Respondent filed a suit for declaration, permanent and mandatory injunction and recovery of damages of Rs. 25,000/- against the appellants.
2. Case of the respondent as set out in the plaint is that Muhammad Mushtaq son of Saeed Muhammad was the customer and principal borrower of SBFC, whom the loan for an amount of Rs.
3,50,000/- was sanctioned and disbursed. Respondent being his brother- in-law, furnished the guarantee for repayment of loan, advanced to principal borrower. The borrower committed default and appellants Nos. 2 and 3 in the course of recovery, visited the business place of the respondent, misrepresented themselves as Judge/Magistrate and pushed the respondent in the vehicle (Suzuki Carry) and lodged him in Adayala Jail, where the remained confined. Respondent challenged the authority of the appellants to cause arrest of respondent for recovery of the amount of default. The respondent, who is statedly a patient hypertension and of old age, suffered mental torture and agony at the hands of the appellants. Learned Thal Court, after hearing learned counsel for the parties, vide order dated 17.11.2007 observed that respondent-bank is vested with no authority to arrest any of it's defaulters and the impugned action of the respondent was therefore held without any lawful authority and illegal. Learned Court directed for release of the respondent and imposed penalty upon appellants Nos. 2 and 3 to the tune of Rs. 15,000/-. Hence this appeal.
3. It is contended by learned counsel for the appellants that appellants under Section 22 of the S.B.F.C. Act, 1972 can recover the amount of default as arrears of land revenue. Learned counsel has further contended that R.D.F.C. And S.B.F.C. Were amalgamated and merged into S.M.E. Bank Limited. By virtue of Ordinance No. I of 2001, all the contracts, proceedings by or against R.D.F.C. And S.B.F.C. Are to be continued, prosecuted and defended in the same manner and to the same extent as might have been continued, prosecuted and defended by or against R.D.F.C. And S.B.F.C. Before the amalgamation. It was then contended that the appeal by S.M.E. Bank Limited, has competently been filed. Learned counsel has submitted that there is no restraint in S.B.F.C., to seek recovery of it's dues, by the invoking provisions of Land Revenue Act. He in support of this contention, has referred to unreported cases titled as Muhammad Jamil v. M.D. Small Business Corporation (Writ Petition No. 4327/2002) and Muhammad Ejaz v. President S.M.E. Bank Limited (Writ Petition No. 28/2004) wherein it has been held that corporation can recover it's dues as arrears of land revenue under Section 22 of Act No. XXIX of 1972. He went on to argue that the arrest was legal and order impugned by learned Judge Banking Court, is not sustainable. Learned counsel submitted that the penalty has been imposed upon appellants Nos. 2 and 3, without a notice or show-cause and the Banking Court has no jurisdiction to award fine.
4. Respondent has been appeared in response to the notice and despite substituted service through citation in "Daily Nawa-e-Waqt" in it's print dated 6.10.2008, none came forwarded to represent the respondent. The respondent was proceeded against ex parte on 15.10.2008..
5. Heard learned counsel for the petitioner and record perused.
6. The authority of the appellant-Bank to recover it's dues as arrears of land revenue, by invoking provisions of Section 22 of the Act, 1972 is not disputed. Appellant-Bank has the authority of recovering it's dues as arrears of land revenue but this authority is not unfettered. Appellant can resort to the provisions of Land Revenue Act only, when it's claim has been adjudicated as amount due. The Bank in exercise of recovering the amount due against it's borrower cannot be equated with the power of judicial forum for the determination of the amount due. Summary power of recovery of the amount due, has been conferred on the bank by law with a view to obviate cumbersome procedure of execution of decree, as contained in Order XXI of the Code of Civil Procedure and the Banking Laws. We may mention here that recovery of claim of a bank, without it's determination by the Court of competent jurisdiction has been held illegal and there is plethora of case-law on the subject. As authority for this proposition: We may also refer the case of The Province of West Pakistan v. Muhammad Ayub Khuhro (PLD 1967 Karachi 673) and Agricultural Development of Bank of Pakistan v. Sanaullah Khan and others (PLD 1988 S.C. 67).
7. The identical issue came up for consideration before the Hon'ble Supreme Court of Pakistan, in the case of Agricultural Development Bank of Pakistan and another v. Abid Akhtar and others (2003 SCMR 1547). The Hon'ble Apex Court has enunciated that:- "Ratio decidendi of the precedent cases clearly appears to be that in the event of substantial dispute between the parties, the procedure of recovery of amount by way of land revenue arrears would be available only where the amount claimed was found due, ascertained and determined by a competent judicial forum. We are in no manner of doubt that this unbridled power cannot be said to be available with the petitioner-Bank in the peculiar facts and circumstances of the case, in which the original borrower has died while his successor-in-interest has seriously disputed the liability giving authenticated facts and figures of having made payment as stated above. In the absence of any proper judicial determination as to the amount due by a proper forum created under the law, we do not find any legal flaw with the view taken by the High Court."
8. Being fortified with the above view of the Apex Court, we have no hesitation to hold that the appellants have proceeded for recovery of their claim in the absence of any proper judicial determination as to the amount due. Learned Banking Court has rightly observed that appellants have arrested the respondent without any valid authority.
9. Appellants have proceeded under the provisions of Land Revenue Act, without serving upon the respondent, the notice of demand. Appellants have caused arrest of the respondent and he was lodged in jail without complying with mandatory requirements of provisions ofLand Revenue Act Such and offends the contained obligations of the parties and also principles of 'Natural Justice.
Appellants have exercised their jurisdiction in excess and offended the fundamental rights of the respondent. Thus the findings of learned Banking Court that the arrest of the respondent under Section 22 of the Act, 1972 is illegal, is not open to exception. The judgment to this extent is devoid of any illegality or legal infirmity.
10. Learned Court while passing the impugned order has imposed the penalty upon appellants Nos.
2 and 3 and in this exercise, neither explanation nor show-cause notice was issued to the .Ppellants Nos. 2 and 3.It is primary responsibility of the Banking Court to pass the order, keeping in view the principles of natural justice. The order of imposition of the penalty, which has been passed without providing opportunity of being heard to appellants Nos. 2 and 3, is not legally sustainable and is accordingly set aside. Learned Banking Court can proceed against appellants Nos. 2 and 3, but before taking any action adverse to the interest of appellants Nos. 2 and 3, it is required under law that opportunity of being heard is provided and explanation of show-cause notice, is issued learned Court can proceed further but before taking action it shall be ensured that principles of Natural Justice are not offended.
11. The appeal is disposed of in above terms. .