' MUHAMMAD KHALID MEHMOOD KHAN, J.---The plaintiff, a banking Company in terms of section 2(a) of Financial Institutions (Recovery of Finances) Ordinance 2001, filed a suit for recovery of Rs,126,971,551.53 against defendants through its authorized attorneys, claiming that defendant No,1 is a Public Limited Company incorporated under the Companies Ordinance 1984, the defendants 2 to 15 are its members/directors/shareholders, guarantors and mortgagors.
2. On the request of defendant No,1 and guarantee of defendants Nos.2 to 15, the plaintiff in the year 2002 allowed following financial facilities to defendant No,1 as under; NICF Rs.25.00 Million L/C Rs.10.00 Million L/G Rs.1.700 Million
3. In consideration of said financial facilities availed or to be availed of the defendants executed different charge documents detailed in para 6 of the plaint, in the year 2003, the plaintiff enhanced the above said facilities as under; NICF Rs.32.500 Million NIDF Rs.11.00 Million L/C Import/Sight/DA. Rs.17.50 Million Post shipment, Negotiation Bank Risk cleanRs.100.00 Million Documents Rs. 20.00 Milllion
4. The plaintiff in consideration thereof executed different charge documents detailed in para 10 of the plaint. The plaintiff continued to avail the facilities without any let or hindrance and objection, continue to execute different charge documents detailed in paras 12, 14, 16 and 18 of the plaint. The defendants also mortgaged their immovable property for securing the facilities availed or to be availed of, the detail of which is given in para 23 of plaint in addition to registration of mortgage charge in favour of plaintiff with the SECP. The defendants Nos.2 to 15 also executed agreement of personal guarantee, guaranteeing the repayment of finance availed of by defendant No,1.
5. In the year 2009, the plaintiffs repayment of finance was not in accordance with the agreement between the parties, the defendant No,1 requested to plaintiff for renewal and restructuring the outstanding finance and on the defendant No, l's request, the plaintiff renewed and restructured the existing finance detailed in para 19 of the plaint on 22-6-2009. The defendants Nos.2 to 15 also executed charge documents for securing the restructured liability including the agreement of personal guarantee. The defendants have also failed to discharge their obligation under the restructured agreement and as per statement of account, the defendants are liable to pay a sum of Rs, 126,971,551.53 as detailed below; NICF (Hypo) Rs. 22,500,000 NIDF II Rs. 35,622,772 NIDF I Rs. 36,093,838 NIDF II Rs. 18,500,000
6. The defendants out of the restructured finance only paid Rs,13,000,000 in NIDF-I facility and following amounts are due and recoverable from the defendants, along with costs of fund till realization NICF (Hypo) Rs. 32,500,000 NIDF II Rs. 35,622,772 NIDF I Rs. 23,096,838 NIDF III Rs. 18,500,000 Mark up Rs. 17,214,941 Total Rs. 123,971,1,551/53
7. The plaintiff thus has prayed a decree for recovery of above amount jointly and severally against the defendants with cost of suit and costs of funds.
8. The defendants have filed petition for leave to defend the suit and raised number of legal and factual objections as under;
(a) The plaintiff's whole claim is baseless and defendants are not liable to pay the suit amount.
' Statement of account attached with the plaint is not certified which could connect the defendants with the suit amount.
' The defendants are not defaulters.
' The entire claim is based on two entries i.e, "Transfer" "Loan disbursement" the statement of account did not show the corresponding entries of these two entries in any account of defendant No, 1.
(e) The statement of account shows that plaintiff adjusted those entries which were never credited or disbursed to the -defendants No, l's account, the defendants have objected the entries for the year 2005 to 2008 detailed in para (e) amounting to Rs,132,282,625, the defendants claimed that debit entries of the above said period pertain to the facility letter of credits, for which the defendant No,1 never requested, the entries showing the payment of PAD liability are false, when the letter of credits were not opened how the liability of PAD can arose, the entries of adjustment have been denied, claiming that defendants are not the beneficiary of alleged finance, the defendants also objected the debit entries of their account No,010-8444-9 from 2-7-2002 to 11-7-2007 amounting to Rs,358,772,604, the defendants also challenged the debit entries of NICF (Pledge) account commencing from 8-2-2007 to 8-2-2007(sic.) amounting to Rs,21,368,875 and specifically alleged that that two amounts of Rs,5,150.000 and Rs,5,700,000 were shown transferred from their NICF (H) account but the said amounts are not credited in their account, the debit entries of NICF (Pledge) commencing from 30-7-2004 to 27-5-2008 amounting to Rs,121,918,288 was challenged to be fake and finally in the account of NICF (P) amounting to Rs,23.093,838 has been claimed wrongly included in the suit amount, a single debit entry of Rs,35,662,772 dated 15-12-2009 has been termed as fake, defendants objected the amount of Rs,18.500 Million the overdue mark up the defendants pointed.Out that NIDF- Ilifacility is self created account. Finance agreements dated 1-1-2007, 1-1- 2008 and 1-7-2009 along with other charge documents are fake and never signed by the defendants as on the respective dates either bank were closed due to bank holiday for Eid-ul- Azha, so no question of execution of these three agreements arose. #TBS (1) #TBE The alleged charge documents as to Finance agreement, Demand promissory notes, personal guarantees are fake and forged documents. The documents are without consideration, the agreement dated 1-7-2009 is hit by section 23 of the Contract Act. The suit does not fulfill the mandatory requirements of section 9 of the financial Institutions (Recovery of Finances) Ordinance 2001, (hereinafter referred to as F10). The properties mortgaged with the bank could not be charged against the so called suit amount. The alleged liability of Pledge finance is subject to return of pledge stocks. The defendants Nos.5, 7, 9, 10, 11, 13 and 14 are not the directors of defendant No,1 and as such the suit against these defendants is not maintainable. In addition of above objections a number of objections have been raised on facts in 48 pages application to defend the suit."
9. Learned Counsel of plaintiff submits that in the year 2009, on the request of defendants, the then outstanding liability was renewed and restructured with the consent of defendants, the defendants executed charge documents for repayment of restructured liability, the statement of account is duly certified under section 4 of the Bankers' Books Evidence Act, all entries pointed out by defendants are duly credited in the proper account and were withdrawn by the defendants. The defendant No, 1 is a Public Limited Company and at the end of every financial year, the defendant No, 1 is bound to publish its accounts and if any amount was wrongly debited to their account, it was in their knowledge, but surprisingly the defendants never lodged any complaint against the alleged wrong debit.
10. Learned counsel seems to agree for relinquishment of claim of accrued mark up, provided the defendants pay the remaining liability. Learned counsel adds that it is the defendants who removed the pledge goods as the goods were stored in their factory premises, hence the defendants could not claim the adjustment of alleged shortage of pledge stocks.
11. The argument of learned Counsel for defendants is that amount of Rs, 18.50 Million shown to be restructured is the overdue interest, accrued after the expiry of agreed period, the plaintiff is not entitled to charge mark up after expiry of agreed price. He relied on Crescent Commercial Bank now Samba Bank Ltd. v. Genertech Pakistan Ltd. (2011 CLD 37). He submits that plaintiff is not in a position to return the pledge stocks and as such the alleged liability of Rs,36.00 Million is not recoverable specially when the pledge stocks were under the plaintiff's lock and key, the plaintiff has not asserted a single word in the plaint that defendants have removed pledge stocks, Learned counsel relied on A.M. Buraq and another v. Central Exchange Bank Ltd. And others (PLD 1966 (W.P.)
Lah 1), Faisal Bank through dull./ appointed Attorneijs v. Messrs Zimindara Rice Mills and 21 others (2007 CLD 1164), Judgment of C.O.S. 144 of 2010.
12. Learned Counsel submits that interest based agreements are not enforceable in terms of BCD Circulars 13 and 32 issued by the State Bank of Pakistan. He relied on Habib Bank v. Messrs Qauuum Spinning Ltd. (2001 M LD 1351), Habib Bank Ltd. v. Karachi Pipe Mills Ltd. (2006 CLD 842).
13. The main thrust of the arguments of learned counsel is that on 1-1-2007 there was public holiday due to Eid-ul-Azha, 1-6-2008 was Sunday and 1-7-2009 was the bank holiday, hence it is a proven fact on record that agreements dated 1-1-2007, 1-6-2008 and 1-7-2009 are fraudulent documents, the defendants never signed these documents, He relied on Mst. Akhtar Bequm v. Muslim Commercial Bank Ltd. (2009 SCM R 264), Mst. Riffat Jehan and another v. Habib Bank Limited and 10 others (2005 CLD 941). He submits that entries in the statement of account are ambiguous and are without any corresponding entries. He relied on United Bank Limited v. Messrs Ilyas Enterprises through Proprietor Mr. Ryas Malik and 2 others (2004 CLD 1338), Messrs United Dairies Farms (Pvt.)
Limited and 4 others v. United Bank Limited (2005 CLD 569) and Bankers Equity Limited through Principal Law Officer and 5 others v. Messrs Bentonite Pakistan Limited and 7 others (2003 CLD 931).
14. Learned counsel argues that plaintiff has not filed all relevant documents with the plaint in violation of section 9(3) of the FIO, he relied on Faysal Bank Limited v. Genertech Pakistan Ltd. And 6 others (2009 CLD 856), the suit has not been filed by authorized person, he relied on National Bank of Pakistan and others v. Karachi Development Authority and others (PLD 1999 Kar. 260), Messrs Ittefaq Industries (Regd.) through Managing Partner and 2 others v. Bank of Punjab through duly Constituted Attorney (2004 CLD 1356) and Dr. S. M. Rab v. National Refinery Ltd. (2005 CLD 1330), Lastly adds that the plaintiff has not filed reply to defendants PLA and as such the contents of PLA will be deemed to be admitted and rely on Nasim Nizami v. Habib Bank Limited (2006 CLD 1213) and Stied Asad Abbas v. Allied Bank of Pakistan through Branch Manager and others (2006 CLD 79).
15. Heard, record perused.
16. The plaintiffs claim is that in the year 2002 the defendants approached plaintiff for allowing different financial facilities, on their request the plaintiff allowed facilities detailed in para 5 of the plaint, the defendants in consideration of the availment of facilities executed different documents and mortgaged the properties, the defendants continue to adjust the liability and plaintiff continue to renew the finance, in the year 2009 the defendants committed default in fulfillment of financial obligation and requested to plaintiff that their outstanding liability be renewed and restructured, the plaintiff on their request and consent renewed and restructured the then outstanding liability on 22-6-2009 but the defendants have failed to adjust the agreed liability even after the restructured facility.
17. The reply of defendants shows that defendants are admitting the availment of finance from 2002 to 2006 and execution of document of the said period after the admission. The argument of learned counsel of defendants is that agreements and all ancillary documents dated 1-1-2007, 1-1- 2008 and 1-7-2009 are fake and Without consideration for the reason that on the day of their execution, the bank was closed either due to Bank holidays or Public holiday. The defendants have not denied, that defendant No,1 a public Limited Company and have not denied the resolution dated 20-6-20Q9 passed by the Board of Directors of defendant No,1 (Page-185).
18. Now the question is what happened in the year 2009, whether plaintiff allowed any fresh facility or restructured the existing liability?
19. Resolution dated 20-6-2009 (page-185) negates the defendants defence. The resolutionshows that defendant Nol and its Directors have admitted their liability as on 20-6-2009 as under; "During the meeting of the Board of Directors the approval of restructuring of credit lines by United Bank Limited, Bank Square Branch, Faisalabad was discussed. The Bank has acceded to the company request regarding relaxation in our financial obligations/ credit lines being availed from the Bank in accordance to our resolution passed on 24-3-2008 and documents/ agreements executed. It was decided to nominate/authorized Mr. Zahid Aslam CEO of . The company and Mr. Abid Aslam Director of the company to execute all the legal agreements/ documentation pertaining to restructuring of our credit lines from United Bank Limited and Company consequent upon which the following Resolutions have been duly passed by the Board of Directors of the company.
' Be and it is here resolved:
(1) That the company seeks to enter into restructuring of the following over due facilities being availed from United Bank Limited, Bank Square Branch, Faisalabad which has expired on 31-12- 2008:
(i) NICF-Hypo credit line amounting to Rs,32.500 M has been _renewed up to 31-12-2009 and the same would be got renewed or adjusted on or before the due date.
(ii) LC-Inland (Sight/DA) credit line with current outstanding Rs,35.662(M) would be restructuring into NIDF-II, on the specific request of the company due to non-payment done by the company, as per accepted Bills of Exchange and other relevant documents. This financial obligation would be adjusted on or before 31-3-2010.
(iii) NICF-Pledge credit line outstanding Rs,51.102M is outstanding would be on adjustment basis and the same would be got adjusted on or before 31-7-2009.
(iv) NICF-Pledge credit line amounting to Rs,36.2M is outstanding would be converted into NIDF-I on the specific request of the company and the same has to be adjusted on or before 31-3-2010.
(v) The Mark-up amounting to Rs,18.500 M accrued upon various credit lines being availed form the Bank has not been serviced by the company, which would also be converted into NIDF-III as a deferred liability, upon the specific request of the company, and would be got renewed/ adjusted on or before 31-3-2010."
20. The plaintiff on 22-6-2009 approved the renewal and restructuring of outstanding liability of defendants on the written request of defendants as under; NICH (Hyp) Rs. 32.500 Million L/C inland/sight/DA(forced PAD)
NIDF II Rs. 35.662 Million NICF (pledge) Rs. 51.102 Million NIDF I (Sub Limit of NICF Pledge)/ NIDF I Rs.36.200 Million NIDF III Rs.18.500 Million
21. The defendants accepted restructuring of the outstanding liability and executed the agreement dated 22-6-2009, the said agreement is also witnessed by two independent witnesses (page-186).
The facility of NIDF-I is find mention the following conditions; "PURPOSE:. Created on the specific request of the customer to allow for restructuring of NICF Pledge credit line in which a short fall occurred due to customers forced lifting of the stocks."
22. The , execution of agreement dated 22-6-2009 (page-186) shows that defendants have admitted the illegal , removal of pledge stocks without making the corresponding price/amount, hence the defendants' argument that, if the plaintiff is not in a position to return the pledge stocks, then the defendants are not bound to pay the liability outstanding against pledge finance, has no force.
23. The documents dated 20-6-2009 and 22-6-2009 fully establish that defendants have admitted the outstanding liability as on 20-6-2009 generated out of finance agreement from 2002 to 2008 without any reservation and objection, the defendants have not even challenged the mark up accrued after expiry of finance agreement and consented the creation of NIDF-III Limit.
24. It appears that at the time of restructuring of outstanding liability, an amount of Rs,18.50 Million was outstanding as over due mark up, the plaintiff created fresh Limit of NIDF-III of the said amount, the defendants agreed to pay the said liability, it is not the case of defendants that they were forced to admit the liability, the defendants' case is that restructured facility was never disbursed to them and as such they are not liable to pay the same. It has to be seen whether the plaintiff was obliged to disburse the restructured amount, to recover the mark up on restructured amount and mark up after the expiry of agreed period.
25. After 20-6-1984, no Financial Institution in Pakistan can transact banking business on interest based system or mark up on mark up basis, the Financial Institutions in Pakistan after 1st July, 1984 are bound to transact banking business on Non-Interest based banking except where the foreign loan is involved. Under NIB system the financing is based on sale and purchase of commodity on deferred payment basis, Lender Institution is entitled to recover the buy back price only within the agreed period. The State Bank of Pakistan has issued Circulars Nos.13 and 32 on 20-6-1984 and 26-11-1984 for regulating Non-interest based financing, the circulars are having the force of law and are binding on all financial institutions, thus plaintiff is not entitled to recover any mark up after the agreed period, the said eventuality is protected under section 3(2) of FIO which provides that customer is bound to pay the costs of funds from the date of default till realization.
26. No doubt, the defendants agreed to pay the over due mark up with their consent but the said consent is against law and the contract to that extent is hit by section 23 of the Contract Act and as such plaintiff is not entitled to recover the amount of NIDF-III of Rs, 18.50 Million out of the restructured amount,
27. Reliance is placed on Waman Shriniwas Kini u. Ratilal Bhagwandas and Co. (AIR 1959 SC 689) and Anayat All Shah u. Anwar Hussain and 2 others (1995 M LD 1714).
28. Likewise the plaintiff is not entitled to mark up on the restructured amount as the buy back price already agreed between the parties includes the mark up or profit of the plaintiff under the admitted finance agreements between the parties.
29. The next argument of learned counsel for defendants, that agreements dated 1-1-2007, 1-6- 2008 and 1-7-2009 are fake and forged, along with its ancillary documents, the said argument is not available to defendants for the simple reason that liability restructured has arisen out of the disbursed finance from time to time, the defendants themselves on 20-6-2009 requested to plaintiff for restructuring the outstanding liability when their Board of Directors passed resolution admitting the entire outstanding liability and the accounts maintained by the plaintiff, even a single entry was not objected by the defendants, they only requested to restructure the outstanding liability, on the request of defendant No,1, the plaintiff entered into an agreement dated 22-6-2009, hence the subsequent agreement dated 1-7-2009 is not, relevant, the plaintiff is demanding the repayment in terms of agreement dated 22-6-2009, the said agreement fulfil all legal requirement of an enforceable agreement. The agreements dated 1-1-2007, 1-1-2008 and 1-7- 2009 become irrelevant in the presence of agreement dated 22-6-2009. If the argument of defendants 2 to 15 is admitted for the sake of arguments that agreement of personal guarantee dated 1-1-2007, 1-1-2008 and 1-7-2009 were not executed by them even then the defendants Nos.2 to 15 are liable to pay the agreed guaranteed amount in terms of the agreement of personal guarantee executed from 2002 to 2006, all these agreement are available on record and the defendants are not denying the execution of these documents reference may be made pages 30 to 47, 72, 104, the amount subject matter of agreement dated .22-6-2009 is not a fresh finance but represents the repayment of admitted and as such plaintiff was not obliged or bound to disburse the amount as it is not a fresh finance.
30. Learned counsel's argument is that Banking Court has no jurisdiction to entertain the suit of restructured finance, under section 9 of the FIO the Banking Court can take cognizance of the default committed by the Financial Institution or the customer for non-fulfillment of financial obligation with regard to any finance, it is an admitted fact c that liability restructured is a finance in terms of section 2(d) of FIO and the word used in section 9 is the obligation. Under section 2(e)
(i), obligation includes restructuring or renewal, the restructuring of outstanding finance will not change the nature of finance, the restructuring facilitates the customer to pay in the extended period, the argument of learned Counsel thus fails having ho substance.
31. Learned counsel has vehemently argued that suit has not been filed by the authorized person as the signa,tory of the plaint are the delegatee of the attorney of plaintiff, further the Memorandum and Articles of Association of plaintiff has not been placed on record establishing, that attorney of plaintiff is authorized to further delegate his powers to any officer of plaintiff.
32. The plaintiff has placed on record, the copies of power of attorney in favour of signatory of plaint i.e, Abid Ali and Muneer Ahmed, these two officers were appointed by Ameer Karachiwala and Aqeel Ahmed Nasir, the plaintiff has filed photo, copies of power of attorney of two attorneys, the document of attorney shows that vide resolution No,324 dated 26-10-2009 the Board of Directors of plaintiff appointed Ameer Khalid Karachiwala and Aqeel Ahmed Nasir plaintiffs attorney under clause 14 of the document of attorney, Messrs Ameer Karachiwala and Aqeel Ahmed Nasir are authorized to further delegate their all or limited powers, the copy of resolution is also available on record, the argument is thus repelled.
33. The last argument of learned counsel of defendants is that plaintiff has not filed complete documents with the plaint enabling them to reply the allegations against them, and further the plaintiff has not filed reply to PLA as such the ' contents of PLA will be deemed to be admitted. The document required to prove the case against defendants is dated 20-6-2009 and 22-6-2009, both the documents are available on record and defendants have not denied these documents, the photo copies of finance agreement and personal guarantee of defendants and title documents of mortgage properties are available which are not denied by the defendants, further the defendants have failed to point out any document which was not filed, The defendant has to prove that there is substantial question of fact and law and if the plaintiff has not submitted documents it is a blessing to defendants, the defendants have not denied the two documents i.e, 20-6-2009 and 22- 6-2009 hence there is no need of any other document. It is interesting to note that defendants have challenged those debit entries which are prior to the challenged agreements i.e, dated 1-1- 2007, 1-1-2008 and 1-7-2009, admittedly the suit amount came into existence on the request of defendants when they admitted the outstanding liability. The defendants Nos.5, 7, 9, 11, and 13 if are not the directors but they are guarantors, hence the argument of learned counsel that suit against these defendants is not maintainable has no force
34. From the above said facts, it is established on record that restructured amount is an admitted amount of finance, the removal of pledge stocks is admitted by the defendants.
35. As the plaintiff itself admits that defendants have, paid Rs,13.00 Million after restructuring of finance, and this court came to conclusion that plaintiff is not entitled to recover any mark up on the restructured amount, hence the plaintiff is entitled to recover Rs,90,593,938 as under; NICF Rs. 32,500,000 NIDF II Rs. 35,622,772 NIDF I Rs. 23,093,338 Total Rs. 90,593,938
36. The upshot of above said discussion is that ,defendants have failed to raise any substantial question of fact and law which require the recording of evidence, hence the PLA is dismissed and suit is decreed against the defendants jointly and severally for recovery of Rs,90,593,938 with costs of suit and costs of funds from the date of decree till realization as prayed for.
37. The decree if not paid within 30 days, it will be automatically converted into execution.