MUHAMMAD TASNIM, J. - This is an application under Section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 read with Section 151, C.P.C (hereinafter called "Ordinance 2001") filed by defendant seeing leave to defend the suit unconditionally and also claiming set off/counter-claim in the sum of Rs. 478,391,500/-form the plaintiff.
2. Brief facts leading to this case, as per plaint, are as under:- That at the request of defendant, plaintiff-bank allowed running finance facility in the sum of Rs.
500 millions to the defendant vide facility letter dated 18.7.2007 for a period upto 30.6.2008. The terms and conditions of aforesaid facility were mentioned in the facility offer letter, In consideration of the aforesaid finance facility the defendant executed an agreement of finance on mark-up basis, demand promissory note, letter of continuity, letter of authority, letter of undertaking and letter of lien all dated 18.7.2007. In addition to the above defendant in consideration of the above finance facility also executed letter of pledge, whereby defendant pledged the terms finance certificate, WAPDA Bonds, PIBS and Blue Chip shares with a cumulative 30% margin requirement.
That the aforesaid finance facility was availed by the defendant, however it defaulted in making payment and servicing of mark-up of-the Finance Facility under the finance agreement.
Defendant also failed to maintain the margin requirements as per the terms of the finance facility in respect of pledged securities. Consequently, upon the margin falling below 30% the plaintiff communicated the default' to the defendant requiring it either to settle the outstanding mark-up payment and/or pledge further securities to adjust the fall in the margin as per the terms of finance facility agreed between the plaintiff and the defendant. The number of reminders and notices were issued to the defendant for clearing their liability but to no avail. Consequently, this suit was filed, In paragraph-11 of the plaint the plaintiff-bank in compliance with provisions of Section 9(3) of the Ordinance, 2001 has claimed as under: a. Total amount availed Rs.
500,000,000/- a. Principal amount repaid Rs.
343,055,510/- i. Principal outstanding (a-b) Rs.
156,944,490/- i. Accured mark-up Rs.
6,489,763/- Total outstanding amount (c+d)Rs.
163,434,253/-
3. After service of the aforesaid suit present application was filed alongwith the claim of set off/counter- claim by the defendant on 29.5.2009, thereafter plaintiff-bank filed replication on 5.11.2009 denying the allegations of the defendant in the leave to defend application and also refuting claim of set off/counter-claim of the defendant.
4. Mr. Saalim Salam Ansari leamed counsel for defendant has argued that finance facility of -Rs.
500 million was sanctioned but plaintiff-bank released only Rs. 1.50 million, which has caused serious financial loss to the defendant. Learned counsel for defendant further argued that if the pledged shares would have been sold by plaintiff- bank on the proper time then instead claiming from the defendant the suit amount, plaintiff-bank would have paid an amount of Rs. 478,351,500/- to the defendant. Learned counsel for defendant further argued that suit filed by the plaintiff bank is not in conformity with the provisions of the Ordinance, 2001 hence liable to be rejected. Learned counsel for defendant further submitted that alongwith application under disposal defendant has also claimed set- off/counter-claim in the slim of Rs. 478,351,500/- hence on this ground alone defendant is entitled to grant of leave to defend this suit. Learned counsel has further submitted that defendant has filed annexure P/8 to the leave to defend application containing question of law and fact, which requires recording of evidence of the parties. Learned counsel for the defendant further argued that present suit be dismissed and the counter-claim of defendant in the sum of Rs. 478,351,500/- be allowed as no leave to defend application has been filed by the plaintiff to the counter-claim of the defendant.
5. Learned counsel for the defendant has submitted that if the amount of sanctioned finance i.e. Rs.
500 million would have been granted in time to the defendant, the defendant would not have defaulted in payment of plaintiffs claim, lt further appears that according to defendant the default has been committed by the plaintiff- bank which has caused serious financial loss to the defendant for which claim of set-off has been raised by the defendant alongwith leave to defend application. For the claim of set off/counter-claim the defendant has, paid proper Court-fee.
Learned counsel has also invited by attention to sub-section (4) of Section 9 of the Ordinance, 2001, which is quoted hereunder:- "Procedure of Banking Courts.- (v (2) ........................... (3) ...................... (4) The provisions of Section 10 of the Code of Civil Procedure, 1908 (Act V of 1908), shall have no application for and in relation to suits filed hereunder."
"Procedure of Banking Courts:- (1)..................
(2)..................
(3)..................
(4) The provision of section 10 of the Code of Civil Procedure, 1908 (Act V of 1908), shall have no application for and in relation to suits filed hereunder.
6. By referring the above provision of Ordinance 2001, defendant's counsel has argued that Banking Court shall in all matters with respect to which the procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908. Learned counsel further argued that provision of Section 10 of the Code of Civil Procedure shall have no application in relation to suits filed hereunder. Learned counsel has referred the above-quoted provisions just to enforce his arguments that claim of set-off and counter-claim is maintainable before the Banking Court while dealing with the suit filed by banking company, lt was further argued that Baking Court shall also deal with the claim of set-off filed, by the defendant in accordance with provisions of C.P.C, In support of his above contentions, learned counsel for defendant has relied upon the following case-law:-
(1) 2005 CLD 1080 (Rahat Badaruddin Bandey v. Union Bank Limited through duly authorized attorneys).
(2) PLD 1999 Karachi 227 (Phalippine Airlines Inc. v. Paramount Aviation (Private) Limited and others).
(3) 2005 CLD 1067 (Chartered Bank, Share Quaid-i-Azam, Lahore through Mr. T.H. Bokhari, Attorney of the Bank).
(4) 2004 CLD 1657 (Agricultural Development Bank of Pakistan through Brach Manager v. Allah Ditta).
(5) 2004 CLD 752 (Agricultural Development Bank of Pakistan through Manager v. Sakandar Hayat):
(6) 2000 CLC 287 (PICIC v. Frontier Ceramics Ltd.. And Others).
(7) 1995 CLC 973 {Mrs. Tehmina Bashir v. Abdul Rauf and another) and
(8) W.P. No. 9304/2010 (M/s. Alvera Enterprises v. Federation of Pakistan etc.).
7. As against the a hove, Mr. Abdul Sattar Lakhani, learned counsel for plaintiff-bank has argued that application filed by defendant under Section 10 of the Ordinance, 2001 is not in conformity with the provisions of Ordinance, 2001 hence same is liable to be dismissed. Learned counsel further argued that defendants have admitted execution of all the documents and have also admitted to avail the finance facility from the plaintiff but have not repaid the same as agreed by them hence leave to defend application be dismissed on merits as well. He has further submitted that mere filing or raising claim of set- off/counter-claim does not entitle the defendant to obtain leave to defend the fault. He has further submitted that no substantial questions of law or facts have been raised by the defendants which requires recording of evidence. He further submitted that defendant is delaying the matter instead of repaying the amount availed by it. The defendant has not approached the Court with clean hands and is not entitled for any relief. Learned counsel for the plaintiff invited my attention to the provision of Section 176 of the Contract Act, which is quoted hereunder:- "176. Pawnee's right where, pawnor makes default- If he pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged on giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor."
8. In view of above provision of Law the learned counsel further argued that if the pawnor makes default in payment of debt or performance at the stipulated time of the promise in respect of which the goods were pledged a pawnee may bring the suit against the pawnor upon the debt or promise, and retain the goods pledged as collateral security or he may sale the things pledged on giving the pawnor reasonable notice of the sale. He further submitted that claim of set-off or counter-claim raised by the defendant is frivolous, misconceived and untenable under the Jaw.
Defendant has not approached the Honourable Court with clean hands and is not entitled to indulgence from the Court. He lastly argued that the leave to defend application be dismissed and the suit be decreed as prayed, In support of his contentions learned counsel has placed his reliance upon the following case-laws:-
(1) 2003 CLD 1406 (Bank of Khyber v. Messrs Spencer Distribution Ltd. And 14 others),
(2) 2006 CLD 244 (Habib Bank Limited v. Messrs Sabcos (Pvt.) and 2003 CLD 1406 (Bank of Khyber v.
Messrs Spencer Distribution Ltd. And 14 others),
(3) 2006 CLD 1011 (Muhammad Arshad and another v. Citibank N.A., Al-Fallah Building, Lahore),
(4) 2007 CLD 1356 (National Bank of Pakistan v. Messrs A.I. Brothers (Private) Limited and others),
(5) 1995 CLC 880 (American Express Bank Ltd. v. Adamjee Industries Limited),
(6) 1990 CLC 1243 (Messrs Razzaq & Company v. Messrs Riazeda (Pvt.) Ltd.),
(7) 2005 PSC 2 [Supreme Court of Pakistan] (Siddique Woolen Mills, etc. v. Allied Bank of Pakistan),
(8) PLD 1966 (W.P.) Lahore 1 (A.M. Burq and another v. Central Exchange Bank Ltd. And others),
(9) 1989 MLD 1026 (Muhammad Habib and others v, Messrs-National Bank of Pakistan),
(10) PLD 1999 Karachi 468 {Salim Adamjee v. Al- Paysal Investment Bank Ltd. And another)] and
(11) 2002 CLD 868 (Messrs Crystal Enterprises and 6 others v. Platinum Commercial Bank Ltd. And 2 others through General Attorney).
9. I have heard learned counsel for the parties and have perused the record with their assistance and have gone through the judgments cited by them.
10. From the examination of the submissions made by learned counsel for the defendants, it is admitted position that amount sanctioned by plaintiff-bank to the defendant is admitted. The documents executed by the defendant in consideration to the finance allowed are also admitted.
There is no dispute with regard to charging of mark-up by the plaintiff-bank.
11. Now taking up the submissions of the learned counsel for the defendant that only Rs. 150 millions were released to the defendant instead of Rs. 500 millions which were sanctioned by the plaintiff- bank. The contention of learned counsel for the defendant is not factually correct. From the perusal of-the record more particularly the statement of account and the replication filed by the plaintiff- bank it is crystal clear that entire limit of Rs. 500 millions was availed and utilized by the defendant.
Hence aforesaid arguments of the learned counsel for the defendant is repelled in view of above.
12. With regard to other submission of the learned counsel for the defendant that since the defendant had raised claim on account of set-off/counter-claim in the sum of Rs. 578,351,500/- leave be granted to defendant by considering the claim of set off. The argument of learned counsel for defendant is opposed to rule laid down by the Superior Courts. To deal with the issue it will be advantageous to reproduce the observations of the Superior Courts on the above point.
13. In the case of American Express Bank Ltd. {supra) while declining the leave to defend application learned Single Judge of this Court had observed that defendant is not entitled to leave to defend on the ground that he had counter-claim against the plaintiff. The learned Judge dealt with the above issue in the following words:- " The facts of the above case are similar to the facts of the present case; and respectfully following the judgment of the Division Bench I would hold that the defendant No. 1 is not entitled to leave on the ground that it has a counter-claim against the plaintiff.
In view of the above, it is not necessary to discuss the merits of the defendant's allegation that the pledged goods were sold for less than their proper value.
The upshot of the above discussion is that the defendant No. 1 has failed to disclose any defence.
Consequently, leave to appear and defend the suit cannot be granted to it. That disposes of C.M.A.
1443/87 insofar as it relates to defendant No. 1."
14. In the case of Messrs Razaq & Company {supra) learned Division Bench of this Court while dealing with the subject has held as under:- " As regards counter-claim of the appellants in respect of damage to the consignment exported, that is not germane to the point of issue viz. About grant or refusal of the leave to appeal.
7. If the pleas being raised by the appellants are accepted for the purpose of granting leave to defend, that would change entire complexion of the suit, making it an ordinary suit and thus frustrating the very purpose for which Order 37 was incorporated in the Code of Civil Procedure, containing. The provisions comparable to similar provisions in the Rules of the Supreme Court in England. The purpose of legislating the provisions contained in Order 37 of the Code of Civil Procedure, has been explained by the Supreme Court of Pakistan in the case of Abdul Karim Jafrani v. United Bank Limited 1984 SCMR 568 in the following words:- "The overall object envisaged by the legislature was to provide for expeditious disposal of litigation involving commercial transactions of a particular nature by a summary procedure so that the defendant does not have the means open to exploitation in the ordinary procedure for trial of suits to, prolong the litigation and prevent the plaintiff from obtaining an early decision by raising untenable and frivolous defences.
8. We find that the appellants have not made out a case warranting interference in exercise of discretion by learned Single Judge. Accordingly ttys appeal stands dismissed in limine."
15. Finally the Honourable Supreme Court of Pakistan in the case of Siddique Woollen Mills etc. (supra) while dealing with the issue has held as under:- "4. In the course of arguments we have perused the written statement filed by the petitioners before the Banking Court which was in fact treated as an application for leave to appear and defend wherein liability towards outstanding amount of the respondent-Bank was not denied except raising the plea that the bank has retained the goods of the petitioners unauthorizedly. In our opinion it does not constitute a defence in favour of the petitioners independently nor it give rise to a bona fide dispute between the parties because in such like cases the Court is required to .Examine the liability and its acceptance by the borrower. As far as question of sustaining losses by the borrower on account of conduct of the Bank is concerned it can be sorted out in some other forum instead of claim relief on such basis from the Banking Court. A Banking Court in exercise of its jurisdiction under Section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 can only entertain defence of the borrower if prima facie a bona fide dispute has been disclosed."
16. The examination of the above-quoted extracts from the judgments of the Honourable Supreme Court of Pakistan and the High Court it is crystal clear that by raising claim of set-off or counter- claim defendant will not be entitled to grant of leave. If leave is granted on this ground alone, it will change the complexion of the suit instituted under a special law i.e. Ordinance 2001. The claim, if any, defendant has against the plaintiff, can properly be dealt with by the Court of competent jurisdiction including the Banking Court in accordance with law through separate proceedings.
17. With regard to the submission of learned counsel for defendant that pledged shares were not sold by the plaintiff-bank at the proper time when such share should have fetched the higher value then the prevailing price. The contention of the learned counsel is misplaced in view of provisions contained in Section 176 of the Contract Act. The point raised by the learned counsel shall be dealt with by me in the following paras.
18. Now taking up the submission of learned counsel for the defendant that plaint is not in conformity with the provision of Section 9 of the Ordinance, 2001 is not tenable for the following reasons. As sub-section (3) of Section 9 of the Ordinance, 2001 mandates that plaint in the case of suit for recovery instituted by financial institution shall specifically slate an amount of finance availed by the defendant from the financial institution. If further requires that amount paid by the defendant to the financial institution and. The dates of payment and the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the dale of institution of the suit. The close examination of above section and paragraph-11 of the plaint quoted hereinabove would indicate that all the requirements contemplated under Section 9(3) of the Ordinance, 2001 have been complied with by the plaintiff while presenting the present plaint hence submission of the learned counsel for the defendant that plaint is not in conformity with the provision of Section 9(3) of the Ordinance 2001 is of no consequence. Now dealing with case-law cited by learned counsel for defendant.
19. In the case of Rabat Sadaruddin Bandey {supra) the Bank, filed a suit against the customer after selling the pledged goods for recovery of remaining amount which was payable by the borrower to the Bank. This judgment is distinguishable on facts and does not apply to the present case.
20. In the case of Phalippine Airlines Inc. (supra), firstly the ease has not arisen from the Banking Statutes, lt was regular suit between the plaintiff and the defendant. The point involved in the reported judgment is not attracted to, the, case in hand.
21. I n the case of Chartered Bank, Shahare Quaid- i-Azam, Lahore through Mr. T.H. Bokhari, Attorney of the Bank, (supra) there was some misappropriation of the pledged goods lying with the Bank and for such misappropriated goods borrower raised the claim against the Bank in the written statement. Since the pledged goods were in control of the Bank hence the claim of the borrower was entertained. But facts of the reported Judgment and the present case are entirely distinguishable, In the present case the pledged shares are lying with the Bank. There is no allegation with regard to misappropriation of the pledged shares.
22. In the case of Agricultural Development Bank of Pakistan through Branch Manager v. Allah Ditta (supra) Banking Tribunal found that the suit amount has been paid and a sum of Rs. 403221- has excessively been received by the Bank, In such situation while disposing of the suit the Banking Tribunal directed the Bank to refund the said amount.
23. In the case of Agricultural Development Bank of Pakistan through Branch Manager v. Sikandar Hayat (supra) the Banking Tribunal also found that some excessive amount has been received by the Bank in this case as well. The Banking Tribunal while decreeing the suit of the plaintiff directed the Bank to refund the amount received in excess of their claim.
24. In the case of PICIC (supra) the point in issue in the case in hand was not under consideration.
25. In the case of M/s. Tehmina Bashir (supra) the facts were entirely distinguishable and not applicable to the present case.
26. The judgments cited by learned counsel for the defendant are not applicable to the circumstances of the case and are distinguishable on facts.
27. Now taking up the arguments of learned counsel for plaintiff-bank that the application under Section 10 of the Ordinance does not fulfill the mandatory requirement hence liable to be rejected, In support of his above contention he has relied upon the case Habib Bank Limited v. Messrs Sabcos (Pvt.) Ltd. (2006 CLD 244), wherein learned Single Judge pf the Court while dealing with the issue has held as under:- "13. Keeping in view of above principle of law I have examined the application for leave to defend and found that it is in the form of written statement, (t contains 9 preliminary legal objections. On further perusal it reveals that the defendant did not specifically state the information or facts required to have been supplied under sub-section (4).. The learned Advocate for the defendants has frankly conceded that the application does not fulfill the mandatory requirements of sub- section (4). However, he has stated that the summary substantial questions of law as required under sub-section (3) has been mentioned but further conceded that the summary of the facts as required under sub-section (3) has not been mentioned in the application. Even if we take the 9 preliminary legal objections as substantial questions of law then again the second requirement of sub-r section (3) has not been complied with the present case. On further perusal it reveals that facts and figures as required under sub-section (4) have also not been mentioned nor any explanation has been furnished for non-compliance. The learned Advocate for the defendants has also frankly conceded that provisions of sub-section (4) have not been complied with, nor the defendants have furnished any explanation in the application for non-compliance of the said provisions. As such, the defendants have disobeyed the directions of law and mandatory provisions as provided under sub-sections (3) and (4), therefore, their application for leave to defend is liable to be dismissed. Consequently invoking the provisions of sub-section (6) dismiss the said application."
28. Learned counsel for plaintiff further relied upon the case of Bank of Khyber (2003 CLD 1406) the learned Single Judge of Lahore High Court while dealing with the point in issue has held as under:- "Upon the examination of the instant leave application, I find that the said defendants failed to give amount of finance availed by the defendants; the amount paid by them; the dates of payments; amount of finance and other amounts relating to the finance payable by the defendants to the financial institutions; the amount of finance and other amounts, which the defendants dispute as payable to the financial institutions, thus, the said defendants have comprehensively failed to ad here to the provisions of Section 10(4) of Ordinance of 2001, in the above back drop, now the pivotal question, which has arisen for determination by this Court is as to whether the instant leave application, filed by the said set of defendants, is liable to be rejected summarily. Provisions of Section 10(3), (4) and (5) of Ordinance XLVI of 2001, inter* alia, provide that the application for leave to defend shall be in the form of a written statement, containing summary . Of substantial questions of law and facts, and also giving certain particulars to be furnished by the defendants regarding the finance, i.e. Finance availed, amount paid by the defendants etc. And that such an application must be accompanied by all the documents in support of substantial question of law and facts raised by the defendants. If the afore-noted provisions of law are placed in juxtaposition with the contents of the application, filed by the aforementioned set of defendants, the only irresistible conclusions, which can be drawn is that the said defendants did not comply with the aforesaid provisions of law. In the above perspective I am constrained to hold that the said defendants have comprehensively failed to file leave application, as required under the law, and they have not complied with the requirements of Section 19(4) and (5) of Ordinance XLVI of 2001, thus, the defendants failed to file leave application in accordance with the provisions of the said Ordinance.
7. Section 10(6) of Ordinance XVI of .2001 provided that an application for the grant of leave, which does not comply with the requirements of subsections (3), (4) and (5) of Section 10 of Ordinance - XLVI of 2001, the same shall be rejected, unless the defendants able to show sufficient cause for their inability to comply with any such requirements, in this case, as noted above, the. Application filed by these defendants does not fulfill the requirements of Section 10(4) and (5) of Ordinance XLVI of 2001. Additionally, they have not been able to show in their application, any cause, what to talk of sufficient cause for their inability to comply with said requirements.
8. Now the question, which arises is as to whether the provisions of Section 10(6) of Ordinance XLV1 of 2001 is mandatory or directory. Basic principle for the interpretation of statute is that when a provision of law has been couched with the penal consequences, the said provisions of law would be Considered as a mandatory provision of law and where no penal consequences entail to the noncompliance of a provision of law, in that case, the said provision of law would be taken as directory. Having gone through the provisions of Section 10(6) of Ordinance XLV1 of 2001 as noted above, I am of the considered view that this provision of law is mandatory in nature, as the non- compliance of said provision of law entails penal consequences of rejection of leave application, as provided in the afore noted provision of law. In the present case, as the defendants did not comply with the afore-noted provisions of law, therefore, the presumption would be that no application for grant of leave to defend a suit is deemed to be pending and the present application for leave to defend is liable to be rejected per force of Section 10(6) of Ordinance XL VI of 2001."
28. An examination of leave to defend application filed by defendant clearly demonstrates that provisions of sub-sections (4) and (5) of Section 10 of the Ordinance, 2001 have not been complied with sub-section (6) of Section 10 of the Ordinance, 2001 provides that if an application for leave to defend which does not comply with the requirement of sub-sections (3), (4) and (5) is liable to be dismissed. Defendant has failed to show any sufficient cause for their inability to comply with such requirements. On the contrary defendant's counsel has conceded before the Court during his arguments that provisions of sub-sections (4) & (5) of Section 10 of the Ordinance, 2001 have been complied with. The aforesaid judgments fully apply to the present case and the application filed by the defendant does not fulfill the requirement of Section 10 of the Ordinance 2001 hence liable to be dismissed on this ground alone.
30. Learned counsel for plaintiff-bank also placed reliance on the case of National Bank of Pakistan (2007 CLD 1356), wherein learned Single Judge of this Court finally concluded as under:- "As regards the Question, whether defendants in Suit No. 1445 of 1999 are entitled for leave, the defendants have not denied that financial facilities have been granted by the Bank and or received by them, the execution of document has also not been denied by the defendants the defendants are therefore not entitled for leave to defend the suit Suit No. B-02 of 2004 is, therefore, dismissed and Suit No. 1445 of 1999, is decreed for the sum of Rs. 58,138,577/- with cost of funds at the prevailing rate fixed by the State Bank of Pakistan from the date of filing of the suit realization."
31. The learned counsel for the plaintiff-Bank also relied upon the case of Muhammad Arshad and another (2006 CLD 1011) where the Honourable Supreme Court of Pakistan while dealing with issue of terms of agreement entered into between the customer and the Bank has held as under:- "We have no hesitation in our mind to hold that agreement dated 26.6.1999 was authentic, genuine and executed between the parties and acted upon. A careful perusal of the agreement dated 26.6.1999 would reveal that mark-up was charged in accordance with the terms and conditions stipulated therein, It is to be noted that in the agreement dated 26.6.1999 it has been stipulated in a categoric manner that the petitioners had also entered into mark-up agreement which was executed on 21.6.1995 and thus, it stood admitted by the petitioners, It would not be out of place to mention here that an amount of Rs. 21,05,280/- was mentioned as mark-up in the last agreement, It would be too late in the day to challenge its authenticity on the pretext of certain blank columns. The question which arises here at this juncture would be that as to whey certain columns were left blank and if it was so done whey the incomplete agreement was signed by the petitioners? No answer could be given by the learned Advocate Supreme Court on behalf of the petitioners, in our considered view the plea of "blank columns" would hardly renders any assistance to the case of petitioners, In view of the provisions as contained in Section 20 read with Section 118 of the Negotiable Instruments Act, 1881 no benefit could be given to the petitioner on the ground that the agreement was not completely filed in when executed as it would have no substantial hearing on the validity of the agreement."
32. Now taking up the other arguments of learned counsel for the defendant,, that in view of provisions contained in Section 176 of the Contract Act that if the pawnor makes default in payment of debt or performance at the stipulated time of the promise in respect of which the goods were pledged a pawnee may bring the suit against the pawnor upon the debt or promise, and retain the goods pie jed as collateral security or he may sale the things pledged on giving the pawnor reasonable notice of the sale. Learned counsel in support of his aforesaid submission has cited following judgments.
33. In case of A.M. Burq and another (supra) the learned Division Bench of Lahore High Court has held as under:- "It was held, "that the plaintiff was entitled to recovery, although the gun had not been returned or tendered, the defendant might enforce the return by bringing his action or trover." The respondent could invoke successfully the principle laid down in this judgment if he had still been in possession of 29 reams of paper. Lt is a right of the pawnee-pledgee either to bring a suit upon the debt or to sell the things pledged upon giving a reasonable notice of sale. Both these rights are concurrent and they are provided in Section 176 of the Contract Act. Under this section, as interpreted in Percy F. Fisher v. Adreshir HormaSji Gazdar (2) the pawnee has a right of action for the debt notwithstanding the possession of the goods, subject to the pawnor's right to redeem the goods upon tender of the amount due before the sale, In Nim Chand v. Jaga Bundhu Ghose (3), it was held:- ""There can be no doubt that when movable property is pledged to a person/or money lent, he acquires, a special property therein; he has a charge upon it for the satisfaction of the loan advanced, and he is entitled under Section 176 of the Contract Act, either to bring a suit 2010 against the owner upon the debt or promise, retaining the goods pledged as collateral security or he may sell the things pledged up on giving reasonable notice of the sale."
It is, therefore, clear that the right to proceed against the property is not merely accessory to the right to proceed against the debtor personally. Thus a pledger cannot compel the pledge to exercise the power of sale or its adjustment as a means of discharging or satisfying the amount due to him. The pledger, therefore, is competent in law to sue for his debt without selling the pledged property and adjusting its price towards the payment of the debt. He has, however, to keep the property pledged in tact so that he may be able to hand over the security to the pledger on payment of the debt by him."
34. In case of Muhammad Habib and others {Supra) learned Division Bench of this Court has dealt with the issue as under;- "Even otherwise under Section 176 of the Contract Act the pawnee has got the option that in case the pawner makes default in payment of the debt, either to bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security, or he may sell the good pledged on giving the pawner reasonable notice of the sale. Apparently in the instant case the plaintiff/respondent chose to bring the suit while retaining the pledged goods as collateral security. Admittedly the plaintiff/respondent did not sell the goods before the institution of the suit, but it was only after the institution of the suit in the Court, that at the request of the appellant the Court ordered the sale of the pledged good through Nazir of the Court."
35. In case of Salim Adamjee (supra) another learned Division Bench of this Court has dealt with the provision of Section 176 of the Contract Act and has held as under:- "Section 176 of the Contract Act is applicable to this case, It is as under:- "If the pawnor makes default in payment of the debt or performance, at the stipulated time of the promise in respect o f which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged on giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawner is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor."
According to this section, the 'pawnee' has a right either to file a suit in case the pawner ^makes default in payment of debt or sell the things pledged on giving reasonable notice of the sale, lt is an admitted position that the respondent No. 1 had sent notice to the appellant for the sale of pledged shares as back as September 1998. The respondent No. 1 thereafter, could sell the pledged shares on any date to reimburse themselves by the sale of the pledged shares. The object of the notice is that the pawner, being the owner of the property shall have priority to get back his property by clearing the dues outstanding against him. Lt is based upon equitable principles. On one hand, it provides fair opportunity to the pawner to get back his property and on the other, it also safeguards the interest of the pawnee. The right of respondent No. 1 to sell the pledged shares was absolute and could not be bracketed with the possible rise in price of shares."
36. In the case Messrs Crystal Enterprises and 6 others (supra) a learned Division Bench of Lahore High Court has held as under:- Under the provisions of the Contract Act, the pledgee bank was entitled either to sell the goods prior to the filing of the suit, or to file its suit and to retrain the pledged goods as collateral security, lt is clear that the bank exercised the second option and it therefore, entitled to retain the imported goods in its custody, as collateral security."
37. From the examination of the above judgments it is clear that it is a right of the pawnee/pledgee either to bring a suit upon the debt or to sale the goods pledged upon giving a reasonable notice of sale. Both these rights are concurrent and they are provided under Section 176 of the Contract Act. Under this section the pawnee has right to auction of the debt, notwithstanding, the possession of the goods subject to pawnee's right to redeem the goods upon tender or amount due before the sale.
38. In view of above, it is held that plaintiff-bank has rightly filed suit inspire of the fact that pledged shares were not sold and were trained by the plaintiff-bank. The action of the bank is clearly in line with provisions of Section 176 of the Contract Act.
39. Since the defendants have not discharged their obligation as per agreement of finance and other documents suit has .Been rightly filed by the plaintiff. Learned counsel for defendants has failed to make out any substantial question of law as well as facts in respect of which any evidence is required to be led by the parties.
40. In the above circumstances, the leave to defend application filed by defendant is dismissed for the aforesaid reasons. Consequently the suit of the plaintiff is decreed as prayed with cost.