' MUNIB AKHTAR, J.---By means of the present application, the defendants Nos. 1 to 6 seek leave to defend the instant suit, which has been filed by the plaintiff, a financial institution, under the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("2001 Ordinance").
2. Briefly stated, the plaintiffs case is that it has provided two term finance facilities to the defendant No,1, one for Rs, 60 million, and the other for Rs, 70 million. The first facility was provided by means of a markup agreement dated 18-5-2005 and required the defendant No, 1 to repay a sum of Rs,109.7 million, while the second was provided by means of an agreement dated 30-11- 2006, and required the said defendant to repay a sum of Rs,133.5 million. These agreements were executed at Lahore. The plaintiff contends that the defendant No,1 availed both facilities, and made partial repayments in terms thereof, such that a sum of Rs,57,148,025 is due and payable on the first facility and a sum of Rs,110,663,475 is repayable in respect of the second. In addition, the plaintiff has also claimed certain amounts by way of liquidated damages in respect of each facility.
3. By way of security, the defendant No,1 created a mortgage on its immoveable property by way of deposit of title deeds. Likewise, the defendants Nos.2 and 5 also created a mortgage on certain immoveable properties owned by them to secure the amounts due and payable to the plaintiff by the defendant No,1. Memorandums of deposit of title deeds were duly executed by the said defendants in respect of the mortgages. Although the immoveable properties are situated in the Punjab the memoranda record that the title deeds were deposited at Karachi with the plaintiff. The defendants Nos.2 to 5 have also given personal guarantees in respect of the amounts due and payable to the plaintiff. The defendant No,6, which appears to be a sister concern of the defehdant No,1, has given corporate guarantees in respect of the amounts due and payable to the plaintiff. All of the guarantees expressly note that they have been executed at Lahore. Finally, and for purposes of completeness, it may be noted that the Bank of Punjab, the defendant No,7, holds a ranking charge on the fixed assets of the defendant No,1 mortgaged to the plaintiff, but without prejudice to the priority of the security created in favour of the latter.
4. Learned counsel for the defendants Nos.1 to 6 (herein after "the contesting defendants") raised a number of points in support of their leave to defend application. Firstly, learned counsel contended that this Court lacked the territorial jurisdiction to hear the suit. He contended that all of the defendants, even as per the title of the plaint itself, were either ordinarily resident or carried on their business (as the case may be) outside Karachi. All the relevant documents, including the financing agreements and security documents were executed outside Karachi. The plaint therefore had to be returned for presentation before a court of competent jurisdiction. Secondly, learned counsel contended that the statement of account filed by the plaintiff in support of its claim was materially defective. He drew attention to section 9(2) of the 2001 Ordinance, which requires that the plaint filed by a financial institution must be supported by a statement of account duly certified under the Bankers Books Evidence Act, 1891 ("the 1891 Act"). Learned counsel referred to the various sections of the latter enactment to contend that the presumption that arose in terms of section 4 thereof could only arise in the case of a banking company, since the 1891 Act applied (by virtue of section 2(2)) only to banks. The plaintiff however, was admittedly not a bank. Since only a bank could certify a statement of account under the 1891 Act, the requirement imposed by section 9(2) of the 2001 Ordinance could only be fulfilled by a banking company. As the plaintiff could not comply with the foregoing requirement, no presumption arose in favour of its statement of account, and therefore the entries therein had to be proved at the trial. Hence, the contesting defendants were entitled to leave to defend.
5. Learned counsel assailed the statement of account on other grounds as well. He submitted that the said statement was not certified by an officer holding any of the designations required by the 1891 Act. Indeed, his case was that the person who had certified the statement of account was the same individual who had verified the plaint, and he was not properly authorized to do either att. He also contended that the statement of account was incomplete and thus, not a statement as contemplated by law. In this context, he submitted that the plaintiff itself had filed another statement of account along with its replication, and there were material differences between the two statements. This was itself sufficient to entitle the defendants to leave to defend. Indeed, this submission formed the crux of the third basis of his case, which was that if the plaintiff filed additional documents or material along with its replication (including a statement of account), the defendant was entitled to leave to defend. This was so for the reason that the defendant could not file a reply to the plaintiffs replication. If the latter had either improved its case by the additional filings, or sought thereby to overcome any lacuna or defects in the case as made out in the plaint, the defendant had no opportunity to rebut the additional material and the plaintiffs case would go unanswered. The defendants having been put in an untenable position were entitled to leave to defend. Fourthly, and with specific reference to the defendant No, 2, learned counsel submitted that the documents filed by the plaintiff itself showed that the said defendant was not even in Pakistan on the day on which he was supposed to have executed the personal guarantee. Fifthly, learned counsel submitted that the financing agreements were neither duly stamped nor registered, and hence could not be relied upon. In this context, he submitted that section 18(4) of the 2001 Ordinance only protected security documents and not the finance agreements.
6. Learned counsel for the plaintiff submitted that the contesting defendants had made out no case for the grant of leave to defend. Learned counsel submitted that the title deeds had been deposited at Karachi with intent to create a mortgage to secure the sums payable to the plaintiff, and the relevant agreements, including the financing agreements, expressly provided that it was the courts at Karachi that would have exclusive jurisdiction in respect of any disputes between the parties. She submitted that the sums were repayable to the plaintiff at Karachi, and thus on any view of the matter, this Court had territorial jurisdiction to entertain the suit. Learned counsel further submitted that the statement of account filed by the plaintiff was proper and in accord with the requirements of law. She submitted that the finances provided to the defendant No, 1 were term finances, which had been completely availed and it was for this reason that the statement contained (in respect of each facility) only one debit entry showing the amount disbursed.
Thereafter, there were partial repayments, which were duly reflected in the statement. Learned counsel also submitted that the statement did show a claim by way of liquidated damages, but her case was that the plaintiff was ready to give up this amount. As regards the authorization of the person who had verified the plaint, learned counsel submitted that para 2 thereof clearly stated that he was duly authorized and that the relevant document had been annexed to the replication.
She submitted that the application merited dismissal.
7. Both learned counsel referred to certain case-law, which I will consider in the paras herein below.
8. I have heard learned counsel as above, examined the record with their assistance, and considered the case-law relied upon by them. It will be seen that at least some of the points raised by learned counsel for the contesting -.1141 defendants are 'pure' questions of law, i,e,, questions that can be decided without recording evidence. The first matter that must be examined is how such questions are to be dealt with in the context of a leave to defend application under the 2001 Ordinance. At first sight, it may seem somewhat surprising that this question should arise at all. If a defendant raises a (substantial) 'pure' question of law, it ought surely to be the case that he is entitled to leave to defend. However, the question does arise, because of section 10(3) of the 2001 Ordinance, which provides as follows:-- "The application for leave to defend shall be in the form of a written statement, and shall contain a summary of the substantial questions of law as well as fact in respect of which, in the opinion of the defendant, evidence needs to be recorded."
' Reference must also be made to subsection (8), which insofar as is presently relevant, provides as follows:- the Banking Court shall grant the defendant leave to defend the suit if ... It is of the view that substantial questions of law or fact have been raised in respect of which evidence needs to be recorded."
9. The trouble is caused by the words at the end of these subsections, emphasized for convenience.
The question is whether, as appears to be the case, these words are a necessary ingredient of the leave to defend application. If so, then defendant must show (a) one or more substantial questions of law or fact, which (b) require evidence to be recorded. In one sense, the second requirement is both superfluous and limiting.. As is well known, issues or questions that arise in a suit can be of three types: (i) 'pure' questions of law; (ii) mixed questions of law and fact; and (iii) questions of fact. Now, a question of fact is, by definition, a question that can only be resolved by evidence. In respect of such questions therefore, it is superfluous to require that leave will only be granted if evidence needs to be recorded. As regards questions of law, the requirement is unnecessarily limiting. This is so because no evidence needs to be recorded in respect of a 'pure' question of law.
Such a requirement therefore seems to imply that if the application raises only 'pure' questions of law leave cannot be granted even though the questions may be substantial. In other words, the requirement seems to have the effect that leave can only be granted if either questions of fact or mixed questions of law and fact (or some combination of these) are raised because evidence needs to be recorded only for such questions.
10. Such a conclusion is intuitively unattractive, and the question therefore is how to resolve the conundrum caused by the subsections (3) and (8) of section 10. The position under the present law can be contrasted with that which had obtained under the precedent legislation, the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 ("1997 Act"). Section 10 of the 1997 Act had simply required that a "substantial and bona fide dispute" be raised in the leave to defend application. This formulation readily covered all the three types of questions that could arise and was also, on the face of it, of broader scope than the corresponding requirements of the 2001 Ordinance. However, it surely cannot be the case that the 2001 Ordinance, by introducing the requirement of evidence B having to be recorded, intended to whittle down the scope of a leave to defend application to the extent of altogether eliminating 'pure' questions of law from consideration. Now, it must also be kept in mind that while considering a leave to defend application, the court is not as such deciding the questions raised thereby. That is a matter for the trial if leave is granted. Rather, the court only requires to be satisfied, that the threshold imposed by the applicable legislation has been successfully crossed by the defendant. Under the 1997 Act, a uniform threshold, that of a substantial and bona fide dispute, was imposed in relation to all three types of questions. Of course, the actual determination of the substantial and bona fide dispute was a matter for the trial.
11. In my view, the position under the 2001 Ordinance must be regarded as having been altered. The present law of course imposes its own threshold: that of (a) substantiality, and (b) evidence having to be recorded. If the leave to defend application crosses this threshold in relation to mixed questions of law and fact and questions of fact, then the court must grant leave to defend, without as such deciding the questions. In relation to these questions therefore, the position parallels that which had obtained under the 1997 Act. The situation as regards 'pure' questions of law however is now different. In my view, these questions have not been eliminated from consideration. Rather, by imposing the condition of evidence having to be recorded, which is inapt for, and cannot be met in relation to, such questions, the 2001 Ordinance requires that such questions be actually decided at the leave granting stage itself. In other words, the court is no longer limited to only considering whether such questions are substantial, and if so, granting leave to defend while deferring the actual decision thereon for the ,trial. Rather, the court ought to decide such questions, as it were, there and then. What the effect will be on the suit of such determination will of course depend on the nature of the question and how it is decided. The situation in each suit will have to be considered on its own terms. With the foregoing points in mind, I now turn to consider the various grounds taken by learned counsel for the contesting defendants.
12. The first point raised relates to the territorial jurisdiction of this Court. As noted above, learned counsel submitted that the relevant documents had been executed at Lahore, the defendants were all ordinarily resident and/or carried on business or worked for gain outside Karachi, and nothing had been shown in the plaint as would indicate that the cause of action had accrued in whole or in part at Karachi. Learned counsel relied on Bank of Credit and Commerce and others v.
Asrar Hassan and others 2007 SCM R 852 to contend that a question regarding territorial jurisdiction was a mixed question of law and fact, which required the recording of evidence. He relied on Askari Leasing Ltd. v. Judge Banking Court No,1, Multan 2008 CLD 708 (LHC; DB) and Highnoon Textile Ltd. v.
Saudi Pak Industries, etc. W.P. 24148 of 2009 decided on 11-2-2010 (LHC; SB; unreported) in support of his submission that even if there is a choice of forum clause in an agreement, that does not itself confer jurisdiction on the courts of the chosen foruni unless that jurisdiction otherwise vests in those courts. Learned counsel for the plaintiff on the other hand submitted that the title deeds had been deposited at Karachi with intent to create the mortgage in favour of the plaintiff, there was an express choice of forum clause in the relevant agreements whereby the courts of Karachi had been selected, and that in any case, the finances were payable at Karachi. The cause of action had therefore arisen at least in part here, and hence this Court had jurisdiction. Learned counsel submitted that the plaintiff in fact, had only one office, which was in Karachi, and hence all finances had necessarily to be repaid here. Learned counsel relied on orders dated 29-9-2011 and 5-5-2010 made by learned single Judges of this Court in Suit B-52 of 2009 and Suit B-53 of 2009 respectively.
Both these suits had been brought by the present plaintiff. Learned counsel referred in particular to the following passage from the latter Order:-- "It is clear that even a fraction of cause of action gives territorial jurisdiction to decide the case. In the present case, it is an admitted position that sanction letter was issued from Karachi, funds disbursed from Karachi and repayments were being made at Karachi. In the leave to defend application, the defendants have mentioned 70 entries whereby they have shown the amount paid to the plaintiff at Karachi against different dates of repayments which starts from 26-1-2004 to 26- 3-2006 which is another proof that payments were being made at Karachi and discontinuation/default in repayment gives much more than a fraction of cause of action to the plaintiff at Karachi.... It is clear that defendant has committed default at Karachi within the territorial jurisdiction of this Court."
' Leave to defend was refused.
13. There can be no cavil with the proposition that mere choice of parties cannot confer jurisdiction on the courts of the forum unless such jurisdiction otherwise vests in them. To hold otherwise would violate the principle that jurisdiction cannot be conferred by agreement of the parties. The mere fact therefore that the relevant agreements show that the parties have chosen Karachi as the forum is not, as such, conclusive. As regards repayments having been made at Karachi, in the two decisions relied upon by learned counsel for the plaintiff, it was either admitted or found as a fact that that was the position. In the present case, his point is controverted and there appears to be nothing in the record that would resolve the issue one way or the other. Along with the replication, the plaintiff has filed copies of a number of cheques, deposit slips and its own inter-office memos.
If anything, this material seems to suggest that all the cheques in question were issued outside Karachi and handed over to the representative of the plaintiff (it would seem, at Lahore or (perhaps) Multan), which then itself deposited them in its bank accounts in Karachi. Prima facie, this would seem to indicate that the payments were made by the defendants outside Karachi. If this therefore were the only material at hand, then it would seem that the contesting defendants have raised a substantial question of law and fact, which would require evidence to be recorded.
However, learned counsel for the plaintiff also relies on the fact, which is expressly recorded and is not denied, that the title deeds were deposited at Karachi with intent to create the mortgage, and it is this aspect which must be considered.
14. Section 16, C.P.C. Provides in material part as follows:-- "
16. Suits to be instituted where subject-matter situate.---Subject to the pecuniary or other limitations prescribed by any law, suits--
(c) for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property, shall be instituted in the Court within the local limits of whose jurisdiction the property is situated, or in the case of suits referred to in clause (c) at the place where the cause of action has wholly or partly arisen...."
The words emphasized were added in 1962. Now, in the present case, the defendants Nos.1, 2 and 5 have created mortgages on their immoveable properties by deposit of title deeds at Karachi and the plaintiff has expressly prayed for sale of the mortgaged properties; Thus, the present suit is one to which clause (c) of section 16 applies, and such a suit can be brought either where the immoveable properties are located or the place where the cause of action has arisen in whole or in part. In my view, the cause of action in respect of a mortgage arises, inter alia, where the mortgage is created, or where the money sought to be secured is advanced. Since a mortgage by deposit of title deeds is necessarily created where the title deeds are deposited, it follows that the cause of action accrued in part at Karachi. Thus, the suit against the defendants Nos.1, 2 and 5 has been properly brought in this Court.
15. What of the other contesting defendants, i,e,, defendants Nos.3, 4 and 6? It will be recalled that these defendants are guarantors (i,e,, sureties) for the finances provided to the defendant No,
1. The mortgage-debt is of course nothing other than the aforesaid finances. Now, Order XXXIV, Rule 1.
C.P.C. Provides that all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties in any suit relating to the mortgage. The intent behind this provision is clear: it is to avoid multiplicity of litigation by bringing all concerned persons within the ambit of a single suit. Section 91 of the Transfer of Property Act, 1882 lists the persons who may redeem the mortgaged property or sue for its redemption, and sureties for the payment of the mortgage-debt or any part thereof are expressly covered by this section. It is also settled that all of the persons listed in section 91 have an interest in the equity of redemption. Thus, in terms of Order XXXIV, the sureties of a mortgage-debt are persons who must (or at least can) be joined in a suit seeking sale of the mortgaged property. In the present case this would mean and include all the guarantors of the defendant No,1, including in particular the defendants Nos.3, 4 and 6. These persons have also rightly been joined as defendants in the present suit. ,
16. In my view therefore, in the present case it follows as a matter of law from the undisputed fact that the title deeds were deposited at Karachi that the present suit could have been instituted here against all the contesting defendants, and this is so notwithstanding that the question of whether repayments were to be made here or elsewhere may not be resolvable from the record as it stands at present. The question of territorial jurisdiction is, in the present. Case, a 'pure' question of law, which therefore can be decided at the leave granting stage. In view of the foregoing discussion, the question must be answered against the contesting defendants.
17. The next grounds taken by learned counsel for the contesting defendants relate to the statement of account with which the plaint must be supported. Section 9(2) of the 2001' Ordinance requires that in the case of a financial institution, the statement of account "shall be duly certified under the [1891 Act)". Learned counsel submitted that section 2(8) of the latter statute defined what was meant by a "certified copy" of an entry in the books of account, and it was.Only to a copy so defined that section 4 applied. The latter section allowed entries in the books of account to be proved by means of a certified copy. However, the definition of certified copy was only in relation to a "bank", which was itself defined in terms of section 2(2). Thus, the combined effect of these provisions was that it was only a statement of account filed by a bank which could be certified pursuant to the 1891 Act and to which the presumption made therein could apply. Since the plaintiff was admittedly not a bank, the statement of account filed by it was neither certified under the 1891 Act nor could any presumption attach thereto. In such circumstances, the defendants were entitled to leave to defend.
18. The foregoing ground taken by learned counsel is of course, a 'pure' question of law, since it turns entirely on a proper interpretation of the relevant provisions of the 2001 Ordinance and the 1891 Act. Though prima facie intriguing, on a closer examination the ground must, with respect, be regarded as misconceived. This is so . Because if learned counsel is correct, it necessarily means that the 2001 Ofdinance has, in section 9(2), imposed on financial institutions other than banks a mandatory obligation that is impossible for them to comply with. The reason why it is impossible is of course because (according to learned counsel) by definition it is banks alone which can comply with the obligation. In my view, this cannot be regarded as a correct interpretation of section 9(2).
A reading of a statutory provision which mandatorily obligates a person to do an act which is impossible for that person to perform must be regarded as absurd, and absurdity cannot readily be imputed to the law-maker. Looking at the matter from a slightly different perspective, the ground taken also means that in every case in which the plaintiff is a non-banking financial institution, leave would have to be granted since such a plaintiff would, by definition, be in default of the obligation imposed by section 9(2). In other words, the 2001 Ordinance must, on this reading, be regarded as having created two classes of financial institutions: banks and non-banking companies. Since it is only the former which can comply with the obligation under section 9(2), it is only where a bank is the plaintiff that a defendant would have to apply for leave to defend. In a suit where a non-bank is the plaintiff there will always, by definition, be a default, which would mean that in every such suit filed the defendant would be automatically entitled to leave to defend. In my view, there is no warrant to interpret and apply section 9(2) in this manner. The 2001 Ordinance treats all financial institutions at par and in the same manner. A suit filed by one type of financial institution (i,e,, a bank) cannot be placed on a footing that is (considerably) higher than an otherwise identicaj suit filed by another type of institution (i,e,, a non-bank). Indeed, on learned counsel's interpretation, a suit under the 2001 Ordinance filed by a non-bank would, in effect, be no different from an ordinary suit since the defendant would be guaranteed leave to defend. In my view, this result is clearly and obviously wholly contrary to the express provisions of the 2001 Ordinance. This ground must therefore be regarded as being without substance.
19. Before proceeding to consider the other grounds taken in respect of the statement of account, it will be pertinent to consider the intent behind making it mandatory for a financial institution (as plaintiff) to support the plaint with a statement that is certified under the 1891 Act. It is to be noted that although the 1997 Act did require that the plaint, be supported by a statement of account, there was no requirement that it be certified under the 1891 Act: see section 9(1) thereof. The laws prior thereto, being the Banking Companies (Recovery of Loans) Ordinance, 1979 ("1979 Ordinance") and the Banking Tribunals Ordinance, 1984 ("1984 Ordinance") did not require the filing of a statement of account.
20. The preamble to the 1891 Act expressly states that the intent is to amend the' law of evidence, and the change is brought about through section 4 of the Act. The effect of this section was considered by the Supreme Court in Muhammad Siddiq Muhammad Umar and another v.
Australasia Bank Ltd. PLD 1966 SC 684. This decision was relied upon in United Dairies Farms (Pvt.)
Ltd. v, United Bank Ltd. 2005 CLD 569 (LHC; DB), a judgment cited by learned counsel for the contesting defendants. The Supreme Court observed as follows with regard to section 4:-- "It will be observed that all that this section says is that the certified copy shall be prima facie evidence of the existence of such an entry in the books of the bank and shall be admitted as evidence of the matters, transactions and accounts therein recorded to the same extent as the original entry itself is now by law admissible, but no further or otherwise. It does not purport, therefore, to give the certified copy any greater efficacy than the original itself. It merely provides a simplified mode of proof of the original entry, provided the original entry itself is relevant to the enquiry or was admissible under the law prevailing in 1891. The Evidence Act, which was enacted in 1872, was a law applicable on the date of the enactment of the Bankers' Books Evidence Act, and it clearly governed the proof of the original entry. Ifs under that Act the original entry was not by itself sufficient to charge a person with liability the certification of that entry under the latter Act could not make it so. We must not also confuse between admissibility in evidence and sufficiency to charge with liability. It is with the latter that we are concerned here and this is not dealt with by the Bankers' Books Evidence Act." (pg.698; emphasis supplied)
' It is to be noted that it is sometimes stated that there is a "presumption" attached to the entries certified under the 1891 Act. It is respectfully suggested that this formulation can be misleading. As the Supreme Court has made clear, while the effect of a certified entry is as though the original had been produced before the court, the copy is admissible only to the same extent as the original.
However, within the parameters laid down by section 4, the original entry and a copy duly certified under the 1891 Act are exact equivalents.
21. The effect therefore of section 9(2) of the 2001 Ordinance- requiring that the plaint be supported by, a statement of account certified under the 1891 Act is as though the original entries of account have been produced by the financial institution. Obviously, a financial institution cannot make out a case other than one based on the entries in the defendant's account maintained by it Therefore, the obligation cast by section 9(2) means that the 2001 Ordinance requires, in effect, that the financial institution place its best possible case before the court right from inception. Thus, when filing his 'leave to defend application, the defendant has before him the case that he has to answer when placed at its highest footing.
22. It is also pertinent to note that while the 1891 Act is, strictly speaking, concerned with entries in books of account, section 9(2) requires a "statement of account" to be certified in terms of the said Act. Learned counsel for the defendants relied on C.M. Textile Mills (Pvt.) Ltd. v. Investment Corporation of Pakistan 2004 CLD 587 (LHC; DB), the United Dairies case (supra), Bankers Equity Ltd v. Bentonite Pakistan Ltd. 2003 CLD 931 (LHC; SB) (affirmed on appeal, at 2010 CLD 651 (LHC; DB)), Icepac Ltd. v. Pakistan Industrial Leasing Corp. Ltd. 2005 CLD 1186 (LHC; DB), Ravi Associate (Pvt.) Ltd. v. Industrial Bank of Pakistan 2005 CLD 393 (LHC; SB) and AECO International v. Allied. Bank Ltd.
(R.F.A. 24 of 2007 dated 8-3-2007, unreported LHC; DB) to show what was meant by, and required of,- a proper statement of accounts. I will shortly consider these decisions, but first must touch upon another important aspect of the matter, which arises from the decision of the Supreme Court in the Australasia Bank case (supra).
23. It will be seen from the aforesaid decision that it is not enough for the bank (or as would now be the case, the financial institution) to simply produce either the original books of account or copies certified under the 1891 Act for as would now be the case, a statement of account so certified). The Supreme Court referred to section 34 of the Evidence Act, 1872 (now Article 48 of the Qanun-e- Shahadat Order, 1984) and observed as follows:-- "We are unable, therefore, to agree that the mere production of a certified copy of the account was by itself sufficient to charge the defendants with liability. The copy produced was tantamount, however, to production of entries from the original books of account. Those entries could have been admissible in evidence only, for the purposes mentioned under the Evidence Act and to the extent therein provided. Section 34 of the Evidence Act provides that "Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability." It is clear from this section that corroboration is necessary of the entry to charge a person with liability, but as to what should be the nature or the extent of the corroboration no hard and fast rule can be laid down, for, that must depend on the circumstances surrounding each transaction and the reliability of the manner in which the account has been kept." (pg. 699; emphasis supplied)
' As is clear, the Supreme Court has categorically held that corroboration is necessary, but has also indicated that a definitive test ought not to be judicially formulated as to what would be the appropriate nature of the corroborative evidence required.
24. It will be seen that the matter in appeal before the Supreme Court was from the final judgment and decree of the trial Court (by way of further appeal from the Lahore 'High Court). The Supreme Court was considering the evidence actually led at the trial (and the additional evidence recorded before the Lahore High Court). The matter presently under consideration however, is the leave granting stage under the 2001 Ordinance, and the question is whether leave to defend the suit should be granted or not. One aspect of section 9(2), namely that the statement of account be certified under the 1891 Act, and the - effect of Such certification, has been considered above. In my view, section 9(2) has another aspect that is relevant for present purposes and this is in relation to .The corroboration of the certified statement of account, at least for the leave granting stage. As presently relevant, section 9(2) provides as follows:-- "The plaint shall be supported by a statement of account which in the case of a financial institution shall be duly certified under the Bankers' Books Evidence Act, 1891 (XVII of 1891), and all other relevant documents relating to the grant of finance." (emphasis supplied)
' Thus, the plaint must be supported both by a certified statement of account and all other relevant documents relating to the grant of the finance. It is respectfully suggested that this latter requirement, enacted for the first time in the 2001 Ordinance, is the express statutory rule that has been laid down as to the corroboration required of the certified statement of account, at least for the leave granting stage. In other words, the law-maker, recognizing that requiring the financial institution to produce its books of account (the result obtained by requiring a certified statement of account to be filed) is not sufficient, in and of itself, to charge the borrower, has further provided that the relevant documents relating to the grant of finance must also be produced. These documents serve to corroborate the claim made by means of the certified statement.
25. In my view therefore, the scheme of the 2001 Ordinance; as presently relevant, is as follows. (It may be recalled that the present context is of a suit where the financial institution is the plaintiff and the customer is the defendant.) The obligations imposed by section 9(2) make clear that while making his application for leave to defend, the defendant is to be confronted with the best possible case that the plaintiff can put forward. The foundation of such a case must be the statement of account, and section 9(2) ensures that the statement, by being certified under the 1891 Act, is placed at its highest possible footing, i,e,, is the equivalent of actually producing the original books of account. However, since the production of a certified statement of account is a necessary but not sufficient condition to charge the defendant with liability, section 9(2) further provides that the relevant documents relating to the grant of finance must also be produced (if only by way of copies). These documents serve to corroborate the claim made in the statement of account. It is emphasized that this corroboration is only at, and for the purposes of, the leave granting stage. If in fact leave is granted and the suit goes to trial, then the ultimate decision will have to be based on the evidence actually led by the parties. As is obvious, the relevant documents relating to the grant of finance would be important at any stage to establish the plaintiffs claim. It would seem that the law-maker has chosen such documents as being the best possible corroboration of the certified statement of account for the leave granting stage. If a question arises as to whether a document is, or is not, relevant for the grant of the finance (and therefore ought to have been filed with the plaint), the test is in my view one of materiality: would the document be material corroboration of the certified statement of account? If so, then it is obligatory for the financial institution to file it with the plaint.
26. Thus, the policy of the 2001 Ordinance appears to .Be that if a financial institution sues to recover any amount, then it must, right from inception, put forward the best possible case that it can make out up to and at that point and this is so especially for purposes of considering the application for leave to defend. This is a mandatory obligation cast on the financial institution. In other words, the defendant is entitled to have the questions raised by him in his leave to defend application tested against the plaintiffs case when placed at its highest footing. This is obviously an important and valuable right that inheres in the defendant.
27. One question that naturally arises from the foregoing analysis is what happens if the plaintiff fails to abide by the statutory obligations imposed in terms of section 9(2)? At least three possible situations (or some combination thereof) can arise: (a) the plaintiff does not file a proper statement of account; (b) the statement, though otherwise proper, is not duly certified in terms of the' 1891 Act; or (c) the relevant documents relating to the grant of finance are not filed. Is the plaintiff entitled to make up any such deficiency by means of the replication that he can file in terms of section 10(7)? Learned counsel for the contesting defendants, who took at least some of these objections, would answer this question in the negative. His submission was that in any such situation, the defendant would be entitled straightaway to leave to defend. The plaintiff cannot be permitted to improve his case by way of the replication, and learned counsel referred to certain decisions in this regard, to which I will presently refer. But first, the objections taken by learned counsel for the defendants must be considered.
28. The first objection taken by learned counsel was that the statement of account, as filed along with the plaint, was not a proper statement within the meaning of section 9(2). As noted above, he referred to certain decisions in this regard, which are noted in, Para 22 above. When these decisions are considered, being in particular the C.M. Textile Mills and United Dairies cases, it appears that two requirements are essential for a proper statement of accounts. Firstly, the statement must show the debit and credit entries of and in the account, and the balance being claimed by the plaintiff. In C.M. Textile Mills, the plaintiff merely produced what the High Court described as a certificate of balances (reproduced at pg. 596 of the report), without any debit and credit entries at all. It was held that this could not be a proper statement of account at all.
Secondly, the debit and credit entries should not be jumbled up or presented in a haphazard manner. They must be in a proper format, which should be easily comprehensible. As observed in United Dairies: "9. From the perusal of the record it is noted regretfully that the transfer entries seen in the statements of accounts neither show the accounts wherefrom these originated nor the accounts to which the transfers were directed. Furthermore, as the statements of account lacked headings and proper column spacing, therefore these transfer entries became indistinguishable between credits and debits. In a recovery suit the statement of account is a basic document that is filed by a financial institution in discharge of its statutory duty under section 9(2) of the [2001 Ordinance].
The filing of such a document is not a formality alone but the performance of a mandatory obligation to support the claim made in the plaint as held by a learned Division Bench of this ' Court in Messrs C.M. Textile Mills (Pvt.) Limited v. I.C.P. 2004 CLD 587. Clearly this document should be laid out in a format that is comprehensible to any reasonable person reading it in the ordinary course. It must be set out in a mode that clearly describes the nature of the account entries and arranges them in a manner that distinguishes the various categories of amounts, for example credits, debits or amounts outstanding.... The presentation of a fully integrated picture of the transactional history in a customer's account is meant to enable a Banking Court to transparently determine the correct financial liability of a customer who, as in the present case, had admitted having availed financial facilities but denied their aggregation as presented by the respondent- Bank. (pp. 576-77)
' Whew the statement of account filed along with the plaint in the present case is examined in light of the foregoing observations, I am of the view that it cannot be said that it is not a statement within the meaning of section 9(2). On the face of it, the statement lists the debit and credit entries in respect of both of the finances provided to the defendant No,
1. Learned counsel for the plaintiff explained that since the financing was by way of term finances, there was only one debit entry in each case namely, when the finance was availed. Thereafter, there were credit entries which showed the (partial) repayments made from time to time by the defendant No,
1. Finally, there was the balance amount being claimed by the plaintiff. The statement also showed a claim by way of liquidated damages, but as already noted above, learned counsel for the plaintiff submitted that, the plaintiff is ready, to forego this claim. In any case, the latter claim is set out separately from the claim in terms of the finances availed, and can be easily excised from the statement.
29. Learned counsel for the defendants made much of the point that the plaintiff filed another statement of account along with the replication. Learned counsel contended that this in itself showed that the original statement was materially defective, and the plaintiff was attempting to improve its case. Since the defendants did not have an opportunity to rebut what was stated in the replication, they were entitled leave to defend. I have compared the two statements of account.
The only difference that is discernable is between the amounts being claimed by way of liquidated damages. Since the plaintiff is in any case ready to forego this claim I am of the view that the statement filed along with the replication is not of the nature, nor does it have the effect, as claimed by learned counsel for the defendants. In my view therefore, a proper statement of account, as contemplated by law, was filed by the plaintiff along with the plaint.
30. The second objection taken by learned counsel for the defendants is as regards the certification of the statement of account in terms of the 1891 Act. Learned counsel contended that the person who has certified the statement was not an officer as contemplated by section 2(8) of the 1891 Act and that he was not even, at the time of the filing of the suit, in the employ of the plaintiff. Section 2(8) requires that the certificate be "dated and subscribed by the principal accountant or manager of the bank with his name and official title". For purposes of section 9(2) of the 2001 Ordinance, the word "bank" must of course be read as meaning "financial institution".
Equally, the term "principal accountant" can, in light of the principle of interpretation that a statute should be regarded as "always speaking" and its interpretation adapted to meet ever-changing conditions, be regarded as including a modern day equivalent, such as a chief financial officer.
Nonetheless, in the end the certificate must be subscribed by one or the other of the officers identified section 2(8). Now the original statement of account, as also the statement appended to the replication, have both budging from the signatures) been certified by the same person. While the name and official title of the individual have not been stated in either case, the material on record indicates that the signatory is Mr. Tasnim ul Haq Farooqi. His authority is stated to derive from a resolution of the Board of Directors of the plaintiff (appended to the replication) passed at a meeting held on 16-5-1994. The authority conferred by the Board prima facie relates to matters such as the institution of suits, verification of plaints engaging counsel, etc. The authority relied upon would seem to address another objection taken by learned counsel for the defendants, namely, that the plaint has been signed and verified by an unauthorized person. This objection appears to be without force in light of the authority relied upon. However, it does not appear to address at all the question presently under consideration, i,e,, whether the statement of account has been duly certified pursuant to the 1891 Act. In this context, it may also be noted that in terms of the relevant laws in force in 1994, being the 1979 and 1984 Ordinances, there was no requirement at all to file a statement of account along with the plaint. Thus, the authority conferred upon Mr. Farooqi could not relate to an authorization to certify the statement of account, for the very simple reason that it did not need to. I may note in passing that the language of section 9(1) of the 1997 Act could, on one possible reading, mean that both the plaint and the statement of account could be verified by, inter alia, any officer authorized by the Board of Directors. However, section 9 of the 2001 Ordinance is not open to any such possibility. The plaint and its verification are dealt with in subsection (1), and the statement of account (along with its certification under the 1891 Act) is dealt with in subsection (2). It is significant that the plaintiff also appears to have maintained a discreet silence as to the employment status and/or position held by Mr. Farooqi at the time of the filing of the suit or the replication. It would therefore seem prima facie that Mr. Farooqi was not an officer of either designation as contemplated by section 2(8) of the 1891 Act and could not therefore certify the statement of account in terms as required thereunder.
31. As noted above, learned counsel relied on certain decisions in respect of whether the plaintiff can in his replication remove any deficiencies in fulfilling his statutory obligation to put forward his best possible case, i,e,, to meet any of the situations noted in para 27 above. He referred to Soneri Bank Ltd. v. Classic Denim Mills (Pvt.) Ltd. 2011 CLD 408 (SHC; SB), Saudi Pak Commercial Bank Ltd. v.
Nazimuddin and another 2009 CLD 1195 (SHC; SB), Muzamil Brothers and another v. Saudi Pak Commercial Bank Ltd. 2006 CLD 1546 (LHC; DB) and Nusrat Textile Mills Ltd. v. United Bank Ltd. 2005 CLD 1421 (LHC; DB). In the Classic Denim Mills case, a learned single Judge of this Court held as follows:-- "In my view, it is clear beyond any shadow of doubt that while instituting the plaint in the Banking Court, it is duty of the plaintiff to file complete statement of account. The purpose of this obligation on the plaintiff is to give fair opportunity to the defendant to come up with cogent justification and ground for leave to defend and if the plaintiff is left open and allowed to file statement of account in piecemeal through ' replication or by way of separate statement then no opportunity could be availed by the defendants to counter or reply subsequent statement of account as after filing, leave to defend application, law does not permit further or fresh leave to defend application as it is clear from section 10 of the Ordinance, 2001, that where an application for leave to defend is accepted, the Banking Court shall treat the application as written statement.
' Since the complete statement of account was filed with the replication and further additional documents were filed through statement, no opportunity was given to the defendants to rebut the statement of account and to answer the additional documents. After 18th Amendment, right of a fair trial has become a fundamental right under Article 10-A of the Constitution of the Islamic Republic of Pakistan, 1973 which clearly provides that for the determination of civil rights and obligations or in any criminal charge, a person shall be entitled to a fair trial and due process." (pp. 427-8)
' The Lahore High Court decisions are to the same effect.
32. I have already held that the statement of account filed along with the plaint was a proper statement as contemplated by law. Thus, in my view, the first situation noted in Tara 27 above does not arise. However, the second situation does appear to arise in the present case. There is nothing in the record (not even in the replication) to establish that the statement of account was certified by any one of the two officers contemplated by section 2(8) of the 1891 Act, or that Mr. Farooqi held any of these offices at the material time. Indeed, all indications are to the contrary. The statement of account therefore appears to be non-compliant with the requirements of section 9(2) in -regard to the certification. Prima facie, the plaintiff has failed to comply with its mandatory obligation to put forward its best possible case at the leave granting stage, thus depriving the contesting defendants of the valuable right that inheres in them in this regard. In my view therefore, the contesting defendants are entitled to leave to defend the suit, and since the breach is of a material provision that imposes a mandatory obligation on the plaintiff, the defendants are entitled to unconditional leave to defend. However, it is clarified that the 'pure' questions of law noted and decided herein above stand concluded and cannot be reopened or re-agitated at any subsequent stage of the suit.
33. Accordingly, this application is allowed. The contesting defendants are granted unconditional leave to defend the suit and their application is to be regarded as the written statement filed by them. In the circumstances of the present case, in my view it is more appropriate if learned counsel for the parties first purpose the issues to be framed in the matter. Let this suit therefore now be fixed in framing of issues.