' IJAZ UL AHSAN, J.---This suit has been filed by the plaintiff bank for recovery of Rs,337,891,831 along with mark-up, costs, cost of funds and all other claims arising therein till realization. The plaintiff bank is incorporated under the Bank of Punjab Act, 1989. It is engaged in the business of banking and is a financial institution as defined under the Financial Institutions (Recovery of Finances)
Ordinance, 2001 ("FIO"). The defendant company is a private limited company. Defendants Nos. 2, 3 and 4 are its Directors and have been sued in their respective individual capacities as guarantors.
It is alleged in the plaint that the defendants requested the plaintiff bank for finance and banking facilities. The plaintiff sanctioned in favour of the defendant company the following: "package finance facilities" vide Facility Offer Letter dated 25-2-2008:-- Demand Finance Facility (DFF) Rs,300 Million Running Finance (RFF) Rs,30 Million Letter of Credit (LC)
Rs,100 Million
2. The defendant company duly accepted the aforementioned facility offer letter. In respect of Demand Finance Facility, it was agreed between the parties that its tenor would be 5-years commencing from the date of disbursement. A grace period of one year was allowed with regard to repayment of principal amount to be liquidated thereafter in 16=equal quarterly installments.
According to the offer letter the mark-up pricing formula was "3-months average kibor + 450 bps with a floor of 12% per anum" and recoverable quarterly.
3. With regard to. The Running Finance Facility of Rs,30 Million, as per the aforenoted Facility Offer Letter, this facility was valid till 31-12-2008. The pricing formula was "3-months .Average kibor + 400 bps with a floor of 10% per anum" and was also recoverable quarterly. Repayment was to be made in lump sum on demand or on the maturity of the facility.
4. Pursuant to the aforesaid arrangement, the following documents were signed and executed by the defendants:--
(i) Letter of Continuity.
(ii) Demand Promissory Note.
(iii) Acknowledgment letter dated 10-3-2008.
(iv) Letter of Authority dated 10-3-2008. . (v) Standing Instructions dated 10-3-2008.
(vi) Undertaking to comply with State Bank of Pakistan's Prudential Regulations.
(vii) Undertaking for Appropriate, Utilization of Loan Proceeds.
5. It is also alleged in the plaint that the defendant company requested the plaintiff to establish an inland Irrevocable Letter of Credit for Rs,9.9 Million vide Application/Agreement dated 3-4-2008.
The defendants also executed Trust Receipt dated 10-3-2008. In pursuance of the above, the plaintiff opened a Letter of Credit dated 3-4-2008 for a sum of Rs,9,985,905 in favour of the beneficiary. The credit was made available through acceptance by the plaintiff of the Bill of Exchange drawn by the beneficiary payable after expiry of 180 days. The plaintiff claims that the said amount was duly paid to the beneficiary.
6. The defendants Nos. 2, 3 and 4 guaranteed payment of all sums due under the afore-mentioned facilities. The guarantors irrevocably and unconditionally, jointly and severally agreed to pay all outstanding amounts on demand being made by the plaintiff. By way of security for payment of all amounts due under the aforesaid facilities, the defendant company mortgaged immovable properties in favour of the plaintiff which are described in paragraphs Nos.7 and 9 of the plaint.
Further, the defendant company also hypothecated all present and future current assets/stocks in favour of plaintiff. The charge created by the defendant company was duly registered with SECP on 3-3-2008.
7. It is alleged that the defendant company availed a sum of Rs,220 Million in aggregate in different tranches. The Account Statement indicates that sums of Rs,150 Million, Rs,10 Million and Rs,60 Million were disbursed to the company on 13-3-2008, 18-3-2008 and 26-3-2008 respectively. The first two tranches mentioned above (Rs,150 Million and Rs, 10 Million) were made available to the defendant company through a pay order irr the vendor's name. The last tranch of Rs,60 Million was transferred to the current deposit account of the defendant company.
8. The plaintiff bank alleges that the defendant company paid mark-up for the first quarter of 2008 amounting to Rs,1,363,726. However, no further payment was made either towards principal or mark-up. It thus committed default in fulfillment of its obligations with regard to the finance. The plaintiff, therefore, claims the following sums from the defendants:-- Principal Availed Rs. 220,000,000 Amount repaid Nil Principal Outstanding Rs. 220,000,000 Mark-up paid (till 31-3-2008) Rs. 1,363,726 Outstanding Mark-up on 8-1-2010 (within contractual period)Rs. 69,293,337 Total Rs. 289,293,337
10. It is further alleged in the plaint that a sum of Rs,30 Million was availed by the defendant company as Running Finance Facility. This finance was transferred to the defendant company in the current deposit account along with the last tranch of Rs,60 Million under the Demand Finance Facility. The defendant company liquidated the mark-up for the first quarter of 2008 amounting to Rs,69,731. However, it did not make any further payments. The plaintiff bank, therefore, claims the entire amount of Rs,30 Million together with mark-up in the sum of Rs,6,849,691 as of 31-12-2009 which is depicted in a tabular form as follows:-- Principal Availed Rs. 30,000,000 Principal Outstanding Rs. 30,000,000 Mark-up paid (till 31-3-2008) Rs. 69,731 Outstanding Mark-up on 31-12-2009Rs. 6,849,691 Total Rs. 36,879,691
10. The plaintiff bank had established a Letter of Credit dated 30-4-2008 for a sum of Rs, 9,985,905.
Payment was to be effected within 180 days from the date of truck receipt. The defendant company failed to make the requisite payment. The plaintiff bank was, therefore, constrained to make payment under the LC to the negotiating bank on 4-10-2008. In this regard, the plaintiff bank claims a sum of Rs,9,486,605 as principal and Rs,2,232,198.16 as mark-up aggregating a sum of Rs,11,718,803 as of 30-9-2009.
11. The plaintiff bank claims that the defendants have time and again expressly acknowledged their liability but have failed to clear the outstanding amounts. In this regard, reference has been made to letters dated 10-10-2008 and 23-6-2008 (attached as Annex-S & S/1 with the plaint) issued by the defendant company. On failure of the defendant company to liquidate its liability, the plaintiff seeks a decree against the defendants jointly as well as severally in the aggregate amount of Rs,337,981,831 with costs, cost of funds under section 3 of the FIO, 2001 from the date of default till realization along with liquidated damages @ 20% of the outstanding amount.
12. On filing of the suit, the defendants were duly served who filed their petition for leave to appear and defend the suit. The plaintiff filed a replication.
13. The learned counsel for the defendants submits that the defendants are entitled to the grant of unconditional leave to appear and defend the suit. He submits that the suit has not been filed by a duly authorized officer of the bank. He points out that under section 9 of the FIO, the plaint on behalf of financial institution is required to be verified on oath by the Branch Manager or such other officer of the financial institution as may be authorized in this behalf by Power of Attorney or otherwise. He submits that the suit has been filed through Mr. Waheed Yousaf who claims to be the Chief Manager of the Bank. However, no Power of Attorney or authorization in favour of Mr. Waheed Yousaf has been placed on record. He maintains that when the defendant raised the specific objection with regard to authorization, the plaintiff bank filed a copy of its internal circular with its replication regarding delegation of powers. He argues that the plaintiff bank failed to file said document with the plaint as required under section 9 of the FIO. Even otherwise, he submits that it is evident from the language of the said document that Chief Manager and Branch Manager are different and approval of the head office is necessary to file a suit on behalf of bank. No such approval has been placed on record. As such, the suit has incompetently been filed. In support of his contentions, the learned counsel relies upon 2005 CLD 1546 and 2004 CLD 1356.
14. The learned counsel for the defendants further submits that under section 9(2) of the F.I.O., 2001, the plaintiff bank was required to file all relevant documents along with the plaint. The plaintiff bank did not file any authorization in favour of Mr. Waheed Yousaf with the plaint. However, while filing replication an attempt was made to cover the said lacuna by providing a copy of an internal memo purportedly granting such authorization. Relying on 2009 CLD 931, 2005 CLD 1421 and an order passed by this Court on 4-6-2013 in C.O.S. No,2 of 200, the learned counsel submits that filing additional documents with the PLA by itself furnishes ground for grant of leave to appear and defend the suit. The learned counsel further submits that although the PLA is duly verified on oath and also supported by affidavits of all defendants, the plaintiff hank has filed a replication contents whereof are not duly supported by a counter affidavit. In the absence of a counter affidavit, the contents of the PLA are deemed to be admitted as true. Reliance in this regard is placed on 2003 CLD 606, 2006 CLD 1213 and 2011 CLD 458.
15. The learned counsel for the defendants further argues that the Statements of Account attached with the plaint are not duly certified as required by law. He submits that under section 9 of the FIO, 2001, the Statement of Account is required to be certified in terms of the Bankers' Books Evidence Act, 1891. Section 2(8) of the said Act requires that a certificate given at the foot of the Account Statement must be dated, certified by the principal Accountant or Manager of the Bank with his full name and official title. The learned counsel points out that the name of the person subscribing the certificate on the Statement of Account has not been given, the certificate is not dated and the designation of the person issuing the certificate is not legible. He further points out that the person signing the alleged certificate is neither the principal Accountant nor Manager of the plaintiff bank.
As such, the Statements of Account attached with the plaint cannot be termed as Statements of Account as visualized by the provisions of F.I.O., 2001 and Bankers' Books Evidence Act, 1891.
16. It is further submitted that the entries in the Statement of Account are not corroborated by the documents as no proof of disbursal has been attached with the plaint.
17. Referring to the Agreement dated 10-3-2008, the learned counsel for the defendants submits that the same is not executable. The learned counsel points out that in the said agreement the Demand Finance Facility of 5 years and Running Finance Facility expiring on 31-12-2008 have admittedly been clubbed together which could not have been done. The purpose of both facilities is different and the rate of mark-up given in the offer letter is also different for the two facilities. As such, separate agreements were required to be executed which has not been done. This has rendered the agreement inexecutable. The learned counsel for the defendants further points out that the original offer letter dated 25-2-2008 was amended on 8-3-2008. However, the plaintiff bank has withheld the said document.
18. With reference to the Demand Finance Facility, it has also been argued that there are contradictions between the offer letter and the Agreement, No date of repayment of the purchase price is given in the agreement, therefore, it cannot be said that the defendants have committed default. It is also pointed out that no rate of mark-up has been given in the agreement in question.
19. As far as Running Finance Facility is concerned, it is urged that the claim of the plaintiff bank is not duly supported by any mark-up agreement, no date of repayment of the purchase price has been given nor has the number of installments been provided.
20. The learned counsel further submits that the plaintiff bank has illegally charged mark-up on all facilities including the LC facility. He, therefore, submits that the plaintiff bank has failed to set-up an open-shut case which is the basic requirement for decreeing the suit in a summary manner.
21. I have heard the learned counsel for the parties at length and gone through the record.
22. The record indicates that disbursement of a sum of A Rs,220 Million is not denied by the defendants. In this regard, it would be useful to reproduce paragraph 13 of the plaint which provides as follows:-- "That the defendants have time and again, expressly, acknowledged their liability but have not cleared the outstandings. In this regard, reference is made to the defendant company's letters dated 10-10-2008 and 23-6-2009 (Annex-S to S/1). The defendants are liable to fulfill their obligations vis-a-vis the finance documents and repay Rs,337,891,831 along with costs, costs of funds from the date of default till realization, service charges, penalties, etc. And liquidated damages at 20% of the said outstanding amount till the payment/realization thereof."
23. In reply to the said paragraph, a generalized and evasive response has been given which is evident from the following language:-- "10 to 14. The contents of the .Paragraphs under reply are not admitted to be correct, hence are denied. The alleged liabilities mentioned in the paragraphs under reply and amounts have seriously been refuted and detailed reasons have been furnished under the questions of law and facts raised above, contents whereof are reiterated in reply to these paragraphs as well and the paragraphs under reply are denied accordingly. The contents of paragraphs "C" onwards under the questions of law and fact raised above and claim of set off are reiterated in reply to these paragraphs as well."
24. Further, the plaintiff bank has specifically alleged that the defendant company had acknowledged its ability in terms of letter dated 10-10-2008 in the following language:- "The amount disbursed in favour of Messrs Khan Unique Builders (Pvt.) Limited that amounted to Rs,220.00 million (Rs,160.00 million for payment of cost of land made directly to the owner by the bank and Rs,60.00 million for construction of the project.)
' Major portion of the amount disbursed to us has been paid in advance to the contractors and suppliers for securing continuous supply of material at low cost because prices of construction material fluctuate frequently."
' Neither the letter nor its issuance or signatures of the Chief Executive have been denied.
25. Another significant admission of the defendants appears on page 5 of the PLA where it is clearly and categorically been stated as follows:-- "And it is now an admitted fact that the actual amount disbursed by the plaintiff bank was only Rs,220.00 Million and there is no finance agreement corresponding with the said amount or even with the amount mentioned in the facility offer letter of the plaintiff bank."
' The above admission appears to have been made in the context of the finance agreement appearing at page 20 of the plaint titled as "Agreement for Finance for Short/Medium/ Long Term on Mark-up Basis". In the said agreement, sale price of Rs,330 Million and purchase price of Rs,686,887,000 has been mentioned.
26. I am of the view, notwithstanding the legal significance or effect of the said figures, the disbursement of an amount of Rs,220 Million by the plaintiff bank stands established from the record which is also admitted by the defendants. Therefore, the dispute between the parties is limited to the differential between said amount of c Rs,337,'891,831 being claimed by the bank and Rs,220 Million admittedly disbursed by the bank and admitted to have been received and/or utilized by the defendants. Although an attempt has been made to argue that disbursement had been denied, the admission cannot be used against them or the letter in question dated 10-10- 2008 needs to be proved, yet I have not, found much force in these arguments. Denials at best are evasive. It is settled law that evasive denial is no denial at all. D Further, there are specific admissions to the extent of Rs,220 Million. This disbursement also finds support in the documents. In addition, the letter dated 10-10-2008 has not been specifically denied and' its contents match up with the line of defence taken in the PLA. The defendants have also not seriously contested the existence and factum of issuance of the same. This balance amount (over and above Rs,220 Million) mainly constitutes mark-up and other charges which the defendants seriously dispute and have made out a case for grant of leave to the extent of the said amount.
27. As far as the sum Of Rs,220 Million is concerned, other than hyper-technical objections made at the bar the fact of disbursement of the same is ex facie evident and has also been admitted by the defendants. The defendants are therefore, required to pay the said admitted and undisputed amount.
28. In view of the above, an interim decree for recovery of Rs,220 Million is passed in favour of the plaintiff against the defendants jointly and severally together with cost of funds from the date of filing of the suit till recovery of the amount, in terms of section 3 of the FIO, 2001. The defendants are granted unconditional leave to appear and defend the suit to the extent of the remaining suit amount. The PLA filed by the defendants will be treated as their written statement.
29. Now to come up for submission of proposed issues on 8-4-2014.