1. ORDER SALMAN HAMID, J. - This Order will dispose of CMA Nos. 10511/09, 10512/09, 10513/09 and 10514/09 being leave to defend applications, filed by defendants namely Pak Leather Crafts Limited and its three directors/guarantors. Ms. Muhammad Saleem Ahmed, Muhammad Saqib Ahmed and Bilal Ahmed.
2. From paragraph 1 to paragraph 6 of the plaint, it was shown by the plaintiff that the present suit for recovery of Rs. 135,535,347/- was filed against the defendants jointly and severally under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 (Ordinance XLVI of 2001) on the grounds that the plaintiff being a banking company extended finance facilities upto a limit of Rs. 100,000,000/- to the defendant No. 1 in terms of agreement for financing on mark-up basis dated 17.04.2006 for the purpose of export refinancing SBP scheme. The defendants, in order to avail the above finance facility limit executed various security documents in favour of the plaintiff, which among others included a demand promissory note for Rs. 120,000,000/-, letter of continuity dated 17.04.2006, letter of hypothecation dated 03.05.2006, against which charge was registered with SECP and certificate of registration of charge was issued on 12.05.2006 which charge was first pari passu hypothecation charge over stocks, book debts on defendant No. 1 for which no objection certificates were also obtained by the plaintiff from the other lenders of the defendants. The defendant No. 1 also created a charge in favour of the plaintiff in terms of memorandum of deposit of title deeds dated 03.05.2006 to the extent of Rs. 100,000,000/- which was registered with SECP and certificate of registration of mortgage was also issued by it on 12.05.2006.
3. In paragraph 7 of the plaint it was stated that since the defendant No. 1 was indebted to Bank Alfalah, main branch, Karachi, to the approximate extent of Rs. 96,0, 000/-, requested the plaintiff to clear such liability. The plaintiff, in turn, upon an understanding with the defendant No, 1 swapped their (defendants') liability against simultaneous release of immovable property bearing Plot No. 18, Sector 7-A, Korangi Industrial Area, Karachi in their (plaintiffs) favour towards security. This swa pping/payment having been made by the plaintiff to Bank Alfalah oh behalf of defendant No. 1, their FAPEII/FAPC account, maintained with the plaintiff was debited. At the time of swapping, NOC in favour of plaintiff was also issued by Bank Alfalah Limited regarding the satisfaction of the charge against defendant No. 1. Thereafter a fresh joint first pari passu supplemental hypothecation agreement was executed on 13.10.2006. Document like subordination agreement was also executed by the defendants in favour of the plaintiff whereby direct loan of Rs. 31,115,000/- was advanced by defendant Nos. 2 & 3 to defendant No. 1, which was to remain subordinate to the financial facilities, extended by plaintiff to the defendant No. 1.
4. Thereafter by way of paragraph 10 of the plaint, it was stated that in April 2007 an agreement for finance for renewal of facility upto Rs. 100,000,000 dated 26.04.2007 was executed between the plaintiff and defendant No. 1. Other security documents like demand promissory note and letter of continuity were also executed and again in or about April 2008 the defendant No. 1 executed another agreement for financing on mark-up basis for facilities of Rs.1,0, 000,000/- at which time they again executed a demand promissory note of Rs. 120,000,000/- and a letter of continuity both dated 30.04.2008.
5. As per averments in the plaint it was further stated that in addition to the above facilities, the defendants were also liable to pay to the plaintiff in respect of outstanding irrevocable letters of credits/facilities, availed by them under such irrevocable letters of credit dated 13.10.2008, 16.10.2008, 22.10.2008, 24.10.2008, ' 24.10.2008, 26.12.2008, 26.12.2008 and 26.10.2008.
6. It was also urged in the plaint that the defendants Nos. 2 to 4 to secure above facilities executed personal guarantees in favour of the plaintiff.
7. Finally it was stated in the plaint that despite availing above facilities, the defendants failed to repay the same and started defaulting.. Therefore, in the first instant, the plaintiff made efforts to resolve the issue. However, this did not bear fruits. The letters which were written subsequently for repayment arrangements by the plaintiff were also not received with satisfactory and reasonable offers. Left with no choice, the plaintiff finally sent legal notice to the defendants on 27.08.2009 for payment of outstanding dues. This notice was responded on 29-8.2009 whereby entire liability as mentioned in the notice was denied by the defendants. Therefore present suit was filed for recovery of amount of Rs 135,535,347, the break up whereof in the plaint was shown as under:- "20 (A) ERF/FAPE-H
(i) Principal amount outstanding against ERF/FAPE-II Rs. 100,000,000/-
(ii) Mark-up outstanding for the agreed period i.e. 1-10-2008 to 10-3-2009 1st quarter of 2009 including preceding year as per SBP Rate Rs. 3,308,219/-
(iii) Mark-up from 9-4-2009 till 31- 8-2009 @ 12.68%. Rs. 5,099,365/- (B> Various L/C PAD over- dues (i) Principal outstanding Rs. 24,992,250/-
(ii) Mark-up @ 13.67% from various Lodgment dates to 31.8.2009 Rs. 1,940,358/-
(C) Pending LC advising charges Rs. 195,155/- Total of (A) plus (B) plus (C)
8. 0 Rs. 135,535,347/- This break up of account was supported by statement of account dated 31.08.2009 filed as Annexure T/1 to T/4 to the plaint.
9. Rebutting the above claim of the plaintiff, the defendants in terms of above CMAs in the first instance under the head of preliminary statement stated that the defendant No. 1 commenced banking with the plaintiff in or about 1973-1974 when it at plaintiffs Nursery Branch opened an account No. 2731 which account was dosed in the year 1996-97 and at such time all the finance facilities those were availed of by the defendant No. 1 had been fully * repaid. Again in the year 1988-89 the defendant No. I opened an account with the plaintiff Korangi branch When account No. 461 was assigned which account was closed in the year 2001. No finance facility was ever availed by the defendant No. 1 during the period the account No. 461 was in operation. Finally the defendant No. 1 opened account No. 010-1588-8 at the plaintiffs same Korangi branch which account was being maintained by the defendant No. 1. The plaintiff vide its letter dated 11th November, 2009 confirmed to the defendant No. 1 in response to their letter dated November 10, 2009 that this was only account which the defendant No. 1 was maintaining with the plaintiff. The scope and intent of this background of account was argued by the counsel for the defendants as would be seen in the later part of this Order.
10. By way of substantial questions of law and fact which according to the defendant came from the plaint and documents, annexed therewith were that the suit was improperly/un-authorizedly instituted and therefore it was liable to be rejected in terms of the provisions of Order VII, Rule 11, CPC and/or the suit was liable to be dismissed. According to the defendants, no cause of action ever accrued to the plaintiff against them as attempted to be disclosed in the plaint and that no specific date of such cause of action was disclosed, which according to them was fatal. There was nothing to be recovered by the plaint that no defendants, more particularly because of the fact that the agreements for financing on mark-up basis dated 17.04.2.006, 26.04.2007, 30.04.2008, annexed to the plaint as Annexures A, H & L had no nexus and or did not confirm with the facility which was the subject-matter of the present suit and that such agreements were absolutely alien to the finance amount sought to be recovered. It was further urged in the leave to defend applications that the amount of Rs. 96 million that was swapped was fully repaid by the defendants to the plaintiff and that even if for the sake of arguments it was admitted that the same was due and payable, became time-barred and could not be claimed now by way of present proceedings. It was further urged in the leave to defend applications that the statement of account, filed with the plaint as Annexure T/1 to T/4 were in violation of requirements of law and therefore, the same do not establish the plaintiffs entitlement to the suit and therefore, the plaintiff failed to comply with the provision of Section 9(3) of the Ordinance XLVI, 2001 and were affected by such non- compliance. According to the defendants and in compliance of requirement of sub- section (4) of Section 10 of Ordinance XLVI of 2001 it was stated that the claim of suit amount was based on three agreements for financing on mark-up basis (Annexures A.H & L) against which no amount whatsoever was ever disbursed and/or it was not brought forth by way of present proceedings and as per plaintiffs own showings the amount of Rs. 96 million having been fully repaid and that such amount was not part of any of the three agreements, compliance of referred Section was not possible or called for. Similarly other part of the finance facility as contained in the present proceedings, which was based on eight letters of credit also having been paid/adjusted and that such letters of credit are full of discrepancies inasmuch as that the dates do not conform and also that the beneficiaries thereof were persons/entities other than the defendants, the plaintiffs are not entitled to recover any amount there under from the defendants. In this respect annexures 0-1 to 0-8 were opposed, denied and refuted in the terms mentioned above and therefore it was argued that nothing was due and payable against such letters of credit.
11. Resultantly fulfilment "of requirements of sub-section (4) of Section 10 of the Ordinance XLVI of 2001 were not attracted. Letter dated 12.3,2009 (annexure 0/9 to the plaint) was denied by the defendants.
12. In the light of the above circumstances the defendants agitated that they were not the customers of the plaintiff against whom proceedings under Section 9 of the Ordinance XLVI of 2001 were instituted when it comes to the finance facility envisaged in the plaint which according to them were fully paid off. Various documents annexed to the plaint were referred to in support of such a claim.
13. However the defendants did not dispute execution of .Various securities documents in favour of the plaintiff, be they were the three finance agreements, demand promissory notes, memorandum of deposit of title deeds or personal guarantees; but it was denied that the same could be used for the purposes of recovery of finance amount which was the subject matter of these proceedings or that the plaintiff were entitled to the benefit thereof for the purposes of recovery of suit amount.
14. In the back-drop of the above-narration, counsel for the defendants thus broadly argued on four points. First was that the suit was not maintainable because it was filed/instituted by unauthorized persons; secondly the documents, particularly the three finance agreements against which the liability that was attributed with the defendants nowhere shows that it was the same as- mentioned against annexures F-1 to F-8 or relate to such three financing agreements (Annexures A, H & L). In the perspective of the above two arguments, the third argument was that no cause of action was ever accrued to the plaintiff to the present proceedings against the defendants for recovery of the alleged amount and that such cause of action was also not disclosed in the plaint and fourthly that even if it was presumed that the amount was due and payable, the same was barred under the statute of limitation. Consequently plaintiff failed to present, "open and shut case" and therefore, the defendants at the very least were entitled to the grant of leave to defend the suit, if the plaint was not liable to be rejected or the suit was to be dismissed.
15. Refuting the stand as taken by the defendants in their leave to defend 'applications, the plaintiff filed replication alongwith various documents thereto whereby the defence of the defendants was disputed rather specifically and vehemently denied. Not only this, in order to reinforce their case anchor to combat the* resistance shown by the defendants, the plaintiff filed various documents with their replication as Annexure A, Annexure B, Annexures C-*1 to C- 22, Annexures D-1 to D-11, Annexures E-1 to E-15, Annexures F-1 to F-23, Annexures G-1 to G-12, Annexures H-1 to 11-14, Annexures 1-1 to 1-14, Annexures ,J-1 to J-21 Annexures K-1 to K-12|ind Annexures L-1 to L-28. It may be mentioned here that in the manner and fashion the replication was filed by the plaintiff was seriously objected to by the defendants inasmuch as according to them it was against the norms of practice and/or in violation of the relevant provisions of Ordinance XLVI of 2001. It was argued on behalf of the defendants that they were left handicapped to rebut all the documents attached with the replication as according to them there was no provision available in the scheme of Ordinance XLVI of 2001 to meet such a situation. According to the defendants this too was a good ground for the grant of their leave applications, enable them at the trial to counter the additional documents filed with the replication.
16. When the arguments commenced on leave to defend application and option was given to the defendants by this Court exercising power under Section 7 of the Ordinance XLVI 2001 and after consent of the counsel for plaintiff to file rebuttal to the replication which was not accepted by the counsel for defendants as according to him since there was no provision in law/Ordinance XLVI of 2001 in such respect and therefore he cannot file such rebuttal. Learned counsel for the defendants to fortify above stance relied upon the case of At-Madina Electric Store, Daharki v. H.B.L. Reported a$ 2006 CLD 734. This case was not relevant as in that case additional documents were filed by the bank after the case was heard and reserved for order and without knowledge of the borrower and therefore in appeal it was held by this Court that since the borrower was not given an opportunity to rebut the documents, the case was remanded for trial of fresh.. In the present case however, despite according opportunity before the commencement of arguments, the defendants declined to avail the same cannot say that they cannot file rebuttal now as the scheme of law is not such.
17. As far as maintainability/filing of the suit was .Concerned, the counsel for the defendant drew my attention to Annexures U/1 and U/2 to the plaint i.e. The two powers of attorney, filed in the present case by M/s. Ahmed Arsalan Nayyar and Syed Farrukh Hasnain on behalf of the plaintiff. It was urged by the counsel for the defendants that these two officers of the plaintiff failed to show that M/s. Ayaz Hashim Shamsi and Aamir M. Karachiwala who had purportedly granted sub power-of- attorney to the referred two officers under Clause 14 of the Officers Power-of- attorney dated 23.04.2008 had the power to do so. It was further urged that no resolution or memorandum and articles of association of the plaintiff, highlighting particular article with regard to the giving of power was produced to show that the two officers were competent to institute present proceedings. In support of this argument, the case of Central Bank ot India, Lahore v. Talibuddin Abdur Rauf and another reported in 1992 SCMR 846 was relied upon. In answer to this argument of maintainability/institution of the suit for want of proper power-of-attorney, the learned counsel appearing for the plaintiff argued that the objection as raised by the counsel for the defendant was not sustainable and at best the authorization could be challenged only by its author and/or the principal. In support of such an argument the counsel for the plaintiff relied upon the provisions of Section 8 of the Notaries Ordinance, 1961 (XIX of 1961) particularly Section 8 thereof which deals with the functions of Notaries. Relying upon such provisions of law it was mentioned that two sub power-of-attorneys having been notarized in presence of the principal, fulfills the requirement of the referred-Section of the Ordinance XIX of 1961 and therefore, objection raised by the counsel for the defendant concerning the authorization of the two officers carried no force and that if any resolution was .Passed or the articles of association empowered the officer to execute sub power- of-attorney could always be looked into subsequently. In support of his argument, the learned counsel relied upon the case of Khayani Films & another v. Bank of Bahawalpur reported in 1982 CLC 1275 wherein it was held among others that "the person did or did not have authority can effectively be challenged only by the principal. If inspite of the objection taken the principal continues to recognize the authority of the agent to institute the suit.......... This would amount to a ratification and the suit would stilt be a validly instituted suit." It was further held in the cited case that *if the plea of the kind as taken in this case is raised it may be triad alongwith the whole suit."
18. The other case that was relied upon to deter the argument of the counsel of the defendants was a case of Islamic Republic of Pakistan v. Sabah Shipyard (Pakistan) Limited and another reported in 2009 CLQ 999 wherein it was held that "pursuing the matter by the government itself amounts to ratifying the act of filing of petition by Managing Director PP/fi" meaning thereby that if the principal continues to act through agent on the basis of power-of- attorney despite objection being raised by the other party, is deemed to have been ratified by the principal. In the present proceedings, in my opinion deposit objection, replication having been fried by the same attorney the previous act was ratified whose very Sub power was challenged by the counsel for the defendants. The upshot of the discussion would1 therefore, be that at best, die counsel for the defendant can thrash out the authenticity of the sub power- of-attorney at the time of trial. Therefore, a case for leave has been made out by the defendants on this ground. One out of the two reported cases, cited by the learned counsel for the plaintiff and a case cited by the defendants would show that in such cases only at trial authenticity Of the power was examined.
19. Coming to the second argument of the learned counsel for the defendants that the three financing agreements (Annexures A, H & L), on the basis of which the suit was primarily filed do not constitute any liability and/or the finance amount that was sought to be recovered through the present proceedings was not the subject-matter of such three financing agreements and that the amount that was borrowed by the defendants and mentioned in paragraph 7 of the plaint and the amounts claimed against eight letters of credits had been fully paid off by them, the counsel for the defendants took me through the three financing agreements, mentioned above and stated that by virtue of various clauses thereof it would become abundantly clear that all the three agreements were in respect of certain assets which were to be provided by the plaintiff for the business of the defendant and that no such purchase of assets ever took place or even that was not the case of the plaintiffs in these proceedings. Therefore, such three agreements have no nexus to the financed amount, claimed under the present proceedings. It was further argued that at best Annexures F-1 to F-8 could form and/or taken as agreements in respect of the amounts .Of loan mentioned in the plaint and not the agreements, Annexures A, H & L in any manner whatsoever. It was further stated by the counsel for the defendant that the finance-amount which was availed under Annexures F-1 to F-8 and under the eight letters of credit (Annexures 0-1 to 0-8) according to plaintiffs own showing had been repaid/satisfied and that such letters of credits have no concern with the defendants as the beneficiaries thereof were persons other than the defendants and that the statement of account filed by the plaintiff show nil balance. My attention was drawn to Annexure T/1 to T/4 and particularly to pages 249, 251, 253, 255, 257, 259, 261, 263, 266, 267-275 and 277-293 wherein the dosing balance was shown nil. Thus on such basis it was claimed by the counsel for the defendants that nothing was due and payable by the defendants to the plaintiff and therefore, the suit was liable to be dismissed as neither there was any outstanding finance to repay nor the obligation to repay existed. Case of H.B.L. v. Al-Jalal Textile Mills Ltd. Reported as 2003 CLD 1007 was relied upon wherein the term "objection " was elaborated in the light of the meaning given to it as per Section 2(d)(e) of Ordinance XLVI of 2001 by. Observing that the word obligation would mean only an obligation relating to finance and nothing more. Since it was the case of the defendants that no "finance" was due and payable by them in these proceedings no "cause" for such enforcement of an obligation was available to the plaintiff against the defendants. In response to this argument, the counsel for the plaintiff slated that the three agreements were signed by the * defendants in lieu of the facilities availed by them and that they have also not disputed the execution thereof and therefore, they are under obligation to repay the outstanding .
20. Amount, accrued thereunder. It was further argued by the counsel for the plaintiff that since the execution of the three agreements were not disputed and there were no agreements other than these under which the liability to, pay by the defendants was still subsisting, decree against them must follow.
21. Having considered the two divergent arguments, advanced by the counsel for the plaintiff and the defendants respectively, tentatively I am of the view that since the statement of account that was filed by the plaintiff shows at various places nil balance against the amounts of finance, claimed by way of these proceedings and that prima facie there seems to be no connection between the amount of finance which was the subject-matter of the present suit and the three agreements, defendants have made out a case to be taken at trial to find out whether the finance amount claimed by the plaintiff had any nexus with the three finance agreements and/or if the claim of the defendants as out and discussed hereinabove has any force, particularly in the light of the fact that after filing the present suit on 28.09.2009, letter dated 10.11.2009 (Annex D-1/1) was written to the plaintiff whereby a request was made to confirm if the defendants were maintaining only one account No. 010- 1588-8 or any other account. In answer the plaintiff, in terms of letter dated 11.112009 (Annex D/1/2) confirmed that this was the only account being maintained by them and no other account against which account balance was shown as nit: All this needs to be thrashed out for which leave was necessary.
22. 'The third argument that was raised by the counsel for the defendant was that since there was nothing due and payable by the defendant to the plaintiff under the agreements, no suit on such basis could be filed by treating it to be, "a cause". It was further urged by the counsel for the defendants that even paragraph 22 of the plaint which spoke about cause of action was silent as to the date when it actually accrued. The answer by the counsel for the plaintiff was simply that the date of cause of action was available in' paragraphs 18 and 19 of the plaint where it was mentioned that the defendants started defaulting and thereafter on 25. CX2.2009 the plaintiff wrote to.
23. Defendant No. 1 seeking resolution with regard to the repayment of the outstanding liability and that in the meanwhile on 12.03.2009 another letter was written, seeking settlement of over dues but to no avail. I am satisfied that cause of action and its date is mentioned in the plaint I would be worth mentioning that in terms of the provisions of Order VII, CPC cause of action can be mentioned at any place in the plaint and/or it can be deduced from anywhere in the plaint No particular form and/or place is prescribed under the law for the cause of action to be stated in a particular manner in the plaint. All that is required to be seen is the date when it actually accrued which can even be gathered from the documents annexed with the plaint. Clause 'e' of Order VII, Rule 1, CPC provides that *the facts constituting the cause of action and when it arose" is to be stated in the plaint which in the present case was elaborately mentioned. Thus requirement of law had been fulfilled and therefore plaint in the present suit cannot be rejected for want of cause of action.
24. Fourth argument, i.e. Recovery of the finance amount was barred In limitation in terms of Article 59 of the Limitation Act is without any substance inasmuch as that under Article 132 of the Limitation Act 12 years period for a suits for foreclosure is provided from the date of execution of memorandum of deposit of title deeds. In the present case such memorandum was executed on or about 31.5.2006. Therefore the present suit was very much within the period of limitation.
25. Reliance was placed on U.B.L v. Iftikhar & Co. Reported as PLD 1990 Lahore 111, wherein it was held that the suit being based on mortgage of immovable property will : be governed by Article 132 of the Schedule to the Limitation Act which prescribes a period of 12 years for the institution of the suit to be computed from the date when the money sued for becomes due, which period has not as yet run out and in the case of Muslim Commercial Bank Limited v. Messrs Malik & Company reported as 2002 CLD 606 it was held that a mortgage had been duly created by the respondent in favour of the appellant Bank by deposit of title deeds (although not registered) - it follows that the period of limitation for filing of the appellant's suit was 12 years from 09.08.1983 and not three years as held by the learned Special Judge Banking Tribunal.
26. I therefore, hold that the present suit was within the period of limitation under Article 132 of the Limitation Act notwithstanding the period of limitation reckoned by the defendants from 24th of July, 2006, the date of Annexure F- 3 to the plaint.
27. It was on the strength, of the above arguments that the counsel for the defendant throughout agitated that the present case was not *open and shut case" and therefore at the very least needs to be probed into after the leave of this Court. Reasons having been given hereinabove, ait the leave .Applications are granted unconditionally inasmuch as that in my opinion the amount sought to be recovered by the plaintiff from the defendant is covered by the immovable property mortgaged by defendant No. 1 which was in addition to the guarantees and other security documents executed by the rest of the defendants in favour the plaintiff, execution whereof were also not disputed. However the only reservation that was expressed was that the same cannot be sued for the purposes of satisfaction of the finance amount, which was the subject-matter of the present proceedings. It is yet to be explored by way of evidence if any amount was due and payable by the defendants to the plaintiff under the three agreements for which leave to all the defendants has been granted.
28. List the case for issues.