at its request was .Granted Running Finance facility of Rs,10 million against deposit of foreign currency in A/C No,007117-6 which had expired in 1999 when there was debit balance of Rs,30399, and the plaintiff vide letter dated 10-9-1999 and 27-9-1999 had informed the defendant No,2 that the company would not avail the facility till finalization of export contracts with the foreign buyers and therefore, no debit should be raised against the account without prior permission of company/plaintiff. The defendant No,2 had debited, plaintiff's account No,007117-6 with Rs,27,255,125 being difference of TT rate and O.D. Rate on 29-12-1999 of subsequently debited Markup of either amounts on that amounts and also debited amount equivalent to US$ 80,000 being Rs,4,11,2000 on 29-12-1999 of subsequent debit of Mark and other amount on that amount.
The defendant No,2 also encashed US$ Account N.D.R. PIII Scheme of US$ 315000 at premature stage without permission of plaintiff, though no further debit entry was to be made in a closed account as period of finance facility had expired in account No,007117-6. The said deduction/debit in plaintiff's account is illegal against the provisions of law and rules and has been effected only to suppress the negligence and faults of defendant No,2. The advance payment was received on 13- 81997, as permit realization Certificate issued by defendant No,2 an according to Exchange control regulations the export proceeds should be realized within 120 days of shipment whereas in this case the proceeds were realized before shipment and after 270 days of shipment false issue has been raised because of fault of defendants Nos.1 and 2, they did not obtain the credit report of importer being unknown African importer as required under regulation of State Bank of Pakistan.
They misdeclared on export form having obtained and satisfied. They dispatched the shipping documents directly to importer instead of through Banking Channel as per practice. The plaintiff wrote various letter's to defendants Nos.1, 2 and 3 regarding the said illegality and illegal demand and lot of correspondence took place but they turned deaf ears. The plaintiff made complaint before Wafaqi Mohtasib (Ombudsman) for the maladministration of the Agencies i,e, defendants Nos.1 to 3 and the acting Ombudsman vide order dated 5-4-2000 declared the same as white collar fraud and held that the appropriate forum for handling such cases is Banking Court and advised the Complainant/plaintiff to approach the Court of competent authority for redressal of his grievance. The defendants Nos.1, 2 and 3 admitted that on 18-9-1997 after expiring of 42 days National Bank of Pakistan received telex from American Express Bank New York through their OBD/Head Office that the said draft was returned with remarks "altered amount" and National Bank of Pakistan Head Office had immediately replied on 19-9-1997 to them that payment had already been effected on the basis of their Karachi office advice dated 8-8-1997, therefore, National Bank of Pakistan A/c should not be debited accordingly. On 9-41998 after lapse of 9 months the American Express Bank, New York debited National Bank of Pakistan A/c with them and returned the cheque with the remarks that the cheque is forged/ counterfeit instrument. The respondent No,3 filed a complaint under sections 12(1) and 23B(4) of Foreign Exchange Act 1947 being FER case No,45/99 before Court of Muhammad Bari Director of adjudication Foreign Exchange Adjudication Court State Bank of Pakistan Karachi. The evidence was led and the Court vide order dated 31-7-2000 vacated the show cause issued to plaintiff for failure to repatriate sale proceeds of shipment to Uganda within stipulated period of four months from date of shipment. The Court also declared it to be international white collar fraud. The plaintiff approached defendant No,4 but he was neither heard nor any action was taken by defendant No,4. Due to all extreme and coercive actions and illegal and unlawful acts of defendants the export business of plaintiff was ruined and came to stand still as plaintiff had to refuse and return L.Cs. Valuing millions of foreign Exchange during the above mentioned period due to lack of Banking Service and facilities on the ground of dispute raised by the efendant. The defendant No,1 not only created illegal and unlawful hurdles in the smooth export business of plaintiff but also started cheap publicity through their henchmen and favourite exporters that the plaintiff is not able to export rice as he has been penalized and huge amount is outstanding against him, which caused alarm in the minds of rice suppliers to the plaintiff and they stopped credit business with the plaintiff, which resulted huge losses to the plaintiff. The entire business of rice exports of plaintiff has been destroyed and all contracts and orders have been cancelled by the foreign buyers, and plaintiff suffered huge financial losses.
According to the plaintiff he had to undergo mental torture and harassment due to illegal acts of defendants and litigation. The plaintiff has suffered huge financial losses and therefore, claimed the following amount by way of damages:---
(a) Loss of exports of US $ 25 Millions per annum. The plaintiff suffered loss of Rs,300 Millions estimated upon shipment and calculated @ 7%.
(b) Loss of goods in the local as well as foreign market and prompt service record being Rs, 10 Million.
(c) Mental Torture Rs,300 Millions
(d) Litigation Cost Rs,01 Million.
Total damages claimed Rs,611 Millions.
5. The plaintiff served the defendants with legal notice dated 6-6-2000 and 28-11-2000 but the defendants neglected the same. The plaintiff accordingly filed the present suit with following prayer:
(a) To declare that the amount of Rs,27,25,125 charged as difference of TT buying rate and O.D.
Buying rate debited on 29-12-1999 and amounts subsequent Markup and others in the account No,007117-6 of the plaintiff is illegal, unlawful and without any lawful authority.
(b) To declare that the amount of Rs,41,12,000 charged as equivalent value to US$ 80,000 and debited on 29-12-1999 and subsequent Mark-up and other amount in the account No,007117-6 of the plaintiff is illegal unlawful and without lawful authority.
(c) To declare that premature encashment on 15-5-2000 of foreign currency deposit NDRP HI of US$ 31,5000 deposited vide receipt No,754265 dated 15-4-1997 by the plaintiff is illegal unlawful and without any lawful authority said deposit continues up to 14-4-2002.
(d) To declare that Running Finance facility in A/c No,007117-6 was never got renewed by plaintiff and entries after the expiry of finance period are illegal and against Banking laws.
(e) To direct the defendants to reverse the debit entries and restore the foreign currency under deposit NDRP HI at its original position and return from 29-12-1999 till date and continue paying return.
(f) To pass a decree of Rs,611 Million as damages against the defendants in favour of plaintiff, for the loss suffered in business and agencies of mental torture and harassment suffered by the plaintiff, who had to incur for litigation he had to face on account of illegal actions of defendants.
(g) Any other relief this Honourable Courts deems fit and proper.
6. The defendants contested the above suit by filing their leave to defend applications which were allowed by consent vide order dated 25-8-2003 and the defendants filed the written statement.
The defendant raised preliminary objections as regards maintainability of the suit. The case of the defendants as contained in the said written statement is as follows:-- .... Sic........
7. It is averred in the written statemern that all 13 shipments were made against the letters of credit issued by. The Bank Millat-e-Iran and shipments were effected by the exporters. The defendant bank never received any advance payment. It is further averred in the written statement that plaintiff has filed a false and frivolous letter before the State Bank of Pakistan in order to obtain a letter for charging TT buying rate instead of O.D. Buying rate. It was averred that plaintiff has not produced any document in support of their contention of any advance payment to the defendant bank. The export under advance payments and against letters of credits are quite different mode of shipments, in case of export against advance payment proceeds are received before the shipments and credited to the account of the Exporter whereas exports against letters of credit, proceeds are received after shipment moreso after negotiation of export documents, as such, two different rates are applicable to the exports against advance payments which is TT rate and on the other hand exports against letter of credits, in which documents are drawn and the exporter asked for negotiations to the negotiating bank, then the O.D. Buying rate is applicable to the exporters. It is further averred that the thirteen shipments the documents were drawn under letters of credit, and on the instructions of the exporters, the documents negotiated and proceeds were credited in the respective accounts maintained by the plaintiff with the defendant bank and the plaintiff was entitled for O.D. Buying rate as per State Bank of Pakistan Foreign Exchange Circular No,83 of 193. It is further asserted by the defendant in the written statement that the defendant bank has to pay to the plaintiff O.D. Buying rate applicable to the letter of credits in any circumstances except the payments which are received in advance: The O.D. Buying rate is applicable in all the letters of credits whatsoever, whereas TT buying rate is applicable only against advance payments received by the Exporter through the bank. According to the defendant, the Circular No,5 of 1997, dated 18-3- 1997 was not applicable in the instant case as the plaintiff's case pertains to the years 1994 to 1996.
It was pointed out by the Senior Auditor during the course of audit in the year 1996 that wrong TT buying rate had been allowed to the plaintiff after negotiations of export documents instead of O.D.
Buying rate applicable as per Circular No,83 of 1993 of State Bank of Pakistan. After the discovery of this mistake, the Senior Auditor had instructed defendant No,2 to mark lien against foreign currency deposit account and the plaintiff may not be allowed to withdraw the same unless and until the amounts are recovered from the plaintiff, whereafter the plaintiff were repeatedly requested orally as well as through letters for the adjustment of the excess amount paid to them towards the T.T.
Rate instead of O.D. Buying rate but they did not pay any attention to this and avoided/neglected the adjustment of the excess amount paid by the defendant No,2 bank inadvertently. It is not disputed that four shipments were made by the sister concern as the letters of credit were in the name of sister concern as such, the proceeds were credited to its sister concern account. When the correct position was explained to the State Bank of Pakistan they declined to accept their complaint in respect of T.T. Buying rate and asked the defendant No,2 to charge the same at the O.D. Buying rate which were accordingly charged and the plaintiff was repeatedly asked to adjust the excess amount received by them towards TT buying rate as well as through its sister concern.
The defendant-Bank has rightly issued letters to the plaintiff whereby the amounts were demanded. The plaintiff's letter in reply thereto was quite unjustified, as such, the defendant-Bank did not remove the lien marked according to instructions of the senior Auditor of the defendant- Bank. After receipt of correct explanation of the defendant-Bank in respect of the exports made by the plaintiff under the letters of Credit, State Bank of Pakistan had rightly refused vide its letter dated 25-8-1999 in terms of foreign exchange circular of SBP, as the payments were received by the defendant bank after negotiation of documents. The defendant denied that the Branch Manager/defendant No,2 had criminally fabricated the documents by changing the dates of the receipts of shipment documents and export proceeds to misguide the State Bank of Pakistan. The State Bank of Pakistan has rightly declined its request in respect of T.T. Buying rates. The defendant bank has rightly claimed the difference of O.D. Buying and T.T. Buying rates. The plaintiff had deposited cheque in its FC deposited account No,72 for US $ 80, with the defendant bank without assigning and showing the purpose of its receipt from abroad. The plaintiff was also maintaining current account in Pak rupees with the defendant-Bank. The cheque of US $ 80,000 was received in the name of the plaintiff i,e, Kalb-e-Hyder & Company (Pvt.) Limited and on presentation in clearing through American Express Bank, the proceeds were credited to the foreign currency account No,72 accordingly and thereafter at the request of the .Plaintiff vide its letter dated 6-8- 1997 transfer the entire amount of US $ 80,000 equivalent to Pak rupees to the account of sister concern bearing No,860-1 of Messrs Five Star International in order to export the cargo by them to Mambasa through the sister concern and accordingly Pak rupees were transferred as advance in its sister concern account 860-1 on 13-8-1997. However, the plaintiff did not ship the goods, whereas the shipment was made by its sister concern Messrs Five Star International, Karachi under the proprietorship of Mr. Mazhar Hussain, who is also Chief Executive of Kalb-e-Hyder & Co. (Pvt.) Ltd., against the cheque of US$ 80,000 which was later on dishonoured and the same was returned by the collecting bank to the defendant bank being forged/counterfeit instrument. The American Express Bank, debited the account of the defendant-Bank for US$ 80,000 of forged/counterfeit cheque deposited by the plaintiff with the defendant-Bank. According to the defendant the plaintiff was in connivance with the importer and it was in the knowledge that the said cheque of US$ 80,000 is a forged/counterfeit instrument, as such, after the presentation and credit of the proceeds to the foreign currency account No,72, the plaintiff exported rice according to his own choice without any consent and involvement of the defendant/bank which has completed in a very short span of time i.e, one and a half day and completed the shipment on 15-8-1997 which was not possible in normal dealing of exports and instructed the defendant to dispatch the shipment documents to the consignee through courier service vide its letter dated 13-8-1997.
According to the defendant, the plaintiff itself due to connivance with the importer has been trying to stimulate the defendant bank from each and every corner for achieving its evil designs. It is further averred in the written statement that the defendant bank informed the plaintiff that the draft was forged/counterfeit instrument, as such, a lien was made on US$ account of the plaintiff.
The plaintiff also obtained running finance facility of Rs,10.0 million against the deposit under NDRP- III Scheme. It is alleged by defendant that plaintiff deliberately and knowingly has tried to indulge the defendant bank under heavy losses on one pretext or the other. According to the defendant the plaintiff was also aware that the importer after issuance of the draft of US$ 80,000 had disappeared and was not available even otherwise the plaintiff asked the defendant-Bank to dispatch the shipment documents directly to the Importer at Uganda. It is,further stated that plaintiff was granted a running finance facility of Rs,10.0 million against NDRP-III Scheme and according to the sanction amount which the plaintiff was utilizing time to time. The amount of forged/counterfeit cheque as well as the amount of difference of TT buying rate and O.D. Buying rate was payable by the plaintiff, as such, in order to save its skin, instructed the bank not to debit the running finance account. According to the defendant, the defendant-Bank repeatedly requested the plaintiff to adjust the above amounts, when the plaintiff failed to adjust the same, the defendant bank had no alternate except to debit the said amounts which the defendant bank adjusted according to law and banking practice, as such, the allegations of the plaintiff are baseless and without any footings. The defendant had also denied that defendant bank encashed US $ NDRP III Scheme of US$ 315,000 at premature stage without permission of the plaintiff as alleged or at all. According to them, repeatedly letters and notices were sent to the plaintiff in respect of encashment of US$ account for adjustment of the outstanding liabilities of the plaintiff but the plaintiff failed to fulfil the demand of the defendant-Bank, as such, the same was encashed and amounts were credited to its account and remaining amount was sent to the plaintiff through Draft No,110006 dated 11-9-2000 US$ 106,176.73 of defendant bank, but the same was refused by the plaintiff. After refusal by the plaintiff the said. Draft was cancelled and the amount was kept in the sundry account of the defendant No,2/bank which is still lying with the defendant-Bank and the same can be withdrawn by the plaintiff any time without any hitch and hurdle. It is further case of defendant that except forged/counterfeit US$ 80,000 draft, no any advance payment was received towards the 13 shipments made to Islamic Republic of Iran. The said US$ draft, according to defendant, was returned being forged/ counterfeit instrument, which was against the shipment documents sent to the Importer at the request of the plaintiff. According to the defendant, the draft was firstly returned with the remarks "altered amount", thereafter they declared the same cheque being forged/ counterfeit and debited the defendant-Bank account at New York. According to them, the American Express Bank, New York, debited NBP Account and the same was returned with the remarks mentioned above. According to the defendant, the Adjudication Court also declared it to be international white collar fraud, as well as the same was also declared by the Ombudsman as white collar fraud. It is averred by the defendants that due to return of cheque of US$ 80,000 and eon-cooperation of the plaintiff on flimsy grounds, the plaintiff itself stopped the business.
According to the defendants, the defendant No,2/Bank always tried to explain the plaintiff the difficulties of the bank and after the return of US$ 80,000.00 cheque but, the plaintiff never cooperated and did not solve the problem of the bank, as such, the bank was compelled to adjust the outstanding liabilities according to rule from its account. According to the defendants, the plaintiff had not sustained any loss in export business as they had already admitted vide its letter No,KH/786- 110/137/95/99 dated 10-9-1999 that no export contracts/orders were finalized with the foreign buyers, hence could not avail finance facility which was granted by the defendant No,2/Bank. According to the defendants, it was a case of arranged shipment against a bogus contract, moreover, against a forged/counterfeit instrument, therefore, the export proceeds could not be repatriated. According to the defendants, the outstanding amounts were correctly debited to plaintiff's account from the proceeds of NDRP-HI, which was under lien for the purposes and, when the plaintiff despite all efforts, letters/reminders and due notices, by the defendant No,2/Bank failed, then the defendants had no alternate except to adjust the outstanding liabilities from its accounts as per authorization under the law. Prayer for the dismissal of suit with special costs.
8. On 25-8-2003 following consent issues were framed in view of the above pleadings of the parties:--
(1) Whether the defendant is entitled to charge from the plaintiff T.T. Rates or O.D. Rates on the transaction does by the plaintiff with the Iranian counterparts?
(2) Whether the cheque of US$ 80,000 was cleared by the National ' Bank whereafter shipment was effected by the plaintiff to Uganda?
(3) Whether the plaintiff has clouded with the foreign importers (Uganda) at the cost of the defendant?
(4) Whether National Bank could encash the plaintiffs NDRP Certificates to recover amount in connection with another transaction.
(5) Damages.
(6) Relief.
9. After framing of the issues the evidence of both the parties were recorded.
10. I have gone through the written arguments. Of .Mr. Saalim Salam Ansari Advocate for the plaintiff and Mr. Zubair Qureshi Advocate for defendants Nos.1 and 2 National Bank of Pakistan and also perused the record of the case.
11. Before we discuss the issues framed above, it is pertinent to mention that the defendants Nos.1 and 2 have taken a specific plea in their written statement that the suit as framed is not maintainable under the law but at the time of framing the issues the said plea is not pleaded and by consent this issue was framed. Issue No,1
12. On this issue the learned counsel for the plaintiff contended that the plaintiff has succeeded to establish his claim through recording his evidence as well as documents produced by the plaintiff, which are exhibited and mostly of them issued by the defendant and State Bank of Pakistan. He further drawn the attention of this Court on the evidence of Bank Manager and another witness of the defendant who came from American Express Bank. By referring the evidence and documents learned counsel contended in cases where documents presented are not negotiated for any valid reasons but payment is made to the exporter after receipt of funds from the opening/reimbursing bank then conversion will invariably made at the T.T. Clean buying rate instead of O.D. Buying rate his contention in this regard is that the instant case no funds of bank are involved therefore, the exporter/plaintiff should have been given T.T. Rate (i,e, no markup should be charge) and if funds of negotiating bank are involved by paying first 'exporter from own funds at the time of negotiating and then claim reimbursement from abroad then O.D. Rate paid to the exporter (which is less because mark-up for 15 days) to come from abroad.
13. According to him in this case no funds of negotiating banks (the defendants) were involved. The plaintiffs were paid the proceeds already available with defendant by debiting the account of importer bank Messrs Millat Bank, Tehran. Accordingly, T.T. Rate given to the plaintiff as per L.Cs.
Reimbursement clause of Exhs.5/12, 5/14, 5/18 and 5/21.
14. He further contended that after about one year when shipments were completed and cases were closed mark up for 15 days was claimed on all thirteen (13) shipments by giving O.D. Rate and also mark up over mark was charged which is violation of the State Bank of Pakistan's Circulars 13 and 32 of 1984, the circular of the State Bank of Pakistan are binding on the banks operating in Pakistan in view of sections 25 and 33-P of Banking Companies Ordinance, 1962.
' He referred as under:--
(a) Letter of National Bank of Pakistan Branch dated 18-6-1996 to their Head Office (N.B.P.) confirming that there is no involvement of National Bank of Pakistan funds in the plaintiff's case Exh.5/69-B.
(b) L.Cs. Were opened under U.C.P.-500 which says that negotiations means (providing funds) which were not provided on presentation of documents as per L.0 terms, but were provided on receipt from abroad.
(c) The plaintiff were issued Annexure "A" (format annexed to the circular) will also be used for claiming refunds of the import fee) against all the 1'3 shipments which is only issued when proceeds are realized into Pakistan. In case where proceeds are to be realized later after negotiation then "annexure-B" (Format where export has been made) is supposed to be issued which is quite different from "annexure-A" as per State Bank F.E. Circular 64 dated 25th August 1993.
(d) Further contended that the dates of realization of proceeds into Pakistan and the dates of its reporting to State Bank of Pakistan are specifically mentioned in the Annexure "A" issued by the defendant. "Negotiation date" and "proceed realization date" both are same (Column No,5 and column-9), hence no Capitals of National Bank of Pakistan were involved.
(e) L/Cs reimbursement clause is also self-explanatory, which allow reimbursement by debiting bank Millat Tehran account only, with the defendant.
(0 The Export Promotion Bureau of Pakistan (EPB).In its letter to defendant (Exh.5/69) had explained the position of the plaintiff, which was not rebutted.
15. According to the learned counsel the bank (defendant) did not provide any funds to the plaintiff, hence no negotiations took place under the terms of UCP-500. The credit was given to the plaintiff after getting instructions/funds from Bank Millat, Tehran, using "delay tactics", so much so that in one shipment defendant although issued the credit advice to the plaintiff in time on 29-2-1996 (Exh.5/51) but criminally, credit of PKR 120 Million was not provided into plaintiff's accounts resulting cheques issued to local Rice suppliers worth Rs,120 Millions were "dishonoured".
16. Further the learned counsel in light of the above contended that the defendant (bank) is entitled to charge from the plaintiff T.T. Rates and not O.D. Rates on the transaction done by the plaintiff with the Iranian Counterpart.
17. On the other hand the learned counsel for the defendant contended that initial burden to prove this issue lies on the plaintiff and he referred the evidence of the plaintiff as under:-- ' As per understanding between the members of ACU exporters' banks as well as importers' bank has to establish account in each country from where remittance can be transferred by debiting their accounts. The defendant's-Bank have an account with Bank Millat Iran, Tehran, likewise Bank Millat Iran has account with the defendants' bank. In case letters of credit are allowed then amount can be debited from the account of Bank Millat Iran by debiting their accounts from the accounts maintained by the bank with the defendant's-Bank. I have filed the details of export undertaken by the plaintiff under ACU. I produce 13 shipments under four letters of credit with enclosures. The said letters of credit have been established by the importer with defendant's-Banks. I produce Exhs.5/12 to 5/24. There are two types of conversions one is known as O.D. Conversion rate and other is T.T.
Buying, OD rate is paid by the bank to the exporters, when the bank pays the amount has been paid by exporters' bank form its own reservation and claims the fund, from importers' bank later which normally come after 15 days so exporters' bank charges the interest for 15 days and the TT rate is charged when the other bank's funds are available at the time of negotiation or it is received by the exporters' bank by debiting accounts of importers' bank with them".
18. The learned counsel for defendants referring the above piece of evidence of plaintiff contended that no document was produced by the plaintiff to show and prove the ACU mechanism, whereby TT buying rates are allegedly applicable on the export between ACU member countries enjoyable by exporters irrespective of Bank involvement. His further contention is that the plaintiff distorted from its pleading as under para.5 of the plaint, the plaintiff alleged that his case covers under State Bank of Pakistan, F.E. Circular No,5 of 1997, however, same was never produced by the plaintiff.
19. According to the learned counsel for the defendant the plaintiff's case does not fall within the ambit of State Bank of Pakistan, FE Circular No,5 of 1997 dated 20-3-1997 as the same is not applicable having no retrospective effects. The transactions were made during the year 1995-96 and as such clean TT buying rate cannot be charged in any case for the transactions made prior to the Circular. The plaintiff's case fall within the purview of State Bank of Pakistan, FE Circular No,83/93 dated 30-12-1993, which is Exh.D/1. The State Bank of Pakistan FE Circular No,83/93 has been annexed with the plaint as Annexure "C" as well as FE Circular No,5 of 1997 dated 20-3-1997 as Annexure "C/1".
20. Both Circulars for appreciation of the contention of the parties counsel are reproduced as under:- F.E. Circular No,83 of 1993 dated 30th December 1993 "Under the existing rules Authorized Dealers are required to convert inward remittances on account of exports at the T.T. Clean buying rate where documents are sent on collection basis or where advance payment is received. In cases where the documents are drawn under a letter of credit, conversion is required to be made at the O.D. Buying rate. The rationale is that under letters of credits, negotiating banks are required to make immediate payment upon negotiation of documents while the payments from the opening/ reimbursing banks are received subsequently.
The exporters have, however, complained that the Authorized Dealers are making payment even in the case of documents presented against the letters of credit after receipt of funds from the opening/reimbursing banks at the O.D. Buying rate instead of making up-front payments. It is, therefore, advised that in cases where documents presented under letters of credit are not negotiated for any valid reason but payment is made to the exporter after receipt of funds from the opening/reimbursing bank, conversion will invariably be made at the T.T. Clean buying rate instead of O.D. Buying rate. The Authorized Dealers will, however, be free to recover from the customers their service charges and postages".
F.E. Circular No,5 of 1997 dated 20th March, 1997 "The present different Authorized Dealers have, adopted different methods for making payments to the exporters in Pakistan exporting goods to the buyers in the ACU member countries. It has since been decided that in future, uniform method will be followed by all the Authorized Dealers which is given hereunder:-
(I) Where the negotiating bank maintains the ACU Dollar account of L/C-opening bank, it will debit the relative ACU Dollar account, will take that U.S. Dollar amount in its normal US$ Nostro account, will pay rupee equivalent to the exports at the Authorized Dealers' T.T. Clean buying rate the prevailing on the date of payment and will report the transaction to the State Bank of Pakistan on Schedule A/1 or A/2 as the case may be.
(II) Where the negotiating bank does not maintain the ACU Dollar account of the L/C-opening bank, it will negotiate the documents and lodge claim with the reimbursing bank which in turn will debit the ACU Dollar account of the L/C-opening bank, deliver the amount involved in U.S. Dollar to the negotiating bank which will take the relative amount in its normal U.S.$ Nostro account, will pay rupee equivalent to the exports at the Authorized Dealer' T.T. Clean buying rate obtaining on the date of payment and will report the transaction to State Bank of Pakistan on Schedule A/1 or A/2 as the case may be".
21. The perusal of the above circulars, the Circular No,F.E. 5 of 1997 where whole case of the plaintiff depends shows the date 20-3-1997 and it does not have any retrospective effects, whereas admittedly the transactions of the plaintiff are during the year 1995-96, whereas the F.E. Circular No,83/93 dated 30-12-1993, which is an early circular, hence, applicable on the transactions during the year 1995-96 clearly speaks that: "In case where the documents are drawn under a letter of credit conversion is required to be made at the OD buying rate, negotiating banks are required to make immediate payment upon negotiation of documents while the payments from the opening/reimbursing bank are receiving subsequently".
22. It is a matter of fact under ACU Mechanism arrangements were made for the bank to bank facilitation and exporters have nothing to do with it and they are bound under the Circulars issued by the State Bank of Pakistan time to time. It is rightly argued by the learned counsel for the defendant that being a financial institution ire bound to implement and enforce the Circulars issued by the State Bank of Pakistan from time to time is dealing and treating with their customers like the plaintiff. Even otherwise the State Bank of Pakistan Circulars are binding and having the force of law and are required to be implemented as a provision of the law. The plaintiff cannot claim any thing for the Bank to Bank transaction or any other arrangement.
23. It is also admitted position that plaintiff before coming to this Court have also moved the State Bank of Pakistan that he is entitled for T.T. Buying rate as per Circular No,F.E.5 of 1997 dated 20-3- 1997. It is admitted by the plaintiff's witness in the cross-examination: "It is correct to suggest that exporter has nothing to do with the Bank to Bank transaction It is also correct to suggest that while not accepting my representation State Bank of Pakistan . Gave the reason that payments were made on negotiation of document".
24. It is also come in the evidence that according to the State Bank of Pakistan letter Exh.5/32, has not accepted the plea of the plaintiff to treat the case under Circular No,5 of 1997.
25. Initially the plaintiff's own case based on the touch stone of the State Bank of Pakistan Circular No,F.E.5 of 1997. However, during course of evidence a divergent plea has been taken by the plaintiff in his examination-in-chief as: "The said letters of credit have been established by the importer with the defendant's Bank.- I produce Exhs.5/12 to 5/24. There are two types of conversions one is known as OD conversion rate and other is TT buying rate OD rate is paid by the bank to the exporters, when the bank pays the amount has been paid by exporters' bank from its own reservation and claims the fund from importers' bank later which normally come after 15 days and the TT rate is charged when the other bank's funds are available at the time of negotiation or it is received by the exporters' bank by debiting accounts of importers' bank with them".
26. It is well-settled principle of law that Circulars of State Bank of Pakistan have to apply as a law and have binding effect like other provisions of la* as Circulars have been issued under the authority and A same must be treated as having the force of law. Reliance placed on a DB authority of Karachi reported as 2002 CLD 542 relevant pages 544 and 547.
27. The learned counsel contended that the defendant No,2 inadvertently charge TT buying rates which on pointation of Senior Auditor of the defendant/Bank were required to be corrected and amount of difference to be collected from the plaintiff. The plaintiff was served with a letter, which is Exh.5/25 on record and was directed to pay outstanding amount due and payable by him in ordinary Banking business, however, the plaintiff himself initiate different proceedings against the defendants such as filing of complaint before State Bank of Pakistan decision of which has been produced as Exh.5/32. Despite State' Bank of Pakistan, the plaintiff on his own accord take up the matter to different agencies like Wafaqi Mohtasib whose decision is available as Exh.5/47 and Federation of Chamber of Commerce and Industry to militate and defame the defendants goodwill in the market.
28. The perusal of Exh.5/32, the letter of State Bank of Pakistan bearing No,5726/FEP.1(51)99 dated 25th August, 1999 clearly shows by referring letter of plaintiff dated 14th June, 1999 on the subject "Negotiation of Export Documents under CU arrangement-accounts Messrs Kalb-e-Haider and Co.
(Pvt.) Ltd. And its sister concerns" and they were advised that they have requested to treat their case in terms of F.E. Circular No,5/1997 cannot be acceded to as payments in your case were made on negotiation of documents.
29. The Exh.5/47, which is a decision of Wafaqi Mohtasib (Ombudsman)'s Secretariat Regional Office Karachi, the proceedings were initiated on complaint of plaintiff against the National Bank of Pakistan and during the proceedings Mr. Raees Ahmed, Foreign Exchange Officer, State Bank of Pakistan was invited specifically to enlighten the Investigating Officer about the position of rule on the issue ih at para. 4 of the order of Ombudsman which shows:-- "This followed a heated discussion about the position of the proceed, whether the proceeds were actually received by National Bank of Pakistan as per ACU Mechanism or not. The complainant pointed out that the account of his clients was being maintained with National Bank of Pakistan Head Office and they had consented for debiting their account but the officials of NBP purposely debited the account of their H.O. In order to apply O.D. Rates" and then in the end of para. 6, it is clearly mentioned "Export Transactions in the cage under reference pertain to the period between 1994-96, as such, does not fall within the purview of F.E. Circular No,5 of 1997 as the instructions contained therein did not have retrospective effect" and in the end it has been mentioned that "No mal-administration is involved in this case".
30. In light of the above discussiOn of the evidence and the documents produced by the parties clearly established that the charge of O.D. Rate is not for the reasons that upon negotiation of documents, the payment has to make immediately by the negotiating Bank, and has been given 15 days markup in terms of charging of higher rate as O.D. Buying rate. In terms of State Bank of Pakistan Circular No,83/93, the export was made on the basis of letters of credit, the defendants were supposed to charge O.D. Buying rate irrespective of the terms and conditions of letter of credit. The discussion further clears that in terms of Circular No,83/93 of State Bank. Of Pakistan where the documents are drawn under Letter of Credit, conversion is required to be made as the OD buying rate as the Banks are required to make immediate payment upon negotiation of documents.
31. In the instant case the 13 shipments were made on the basis of four letters of credit. It is settled principle that negotiation is deemed to be completed on realization of funds. In this regard the defendants' witness namely Javed Haider deposed in his cross-examination. "Under UCP-500 the negotiation is deemed to be completed on realization of funds. We reimburse ourselves by debiting the accounts of Tehran Millat Bank who were L/C opening Bank". As per the State Bank of Pakistan, Exchange Control Department's Circular No,35/ECP-II(13)B-81, which is Exh.7/19 on record clearly mentioned therein that: "Documents drawn under letter of Credit" O.D. Rates are applicable against Exports". This position also admitted by the plaintiff in his cross-examination that:-- "I see Circular No,83 dated 30-12-1993 issued by the State Bank of Pakistan and say that whatever stated in the said Circular is correct. I see Circular 35 issued by the State Bank of Pakistan and I say that the same has been issued by State Bank of Pakistan in respect of the document drawn under the letter Credit."
32. Therefore, the circulars of State Bank of Pakistan are unrebutted and unchallenged admitted by the plaintiff as such the documents drawn under Letters of Credit, the O.D. Rates are applicable.
33. Under ACU arrangement funds could be realized from the opening Bank at the time of negotiation of documents but the exporters have nothing to do with it. The said arrangements were for the Bank to bank transactions without any concession for the Customers of the member Bank.
The plaintiff's account was credited with the export proceeds on completion of negotiation of documents which include realization of funds as per Circular No,83/93. The plaintiff cannot claim TT buying rate for the export proceeds which were credited in the plaintiff's foreign currency account.
In view of above, it is proved that the defendants are entitled to charge OD rates from the plaintiff.
Hence, this issue is decided accordingly.
Issue No,2
34. On this issue the learned counsel for the plaintiff argued that the cheque of D.D. Was received as "advance payment" from a "quite unknown party" which was deposited with defendant for clearance and referred their letter dated 17-8-1998, which is exhibited 5/35 on record as well as letter of defendant, which is exhibited 5/69. He further contended that the defendant has accepted during cross-examination before the State Bank of Pakistan's adjudication court that cheque/D.D.
No,014028, was deposited by plaintiff with defendant to send it for clearance (collection) and after scrutiny it was also found genuine and was not altered/forged or counterfeit. He further contended that the shipment was made to Uganda on 15-8-1997, Bill of Lading is the Exh.5/37. The shipment was effected in the name of plaintiff's sister concern Messrs Five Star International against same cheque/D.D. Of U.S. Dollar 80,000. Shipment was received in Uganda on 23-9-1997. The defendants were accordingly informed in writing before shipment that goods will be shipped by Messrs Five Star International as per letter dated 6th August, 1997.
35. His further contention is that there is no restriction by the State Bank of Pakistan that against "advance payments" a sister concern cannot ship the goods, when signatory of both the concerns is same. The shipment was made against Form-E No,NBP-248765, which was issued by defendant to plaintiff confirming receipt of advance payment and also confirming their satisfaction about the credentials of imnporters. He further contended that the plaintiff routed the shipping documents through banking channel instead of sending directly, being importers "Quite unknown" to them, although plaintiff had received the funds in advance. The shipment was received by importers on 23-9-1997.
36. He further contended that the defendant.Wilfully misdeclared on Form "E" No,NBP-248765 (Exh.5/36) that they are satisfied with credential of importers. In fact, they did not make any enquiry about credential of importers which is must in all export cases as per exchange control manual of State Bank of Pakistan. If they could have made the enquiry, the shipment should not have been done to such a fraudulent company. He also contended that the custom does not allow any shipment until and unless satisfactory credentials are obtained by the Bank irrespective of fact whether shipment is against advance payment or otherwise.
37. He further contended that during cross-examination of defendant he admitted that they have not made such enquiry. The plaintiff made the shipment only after getting the defendant confirmation of receipt of payment against D.D. No,014028 as advance payment and also confirmation of defendant being satisfied about the credentials of importers and lastly contended that the adjudicating Court of State Bank of Pakistan had decided this case in favour of the plaintiff and neither the complainant (State Bank of Pakistan) nor the defendant filed any appeal against the order of adjudicating Court, which is Exh.5/48 on record. A., such the cheque of US $ 80,000 was cleared by the National Bank of Pakistan whereafter shipment was effected to Uganda.
38. On the other hand the learned counsel for the defendants on this issue referred the evidence of his witness namely Javaid Haider who categorically states in his affidavit-in-evidence that plaintiff had deposited a cheque in its FC Account No,72 for US $ 80,000 for collection purpose without assigning/showing purpose of receipt from abroad and he pointed out para.14 page 4 of affidavit- in-evidence of Javaid Haider as Exh.7.- He further contended that during proceedings before Director of Adjudication in FER case No,45 of 1999 (Exh.5148) it was established that the amount of cheque was accordingly credited through FC Account No,72 of the plaintiff on 7-8-1997, thereafter as per instruction of the plaintiff, the entire amount of US $ 80,000 equal to Pak Rupees were transferred to the account of sister concern bearing Account No,860-1 of Messrs Five Star International Karachi on 13-8-1997.
39. He further contended that the said cheque was routed through Messrs American Express Ltd., Karachi, which was later on dishonoured and the same was returned by the collecting Bank to the defendant. No,2/Bank being forged and counterfeit instrument. The copy of letter dated 18-9-1997 received from American Express Bank that the said draft had been returned unpaid with the remarks "Altered Amount" sent to the plaintiff. The learned counsel further contended that the plaintiff in order to save himself dispatch the consignment of counterfeit cheque through its sister concern Messrs Five Star International, which clearly shows mala fide on the part of the plaintiff.
40. His further contention is that American Express Bank according to the Bank to Bank agreement debited US$ 80,000 in the account of defendant No,2/NBP/vide Exh.7/9. The learned counsel for the defendant further contended that the plaintiff refused to pay back the counterfeit/forged cheque amount as such the outstanding amount was adjusted from the under lien NDRP-III and the balance amount was paid to them but refused and the same was paid through the order of this Court dated 25-8-2003 and in this regard he referred the plaintiff's cross-examination, which is as under:-- "I say that at the time of depositing the DD with the defendant-Bank I have not informed the defendant-Bank in writing that the amount in question pertains to advance in respect of consignment to be exported".
41. He further referred the evidence of plaintiff wherein the plaintiff admitted that:-- "I see letter dated 26-7-1997 (Exh.5125) it is correct to suggest that by this letter the defendant-Bank has asked for adjustment of difference amount between TT & OD rate". It is correct to suggest that the defendant-Bank time and again repeatedly asked for adjustment of difference between TT and OD rates, but plaintiff did not adjust the same".
42. He further admitted that: "we have not filed any case against the party who has issued DD of US $ 80,000 because proceeds realization certificate was issued by the Bank".
43. According to the defendant's counsel the above shows that the plaintiff has intentionally manipulated forged cheque and exported the consignment through its sister concerned. The plaintiff has also admitted that:-- "It is correct to suggest that entire consignment was exported through one shipment".
44. The above-referred evidence clearly shows that the consignment was exported by the sister concern and not by the plaintiff-Company despite the knowledge of the counterfeit/ forged cheque arranged by the plaintiff.
45. In the above connection the defendants in support of their contention that counterfeit cheque and debit of $ 80,000 in the Account of N.B.P., the defendant/Bank called the witness of America Express Bank namely Babar Kaleem as D.W.2 (Exh.6), who has deposed in Examination-in-Chief as under:-- "The amount is shown was credited in the National Bank Accounts. I produced the same as Exh.
No,6/1. After the amount was debited in the National Bank Aecounts, New York Branch on 9th of April, 1998, we received a Debit Advice, Original Cheque and copy of an affidavit of CAJA DE MURCIA, Avda, Juan Carlos I, s/n-Department to Defendant Extranjero, 30100 Espinardo (MURCIA- SPAIN). We received the original of Exh. No,6/1 and an "Affidavit of Material Alteration" sworn by Officer of the Bank, New York duly sworn on 20-2-1998. The reasons for return of the Bank Draft is mentioned in the Debit Advice, which I produce the copy of Exh. No,6/3. On the reverse of Exh. No,6/3 reason mentioned is 'forged/counterfeited instrument".
46. The witness further stated that:-- "It is the general practice and strictly followed in USA where a wrong credit or debit entries are made, then on furnishing a `Legal Affidavit' Bank has to make good the loss or restore the amount. I produce the Summary of instructions which we are required to follow as exhibit No,6/5 which provides the manner in the Banks are required to act in cases where cheques are either stolen, materialy altered or counterfeited".
47. The contention of the plaintiff regarding FER case No,45 of 1999 which was filed by the State Bank of Pakistan against one Mazhar Hussain Mossvi, Proprietor of Messrs Five Star International Karachi and not against the plaintiff whereby the complainant alleged that Mazhar Hussain Mossvi, Proprietor of Messrs Five Star International Karachi exported Rice to Mambasa valuing US $ 79,988.00 on or about 15-8-1997 as declared on "E" Form No,NBP/248765. He failed to repatriate sale proceeds of the above shipment within the stipulated period of four months from the date of shipment as per undertaking given by him which is contravention of FE Rules 1952 (Exh.5/48).
However, the said complaint of State Bank of Pakistan was disposed of by order dated 13-7-2000 by declaring International white-collar crime.
48. The learned counsel for the defendant argue that the defendant did not misdeclared on Form "E" No,248765 Exh.5/36 about the credential of importers. As the export was made against the advance payment so there was no necessity to make such enquiry. The plaintiff falsely and with mala fide intention alleged that before sending shipment documents bankers are required to verify credibility of importer. The learned counsel further argue that the cheque was discovered as counterfeit/forged, the defendants wrote to the plaintiff for adjustment of amount of counterfeit/forged cheque but the plaintiff failed to pay any amount in respect of the counterfeit cheque and the same was recovered under the State Bank of Pakistan Circular No,SBP/FE Circular No,2 of 1997 (Exhs.7/10 and 7/13).
49. The evidence shows that the defendants after finalization of case bearing No,SBP/FER No,45 of 1999 recovered the outstanding amount from the plaintiff and released the remaining amount to the plaintiff who refused to receive the same. However, the same amount was given by the defendants-Bank to the plaintiff admittedly through order of this Court.
50. In the light of the above discussion it is clearly proved that the shipment was effected to Uganda after clearance of counterfeit/forged cheque. Issue accordingly answered. Issue No,3
51. On this issue the learned counsel for the plaintiff argued that the Importers were "Quite Unknown" to the plaintiff, which is evident from the letter dated 17-8-1998 of plaintiff addressed to State Bank of Pakistan. The learned counsel, for the plaintiff further argued that the State Bank of Pakistan have put no restriction whatsoever that a sister concern cannot ship the goods against "Advance Payment" when the signatory of both the Concern is also the same. The plaintiff had received the proceeds through Banking channel still they routed the shipping documents through defendant, as importer were quite unknown to them.
52. The learned counsel referred the evidence of (D.W.1), who was from the American Express Bank and who in cross-examination admitted that D.D. N.014028 was paid on first presentation and no objection was raised whatsoever by the drawee bank (Bank of New York). The witness further confirmed that no claim has been lodged against them by the defendant against the debit of cheque/D.D. Amount when more than seven (7) months the funds remained in defendants account, therefore, American Bank did not file any claim against the Bank of New York.
53. The learned counsel for the plaintiff further referred the evidence of the witness and argued that this witness has accepted during cross-examination that according to Exchange Control Regulations of Pakistan the funds must be realized from abroad within four months of shipment.
Whereas, in the instant case proceeds had been in defendant account for more than seven months of its shipment. The said witness has also confirmed that D.D. Which was altered/forged/counterfeit was of different number i,e, 013714 and it was said to have been altered/forged/counterfeit in total i,e, number, name, address and amount. The amount was altered from US$ 685 to US$ 80,000 in figures and words.
54. The learned counsel also referred order of adjudicating Court at page 217 and contended that the same is also in favour of the plaintiff which has not been challenged by any party. The concluding para of above said order, which is reproduced as under: "However, the D.D. In question was declared altered/ forged in New York after 42 days when the deal of business was completed. It appears to be an international white collar fraud. I am, therefore, convinced to give benefit of doubt to the alleged Accused viz Mazhar Hussain Mossvi, Proprietor of Messrs Five Star International, Karachi and vacate the Show-Cause Notice dated 28- 10-1999 issued to him."
55. Lastly learned counsel for the plaintiff contended that in light of the above the plaintiff cannot be said clouded with the foreign importers (Uganda) at the cost of the defendants.
56. On the other hand the learned counsel for the defendant argued that admittedly the plaintiff deposited Cheque/DD No,014028 dated 10-6-1997 (Exh.7/6) without assigning any reason and he referred the evidence of the plaintiff's witness namely Syed Mazhar Hussain particularly cross- examination. The learned counsel further argued that the plaintiff through their letter dated 6- 8-.1997 asked the defendants to credit the net proceeds of Cheque equal to Pak Rupees in the account of their sister concern namely Messrs Five Star International having account in Pak Rupees being Account No,860-1, which was accordingly credited. However, the shipment was effected by Messrs Five Star International and not by the plaintiff.
57. He further contended that it is interesting to note that the above said consignment was exported within a short period of one day which is Exh.5/36, which is Form-E dated 9-8-1997, (Exh.5/3) bill of lading dated 15-8-1997 as (Exh.5/38), revised advice dated 13-8-1997. He further argued that on 21-8-1997 Messrs Five Star International address the defendant No,2 for dispatch of shipping documents to the importers by courier service and same is available as Exh.7/12, which has not been denied or put any suggestion during cross-examination to the defendant's witness, as such, the same is unrebutted and unchallenged. This also prove mala fides of the plaintiff in respect of Export against a counterfeit and manipulated cheque to the foreign importers.
58. In light of the above contention of the parties advocate, let see the evidence of plaintiff's witness namely Syed Mazhar Hussain who candidly admitted in his cross-examination: "the DD received by me was in the name of plaintiff-Company voluntarily says that the DD was handed over to the defendant-Bank for collection purpose."
59. To above witness in this cross-examination at page 2 further deposed that:-- "I say that at the time of depositing the with the defendant/Bank, I have not informed the defendant/Bank in writing that the amount in question pertains to advance in respect of consignment to be exported. I see form-E and say that the same was endorsed to us."
' Similarly, the plaintiff's witness further admitted that:-- "It is correct to suggest that Five Star International had exported Rice to Uganda against the Cheque."
60. This very witness at page No,3 .In his cross-examination further deposed that:- "It is incorrect to suggest that the plaintiff has intentionally manipulated forged cheque and exported the consignment immediately. It is incorrect to suggest that we have exported the consignment within one day's time. Voluntarily says that we had exported the consignment 7 days after receipt of the remittance". It is correct to suggest that the entire consignment was exported through one shipment. It is incorrect to suggest that we had sent the consignment immediately as it came to our knowledge that the DD has been dishonoured."
61. In light of above evidence it clear that the plaintiff have admitted that their company Five Star International exported Rice against the cheque and he said cheque against whom the payment was paid by the defendants, which later on proved to be forged/counterfeit. The case of plaintiff is that the importers Were unknown to them then whey on 21-8-1997 wrote a letter to the defendant No,2 to dispatch of shipping documents to the importers by courier service and this letter is (Exh.7/12) on record, which has not disputed by the plaintiff and in the said letter the address of the importers is also given.
62. It is also admitted fact that the shipments were made by the plaintiff after receiving the proceeds of DD deposited by them with defendant-Bank and the said DD was found later on to be forged and counterfeit, therefore, the plaintiff cannot be said that they are not clouded with the foreign importers/Uganda, accordingly issue is answered in affirmative..
Issue No,4
63. On this issue the contention of the learned counsel for the plaintiff is that the bank could not encash the plaintiff's NDRP certificate for recovering the amount in connection with another transactions.
64. In support of above contention he argued that FDR of US$ 315000.00 were fixed deposit for five years under NDRP-III Scheme with Ministry of Finance, Government of Pakistan through SBP. Fixed Deposit Receipt (FDR) was given to defendant to keep under lien against the Running Finance Limit of PKR 10 million. He also draws in this regard the attention of this Court on a letter written by the plaintiff to defendant giving specific authority of encashment of F.D.R. (Exh.5/76). He also draws the attention on agreed Terms and Conditions of plaintiff with defendant (Exh.5/77) and according to him the above two exhibits clearly shows that encashment can be made only against Running Finance. The defendant had no authority to encash the F.D.R. Before 2 years of its maturity and had no authority to encash against disputed amounts which had no link with Running Finance account and the encashment in this case is also against the established Banking practice and it could have been only encashed after 5 years when F.D.R. Value on maturity was double of the amount of defendant's so-called claim, hence no risk of defendant in any case was involved and he lastly argued that however, if the plaintiff (depositor) requests for encashment before five (5) years, only then it can be encashed and he referred the evidence of defendant's Manager Mr. Javaid Haider who admitted during the cross-examination that they themselves had debited the plaintiff's account.
65. On the other hand the learned counsel for the defendant by referring the case of plaintiff argued that they were running Finance Account bearing No,007117-6, which was debited on 29-12- 1999 and so also plaintiff's US $ account NDRP-III Scheme of US$ 315000.00 was encashed without permission of the plaintiff by debiting the amount in running finance account. He also referred the contention of defendants by referring para.18 of written statement that defendants categorically stated that the plaintiff was granted a running finance facility of Rs,10 million against NDRP-III Scheme as well as the same was secured for other transactions being under lien. It is admitted fact that the plaintiff was served letters, notices for encashment of US $ account for adjustment of outstanding liabilities.
66. The learned counsel referred the examination-in-chief of the plaintiff where the plaintiff produced the authority letter Exh.5/76, which clearly mentioned that a lien has been created in respect of NDRP-III Scheme against running finance availed by the plaintiff, as such it is crystal clear that in respect of outstanding liabilities in running finance facility the plaintiff created security of NDRP-III Scheme and this fact is admitted by the plaintiff in his evidence. The learned counsel further argued that the amount was debited in running finance account in terms of State Bank of Pakistan Circular No,SBP/FE Cir-2/97 that in case of outstanding balance in the said facility the lien on deposit NDRP-III was encashed and as such no illegality has been committed by the defendants. He also referred Exh.7/13, which is the letter through which the plaintiff was informed and requested to adjust outstanding liabilities otherwise the same shall be recovered/adjusted in due course of time.
67. The above said letter has not been denied by the plaintiff as such the defendant acted in the process of law for adjustment of outstanding liabilities due and payable by the plaintiff and in this regard the learned counsel placed reliance in 2002 CLD 495.
68. In light of the above contention let see the evidence of plaintiff whereby he admitted that "I see term deposit receipt dated 15-4-1997 and it is correct to suggest that a lien has been recorded in respect of the said receipt against running finance. I produce receipt as Exh.5/74.
69. The plaintiff has further admitted that "It is correct to suggest that on the receipt it is not mentioned that the lien has been created in respect of running finance (last page of cross- examination dated 14-10-2003).
70. The Exh.7/13, which is letter of defendants addressed to the plaintiff Chief Executive whereby they were requested to clear up to date outstanding liabilities along with up-to-date mark up and other charges within seven days from the receipt of the letter otherwise as per instruction of their Head Office they will have no alternate except to encash securities (under our lien) and adjust the same accordingly, and the amount of interest paid on NDRP-III will be recovered/adjusted in terms of SBP/FE Cir.No,2/97, which will be adjusted in due course of time.
71. In light of the letter the plaintiff cannot say that the defendants have encashed the security arbitrarily. There is another letter from the defendant to the plaintiff Exh. 7/14, which is also in respect of "Removal of our lien on finalization of case under FER 45/99 Regarding repatriation of outstanding Export Proceeds under Form E No,248765 for US $ 79988 to account five Star International".
72. It is also not denied that defendant after encashment of security adjusted the outstanding liabilities in the account of plaintiff and for balance amount they issued demand draft, which is Exh.7/15 on record and the said demand draft, which was accepted by the plaintiff then under the order of High Court of Sindh the demand draft was received by the plaintiff's representative.
73. In light of the above discussion the defendants National Bank of Pakistan were justified to encash the plaintiff's NDRP certificate to recover the amount as it was lying as lien with them as the plaintiff has failed to pay/adjust the liabilities in respect of proceeds of counterfeit cheque and difference of DD and TT buying rates, which were debited in the account of plaintiff. This issue is accordingly answered. Issue No,5
74. On this issue learned counsel for the plaintiff argued that the plaintiff is victim of the serious conspiracy and mala fide actions of the defendants most probably under the influence of Rice Exporters/Competitors, resulting plaintiff's doing "Zero" business since 1997 whereas before that plaintiff was in top tens of the Rice Exporters of Pakistan with Rupees one billion turnover per annum and he referred the Annexures "R/21" and "R/23" of the Replication filed by the plaintiff and also income tax paid challans, before 1997 and after 1997. He further argued that besides the plaintiff losses to the tune of PKR 75 Millions per annum and our country have also suffered US dollars 25 million per annum being loss of valuable foreign exchange plus loss of income tax in Millions of Pak Rupees per annum and the country has lost the potential Irani Buyer.
75. The learned counsel further argued that in pursuant of appreciation certificates issued by the National Bank of Pakistan and importers (Exh.5/69) the plaintiff's credibility is proved in local as well as abroad hence entitled for damages as claimed, as the business/profit and image of the plaintiff has been damaged/smashed by the defendants. He further contended that the claim of the damages has been narrated in last paragraph of examination-in-chief of the plaintiff's witness, which was not crashed/questioned/objected and/or rebutted through cross-examination and in pursuance of Articles 132 and 133 of Qanun-eShahadat Order, 1984 placed reliance on PLD 1995 Kar.
388, PLD 2004 Peshawar 104. He further argued that against one shipment, payment was credited in plaintiff's account on 3-3-1996 instead of on 29-2-1996 as per credit advice issued by the defendants as well as the cheque of about PKR 120 Millions were dishonoured and created bad reputation and damaged the credibility of the plaintiff and the plaintiff is entitled for damages as claimed and he lastly contended that the plaintiff's witness who has deposed in examination-in- chief about the illegal act of the defendants the plaintiff's good-will badly affected in Iran and the letters of credit were also returned and unutilized.
76. On the other hand the learned counsel for the defendants referred para.28 of plaint that the plaintiff has given details for financial losses and claimed following amounts by way of damages:
(a) Loss of export of US $ 25 Million per annum. The plaintiff suffered loss of Rs,300 Million estimated upon shipment and calculated at 7% profit.
(b) Loss of goodwill in the local as well as foreign market and prompt service record being Rs,10 Million.
(c) Mental torture Rs,300 Million.
(d) Litigation cost Rs,1 Million.
77. He further argued that admittedly the plaintiff is a Registered Private Limited Company, registered under the Companies Ordinance having an independent character and status than that the natural person being artificial and juristic person, therefore, the plaintiff cannot claim for mental torture. He further argued that it is a settled principle of law that claim in tort particularly damages for mental torture could be claimed by only natural person and not by the artificial person like the plaintiff. He further argued that the plaintiff did not bother to bring on record any resolution of company whereby some authorization have been extended to one Mr. Mazhar Mossvi to present, sign and verify the plaint and get the evidence in the instant case. It is a crystal clear principle of law that the liability of Directors is limited and a company cannot claim damages for mental torture for one or each Director of the Company or even of its Chief Executive.
78. Learned counsel further contended that the plaintiff miserably failed to prove any loss of business attributed to the defendants act. The plaintiff is a Registered Private Limited Company for the purpose of export and dealing only for the export of the rice. It is a common principle of export business that the same is based upon export orders from the international market and the plaintiff failed to prove that any export order has been recalled or the plaintiff quotations for the international supply have been rejected by the foreign buyers due to the reason that their credibility has been shaken by the defendants as alleged and he referred para.12 of the plaint.
79. He further argued that the plaintiff claims loss of business on the basis of presumption and conjectures which, cannot be granted. According to him the plaintiff either innocent enough to deal in international market or withheld with obvious reasons the necessary evidence in order to prove the damages for loss of business and he referred letter of plaintiff addressed to the bank not to debit any amount in its Running Finance facility until and unless finalization df export orders. The plaintiff never informed the defendants of having any export order. He further argued that the plaintiff produced the documents as Exhs.5/52 to 5/55, 5/1 to 5/11 and Exh.5/69 but none of these Exhibits show any loss in the export business. Income tax deduction in export business would not become basic of establishing loss of business as tax deduction is possible only when the goods have been shipped after fulfilling export orders.
80. He further referred the letter of plaintiff dated 17-1-1996 addressed to the defendant, which is Exh.5/53 on record, whereby he requested the defendants to treat the L.C/C No,63404/74202121 for US$ 6480000.00 as cancelled for the reason that the same was not extended by the foreign buyers without assigning any reasons. The learned counsel further argued that it is pertinent to note that the said L/C was cancelled during the period when the plaintiff has no dispute in any way with the defendants. According to learned counsel it is settled principle of international trade that in case the L/C. Is not extended by the opening Bank reasons are required to be given in writing which the plaintiff withheld with obvious reason, therefore, under Article 129(g) of Qanune-Shahadat Order, 1984, the presumption stood against the plaintiff as "if the evidence which could be and is not produced it would go against the person who hold it".
81. The learned counsel further argued that the plaintiff being a Registered Private Limited Company is bound to maintain and keep all the registers of accounts books to maintain and furnish balance sheet duly prepared by the authorized auditor but the plaintiff deliberately with obvious reasons withheld the auditors report and balance sheet along with the plaint to show the losses and he referred the examination-inchief in the above respect.
82. The learned counsel further argued that the plaintiff in para. 27 of the plaint make some scandalous allegations against the defendants but failed to prove anyone of them. The plaintiff for his own accord move against the name and reputation of the defendants through different modes which are available and the same are nothing to do with the banking transaction. The damages for loss of goodwill and name could be claimed against the person who is responsible for the communication of the same to the public. The defendants not on a single point of time made complaint against the plaintiff but it was the plaintiff who himself initiate and become source of communication with different agencies on false and frivolous grounds.
83. The learned counsel lastly argued that the plaintiff has not suffered any loss in the business as alleged and is not entitled to grant of prayer.
84. In light of above contention of the parties' advocates in order to see whether the plaintiff has suffered the financial losses and entitled for damages details of which already given in the above foregoing paragraph.
85. Damages are usually considered under two heads viz. General or non-pecuniary loss or damages, that is physical injury, pain and suffering, impaired capacity for the enjoyment of life or lessened capacity and special or pecuniary damages that are actual, incidental and direct expense, capable of calculation in terms of monetary value may it be on account of medical treatment, loss in business profit earning or otherwise, in an action for damages either general or special, burden to prove is always on the plaintiff. In absence of authentic oral and documentary supporting evidence, mere statement of party is not sufficient to establish amount of damages allegedly suffered by him. A person claiming special damages must prove each item of his loss on the basis of evidence. Where a person claims special damages then it is incumbent upon him to show as to under which head of account and how such damages have been sustained. In absence of such proof, special damages cannot be allowed. Reliance is placed on authority of 1992 CLC 1561 (Kar.) relevant page 1566(B). Even otherwise it is held by superior Courts that a Private Limited Company cannot sue for damages of its feelings like mental torture.
86. The contention of plaintiff is that he suffered loss and not receiving the export order of International market but he failed miserably to prove any loss of business attributed to the defendants act. On the contrary the plaintiff mentioned in para.12 of the plaint as under:--- "That regarding one shipment to Uganda, the plaintiff received Fax No,00256-41-241969 dated 16- 7-1997 from Messrs MNT Importers and Distributors of General Merchandise Kampala, Uganda for supply of rice (15% broken) for equivalent to US $ 90,000 and the plaintiff vide fax message dated 21-7-1997 regretted the supply required (15% broken) rice as it was not available and informed them to wait till next crop which will start after three months".
87. The contention of plaintiff regarding not receiving the order of the export of Rice due to that he suffered the loss, is based on the presumption otherwise no such evidence is brought on record and it is established principle that damages for loss of business could be claimed only for the business in hand and not the business in smoke or even in pipeline. In this regard the plaintiff also wrote a letter which is dated 17-11-1996 for cancellation of . The letter of credits to the defendants, which is Exh.5153 wherein mentioned that the letter of credit for US $ 6480000.00 as cancelled for the reason that the same was not extended by the foreign buyers without assigning any reasons and it has been rightly argued by the learned counsel for the defendant that the said L.Cs. Was cancelled during the period when the plaintiff has no dispute in any way with the defendant.
88. The plaintiff being Regi3tered Private Limited Company is bound to maintain and keep all the registers of accounts, books to maintain and furnish balance sheet duly prepared by the authorized auditor and admittedly such books or balance sheet prepared by the authorized auditor has not been brought on record for establishing the all claims of the damages due to the transaction in question with the bank. In this regard the plaintiff's witness himself in cross- examination admitted that:-- "I see statement, which I have filed to show my damages and it is correct to suggest that the same does not bear my signature or the signature of any auditor or chartered accountant. It is correct to suggest that I have not given details in the balance sheets of the companies about which I have mentioned in the statement. It is correct to suggest that I have not produced any balance sheet along with the said statement."
89. In order to establish the damages the plaintiff has not produced a single document in evidence showing any expenses incurred to the tune of Rs,10 million for litigation charges. The plaintiff did not file any balance sheet being a registered company showing the expenses incurred during all the financial years or to show the losses in the business in all those years and as such the plaintiff's claim in respect of damages is wholly baseless.
90. The contention of the plaintiff is that he produced Income Tax Return and appreciation certificates of which no cross-examination is conducted, therefore, the same is be taken against the defendant in respect of the damages, It is settled principle of law that mere not cross- examining on material facts does not ipso facto constitute the establishment of the fact. The plaintiff is supposed to stand on his own legs and not on the weakness of other side. Without the discharging the burden of proof of any specified fact, the other side could not be presumed to have admitted the. Facts. Omission to cross-examine a witness on specific point which, however, was rebutted by making suggestions and denying the same in evidence by the defendant. Over all impression of entire evidence was that omission pointed out by the plaintiff would not amount to acceptance of his pleas. Same principle has been time and again got assent by this Court so also by the apex Courts. Reliance place in following judgment:--
(1) 2000 CLC 215(2) 1991 SCM R 2300.
91. In light of the above discussion and findings on the Issues Nos.1 to 4 the plaintiff is not entitled for the damages claim. This issue accordingly answered. Issue No,6
92. The learned counsel for the plaintiff contended that undoubtedly the plaintiff filed the suit before this Court in its original Banking jurisdiction wherein defendant-Bank filed its leave to defend application which was granted and the suit was proceeded as Banking suit filed under the provision of Financial Institutions (Recovery of Finances) Ordinance, 2001 and as such under section 9(1)(2) of the ibid Ordinance required the plaintiff to append with the plaint a statement of account. Only concession available to customer is that such statement of account is not required to be certified in the manner prescribe under Bankers' Books Evidence 1891. Plaintiff having failed to file statement of account as required and hence the suit is liable to be dismissed on this score alone. So also the suit has been filed by the Private Limited Company without any Board Resolution,
93. Apart from above, findings of this Court on Issues Nos.1 to 5 the plaintiff is not entitled for the relief claim and subsequently his suit stands dismissed with no order as to costs. Parties left to bear their own costs in the circumstances of case.