1. ' NADEEM AZHAR SIDDIQI, J.---By this application the defendants have prayed for grant of leave to defend the suit, to which the plaintiff has filed replication.
2. ' The case of the plaintiff is that the defendants provided personal guarantee for repayment of loan amounting to Rs,15,60,000 allowed to the borrower company, namely, Messes. Muscat Garments Industry LLC and since the borrower company failed to pay the amount, therefore, a recovery suit at Muscat had been filed, which was decreed against the borrower company as well as against the guarantors including the defendants on 27-6-2004 obliging them to pay a sum of Ro.900,980/892 jointly and severally with interest at the rate of 9% from the date of the suit till the final payment. It was further stated that in spite of decree no payment has been made and the assets of borrower- company and Omani National Directors will hardly suffice for payment of the dues of the Government of Sultanat-e-Oman and the employees of the borrower company.
3. ' The defendants filed application for leave to defend and raised legal pleas about maintainability of the suit and jurisdiction of the Court on the ground that the defendants are not the customers as defined in Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as "the said Ordinance"). The suit is not maintainable under the said Ordinance on the basis of foreign judgment. The defendants have also disputed the disbursement of loan to the tune of Rs,15,60,000 and challenged that under Pakistani Law no interest can be charged after the expiry of the limit which as per sanction advice is 31-7-2003 and that the documents were executed without consideration. It was further stated that the decree passed by Omani Court is not on the merits of the case and is against the Pakistani Law.
4. ' Learned counsel for the defendants submits that the suit in banking jurisdiction is not maintainable. He further submits that there is no provision under the said Ordinance for filing a suit on the basis of foreign judgment. He then submits that the judgment produced by the plaintiff is an ex parte judgment without considering the merits of the case and the same was passed in violation of Pakistani Laws as the company, main borrower has gone into liquidation in 2003 and liquidator has invited claims against the company and for proceeding against a company under liquidation no permission has been sought from the Company Judge and refers to section 316 of the Companies Ordinance, 1984. He then submits that in terms of Pakistani Laws the original suit was time barred and on the basis of decree which was obtained in a time-barred suit this suit cannot be entertained. He then submits that it has not been brought on record that what amount has been recovered from the borrower company and its Omani Directors. He has relied upon the following reported cases:--
(1) Naeemullah Malik v. United Bank Limited 2006 CLD 1592.
(2) R.E. Muhammad Kassim and Co. v. Seeni Pakir-BinAhmad AIR 1927 Madras 265.
(3) National Bank of Pakistan v. Banking Tribunal No,1 PLD 1994 Karachi 358 and
(4) Nadeem Ghani v. United Bank Limited 2001 CLC 1904.
5. ' Learned counsel for the plaintiff submits that the suit has been competently filed in terms of Clause (a) of subsection (1) of section 7 of the said Ordinance and that section 13 of C.P.C. Is procedural and do not exclude the jurisdiction of the Court. He then submits that the foreign judgment is conclusive of the liability of the defendants and they cannot escape their inability on flimsy grounds. He then submits that the liquidation of principal borrower has no effect upon filing of suit against borrower. He then submits that the defendants have failed to fulfil the requirements of grant of - leave to defend the suit and the application is liable to be dismissed. Learned counsel has relied upon the following reported cases:--
(1) Messrs Safa Textile Ltd. v. Messrs Habib Bank Limited 2004 CLD 279.
(2) Emirates Bank International Ltd. v. Messrs Dosman Brothers and 9 others 1990 MLD 1779; and
(3) Abdul Ghani v. Haji Saley Muhammad PLD 1960 (W.P) Karachi 594.
6. The plaintiff has filed this suit on the basis of a foreign judgment passed ex parte by primary Court commercial Circuit, Muscat, Oman and the defendants were directed to pay an amount of Ro.900,980.892 with 9% interest per annum from the date of suit till final payment. The suit was filed on the basis of foreign judgment and not on the basis of original cause of action. In the judgment reported as Emirates Bank International Ltd. v. Messrs Dosman Brothers 1990 MLD 1779, it was held that the plaintiff has the following three remedies available under the law; (1) execution of foreign judgment by proceeding under section 44-A of C.P.C. If the decree is of a Court of reciprocating country; (2) suit on the basis of foreign judgment treating it as cause of action, if conditions prescribed in Section 13 C.P.C. Are fulfilled; and (3) suit on original cause of action.
7. The suit on the basis of foreign judgment can be filed in Pakistan, if not hit by exceptions provided under section 13 of C.P.C. From the perusal of judgment it appears that the same was passed ex parte without hearing the defendants and it is not known whether any attempt has been made to properly serve the defendants personally or not.
8. From the judgment it is also evident that merit of the, case has not been discussed and the suit was decreed simply!' on the basis that the defendants have not attended. In the reported case of Abdul Ghani v. Haji Saley Muhammad PLD 1960 (W.P.) Karachi 594 the different categories of ex parte judgments were discussed and a test for determining whether the ex parte judgment can be on merits has been laid down as under:-- "The true test for finding out whether a judgment is on merits or not, in my opinion, is that whether an ex parte judgment was given on consideration of the truth or otherwise of the claim of-the plaintiff or not and whether it was based on some evidence or not. If a judgment is given as a matter of course simply because the defendant has failed to appear in Court to defend the suit, it is obvious to me that it cannot be considered to be a judgment on merits."
9. Apparently the judgment cannot be treated as Judgment on merits as the same is given as a matter of course simply for the reason that the defendants have not appeared to defend the suit and is fallen within the exception of sub-clauses (b) and (d) of section 13, C.P.C.
10. The defendants have produced annexure D/1 to show that the principal borrower has gone into liquidation which is dated 1-12-2003. In Annexure-D/1 it is mentioned that only the liquidator is authorized to represent the company towards the right of others. The suit at Muscat was filed on February 23, 2004 without disclosing that the principal borrower has gone into liquidation and from the judgment it is apparent that no notice has been served upon the liquidator to represent the company. Section 316 of the Companies Ordinance, 1984 provides that where a winding up order has been made or a provisional manager has been appointed, no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose. It appears that the judgment has been obtained from the Court by suppressing the facts of liquidation of the company and the same falls within the exception of subsections (e) and (f) of section 13, C. P. C.
11. ' The other question which requires consideration is whether at the time when the suit was filed at Muscat the defendants were resident of that area. The foreign judgment is silent in this regard. In the reported case of Fazal Ahmad v. Abdul Bari PLD 1952 Dacca 155, it was held that a decision was given finally ex parte against both the defendants where both were non-resident foreigners and the decision was not on merits and so that decision comes within the exceptions of subsections (a) and (b) of section 13, C.P.C.
12. In this case also the defendants appear to be nonresidents of Muscat and have not submitted to the jurisdiction of the foreign Court and the foreign judgment appears to be not binding upon them.
13. ' The other legal question is whether the suit as filed under the Banking jurisdiction is maintainable or a regular suit under section 13, C.P.C. Is to be filed. This question will decide the fate of this suit and any finding in this regard will prejudice the respective case of the parties.
14. A Court in Pakistan can refuse to accept a foreign decree as conclusive if it is shown that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.
15. In view of the above, I am of the view that substantial question of law and facts have been raised in respect of which evidence needs to be recorded and grant of leave to defend the suit is necessary.
16. As far as the question of deposit of amount or furnishing surety is concerned, the plaintiff has failed to satisfy the Court regarding amount recovered by it from the main borrower and other directors and what efforts the plaintiff has made to enforce the decree in the country where it was passed. In the reported case of Grosvenor Casino Limited, Shahrah-e-Kamal Ataturk, Karachi v. Abdul Malik Badruddin 1997 SCMR 323 the Honourable Supreme Court while dealing execution of a foreign Court decree has held as under:-- "9. We have already pointed out hereinabove that a foreign judgment/decree can be assailed on any of the grounds mentioned in clauses (a) to (1) of section 13, C.P.C. Whereas subsection (3) imposes an obligation on the part of the District Court executing a foreign decree to refuse the execution of the same if it is shown to its satisfaction that the decree falls within any of the exceptions specified in the above clauses (a) to (f) of section 13. The object of deeming provision in subsection (1) of section 44-A, C.P.C. Seems to be to facilitate execution of a foreign decree in Pakistan by assuming by virtue of fiction of law as if it had been passed by, the District Court in Pakistan, instead of compelling the foreign decree-holder to file a suit on a foreign judgment which was the position obtaining in India prior to the incorporation of above section 44-A in 1937.
17. However, this deeming provision contained in subsection (1) the above section 44-A is to be read in conjunction with subsection (3) thereof in order to harmonise the above two provisions of the same section. In our view, since subsection (3) of section 44-A requires an executing Court in Pakistan to refuse the execution of a foreign decree if it is shown by the judgment-debtor that the decree falls within any one of the exceptions specified in clauses (a) to (f) of section 13, the same cannot be controlled or its effectiveness be curtailed by the cumbersome provision of Rule 23-A of Order XXI, C.P.C. The above special provision contained in subsection (3) of section 44-A shall exclude the application of the general provisions of above Order XXI, Rule 23-A, C.P.C., which is applicable generally to decrees passed in Pakistan. Additionally subsection (3) of section 44-A, C.P.C. Is a provision of substantive law, whereas Rule 23-A of Order XXI, C.P:C. Is a procedural provision framed under the C.P.C. And, therefore, in case of any inconsistency, the former shall prevail over the latter. Since the former provision does not envisage the exercise of the right contained therein by a judgment-debtor subject to deposit or furnishing of the security of the decretal amount, there seems to be inconsistency."
18. After considering the above principle, I am of the view that the above principle is also applicable to the present case and the defendants are entitled to unconditional leave to defend the suit.
19. ' The application filed by the defendants is allowed and the same is treated as written-statement and following issues are framed:--
(1) Whether the foreign judgment is conclusive as to any matter thereby directly adjudicated upon between the same parties?
(2) Whether the judgment does not fall within the exceptions of section 13, C.P.C.?
(3) Whether the suit under banking jurisdiction of this Court is maintainable?
(4) Whether the defendants being guarantors are liable to pay a sum of Rs,900,980.892 to the plaintiff?
(5) To what relief the plaintiff is entitled?
(6) What should the Decree be?
20. ' Lists of witnesses to be filed within seven days, documents to be filed and the Commission, if any, to be notified within 60 days.