' UMAR ATA BANDIAL, J.---This suit for recovery of Rs,87.02 million is filed against defendant No,1 company which availed finance of Rs,60 million from the plaintiff-bank. The defendants Nos.2 and 3 are sued as guarantors and also as pledgors of security to the. Plaintiff-bank whereas defendants Nos.4 to 5 are sued as pledgors of security to the plaintiff-bank in respect of the afore- noted finance.
2. In answer to a request by the defendant/company dated 5-12-2003 for finance/advance facility of Rs,60 million, the plaintiff-bank vide letter dated 20-6-2004 sanctioned the requested facility as term finance repayable in seven years subject to mark-up. The defendant/company executed agreement of finance dated 7-8-2004 on mark-up basis for an amount of Rs,60 million with buy back price of Rs,91.155 million repayable on or before 26-11-2010 in installments commencing from 26-8-2004. As security for the said finance the defendant/company executed demand promissory note dated 7-8-2004 signed by its Directors, the defendants Nos.2 and 3 in the amount of Rs,91,155 million supported by four letters of pledge all dated 7-8-2004 executed by each of the defendants Nos.2, 3, 4 and 5 pledging their shares in Messrs Taj Textile Mills Ltd. As security for the finance extended to the defendant/company.
3. The defendants failed to make payment of even a single installment of the finance facility.
Consequently the plaintiff-bank periodically sold the pledged shares in different lots for a total amount of Rs,1.777 million. Adjustment of the said proceeds against the outstanding balance of Rs,58.222 million is claimed from the defendants on the principal account. A further claim of Rs,28.797 million is made in the plaint on account of mark-up due on the finance facility with effect from the due date for payment of first installment on 26-8-2004 which default continues till date.
No charges are claimed by the plaintiff-bank on account of liquidated damages or penalties.
4. This suit is filed prior to the date of payment of full purchase price of Rs,91.155 million on or before 26-11-2010. Accordingly, neither the claim for the buy back price nor for mark-up calculated on percentage basis (depicting interest) is maintainable. However on the allegation that no repayment whatsoever has been made, there is a breach of obligation of the defendant/company under the finance agreement which records 26-8-2004 as the date of payment of first installment.
Accordingly, for the continuing breach of the repayment obligations under the finance agreement the present claim when filed in 2008 was maintainable for the recovery of the principal amount of the finance.
5. In answer to the claim filed by the plaintiff the defendants filed their PLA bearing No,70-B-2008.
Leave was granted to the defendant in the said PLA vide order dated 9-12-2009 but subject to provision of surety bond in the amount of Rs,10 million by the principal debtor company and Rs,1 million each by the remaining defendants subject to satisfaction of the Deputy Registrar (Judicial) of this Court. The surety bonds were not tendered notwithstanding two opportunities/extensions in time given by this court. Accordingly, by order dated. 8-4-:2010 the leave granting order was recalled and the PLA was dismissed.
6. In the foregoing circumstances of the case the court is nevertheless obliged to exercise its jurisdiction in accordance with law, and therefore, to satisfy itself that the mandatory conditions of law for entertaining a suit for recovery under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("FIO"), are duly met. Accordingly, the statement of account attached to the plaint has been perused. The first entry therein shows a negative balance of Rs,60 million as on 10-3-2005. Under the rule laid down by this court in the Bankers Equity Ltd. Through Principle Law Officer and 5 others v. Messrs Bentonite Pakistan Ltd. And 7 others 2003 CLD 931 (Lahore) and ADBP v. Modern Leathers Ltd. 2007 CLD 1424, statement of account attached to a plaint must furnish all debit and credit entries reflecting the transactions in the account.
7. Accordingly, the learned counsel was asked to explain the negative opening balance in the statement of account. He has referred to the letter dated 5-12-2003 by the defendant/company duly signed by its Chief Executive, the defendant No,2, requesting for restructuring of the finance facility of Rs,60 million as per repayment schedule which is not attached on record. The learned counsel has, however, at the hearing offered to place the said repayment schedule on record. In the interest of justice, the request is declined so as to prevent the plaintiff from filling in the lacunae in its case. He has then referred to the facility letter dated 20-6-2004 addressed to the defendant company whereby restructuring of PDF facility of Rs,60 million has been granted for a period of seven yeaRs, That facility letter and its terms and conditions are signed by the Chief Executive of the defendant/company.
8. Pursuant to the facility letter an agreement of finance dated 7-8-2004 was duly signed by the defendant/company and the plaintiff-bank which is available on record. For a principal amount of Rs,60 million the said agreement records a buy back price of Rs,91.155 million for repayment of facility on or before 26-11-2010. Thereafter the learned counsel has referred to the letters of guarantee dated 7-8-2004 signed by defendants Nos.2 and 3 in the amount of Rs,91.155 million as security for the afore-noted finance. More importantly, he has read from 4 agreements of pledge each dated 7-8-2004 respectively executed by defendants Nos.2 to 5 pledging with the plaintiff- bank shares of Messrs Taj Textile Mills Ltd. Held by each of the said defendants. The plaintiff-bank sold a number of the pledged shares from 25-6-2007 until 20-5-2008 as reflected in the statement of account. Consequently, a claim of Rs,58.222 millions shown as the outstanding principal amount due from defendants. In addition, the plaintiff has claimed mark-up receivable upto 30-6-2008 from the defendant/company at the rate of 8% per annum in the amount of Rs,28.797 million.
Consequently, the suit is filed for recovery of an amount of Rs,87.2 million.
9. Heard. At the outset it is observed that the finance facility amount claimed to have been provided by the plaintiff-bank to the defendants is in the nature of a restructured arrangement. No disbursement of funds has taken place pursuant to the agreement of finance. Consequently, the claim of mark-up on such amount is not maintainable and is hereby rejected. Whether the statement of principal account opening on 10-3-2005 with a negative balance has credibility is already explained by the learned counsel by referring to several above mentioned documents including the letter dated 5-12-2003 by the defendant company seeking restructuring of the finance facility of Rs,60.0 million; followed by the facility letter dated 20-6-2004 duly signed by the defendant company, the agreement of finance dated 7-8-2004 and demand promissory note dated 7-8-2004 for an amount of Rs,91.155 million which are signed by the defendants Nos.2 and 3 on behalf of the defendant/company. The said instruments are the standard documentation for originating a finance facility from a financial institution. In addition thereto the defendants pledged their share scrips with the plaintiff-bank under the several letters of pledge dated 7-8-2004. The deposit of shares in pledge involves an overt action that is supportive of the signed charge documents mentioned above and gives credence to the plaintiff-bank's claim that a finance facility was duly extended and restructured pursuant to the afore-noted facility letter dated 20-6- 2004. It` is relevant to note that the finance facility in the present case does not involve a fresh disbursement of funds but merely an extension in the repayment period of an existing liability of the customer. As to the legal status of such a debt the learned counsel has aptly referred to the judgment by this court in Habib Bank Ltd. v. Taj Textile Mills Ltd. Through Chief Executive and 5 others 2009 CLD 1143. In this judgment whilst addressing the legal effect of a restructuring agreement it has been observed as follows:-- "Heard. It is quite a simple case of rescheduling and restructuring of a previous finance; when liability of the borrower company became overdue, a request was made by it for the renewal/restructuring thereof; in this behalf, the resolution of the company dated 21-9-2002, the offer of the Bank dated 23-10-2002 and the agreement dated 11-12-2002, are sufficient to prove the case of the plaintiff. Obviously, in the cases pertaining to restructuring the amount is not disbursed, rather is brought forward envisaging as liability of the customer, and therefore, to argue that as no physical disbursement of the amount was made, resultantly, the claim of the. Bank is false or unfounded, is a submission which is misconceived and without merit."
11. As a result of the foregoing discussion, the claim for overdue amounts on the principal account in respect of the restructured finance of the defendant/company is duly substantiated by several documents executed and actions taken by the defendants. In the context of a restructured facility the absence of a fresh disbursement is immaterial. The claim of mark-up of such facility has already been struck down. There is no other material available on record to rebut or diminish the claim of the plaintiff-bank. Accordingly, the suit is decreed in favour of the plaintiff and against the defendants Nos.1 to 5 jointly and severally for recovery of the principal amount claimed in the suit amounting to Rs,58.222 million along with costs of the suit and the cost of funds from the date of filing of suit till realization.