SYED HAMID ALI SHAH, J. - Plaintiff No. 1 as Singapore based company, having its place of business at Attaturk Avenue Islamabad, Plaintiff No. 1 deposited US$ 6,118,000 in its foreign currency account, maintained with defendant bank, in the M.M. Alam Road Branch. Plaintiffs Nos. 2 & 3 availed from the defendant, finance facilities under Moharaba Financing agreement amounting to Rs. 137- , (million and Rs. 2,530 million respectively. Plaintiffs Nos. 2 & 3, defaulted in repayment of outstanding amounts withdrawn from Moharaba Finance from time to time Plaintiffs have, however, denied such default. The encumbrances on foreign currency, as per State Bank's BPRD Circular No. 23, dated 02.7.1998, were to be removed by July 31, 1998. The defendant in pursuance of BPRD Circular No. 23 (Exh. DW. 1/25) addressed communication vide letters dated 03.7.1998 (Exh.PW 1/6), 18.7.1998 (Exh.PW.1/9) and 1,3.7.1996 (Exh.DW. 1/26) and DW. * 1/27 for the liquidation of outstanding liabilities. Plaintiffs Nos. 2 & 3 responded to the above communication and their Legal Advisor served notices dated 17.7.1998 and 24.7.1998, wherein the defendant was advised, to ignore BPRD Circular No. 23 and not to convert US dollar account into Pak rupees. The plaintiffs, thereafter challenged the BPRD Circular No. 23, in Writ Petition No. 15240/1998. An injunctive order was issued on 29.7.19 of by a Division Bench of this Court in Intra-Court Appeal, The ^ defendant was abstained from adjusting loan amount, from foreign currency account. Plaintiffs (No. 1) US dollar account stood already converted into Pak rupees at a rate of Rs. 46 to one US dollar, on 27.7.1998 and outstanding amounts were adjusted. The plaintiffs, deeming the conversion, illegal act on the part of the defendant, filed instant suit: It is asserted in the plaint that BPRD Circular No. 23 has been declared by a Full Bench of this Court, as null and void; that foreign currency was converted in an undue haste; that the conversion rate was applied ignoring -F.E. Circular No. 8 and that the plaintiffs have suffered damages at the hands of the defendant. A prayer for declaration to the effect that impugned conversion of US dollars was unwarranted and was illegally made. Besides, the claim, of damages to the tune of Rs. 1,00,00,000/- with mark-up,, was. Also made against the defendant.
2. The defendant contested the suit and filed petition for leave to defend the suit. The leave was granted vide order dated 24.11.1999. The defendant thereafter filed written statement, wherein the assertions of the plaint were controverted and various preliminary objections were raised. Out of the divergent pleadings of the parties. this Court framed following issues on 15.12.1999:---
(1) Whether the defendant bank was not liable and obliged to wait until the arrival of the deadline before it could convert the under hen foreign currency account of plaintiff No. 1 at the exchange rate of Rs. 46 per US$?
(2) Whether the defendant bank could ignore and disregard the notice/instructions issued by the plaintiffs?
(3) Whether the defendant bank has committed breach of Contract and liable to pay damages?
(4) Whether the Court has jurisdiction to try the suit?
(5) Whether the suit is not competent?*
(6) Whether the plaintiffs have any cause; of action against the defendant? /
(7) Relief.
3. The evidence of the parties was recorded through .Local Commission. The plaintiffs as well as the defendant restricted their oral testimony to the extent on one witness each and produced various documents.
4. Learned counsel for the plaintiffs has contended that the relationship inter-se the plaintiffs and the defendant is of banker and customer, such relationship is fiduciary and the defendant bank is "under legal and contractual obligation to safeguard the interest of its' customer. Learned counsel supported the contention by making reference to the cases of "Habib Bank Limited V. Raj Begum"
(1990 MILD 804), "Abdul Rahim V. United Bank Limited (PLD 1977 Karachi 62) and "International Finance Corporation V. Halla Spinning Limited" (PLD 2000 Lah. 323): ' The foreign currency account under lien of the plaintiff,-was subject to encashment under SRO No. 23, on 31.7.1998. The defendant bank was obliged '..To wait until the arrival of deadline before encashment of collateral security.
The defendant has ignored the plaintiffs' instructions conveyed through various letters including letter dated 24.7.1998 (Exh.PW. 1/10). The defendant acted illegally and hurriedly, while in the meantime deadline was extended and BPRD Circular No. 23 was ultimately struck (down, by the Full Bench of this Court in the case of "Shaukat Ali Mian and another v. The Federation of Pakistan" (1999 CLC 607). The decision was subsequently affirmed and upheld by the Honorables Supreme Court of Pakistan. Learned counsel has contended that according to the language used in Circular No. 23 (Exh.DW.1/25) the encumbrance was to be removed by 31.12.1998. Learned counsel referred to the case of Mutiiua Chettiar v. Naraynan" (AIR 1928 Mad. 528) to contend that the expression "By" indicates the utmost limit of time, being the end or expiry of date or period indicated. Learned counsel went on to argue that the plaintiffs were deprived of the option to get converted US dollar at their own, at the prevalent market rate. It was contended that neither in the petition for leave to defend the suit, nor in the writter\ statement, it was pleaded that plaintiffs Nos. 2 & 3 have committed default. Any evidence led in this regard, in departure from pleadings, cannot be read or considered,, learned counsel in support of this contention has placed reliance on various cases including "Sar Anjam v. Abdul Raziq" (1999 SCMR 2167), "Muhammad Arif v. Mahmood Ali t and 4 others" (2003 MLD 954), "Aki Habara Electric Corporation (PTE) Limited through Authorized Signatory v. Hyper Magnetic Industries (Private) Limited through Executive/Director/Secretar/' (PLD 2003 Kar.
420) "Abdul Haque and others v. Shaukat Ali and 2 others" (2003 SCMR 74) and "Province^ of Punjab through Chief Secretary and 5 others v. Malik Ibrahim and Sons and another1' (2000 SCMR 1172). Learned counsel referred to the statement of PW.1, recorded on 30.01.2002, wherein he admitted that US dollar rate kept fluctuating during relevant period. It had gone upto Rs. 70/- and touched Rs. 80/-. The plaintiffs suffered loss due to encashment of foreign currency (US$) at a rate lower than the market prevalent rate, in the open market. The witness estimated the loss approximately in this regard and the loss was worked out on the basis of investment of the amount in various venture. The expected loss of the plaintiffs was to the tune of ten (10) million. Learned counsel has submitted that Banking Court constituted under the Act 1997 (now repealed) had the jurisdiction to; entertain and adjudicate upon the suit of. The plaintiff and the same was rightly filed in this Court. Learned counsel in support of this contention has referred to the cases of "Nasimuddin Siddiqui v. United Bank Limited (1998 CLC 1817), "National Bank of Pakistan V, Khalid Mahmood' (2003 CLD 658) and "United Bank^ Limited to Shahid Corporation (1991 CLC 1743). Learned counsel then submitted that High Court in its n Constitutional jurisdiction cannot award damages. Case of the plaintiffs in Writ Petition No. 15240 of 1998 was distinct. The legality and constitutionally of BPRD Circular No. 23 was challenged in writ jurisdiction while the instant suit was filed for breach of contractual and legal obligation by defendant in respect of finance facility. Plethora of ease-law was quoted on this* legal proposition, Learned counsel concluded his arguments by submitting that the suit was instituted by duly authorized person and objection raised by the defendant in this regard was frivolous.
5. Learned counsel for the defendant, on the other hand, has submitted that the plaintiffs have committed default in repayment of outstanding amounts, pertaining to Moharaba agreements. Ari amount of Rs. 212.197 millions as on 27.7.1998 was outstanding against plaintiff No. 2 while an amount of Rs. 269.218 million was outstanding against plaintiff No. 3 Exh.DW. 1/4 to Exh.PW. 1/23 substantiate the stance of defendant as to default, the plaintiffs have admitted availing of finance facilities but have failed to prove the realization or payment of the amount of loan. There is no evidence on record to contradict the factum of default. Learned counsel has referred to the statement of DW. 1 who while recording his statement on 22.11.2002 had categorically stated that Ex.DW. 1/19 to Ex. DW. .1/51 were executed by the plaintiffs. It was contended that the plaintiffs through Exh.PW.1/10 refused to accept the Circular No. 23, dated 02.7.1998. The plaintiffs were neither willing to pay off their liabilities, nor were ready to proceed according to the instructions of State Bank of Pakistan. The defendant being a banking company is bound under sections 25 and 41 of 'the Banking Companies Ordinance, 1962, to follow and comply with the instructions, regulations and circulars of State Bank of Pakistan. Learned counsel supported this contention by referring to the cases of "Wajid Saeed Khan v. Abdul Qadoos Khan Swati and others" (2007 CLD 1239), "Messrs Dadabhoy Cement Industries Limited and others v. Messrs National Development Finance Corporation" (2002 CLC 166) and "United Bank Ltd,, Karachi V. Messrs Gravure Packaging (Pvt.) Ltd, and 4 others" (2001 YLR 1549). Learned counsel emphasized that after due information through letters Ex.DW. 1/26 and Exh.DW.1/27 the amount from foreign currency account, was adjusted. The defendant has acted legally, therefore, there is no question of payment of damages. It was contended that the claim of damages is maintainable only when loss suffered is asserted in the plaint under each head separately and the same is proved through cogent evidence. The plaintiffs have neither pleaded the detail of damages suffered nor any cogent evidence was led in this regard. Learned counsel for the defendant supported this contention by referring to the cases of"Sadaruddin v. Messrs Mitchell's Fruit Farms Ltd., Karachi" (PLD 1979 Kar. 694), "Tariq Cooking Oil v.
United Bank Limited and others" (2001 MLD 1181), "Citi Bank v. Tariq Mohsin Siddiqi and others" (PLD 1999 Kar. 196) and "Jamshed Karimuddin Musalman v. Kunjilal Harsukh Kalar and another (AIR 1938 Nag. 530). Learned counsel has submitted that the suit in the banking jurisdiction under Ordinance, 2001, is competent only where default in fulfilment of an obligation is made. The damages claimed in the instant suit are on the plea that the defendant hastily complied with the instructions of State Bank of Pakistan, which cannot be termed as no fulfilment of obligation. Learned counsel added that the suit is not competent. He supported his contention by relying upon the case of "Messrs PEL Appliances Limited v. United Bank Limited" (2005 CLD 1352). Learned counsel summed up his arguments with the contention that the instant suit is barred by res-judicata and is hit by the provisions of Order II, Rule 2, CPC. The plaintiffs made a specific prayer for the return of US dollars, in his Constitutional petition (W.P. No. 15240/98) but the prayer was not allowed by the full bench of this Court.
6. I have perused pleadings of the parties, documents produced in evidence, written submissions and heard the respective arguments of the learned counsel for the parties. My findings on the issues are as under:- Issues Nos. 1 & 2.
7. Both these issues are interlinked, therefore, I will decide the same jointly.
8. Admittedly plaintiffs Nos. 2 & 3 have availed Various finance facilities under Moharaba agreements. Documents executed in this regard are Exh.DW.1/16 to Exh.DW.1/51, which are admitted and proved. The deposit of US$ 6,118,000 by plaintiff No. 1, with the defendant bank, is also admitted fact between the parties. The parties are also not at variance that the amount in foreign currency account was a collateral security, for the repayment of afore- mentioued loans. The plaintiffs have taken stand that there was no default in payment of outstanding liabilities toward the loan/finances availed by plaintiffs Nos. 2 and 3,. But they have failed to bring on record any proof of payment of the loan amount, although the availing of loan facilities is not denied. The plaintiffs in para No. 2.2 of the plaint has asserted that there was no default in payment of outstanding liabilities of the defendant, which the defendant denied in the written statement. It was the case of the plaintiff that they I have committed no default, therefore, it is wrong to contend that the factum of default has not been pleaded in written statement, therefore, no evidence beyond the pleadings can be adduced. Exh.DW.1/2 is statement of account, duly verified on oath and certified according to Bankers' Books Evidence Act, 1891. Entries in this document duly reflect the factum of default and the expiry data of payment. Similarly - Exh.DW.1/3 is another statement of account, which also reflects the same. Exh.DW.1/4 to Exh.DW.1/18 are the notices, which the defendant has issued to the plaintiffs, regarding overdue amounts of Moharaba. Moharaba Agreements, letters of set off, promissory notes and other loan related documents are Exh.DW.1/19 to Exh.DW.1/51. Letters of lien are Exh.DW.1/39 and Exh.DW.1/51. PW.1 has admitted execution of Exh.DW.1/19 to Exh.DW.1/51. No document was produced by the plaintiffs in rebuttal. The 150 C.L. Pakistan Company & Tax Law Reports . Vol. XV plaintiffs .Reserved the right to adduce evidence in rebuttal when the affirmative evidence was closed but the same was not. Adduced, thus the documentary evidence of the defendant remained un-rebutted. The plaintiffs have led no evidence to prove that outstanding amounts towards Morahaba were paid. They have not produced any-receipt or other proof of payment. PW.1 showed inability to tell the exact amount, outstanding against the plaintiffs. Thus the default in payment of outstanding liabilities stand successfully proved. The question of adjustment from collateral security is permissible according to loan agreements when there is default.
9. Reverting to the encashment of the foreign currency, deposit and its adjustment towards overdue liabilities under BPRD Circular 23, dated 02.7.1998. It is the stance of the plaintiffs that the defendant bank was obliged, to wait until the arrival of deadline before encashing US dollar deposits, under lien. According to the plaintiffs "by 3. 1st July, 1998" means utmost limit of time or end of the expiry time and not before. The defendant, on the tether hand, however, has explained that "by" as used in BPRD Circular 23, signifies/connotes that encashment or conversion has to be made during 02.7.1998 to 31.7.1998 i.e. Period between the date of issuance of circular and its deadline. Plain reading of BPRD Circular transpires that cover against direct or indirect deposits was directed to be removed by 31 7.1998. If it was intended that cover, of collateral security of foreign currency, was to be removed at forenoon on the last date, then word "on" instead of "by" had been used, in the circulars.
Word "by" used in contracts or other enactments has been defined by the Courts. A few instances are mentioned hereunder:- -
(i) "By" as defined in the case of Goldman V. Broyles (Tax Cr. App. 141 SW 283) indicates terminal points of time. It means "not later than" or "as early as".
(ii) Rankin V. Woodworth (Pa, 3 Pen & W 48). It was observed in this case that in a contract to complete work "by" ensuing month of November excludes that month and requires it to be completed before that time.
(iii) A similar view, as has been taken in Rankin v. Woodworth, was taken in the case of Miller v.
Philips (31 Pa (7 Casey) 218).
(iv) "By" as used in contract to deliver barely, requiring delivery by a certain day, is practically synonymous with "on" or "before" that day Conley v. Anderson (NY, 1 Hill 519).
(v) P.C. Muthu Chettiar V. Narayanan Chettiar and others (AIR 1928 Madras 528), it has been held that the expression "by" clearly indicates the utmost limit of time, being the end or the expiry of the date or period indicated.
Having glanced through various decisions and the meanings of term "by" in dictionaries, I am of the view that expression "by" used with a cut-off date, ought to mean "on" or "before" that date.
10. Every bank deals with numerous customers in its normal banking business. It is practically not possible for bank to give effect to the circular on the deadline. The circular (BPRD Circular 23) provides that the subject conversion and adjustments are required to be made between the period from issuance of the circular and the deadline mentioned in it. The defendant through letters dated. 18.7.1998 (Exh.DW.1/26) and 18.7.1998 (Exh.DW.1/27) provided sufficient opportunity to the plaintiffs to pay off the overdue amounts, towards Moharaba Finance. The plaintiffs had taken no steps to save their foreign currency account. They have simply informed the defendant through letter Exh.PW.1/10, to refrain from encashment of collateral security and to not to accept circular 23.
State Bank of Pakistan has the power to control the advances made by the Banking Company, as provided in Section 25 of Banking Companies Ordinance, 2001. The circulars issued by the State Bank of Pakistan are in the nature of instructions/directions to the Financial Institutions. The commercial banks, whether private or government owned, are bound by those instructions. The directions are as consequence of promulgation of statute or an act of Parliament. A banking company cannot deviate from these instructions or circulars. The defendant being a banking company, was under an obligation to follow these instructions within the contemplation of Sections 3-A, 25 and 41 of Banking Companies Ordinance, 1962. The defendant before encashment, duly informed the plaintiffs of desired action for encashment, of collateral security. Plaintiffs Nos. 2 & 3 failed in paying of their liabilities. The plaintiffs could get their foreign currency encashed to save themselves from loss, occasioned due to encashment of US dollars, at specified rate. PW.1 in his evidence has himself admitted that the .Defendant bank was legally bound to follow the instructions and circulars of State Bank of Pakistan. The stance of the plaintiffs that the defendant could ignore the instructions of State Bank as against notice/instructions of the plaintiffs, is not convincing. The issue is, therefore, decided in favour of the defendant. The issue as framed, is answered in affirmative.
Issue No. 3.
11. As has already been observed while deeding issues Nos. 1 & 2 that the defendant was bound to follow the directions/instructions of the State Bank of Pakistan. The defendant has thus committed no breach of contract and as such is not liable to pay damages. Even otherwise the plaintiff .Can get compensation for loss or damage, as was caused to them by commission of breach of contract. It is the duty of the plaintiff to establish the claim of damages suffered on each count and by producing evidence that loss calculated as claimed is directly result of the breach of contract.
There are three plaintiffs and from pleadings it is nob reflected that which of the plaintiff and to what extent such plaintiff has suffered loss. It is vaguely asserted in the plaint that the deposit of foreign currency, was to be invested in the business. The nature of business, details of loss suffered and other necessary details find no mention in the plaint. No evidence was produced in this regard.
The plaintiffs have failed to establish their claim of damages. The issue is answered in negative and is decided against the plaintiffs.
Issue No. 4.
12. The relationship of the plaintiffs and. The defendant is that one of the customer and banker. The cause of action is based on a banking transaction. The suit has been filed statedly on commission of default, in fulfilment of obligation with regard to finance. Banker is the trustee of the account- holder and in that capacity, it is the primary responsibility of a banker to safeguard the interest of its customer and save him from any loss. If the banker fails to perform these obligations the customer/account-holder has a valid cause to bring his grievance before a Banking Court established under Section 5 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
The defendant bank is under legal and contractual obligation, to fulfill the agreements of Finance, e.g. Morahaba agreements and letters of lien etc. The determination of questions arising out of Morahaba agreements or letters of lien, is covered under Section 9 of Ordinance, 2001 and this Court has therefore, jurisdiction to adjudicate, upon the suit of the plaintiffs within the contemplation of Sections 7(4) and 9 of Finance Institutions (Recovery of Finances) Ordinance, 2001. The " issue is decided in favour of The plaintiffs and against the defendant.
Issue No. 5.
13. The defendant claims that the suit is barred by res-judicata and is not competent under Order II, Rule 2, CPC. The plaintiffs had challenged the vires of BPRD Circular No. 23 in the writ petition. The claim of damages falls outside the purview of writ jurisdiction. The question of encashment of collateral security and its adjustment against outstanding amounts, are the factual controversies.
Whether or not, the plaintiffs have committed default in payment of outstanding amounts, regarding Moharaba Finance are the issues, the ascertainment thereof, requires regular trial. Such controversy cannot be ascertained in writ jurisdiction. The suit is, therefore, competent and maintainable. The issue is decided in favour of the plaintiffs.
Issue No. 6.
14. In view of my findings on issues Nos. 1 & 2, this issue is decided against the plaintiffs.
15. The suit of the plaintiff in view of my findings on issues Nos. 1,2 & 3, is dismissed with no orders as to costs.