P.L.A.No,17-B of 2005 ' SYED HAMID ALI SHAH, J.---The applicants/ defendants, through a joint application, seek leave to defend the suit.
2. It is contended that documents, appended with the plaint, are agreements without consideration and for that reason, are not enforceable at law; that the plaintiff has suppressed material information; that the finance facility availed by the applicants, was under State Bank's Scheme of Export Re-Finance, while the documents filed with the plaint, pertain to six buy back agreements, which have no nexus with ERF; that the loan was rescheduled and as per arrangement of the reschedulement of loan, applicants paid Rs,2.1 million and Rs,19.99 million on 16-4-2004 and 25-4- 2004 respectively; the sale proceeds of the properties were adjusted, but the plaintiff bank has deviated from the terms of rescheduling of finance; the terms incorporated in letter dated 12-7- 2004 of reschedulement of the loan, are totally different from what has been agreed inter-se the parties, that the amount of finance, as it exists originally between the parties, has been paid; that defendants Nos.2 to 4 have not furnished any personal guarantee, qua the agreement dated 1-4- 2002; that defendants Nos.3 and 4 have resigned from directorship of the company since 7-6-2001 and have not signed any document. It was also asserted in the application for leave to defend that the plaint does not meet the mandatory requirements of section 9 of the Ordinance, 2001, the suit has not been filed by the authorized persons and agreements, subject matter of the suit, are unconsciousable and defeat the provisions of law.
3. In support of the above assertions, learned counsel for the applicants has submitted that the plaint is silent with regard to the amount of finance, availed by the plaintiff from the State Bank and the exact amount payable by the petitioner in response to the amount of finance statedly disbursed to the petitioners. The suit is not based on buy back agreements, these agreements have not been mentioned in the plaint and thus being departure from the plaint, can neither be considered nor have any value. It was vehemently argued that the applicants, in their application, has asserted that no amount of finance was disbursed under buy back agreements and the plaintiff bank has not denied specifically the stance taken by the applicants. While referring to the plaint, buy back agreements and the statement of account, it is contended that they are self contradictory and fail to make out an open and shut case, which could be decided even without grant of leave to defend. Learned counsel emphasized that rescheduling of the loan was not given effect, although the parties agreed on all material terms and conditions of the rescheduling of loan. Learned counsel at this juncture, has referred to the statement of account at page, 54 of the suit and state that the amounts mentioned in the statement of account with regard to ERF-I, do not correspond with the amounts mentioned in para 17 of the plaint; and that the amount of over draft in current account is not supported by any agreement nor it has been pleaded in the plaint, thus is not recoverable; and that the penalties, imposed by the plaintiff, are not mentioned in the plaint nor any proof to that effect is placed on record to show that State Bank has imposed these penalties and were paid by the plaintiff bank. It is also contended that according to para 5 of the plaint, the amounts of ERF-I were disbursed on 22-7-1999, and of ERF-II were disbursed on 29-7- 1999, but these amounts and payments are not reflected in the statement of account; and that the statement of account reflects payment of Rs,10 million on 2-8-1999, thus no suit can be decreed on such statement of account, which does not support the assertions of the plaint. Learned counsel has submitted that mark up (over due) has been charged and relevant entries at pages 152 and 153, signify that mark up, on mark-up has been charged. He went on to argue that ERF Scheme was for 180 days and any mark-up beyond the said period, is not legally permissible. Learned counsel supported his contention by relying upon the case of "Messrs Naeem Associates through Proprietor and 6 others v. Allied Bank of Pakistan Limited through Branch Manager" 2004 CLD 1672. The rate of mark-up, as agreed, is 8%, but the plaintiff bank is applying mark-up on the advice of two ladies namely Sobia Chughtai and Farida, at an exorbitant rate. Learned counsel has submitted that the letters of personal guarantee reflect that the amount guaranteed, is subject matter of buy back agreements, but no amount was ever disbursed in response to buy back agreements. The balance, according to the statement of account, in respect of ERF-1 and ERF-II reflects "Nil" entry on 10-2- 2002 and 31-12-2002. The defendants have not executed any letter of personal guarantee thereafter, thus they are discharged of their liability, as the amount which defendants Nos.2 to 4 had guaranteed, had already been paid off. It was lastly argued that the original agreement was based on Export Refinance Facility, which cannot be renewed through buy back agreements. The agreements, subject matter of the suit, have no legal value.
4. Learned counsel for the respondent plaintiff has submitted that the application for leave to defend, has been filed under the provisions of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and such application requires compliance of mandatory provisions of subsections (3), (4) and' (5) of section 10. Compliance is mandatory and failure thereof entails the consequences of dismissal of the application. He has submitted further that a plaintiff under the provisions of section 9 of the Ordinance, 2001, is under an obligation to place on record, whole relevant record of the facility/facilities availed by a borrower. Para. 5 of the plaint describes that various facilities, which the defendants availed from time to time, while para. 7 provides all the details of various agreements executed from time to time between the bank and borrowers.
Learned counsel has submitted that Export Refinance Facility (ERF-I) for Rs,60 million finds it's mention in para. 5 of the plaint and it's corresponding agreements are at serial No,I to XXXI. Learned counsel went on to argue that statement of account at pages 154 to 164 supports the averments of para 7 of the plaint. Learned counsel went through various entries of the statement of account and submitted that an amount of Rs,9,700,000.00 is the amount disbursed on 24-4-2002 and two debit entries in the statement of account as on 26-6-2002 and on 15-8-2002 for amounts of Rs,8,100,000.00 and 10,000,000.00 depict that these entries correspond with agreements of finance relied upon by the plaintiff as well as assertions in the plaint. Statement of account pertaining to the current account at pages 185 to 276 reflect the same picture. The debit entries in ERF account are shown as credit entries in the current account, which proves the disbursement and transaction, according to the terms of finance, accorded to the applicants/defendants.
5. Learned counsel has submitted that it is significant from para. 5 of the plaint that ERF facility for Rs,20 million was approved and disbursed. This amount has been shown disbursed on 30-8-2002 in the statement of account at pages 165 to 184 of the plaint. The debit entry in ERF-2 facility, has been shown as credit entry in the current account. Finance agreement dated 1-4-2002, transpires same amount, as sale price in Buy Back Agreement. Learned counsel emphasized that assertions in the plaint are supported by statement of account. Plaint, agreements of finance and entries in the statement of account correspond with one another and there is no contradiction. Learned counsel has denied that the loans were rescheduled as alleged by the defendants/applicants. He added that it cannot be proved merely from letter dated 5-3-2002 that parties have not finally agreed and concluded reschedulement of loan. The letter, according to learned counsel, is at the most an offer, which was not accepted. Mortgaged property situated in Karachi, was sold and it's proceeds were deposited by the defendants. The adjustment of sale proceeds, towards the liability of defendant, is duly reflected in the statement of account. Mere communication for rescheduling of loan without a concluded contract, has no binding force. Defendants never responded to the offer of rescheduling, communicated through letters dated 12-7-2004, 18-7-2004 and 27-7-2004.
Learned counsel has submitted that defendants Nos.1 to 4 are liable to pay the outstanding liabilities of respondent No,1, being guarantors. He has submitted that letter of guarantee was signed by the defendants as and when the facility was renewed or finance facility was extended.
Learned counsel submitted further that defendants have signed letter of guarantee jointly on 20- 5-2000 (page 139). Subsequently defendant No,2 signed a separate guarantee on 3-10-2002.
Learned counsel has submitted that perusal of letter of guarantee, reflects that the liability of defendants Nos.2 to 4 being guarantors, does not come to an end by renewal of the loan or other future arrangement between principal borrower and the lender Bank, even resignation of the defendants from the Board of Directors of the company, does not absolve them of their liability.
Learned counsel referred to clause 2 of the letter of guarantee and has submitted that they are liable as principal borrowers on the basis of this letter of guarantee, even when they have resigned 711.{{BLUR PAGE}} or the .Loan is rescheduled or any variation is made in the main agree t. Learned counsel supported his contention by feefignt to the cases of "Habib Bank Ltd. v. Cargo Despatch bo:8iLifdl and 4 others" 1987 CLC 1002, "Aqal Zaman v. Mst. Azad Bibi and 2 others" 2003 CLC 702 and "S.A. Flameed and ;v: ,N11 Allied Bank of Pakistan Limited and others" 2004 CLD O,,. 60 counsel has submitted that defendants have splOthe execution of the agreement nor disbursement 9.11g.),0.Pility. The suit amount, being admitted liability, d-qlasideereed, without granting the defendants leave Atilt. Learned counsel, in this regard, has referred itec1 5-3-2003 and 3-4-2003, where defendant over due amount of ERF-1 loan to the tune ver due loan in respect of ERF-II facility to he . Ion. In view of this admission, nothing is Kt RI %-fTilylvS ed counsel went through the entries of s rid A19,r1PFERing3 ated 16-4-2002 and 25-8-2004 and 1-4141 of the mortgaged property at Karachi wErAFf5 iye ockv, gctrtowards liability of the defendants. RcluAsfi5g Itig. Claim of the plaintiff Bank for .11 pc ty which the plaintiff Bank has 1..t?,for failure of the defendants Fpw,,,, oad and on non-shipment J rbtApRortTF1,:,44.,q.. Contentions by relying (471Wia-P 1#1 .1-gatip-Aiand 2 others v. Messrs gfo Rr4t4w3.Anipfclpag.,.i,wiipt.Ther" 2003 CLD 702, %0,1,3wAkAilliniAscl.y. Messrs LTsman T-Frtsii qPIPP.5-1 .6rto 511ficpi t4t and e e,_p gs_ n record artitsgii. 0 .80 .. nt6 )115.,3) IS 1.3:1-,t IlTit sue gribd 1.011 Iiribrioqa51 1(.) grithrmietuo 3V11611tipplieatitiii5Efoii34a8iji-Wcidefefialh be ti filed viettlYotita :tiOrtnfilYitkit 944ittpilvtileig of 4ttliitzt1tinsi.:(3);11('4) ah4lEircifs rhP40 dflhedidatikaW:AVI A or ;12001):5)114:0,4641140 WitIO:hold6WittitA 4i4e15fliM rhandift6ilelileiMitliti4titd?liffillieclioihiAriards,'91ifig)A4A-eaeigeb 81"thqk stittledwkidetereiteiktdi Bankt-ciif vdiFiffif iliidtisttksb Eitrittedniffil Ligiot**TV-5:32004 34148It;6 tuttittedrithiwiWitithfeleios041 'bairterittifesimillg9 (LkmyurhitegdittfibtigtftdhfdPgkeroiftf*Ad glitheireITO2 'rib 5E0; b8iddititiel-WO:ilkfialltlilltrillitil &ornef43 Nv!I AirmabiskINI4sto pattiststh-?;2oesnegrimbsg;u1Bavik)46-itifisrweem:1.-tmlfgAstSfaci(Pia bw-igiam ovi3d norlw rt5v9 ,55111EIGI,Eg *10 latitil aifit 0 et8f3d {{BLUR PAGE}} ' Distribution and 14 others" 2003 CLD 1406, "Zeeshan Energy Ltd. And 2 others v. Faisal Bank Ltd" 2004 CLD 174, "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. The application for leave to defend the suit, also lacks compliance of provisions of subsection (4) of section 10 and for this defect, the application merits rejection.
Accordingly, the defendants have failed to disclose sufficient cause, for their inability to comply with the Statutory requirements of subsections (3), (4) and (5).
8. Para 1 of the application, for leave to defend the suit, transpires that the defendants have admitted the availment of finance facility under Export Refinance Scheme of State Bank of C Pakistan. The defendants, however, have taken refuge from their liability on the ground that documents pertaining to buy back agreement etc., are without consideration. The leave application, filed on behalf of the company, without resolution of the Board of Directors, cannot proceed. A lis on behalf of the D company without the resolution of the Board of Directors, has no sanctity. As an authority for this proposition, reference can be made to the cases of "Messrs National Electric Company of Pakistan v. Allied Bank of Pakistan Ltd. And 2 others" 1996 CLC 192, "Walton Tobacco Company (Pvt.) Ltd. And others v. Azad Government of the State of Jammu & Kashmir and others" 1993 CLC 66 and "Muhammad Umar Mirza v. Waris Iqbal and others" 1990 SCM R 964.
9. Defendants have mainly based their defence on reschedulement of loan, but no material is placed on record, except for offer letter dated 12-7-2004. The offer made through, letter dated 12-7- 2004 never culminated into a concluded contract. The defendants in para. 3 of the leave petition, have admitted the execution of letter of personal guarantee, during E April, 2002. The letter of guarantee, covers future transactions, variations, reschedulement and renewals. Such letter of guarantee does not discharge the surety of it's responsibility, on the plea that the variations, extension of time or renewals were made subsequent to furnishing of guarantees. Honourable Division Bench of this Court, in the similar circumstances, has held in the case of "Mian Aftab A.
Sheikh and 2 others v. Messrs Trust Leasing Corporation Limited and another" 2003 CLD 702, as under:-- ' The settled rule appears to be that if variation or composition of the loan or time etc. As to its repayment was allowed by the creditor to the borrower and consent/assent in advance thereto was given by the guarantor in the letter of guarantee. Subsequent to the date of guarantee, such variation, composition, extension, change or indulgence being within the contemplation of the parties at the time of execution of guarantee did not effect discharge of the surety/ guarantee from obligations under the guarantee. And as such surety continued to be bound by the terms of the guarantee despite moratorium, enlargement of time, composition and variations between the creditor and principal borrower."
10. Perusal of assertions made in the application, it's reply and plaint, reflect that questions raised in application for leave to defend the- suit, did not need recording of evidence, for determination.
Mandatory requirements of section 10(4) of Ordinance, 2001, have not been complied with, availment of finance is admitted and application for leave to defend on behalf of company, without a resolution of board of directors leave no room for grant of leave to defend the suit. The application for leave to defend has no fate, except dismissal and the same is accordingly dismissed.
Main Suit.
11. Plaintiff has claimed an amount of Rs,17,789,000 towards principal amount in respect of ERF-1 and levied thereon a mark-up of Rs,11,511,498 at a stipulated rate, till the filing of suit. Legally the mark- up can be levied for the period of transaction. The mark-up for the period of contract, at a stipulated rate, come to Rs1,961,413. The plaintiff can legally recover mark-up for the said period.
The claim of mark-up from the date of expiry of agreement till filing of the suit is rejected. Adverting to the loan in respect of ERF-II, the principal amount of finance is Rs,20,000,000. Plaintiff has charged mark-up to the tune of Rs,6,071,979.00 levying the same from the date of disbursement till filing of the suit. The mark-up which is legally chargeable is, for the period of transaction only. A sum of Rs,1,603,292 is payable towards mark-up, from the date of disbursement till the period of expiry of agreement. Plaintiff has claimed mark-up, in respect of ERF-1 and ERF-II at Rs,11,511,498 and Rs,6,071,979, while it is legally payable to the extent of Rs,1,961,413 and Rs,1,603,292 in respect of ERF-I and ERF-II respectively. The defendants have admitted that ERF-I and ERF-II is overdue, which fact is evident from the letters of the defendants dated 3-4-2003 and 3-3-2003, respectively. The request by defendants for rescheduling through letters dated 12-7-2004, 18-7-2004 and 27-7-2004, further establishes this fact. Various communications addressed by defendants to the plaintiff, brings me to conclude that the claim of the plaintiff stands established to the extent of ERF-I for Rs,17,789,000 (principal) and Rs,1,961,413 (markup). Similarly a sum of Rs,200,000,000 as principal towards ERF-II and mark-up to the tune of Rs,6,071,979. A sum total of these amounts, is Rs,41,353,705. Thus an amount of Rs,41,353,705 is legally recoverable.
12. Coming to the claim of the plaintiff for overdraft facility of Rs,1,867,975,33, nothing has been urged in the plaint about this facility. No agreement exists on the file to prove the existence of overdraft loan facility. Plaintiff-II has failed to prove overdraft facility through a sanction letter through agreement of finance or through express stipulation, in the plaint. The claim of the plaintiff qua the overdraft facility is therefore rejected.
13. Letter of personal guarantee dated 20-5-2000 jointly signed by 'defendants Nos.2 to 4 and separate letter of guarantee signed and executed by the defendant No,2, do not absolve defendants Nos. 2 to 4, of their responsibility as guarantors. Condition No,2 of letter of guarantee binds the guarantor to pay the amount guaranteed, irrespective of any variation, renewal or other arrangement between the lender Bank and the principal borrower. A contract of guarantee is an independent agreement and creates contractual obligations between the surety/guarantor and principal creditor, independently.
14. For the foregoing, the suit of the plaintiff is decreed for a sum of Rs,41,353,705.00 with costs and costs of funds, in favour of the plaintiff Bank and against the defendants jointly and severally.
Defendants' failure to pay the decretal amount within one month from the date of decree, will result into execution of decree forthwith, without the necessity of filing an application for the execution of the decree.