' IRFAN SAADAT KHAN, J.---Through this common judgment I propose to dispose of the above two suits as the same are in respect of a common subject and are cross-suits.
2. Brief facts of the case, as narrated in the plaint of Suit No,B-88 of 2001, are that the plaintiff No,1, a registered partnership firm, concluded a transaction with a foreign supplier Messrs Andre and C.I.E. S.A. Of Switzerland for purchase of 50,000 Metric Tons of White Milling Wheat at the rate of US$ 125 per Metric Ton on Cost and Freight Free Out Basis. The plaintiff No,1 established confirmed irrevocable documentary credit bearing No,DC/BKL/KHII/00293/99 dated 10-5-1999 for a sum of US$ 31,25,000 in favour of the said supplier through the defendant No,1 for import of 25,000 Metric Ton out of the total contracted quantity of 50,000 Metric Tons. The plaintiff No,' requested the defendant No,1 to arrange advance booking of foreign exchange at the rate of Pak Rs,47.82 per dollar for the entire amount of the Letter of Credit with the defendant No,2 and in this regard executed Contract No,374 of 1999 dated 11-5-1999 with the defendant No,2. This was done due to the fluctuation in the exchange rate of the US dollar. However, on the arrival of the goods the defendant No,1 delivered the Bill of Exchange for payment of US$ 31,25,000 to plaintiff No,1 but also informed the plaintiff No,1 that the defendant No,2 has closed out Contract No,374 of 1999 dated 11th May, 1999 in respect of advance booking of foreign exchange and that the defendant No,2 will not issue US dollar at the rate of Pak Rs,47.82 against the said Letter of Credit in respect of the import of 25,000 Metric Tons of Wheat. Therefore, on arrival of the goods the plaintiffs were required to pay at a higher rate of exchange and thus sustained losses. The plaintiff No,1 also came to know through the correspondence made between them and the defendant No,1 that while establishing the Letter of Credit for import of the aforesaid 25,000 Metric Tons of wheat, the defendant No,1 did not abide by the SBP Regulations inter alia pertaining to obtaining prior permission from defendant No,2 for establishing a Cost and Freight Free Out Letter of Credit for import of Sugar and Food Grains (Cereals) and, therefore, a fine of Rs,5.531 million was imposed by the defendant No,2 on the defendant No,
1. The defendant No,1, vide notice dated 21-8-2001, sent through its counsel to the plaintiffs, claimed payment of Rs,5.531 million and vide its letter dated 5-9-2001 threatened the plaintiffs to adjust the aforesaid amount of Rs,5.531 million from the four accounts maintained by plaintiffs Nos.1 and 2 with the defendant No,
1. Subsequently, the defendant No,1 imposed an embargo on the withdrawal of money from the accounts maintained by plaintiffs Nos.1 and 2 with the defendant No,1 due to which cheques issued by the plaintiffs to different parties were dishonoured causing loss of reputation in the business circles. For the purpose of recovery of the loss sustained due to non-booking of foreign exchange, for recovery damages on account of irreparable damage having been caused to the name, reputation and goodwill of the plaintiff No,1 due to dishonouring of the cheques and for restraining the defendant No,1 from debiting the amount of penalty of Rs,5.531 Million to the accounts of the plaintiffs maintained with the defendant No,1 the plaintiffs have filed the present suit. Apart from this the plaintiffs have also prayed for return of the surety documents deposited by them with the defendant No,1 to secure the amount of the Letters of Credit opened by them with the defendant No, 1.
Suit No,B-97 of 2001:
3. On the other hand, Khyber Bank Limited, the defendant No,1 in Suit No,B-88 of 2001, filed cross-suit bearing No,B-97 of 2001 with prayer that the Bank has the legal authority to recover differential amount between the rates of foreign exchange contract booked at the rate of Rs,46 and the closure which was exercised by State Bank of Pakistan on 16-8-1999 prevailing at Rs,47.77 on the LC amount of US$ 3,125,000 amounting to Pak. Rs,5,531,250 along with mark-up. It was also contended by the bank that they are entitled for recovery of Rs,7134276 with 20% mark-up from the date of filing of the suit till the decretal amount is recovered from the plaintiffs, who are defendants in the suit filed by the Bank. On the basis of pleading of the parties the following issues were framed:--
(a) Whether the damages as claimed by the plaintiffs amounting to Rs,73,525,000,00 can be recovered from the defendant-Bank, if not, what is the effect?
(b) Whether the amount of Rs,5,531,260.00 recovered by State Bank of Pakistan from the defendant-Bank is recoverable from the plaintiff on account of closure of the aforesaid Exchange Contract in respect of L/C No, D. C. / BK11/00273 of 1999, dated 10-5-1999 established by the defendant-Bank for the plaintiff, if so what is the effect?
(c) What should be the decree?
' In support of their pleas, the parties have examined their witnesses who produced certain documents which were exhibited.
4. Mr. Abul Inam, learned counsel appeared on behalf of the plaintiffs and submitted that as per the various regulations of the State Bank of Pakistan, the defendant No,1 was under the legal obligation to obtain the prior permission from the defendant No,2 before the opening of the L.C. But admittedly the defendant No,1 due to mistake on their part did not adhere to the said responsibility due to which the State Bank of Pakistan (SBP), the defendant No,2, demanded an amount of Rs,5.5 million from the defendant No,1 and the defendant illegally shifted this burden upon the plaintiffs.
As per the learned counsel it was the defendant No,1 who made the mistake and they should face the music and bear the consequences and not the plaintiffs. Learned counsel invited my attention to the various letters communicated between the plaintiff and the defendant No,1 and between the defendant No,2 and the defendant No,1, which according to him, amply proves that it is the defendant No,1 who was at fault and who had incorrectly and without any lawful justification shifted the onus on the plaintiffs. He also read out the cross-examination of the witness and submitted that perusal of which, as available in the evidence filed, would prove beyond any doubt that it is the defendant No,1 who was at fault and who had illegally shifted the said onus upon the plaintiff. As per the learned counsel the defendant No,1 in order to clear their liability debited the amount lying in the bank account of plaintiffs and when the plaintiff No,2 issued cheques to different parties, the same were illegally and unauthorizedly dishonoured by the defendant No,1 with the result that the plaintiffs suffered loss of reputation and goodwill and in this regard the plaintiffs have claimed a sum of Rs,7.5 million from the defendant No,
1. Learned counsel for the plaintiff further submitted that Suit No,B-97 of 2001 filed by the Bank, as a counterblast, is nothing but an afterthought and an attempt to whittle down the claim made by the plaintiffs. Learned counsel further submitted that the said suit is not maintainable as the claim though mentioned as Rs,77,913,476.00 which is in fact, as alleged, is Rs,7,913,476.00 and this court does not have the pecuniary jurisdiction in respect of the matters of less than Rs,3 Crore, hence the suit filed by the Bank is liable to be dismissed in limine.
5. Ms. Huma Sadiq, learned counsel appeared on behalf of the defendant No,1 Bank and submitted that the suit filed by the plaintiffs is liable to be dismissed as the bank has acted as an agent on behalf of the plaintiffs and as per the agreement entered between the parties whatever liability has arisen has to be borne by the plaintiffs. Though the learned counsel conceded that the amount recovered by the defendant No,2 from them was due to their inadvertence but on the other hand submitted that as per the various circulars and the agreement between the parties that liability has to be borne by the plaintiffs and not by the defendant bank. She also submitted that the suit filed by the Bank against the plaintiffs is in respect of the liability which is legally payable by the plaintiffs and not by the defendant-Bank. Written arguments were also submitted on behalf of the defendant No,1 wherein it was pleaded that the plaintiffs never gave any instructions to the defendant No,1 Bank to take prior permission for Forward Booking Contract. It is also stated that the closure was due to the policy for non-availability of exchange and not as penalty. It is further stated in the written arguments that the defendant No,1 is not duty bound for taking prior permission for the forward booking contract before opening of L/C as it is not mentioned in the L/C contract. In support of her contentions she has also relied upon the decision reported as 1986 CLC 222 and some foreign decisions.
6. On behalf of the defendant No,2, written arguments have been filed according to which it is stated that there has been a non-observance of the conditions of F.E. Circular No,77 by the defendant No,1 and due to which an amount of Rs,5.5 million was debited from their account.
According to the defendant No,2, the matter is between the defendant No,1 and the plaintiffs and the defendant No,2 has no concern in this matter.
7. I have heard both the learned counsel at length and have perused the record as well as their written arguments. As there are only three issues the same are decided jointly as under:
8. Perusal of the record reveals that vide letter dated 19th July, 1997 which was addressed by the defendant No,2 to the defendant No,1 it has specifically been mentioned as under: -- "Since our prior permission was not obtained prior to the establishment of Letters of Credit opened by you on C&F (Free out) basis which is quite irregular.
' You are, therefore, advised to explain as to why forward exchange was booked against an unauthorized transaction and why the licence of the Branch to deal in foreign exchange should not be cancelled."
' In respect to the said letter, the defendant No,1 vide their letter dated July 28, replied as under:- "We solicit you to please condone the irregularity at our level due to oversight and rush of work by allowing opening of L.C. As the consignment have already been arrived for which we assure you that such irregularity will not be repeated in future.
' Inconvenience caused is highly regretted."
' Against the defendant No,1 vide their letter dated 10th August, 1999 intimated the defendant No,2 as under:-- "You are advised to close out the forward contract booked with State Bank of Pakistan as prior permission. Of the Control was not obtained. Further, we have no objection to your clearance of the goods, if the payment is made at the current market rate."
' Against the defendant No,1 vide their letter dated 11th August, 1999 replied as under:-- "Since the goods have already arrived at Port Qasim and have been delivered to Government of N.- W.F.P. By our customer to meet the urgent requirement of N.-W.F.P. Government we request your good self to please accept our regret of having established letter of credit (free out basis) without prior approval.
' Further we assure that such irregularity will not be repeated."
9. Thereafter the defendant No,1 vide letter dated 16-8-1999 addressed to the defendant No,2 requested them to debit their account with disputed amount of Rs,5.5 million. Again the defendant No,1 vide letter dated 13th December, 2000 inquired from the defendant No,2 regarding a debit entry made on 16th August, 1999 for Rs,5,531,250. The defendant No,2 explained to the defendant No,1 as under:- "In this connection we have to advise that on 16-8-1999. You have submitted a letter to us for closeout the contract booked by you for which you have authorized us to debit your account with sum of Rs,5,531,250".
10. A perusal of the above quoted correspondence exchanged between the defendant No,1 and the defendant No,2 clearly shows that by not obtaining prior permission of the defendant No,2 for the forward booking contract before opening of the L/C an irregularity was committed by the defendant No,1 for which the defendant No,2 even threatened to cancel the licence to deal in foreign exchange of the concerned branch of the defendant No,1 which shows that the irregularity was, in fact, committed by the defendant No,
1. So far as the contention that no such condition was mentioned in the L/C is concerned, suffice it to say that the directions issued from time to time by the defendant No,2 to various banks are to be followed and complied with by the banks and not by the customers of the banks unless the same are specifically issued to the customers of the Banks.
11. Perusal of -the evidence file in respect of the cross-examination of the witness of the defendant No,1 reveals that no prior permission was obtained by the defendant No,1 from the defendant No,2 before opening the L.C. Dated 10-5-1999. It is also admitted by the said witness that the amount debited by the defendant No,2 from the account of the defendant No,1 was on the advice of the defendant No,
1. It is also evident from the Foreign Exchange Manual Vol.II and from the averments of the defendant No,2 that it was the responsibility of the defendant No,1 to have obtained prior permission from the defendant No,2 before import of the said items on C&F (Free out basis). The F.E.
Circular No,77 also clearly specifies that prior permission of the SBP shall continue to be obtained in respect of import of sugar and foodgrains (cereals) on C&F (Free out basis).
12. The main contention of defendant No,1 is that the plaintiffs have agreed to pay the differential between the dollars booked at the time of opening the L.C. i.e. Rs,47.82 and the amount at which the said dollars were purchased from the open market at Rs,51.90 and hence cannot say at this juncture that they are liable to recover this amount from the defendant No,1 as due to the inadvertence caused by the defendant No,1 for not obtaining the prior permission from the defendant No,2 in order to release the consignment, dollars were purchased from the open market to fulfil the commitment of the L.Cs. No doubt the plaintiffs had admitted to pay the differential for the time being but that was due to the fact that the plaintiff was in hurry and in dire need to get their goods released lying at the Port Qasim. Had the dollars not been purchased from the open market they would have not been able to get their goods released. However the plaintiffs have categorically stated in their letter dated 19-7-1999 that it is the defendant No,1 who is responsible for abiding by all SBP regulations and in particular obtaining prior permission from SBP for establishing Cost and Freight free out L.C. It is also clear from the record that the defendant No,1 had been demanding through its various letters from the plaintiffs the amount of penalty imposed by the defendant No,2 on them. Whereas the plaintiffs had been agitating that there was no justification for demanding this amount from them as it is a matter purely between the defendant No,1 and the defendant No,2.
13. A perusal of all the above documents and the evidence file would prove that it is the defendant No,1 who did not comply with the Circular and Foreign Exchange Manual. The defendant No,1 is a banking concern and is under the legal obligation to know all the laws in respect thereof and to follow them strictly. They have categorically admitted in their various communications that they have failed to obtain prior permission as envisaged under the law and had termed the same either to be through inadvertence or due to rush of work. The defendant No,1 has even accepted that no such mistake will be made by them in future. Moreover the witness of the defendant No,1 has also admitted that legal formalities before opening of the said disputed L.C. Were not fulfilled. Even the learned counsel who appeared before me on behalf of the defendant No,1 has accepted that the error committed by the defendant No,1 was due to inadvertence and rush of work. In my opinion the said mistake of not obtaining the prior permission from State Bank of Pakistan squarely lies on the shoulders of the defendant No,1 which they cannot shift/transfer to the plaintiffs. The plaintiffs could not be penalized for no fault of theiRs, It is a trite proposition of law that nobody could be penalized for the default made by other person. If the defendants have committed some mistake by violating certain law and regulation it should be they who would be suffering the agony of that mistake.
14. Learned counsel for the defendant repercussion has also placed before me BPD Circular 14 of 2006 wherein it is mentioned that the penalty imposed by SBP on Banks/DFIs because of their negligence/oversight should not be passed on to their customers who do not have any responsibility in this respect. As per the learned counsel this Circular was issued on 12th October, 2006 after which no Bank/DFI is authorized to pass on any penalty for their negligence to their customers meaning thereby that prior to the issuance of this Circular the Banks/DFI's were permitted to shift the said burden on their customers in the event of any penalty is imposed on them for their fault by the SBP. Hence as per the learned counsel the defendant No,1 was fully justified in transferring the said burden upon the plaintiffs. This argument taken by the learned counsel in my view is too far fetched as a perusal of the said circular would reveal that apparently this circular was issued by the SBP to save the customers of the respective Banks/DFI from being unnecessarily previously burdened by certain Banks/DFI in the cases where penalties were imposed by the SBP upon such Banks/DFI for violating certain regulations of the SBP. Hence no advantage could be taken in this regard by the defendant No,1 by interpreting the said circular in a manner which never was apparently the intention of the SBP in this regard.
15. Hence in view of the above discussion, I am of the view that the transferring of the said liability by the defendant No,1 on the plaintiffs is illegal and uncalled for, therefore, Suit No,B-88 of 2001 is decreed in the following terms:-- "(1) That the plaintiffs are not liable to pay a sum of Rs,5.531 Millions to the defendants.
(2) That the defendant No,1 was not justified in debiting the said amount of Rs,5.531 Million which, if deducted, should be returned to the plaintiffs.
(3) That the defendant No,1 should return to the plaintiffs the property documents of the properties bearing Survey No,50/13, Sheet No,LY-30, Old Survey No,K-19/P0(4-5), measuring 664 Sq.Yds., or there-about situated at Usmanabad, Lyari Quarters, Karachi; property bearing Survey No,50/14, Sheet No,LY-30, Old Survey No,K-19/P0(4-5), measuring 662 Sq.Yds. Or there-about situated at Usmanabad, Lyari Quarters, Karachi and Property bearing No,50/15, Sheet No,LY-30, Old Survey No,K-19/PO - (4-5), measuring 688 Sq.Yds., or there about situated at Usmanabad, Lyari Quarters, Karachi.
(4) Since no positive evidence has been filed that the plaintiffs had suffered any loss due to the dishonouring of the cheques and the learned counsel for the plaintiffs has also conceded that no adverse effect has been made upon the plaintiffs in respect of dishonoring of the said cheques, therefore, no judgment and decree so far as the prayer clause (d) is concerned is being made.
(5) The defendants are also restrained from claiming any amount/penalty from the plaintiffs in respect of the Letter of Credit established on 10-5-1599. The defendant are also restrained from placing embargo and/or exercising any lien on the Bank Accounts of the plaintiffs bearing Nos.C.D.
Account No,00012009, SDA 00017017, FSN 00343021 and SDA 00343005, being maintained by the plaintiffs with Behria Complex Branch of the defendant No,1 at Karachi.
(6) The plaintiffs are also entitled to the cost."
16. Now so far as the case of the Bank, i.e. Suit No,B-97 of 2001, is concerned it is a settled proposition of law that a party for his own fault cannot be allowed to take advantage of its own mistake/fault either to claim any amount or sum as damages which due to its own negligence happened. In the present case it was the duty of the Bank to have taken all reasonable steps to fulfil the prerequisite condition before taking any action whatsoever as provided under the law.
When in the given circumstances the Foreign Exchange Manual and the said Circular are quite clear on the subject, the Bank, in my view, should not have violated the same. It is interesting to note that Mr. M. Maqbool appeared on behalf of the Bank while recording his evidence, as available at pages 13 to 31 of the evidence file, had candidly conceded that the Bank acts as an agent of the customer and the responsibility for fulfilling certain prerequisite conditions lies on the Bank and no such permission in this regard was obtained by the Bank. It was also accepted that a customer opening L.C. Cannot approach the SBP in respect of completion of formalities of L.C. Except through his Bank. The said officer produced the letter dated 28-7-1999 which is marked as Exh.DW-1/27 wherein it has been stated that "through oversight prior permission was not obtained from SBP".
The said officer also produced letter dated 10-8-1999 by SBP as Exh.DW-1/28 wherein it was mentioned that the Bank did not obtain prior permission from the SBP. The said officer also admitted that it was the Bank which asked the SBP to debit its account for Rs,5531250. It was accepted by the said officer that the total claim of the Bank against the plaintiff in Suit No,B- 97/2001 is Rs,7913476 only and not Rs,77913476 as mentioned on the title of the plaint. Even the decisions relied upon by the counsel of the defendant No,1 are quite distinguishable on facts and law.
17. Hence in such situation shifting of the burden upon the plaintiffs would be illegal. The Bank was negligent in performance of its obligations and at this juncture cannot plead that the amount recovered from it by the SBP would have to be borne by the plaintiff. The Bank was under an obligation/duty to look after the interest of its clients to the best of their ability and not to penalize them for no default of theirs since they charge substantial amount in this regard from them for providing the required services. The default of Bank being apparent, it was inequitable to allow them to get the benefit of their own wrong against the plaintiff as nobody could be allowed to get the benefit of their own misdeed/negligence. If any authority is needed in this regard reference may be made to the decision given by the honourable Supreme Court of Pakistan in Ch. Muhammad Yousuf v. United Bank Ltd. 2004 CLC 1507 and a Division Bench judgment given by the Lahore High Court in Government of Pakistan v. Messrs Al-Farooq Roller Mills Ltd. 2000 M LD 1130.
18. Even otherwise the suit does not fall within the pecuniary jurisdiction of this Court as in the said case recovery of Rs,7,913,476 has been claimed whereas in the title of the suit an amount of Rs,77,913,476 has been mentioned. Even the officer appearing on behalf of the Bank as witness has admitted that the claim of the Bank from plaintiff was of Rs,7,913,476 and not Rs,77,913,476. As per Annexure P/13 to the suit, which is the letter addressed by the Bank to the plaintiff, it was the amount of Rs,7,913,476 which was claimed by the Bank from the plaintiff. Hence this suit lacks pecuniary jurisdiction of this court and is liable to be dismissed in limine. The Suit No,B-97 of 2001 filed by the Bank, therefore, being bereft of any merit is hereby dismissed.
19. The above two suits are disposed of to the extent and in the manner as stated above.