' MALIK MANZOOR HUSSAIN, J.---This Original Banking Suit had been filed by plaintiff/Bank through Mr. Ashraf Khan Zonal Chief, NBP, Abbottabad, for recovery of Rs,4,37,882,577.00, as outstanding amount against defendants on 30-6-1998, through sale of mortgaged/ charged property/assets, hypothecated machinery/goods, and enforcement of personal guarantees.
2. Facts as emerged from the contents of plaint are that the defendant No,1 is running a Textile Mills in the name and style "Khyber Textile Mills Ltd" situated at Baldher, District Haripur with registered office at The Mall, Abbottabad, who availed several loans and finances from plaintiff/Bank, fully described in Para-4 of plaint, for convenience the same are reproduced as under:--
(i) "In the year 1963, cash credit (K-1) Rs,1.100 Million, enhanced to Rs,16.200 Million in the year 1981.
On 11-5-1987 the outstanding balances in K-5 of Rs,54.083 Million and in K-6 of Rs,5.792 Million were merged with K-1.
(ii) In the year 1963, cash credit (K-2) of Rs, 2.000 Million, enhanced to Rs,12.500,000 in the year 1973.
(iii) In the year 1975, cash credit (K-3) of Rs,3.800 Million.
(iv) In the year 1978, cash credit (K-5) of Rs,8.000 Million, enhanced to Rs,40.000 Million. Balance of Rs,54.083 Million against the line merged with K-1 on 11-5-1987.
(v) In the year 1979 cash credit (K-6) of Rs,0.672 Million, enhanced to Rs,6.190 Million in 1979. Balance of Rs,5.792 Million merged with K-1 on 11-5-1987."
3. That for repayment of the loans etc., defendant No,1, mortgaged land measuring 365 kanals and 19 marlas along with factory buildings, plant, machinery, situated in village Baidher, Haripur through Deed of Registered Collateral Mortgage dated 2-7-1974. Thereafter, the defendant Company obtained further cash in the sum of Rs,3,800,000 by executing Collateral Mortgage deed dated 15- 10-1977 and also mortgaged 489 kanals and 9 marlas situated in village Dobandi, Baldher and Bagara, District Haripur, including buildings, plant and machinery. That the defendants Nos.2 to 10 executed personal guarantees in favour of plaintiff/Bank. That later on the defendant Company failed in repayment of outstanding loan, facilities and as per plaintiff, in order to delay the payment, the defendant first filed a complaint with the Ombudsman and later on a Writ Petition (W.P. No,1406/98) before the Rawalpindi Bench of the Lahore High Court for the sole object of delaying tactics. It was further alleged that cause of action arose within the territorial jurisdiction of this Court as the mortgaged/charged properties/assets are situated in District Haripur, which is within jurisdiction of this Court, while defendants Nos.2 to 10 are also residing within the territorial jurisdiction of this Court.
4. Defendants were summoned, who appeared in response thereof and while contesting suit of the plaintiff, they filed application for leave to defend and through order dated 12-4-1999, leave was granted and in consequence thereof written statement was filed on 31-5-1999. From the pleadings of the parties, 13 issues were framed along with one recasted issue and 3 additional issues, which are as follows:-- ISSUES:
(1) Whether the plaintiff-Bank in the light of details given in Para # 4(1) to 4(5) is entitled to recover a sum of Rs,437,882,577 (as outstanding on 30-6-1998) against defendants # 1, to 10 through sale of mortgaged property, hypothecated machinery and enforcement of personal guarantees?
(2) Whether the suit is not maintainable with reference to section 9 of the C.P.C. And with reference to the provisions of Act XV of 1997?
(3) Whether the suit is time barred?
(4) Whether defendants # 2 to 10 are not the guarantors, (1 so, to what effect?
(5) Whether the original guarantee is not enforcible after the signing of agreements dated 16-8- 1988 and 15-3-1990?
(6) Whether the statements of account are not furnished in accordance with law and hence not admissible in evidence?
(7) Whether the mortgage in dispute is only partially in favour of the plaintiff-Bank?
(8) What are the decisions of Industrial Rehabilitation Committee (Baig's Committee) in 1982 and to what effect?
(9) Whether the loan facilities in question were restructured and rescheduled, if so, to what effect?
(10)Whether each running loan facility stands exhausted in case it is not renewed?
(11)Whether the defendant/ defendants had been making payments towards the loan facilities from time to time, if so, how much and to what effect?
(12)Whether the defendants are entitled to make a counter claim of Rs, 2.77 Million, as detailed in the written statement?
(13)Relief?
'Recast Issue No,12.
' Whether the defendants are entitled to make a counter claim of Rs,2077 million as detailed in the written statement?
'Additip nal Issues: 8-A. Whether the restructure agreement dated 16-8-1988, has any effect, and if so, to what extent?
9-A. What, if any, is the effect of decision of the Revival of the Sick Units Committee No,5 of the State Bank of Pakistan?
12-A. Whether the defendants are entitled to the various amounts claimed by them in the written statement?
5. Initially the parties preferred list of witnesses but thereafter, it was mutually agreed that the parties shall record their evidence through filing affidavits and other party shall cross examine them through filing interrogatories.
6. In order to substantiate its case from plaintiff side, affidavits by Muhammad Ashraf Khan the then Zonal Head NBP. Abbottabad, Mr. Fayaz Ahmad, Manager Credit/Advances NBP, Zonal Office, Abbottabad and Munawar Hussain Shah G-I, NBP, Main Branch, Abbottabad, were filed. All these witnesses replied the interrogatories filed by defendants, supported by the relevant documents.
7. Conversely, Director of the Defendant/Company Mr. Abdul Hameed Khan filed his affidavit and duly replied interrogatories filed by the Bank/plaintiff. These interrogatories were also supported by the concerned record.
8. Learned counsel for the plaintiff contended that the defendant/Company took its case to Committee No,5 (Committee) constituted for revival of Sick Units and the decision taken by the Committee dated 2-9-1997, was not only incomplete but was without jurisdiction. It was further contended that decision given by the Committee was not about all facilities availed by the defendant/Company but was restricted only to one facility i.e,, Serviceable Loan and this decision was taken totally ignoring the other loans including Deferred Loan, Short term loan, Conversion of shares and Debenture loan, thus the decision of Committee was not with regard to total outstanding liabilities availed by the defendant, thus not binding upon the Bank. It was further contended that the plaintiff/Bank never requested the Committee for adjustment of amount rather it was maneuvered by the Company and on the proposal of the Company the decision was taken by the Committee. It was lastly contended that the Company failed to avail the different packages in their true prospective, therefore, no benefit could be granted to the Company and as per Bank statement the plaintiff/Bank is entitled to the decree as prayed for.
9. Conversely, learned counsel for defendant refuted the arguments of plaintiff and argued that grievance of plaintiff, if any, stood redressed by offering of their proposal and taking case before the Committee constituted by Government of Pakistan duly communicated by State Bank of Pakistan to the plaintiff/Bank. It was further contended that it was the Bank, who took the matter before the Committee and the decision was taken with the mutual consent of the parties before the Committee and the total outstanding amount against the Company was provided by Bank to the Committee and the case was processed on the basis of accounts furnished by plaintiff Bank. It was lastly argued that after mutual settlement, decision of the Committee was finalized. The amount agreed was to be deposited in 12 equal quarterly instalments w.e.f, 1-1-1998 till 1-10-2000 and the same had been duly tendered within time prescribed and nothing is outstanding, out of settled amount.
' I have considered the valuable arguments of learned counsel for the parties and have minutely perused the record with their valuable assistance.
' My issue-wise findings are as below:-- Issue Nos.1 and 9-A.
10. Since the main controversy between the parties revolves around the decision of the Revival of Sick Units of Committee No,5 of the State Bank of Pakistan, therefore, issues Nos.1 and 9-A being interlinked are taken together.
11. In the year 1997, Government of Pakistan announced Special Package for Bank Defaulters/Revival of Sick Units. The State Bank of Pakistan circulated package through BPRD Circular letter No,19 dated 15th June, 1997, to the Chief Executives of all the Banks/Banking Companies. The aforesaid Circular introduced a special Incentive Scheme and thereby provided one time golden opportunity to the Bank defaulters to settle their outstanding dues. Under the scheme, defaulters were given opportunity to pay, instead of their huge liabilities against the facilities availed by them, a concessional amount to be calculated on the basis of said Circular. It was on the desire of the then President of Bank that case of the defendant/Company was referred to Committee No,5 vide letter No,HO/SAMD/RMW/97 dated 28-8-1997, which was initially referred to Committee No,6 and in this regard letter No,CRSU/28 dated 1-9-1997, was addressed by the Committee to Senior Executive Vice President of NBP. In response Senior Executive Vice-President of NBP vide letter No,HO/SAMD/RMW dated 3-9-1997, informed Chairman of the Committee, that Mr. M. Ismail Khan Afridi, Executive Vice President Regional Headquarters, Peshawar was authorized to represent NBP before the Committee with respect to processing of the case of Defendant/Company. It was duly incorporated in Circular No,19 under the heading, Terms of Reference and Guidelines for the Committee; that the settlement arrived at between the parties will be subject to clearance by the competent authorities of the Bank and in case no clearance or objection is received within 7 days from the date of decision, it will be deemed as final.
12. In pursuance of Circular, the Bank through letter No,ZO: R&L/14242 dated 15-8-1997, informed the Company to avail package and the total amount of default was shown as Rs,7,405,013. This was the amount, which was also conveyed to the Committee and upon which settlement was arrived at mutually between the parties. The Committee held its meeting on 2-9-1997 at Corporate Branch, National Bank of Pakistan, Super Market Islamabad. The representative of Bank Mr. M. Ismail Khan Afridi, was assisted by Mr. Ahmad Khan Zonal Chief, NBP, Zonal Office Abbottabad along with Mr. Liaqat Khan, AVP/Manager, National Bank of Pakistan, Main Branch Abbottabad, whereas the Company was represented through Mr. Farid M. Jadoon, Chief Executive and Mr. Ashraf Khan Jadoon Financial Controller of the Company.
13. It is pertinent to note that case of Company was presented before the Committee by Mr. M.
Ismail Afridi representative of the plaintiff/Bank, whereafter recommendations of the Committee were made as under:--
(i) The Committee unanimously recommended that present total liabilities of the Bank amounting to Rs,7,405,013 accepted by both the parties, should be paid back by the Company on the following terms and conditions:
(a) LIMITES Rs, 7,405,013.00
(b) PERIOD Three Years (3)
(c) REPAYMENT 12 equal quarterly instalments starting from 1-1-1998
(d) CUT OFF DATE 31-8-1997
(e) RATE OF MARKUP 49 Ps. Per one thousand on daily products.
(ii) The case of Special Participation Terms Certificate (SPTC's) should be decided by the Bank in accordance with the conditions laid down in the original agreement signed between PICIC and the Mills management (Company).
(iii) It was also unanimously recommended for a special financial audit of the Mills be carried out through well reputed External Chartered Accountants, who are on approved panel of State Bank of Pakistan. The External Chartered Accountant should be requested by the Bank to also comment upon the proportionate use of SPTC's amount to meet the losses sustained by the Company.
14. After decision of the Committee No,5, its minutes were communicated by the Chairman of the Ccmmittee formally through letter No,CRSU/031 dated 4-9-1997 to Sheikh Abdul Wahid, the then Senior Executive Vice President. National Bank of Pakistan, Head Office, Karachi, to peruse the same and take appropriate action at Bank level within the timeframe of 7 days w.e.f, 4-9-1997. This letter was duly received by the concerned quarters on 5-9-1997, which is available on file. Bank failed to make any objection within the given timeframe of 7 days, thus the same attained finality.
15. In the light of decision of the Committee, the payment was to be made in 12 equal quarterly instalments w.e.f, 1-1-1998, till 1-10-2000. As per statement of account provided by the Bank, first instalment was tendered on 1-1-1998 and thereafter regular instalments were paid without any fault or delay by the Company. For the first time on 13-6-1998 i.e,, after six months, vide letter No,BR: ABV: KTM: 98: 616 dated June 13th, 1998, Chief Executive of the Company was informed by Bank that recommendations of Committee No,5, have not been approved, therefore, decision has been taken on part of Bank to institute a recovery suit. It is noticed that at the time of issuance of this letter, the Bank had already received two instalments through Bank Drafts bearing No,384435 and No,384704 dated 5-1-1998 and 31-3-1998 respectively towards the instalment agreed upon in the Committee.
16. It is an admitted fact that under the Incenti.'e Scheme/Relief Package announced by the State Bank of Pakistan, vide Circular No,19, the Bank offered for settlement of defaulted amount under the said scheme to. The Company. The case presented by the Bank had been examined by the Committee in presence of representatives duly nominated by the parties, and it was settled unanimously that the total outstanding amount was Rs,7,405,013.00 and was to be paid in 12 equal quarterly instalments. There is no denial of the fact that the Bank was even informed about the objection/reservation timeframe of 7 days from the communication of decision of the Committee.
But despite the fact that decision was communicated on 4-9-1997 and duly received on 5-9-1997, no reservation/objection was communicated to the Committee within time prescribed, rather the decision was taken on 13-6-1998, i.e, more than 9 months of communication of decision. Even otherwise, the authorized representative of the Bank participated in the meeting and agreed to the decision. This decision was not challenged separately uptill now in any forum, by the Bank. After mutual agreement taken before the Committee, the Bank were estopped by its conduct to raise objection to the decision on the pretext that lesser liability was calculated by the Bank or by the Committee inadvertently. Even before filing of the suit, the Bank received amount under incentive scheMe and thereafter during pendency of the suit, rest of the amount has been duly received by the Bank in the light of settlement arrived at before Committee. As a consequence of the settlement, the defendant had deposited the amount in terms thereof, the Bank could not claim any further amount rather there is an estoppel and waiver on their part. The functionaries of the State and particularly all the Institutions dealing with public money are not expected to resile from their commitments, so that the stream of confidence and trust should flow smoothly, as their transactions depend upon confidence, and the commitments made.
17. A Banking Company cannot deviate from the Circulars issued by State Bank of Pakistan as of their binding nature. The directions issued in the shape of Circulars are as consequence of promulgation of statute or an Act of Parliament. Having its binding nature, the Banks are under obligation to follow the Circulars. Reliance can be placed on the case of "Messrs Petrosin and 2 others u. Messrs Fausal Bank" (2009 CLD 361). Since the incentive scheme was duly complied with by the defendants, therefore, the suit of the plaintiff for recovery of amount was without any force of law and is not maintainable. Reliance can be placed upon the Division Bench judgment of Lahore jurisdiction, reported in the case of "UBL v. Messrs Shifa Medicos and others" 2005 CLD 1006, followed by another Division Bench judgment delivered in the case of "A bicultural Development Bank o Pakistan through Manager v. Rehmat Ali through legal heirs" 2005 CLD 1683, wherein the suits were dismissed on the sole ground that the Incentive Scheme followed by decision of the Committee No,5, was to be honoured by the Bank and suit filed by the Bank was held not maintainable and was dismissed. Issues Nos.1 and 9-A are decided accordingly.
'Issues Nos.9, 10, 11: ---These issues are interlinked and the reply of the same has exhaustibly been given while deciding issues Nos.1 and 9-A, therefore, decided in affirmative.
'Issues Nos.2 and 3: ---As the settlement arrived at between the parties took place in the year 1997, to be effective from 5-1-1998, therefore, the suit filed is well within time. No infirmity could be pointed out by the respondents, therefore, both the issues are decided in negative.
'Issues Nos.4, 5, 7, 8, 8-A: ---Since the total liabilities of outstanding amount had been merged in the package offered by the Bank in terms of Circular No, 19, and duly availed by the defendants, therefore, all the previous liabilities or any dispute with regard to signing of agreement or any earlier constituted Committee decision before 1997 merged into final settlement arrived at, and decision taken by the Government of Pakistan through Committee No,5, therefore, these issues become redundant in the light of decision taken on issues Nos.1 and 9-A.
'Issue No,6:--- The statement of account annexed with the plaint negates the claim submitted by the plaintiff before Committee No,5, therefore, the same cannot be relied upon and not admissible in evidence. However, the statement of account furnished during trial in respect of amount deposited in the light of recommendations of Committee No,5, are admitted correct by both the parties, is admissible in evidence. The issue is decided accordingly.
'Issues Nos.12 and 12-A: ---Since the counter claim by the defendants have not been proved, through cogent evidence, therefore, these issues are decided in negative.
'Relief:--- In view of forgoing discussion and conclusion, the suit of plaintiff is dismissed and the counter claim of the defendant is also refused being not proved. The costs of suit shall be borne by the parties jointed.