' This regular first appeal under section 22 of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 was filed against the judgment and decree dated 26-2-2013 passed by Judge Banking Court-I, Multan.
2. Brief facts of the case are that appellants Nos. 1 to 4 requested for sanction of fund based/non- fund based facilities from the respondent/bank in the year 2007/08.
' Appellant No,1 acting through appellants Nos.2 to 4 vide request letter dated 12-1-2009 sought for sanction/renewal of existing non fund based facility i.e, bank guarantee facility (assignable) which was approved by the respondent/bank on 22-1-2009 having expiry dated 31-12-2009 against existing securities already held by the respondent/bank. In order to secure bank guarantee facility appellants executed various charge/security documents including counter guarantee in favour of respondent/bank. Memorandum of deposit of title deeds and registered mortgage deeds were duly executed by the owners/ mortgagers in favour of respondent/bank. On the request of the appellants, respondent/bank issued the following bank guarantees:-- Sr. No.B.G. No.Date of issueA/o of B.G.Name of Benefic Expiry dateEncash-ment
1. 125/083-12-2008 Rs.1.500(M)Pak China Chemicals 2-9-20097-9-2009
2. 105/0823-10-2008Rs.2.000(M)Agri Farm Services 22-7-20094-8-2009
3. 17/092-2-2009 Rs.1.000(M)Auriga Chemicals Enterprises1-8-2009 4-8-2009
4. 15/0931-1-2009 Rs.1.000(M)Warbal Pvt. Ltd. 26-7-20094-8-2006
5. 10/0930-1-2009 Rs.1.000(M)--do-- 29-7-20094-8-2009
6. 135/0818-12-2008Rs.1.500(M)Pak China Chemicals 17-9-200926-9-2009
7. 14/0931-1-2009 Rs.1.000(M)Warbal Pvt. Ltd. 30-10-200931-10-2009
8. 136/0818-12-2008Rs.1.500(M)Waseb Pesticide 17-12-200921-12-2009
9. 137/0818-12-2008Rs.1.300(M)--do-- 10-12-200917-12-2009
10. 121/0825-11-2008Rs.1.500(M)Solex Chemicals Pvt. Ltd. 24-8-20097-9-2009 ' Appellants failed to retire the said bank guarantee within the agreed period despite demands made by the beneficiary(ies) from time to. Time from the respondent/bank. Appellants failed to discharge its/their obligations towards the concerned beneficiary(ies) forcing the respondent/bank to encash bank guarantees in favour of their beneficiary(ies) by way of creating Force Demand Finance at its end as reflected ' in the statement of account. The break up of the Force Demand Facility is as under:--
(a) The amount of demand finance (forced) created: Rs. 11,981,455.00
(b) Amount of mark up charged up to 31-3-2008 Rs. 3,359,081.00
(c) Total: Rs. 15,340,536.00
(d) Amount paid by the defendant(s) to the F.I.: Rs. 209,830.00 (d)(sic.)Amount of finance and other amounts relating: Rs. 15,130,706.00 to the finance payable to the F.I. up to the date of institution of the suit.
' Hence, respondent/bank filed a suit for the recovery ctif Rs,15,130,706.00 together with mark up against the appellants.
3. Leave to defend on behalf of appellants Nos.1, 2, 5 and 6 and on behalf of appellant No,4 was filed and it was averred that the respondent/bank has not appended Agreement for Finance in respect of the Force Demand Finance which was created without consent of the appellants.
Respondent/bank was not entitled to any mark up over the amount Rs,33,59,081 was charged by the respondent/bank towards mark up -which they were liable to reverse/refund being illegal. The claim of the bank is inflated and unrealistic. The counter guarantee for all the bank guarantees issued has not been submitted by the respondent/bank. Counter guarantee dated 28-1-2009 is without name of any beneficiary(ies), thus, having no evidentiary value. Under the said guarantee, respondent/bank is entitled to 01% commission only which the appellants have already paid to the respondent/bank in advance. Counter guarantee was never signed by the appellants Nos.5 and 6, therefore, they are discharged from liability/payments to the respondent/bank. No specific requests were made by the appellants for issuance of bank guarantees and were not issued in the interest of the appellants being a fraudulent transaction the appellants were not liable. Bank guarantee No,121/08 issued on 25-11-2008. For Rs,1.500(M) in favour of Solex Chemicals Pvt. Ltd. 'was never issued for the benefit of the appellants. The respondent/bank failed to append even copy of the said guarantee therefore the respondent/bank was not entitled to claim the amount. Margin retained by the respondent/bank in connection with issuance of bank guarantees is not mentioned in the plaint.
4. It was argued by counsel for the appellants that no counter guarantee in respect of each bank guarantee issued was obtained. The only counter guarantee issued is dated 28-1-2009 whereas bank guarantees were issued in earlier dates. Moreover, the statement of account appended was deficient as the amount adjusted towards encashment of bank guarantees was not reflected in the statement of account. Statement of account appended was not duly vet hied under the Banker's Books. Evidence Act, 1891. Transfer entries seen in the statement of account did not reflect wherefrom these originated nor the accounts to which the transfer were directed. It. Was contended that no instrument was placed in respect of Bank Guarantee No,121/08 issued on 25-11- 2008 in favour of Solex Chemicals Pvt. Ltd. The said guarantee was not meant for the benefit of appellants neither has the respondent/bank placed on record copy ui the bank guarantee.
Reliance was placed on the cases reported as Muzammil Brothers and another v. Saudi Pak Commercial Bank Lrd. Through Manager (2006 CLD 1546), United Dairies Farms Pvt. Ltd. And 4 others v. United Bank Ltd. (2005 CLD 569), Habib Credit and Exchange Bank Ltd. v. Bank International Ltd. (2002 CLD 524) and So; Bank Ltd. v. Classic Derain Mills Pvt. Ltd. And 3 others (2011 CLD 408).
5. Conversely, it was argued that debit and credit entries made in the statement of account towards Force Finance Facility duly reflect encashment made to the beneficiary(ies) in respect of bank guarantees. Appellants Nos.1 to 4 never denied the availment/issuance of bank guarantees nor execution of charge documents executed favour of the respondent/bank. Bank guarantees wen- approved/renewed in favour of the respondent/bank on their specific request and documents in respect whereof were on record. In bank guarantee cases no Agreement for Finance is required/obtained, only counter guarantee is required which was obtained and signed by the appellants Nos.1 to 4. Moreover, the said bank guarantee facility was in the shape of limit from which the appellants were entitled to issuance of bank guarantees as and when they required as such there is no need to obtain counter guarantee with every issue. Individual counter guarantees are obtained in single transaction in bank guarantee cases. Appellants Nos.3 and 4 being mortgagors/guarantors of appellant No,1 (borrower) were not under banking practice required to sign counter guarantees because bank guarantees are issued on the direction of the customer only. That the requirements envisaged under section 10(3)(4)(5) of the Ordinance, 2001 are lacking hence liable to dismissal under section 10(6) of the Ordinance. The judgment and decree dated 26-2-2013 passed for an amount of Rs,1,17,71,625 together with costs and cost of funds was, thus, in accordance with law.
6. Arguments heard. Record perused.
7. Appellants have failed to point out any contradiction/discrepancy in the statement of account which reflects the amount of encashed guarantees created as Force Demand Finance as the appellants despite request/demands of respondent/bank for adjustment failed. Instrument of bank guarantee and other documents are on court record which prove that those were issued at the behest of the appellants. Margin was retained in respect of the bank guarantees issued. Entries reflected in the statement of account duly reflect that those originated in account on default made by the appellants. Instrument of bank guarantee favouring Solex Chemicals Pvt. Ltd. Reveals that it was meant for the benefit of the appellants. In bank guarantee cases, Agreement for Finance is not required. The bank guarantees issued were in the shape of limit from which the appellants were entitled to issuance of bank guarantees as and when they required so there was no need to obtain A counter guarantee in respect of every issue. Individual counter guarantees are obtained in single transaction in bank guarantee cases. Signatures of appellants Nos.3 and 4 being mortgagors/guarantors of appellant No,1(borrower) on counter guarantees were not required. The judgments relied upon being quite distinguishable from facts and circumstances of this case are not helpful to the appellants.
' There is no infirmity or illegality in the judgment and decree dated 26-2-2013. The appeal being devoid of any merit is dismissed.