' SHAMS MEHMOOD MIRZA, J. --- This appeal directed against judgment and decree dated 15.5.2001 passed by the learned Banking Judge of this Court.
2. Brief facts of the case are that responder bank instituted a suit (C.O.S. No, 29 of 2006) for the recovery of Rs, 54,908,228.97 against the appellants. The said suit was defended by the appellants by filing a join application for leave to defend (PLA No, 62-B/2010). Aft hearing the arguments on the afore-mentioned applicator for leave to defend, the learned Banking Judge of this Co, vide judgment dated 25.4.2007 passed an interim decree f Rs, 12,398,584/- in favour of respondent bank and again the appellants jointly and severally (hereinafter referred to the "Interim Decree") and granted conditional leave defend the suit to the appellants subject to furnishing of bail guarantee in the sum of Rs, 31,049,000/- within a period 30 days. Subsequently the appellants filed an applicator bearing C.M.No, 27/2007 on 23.5.2007 before the learned Banking Judge for substitution of the Bank guarantee with the existing security of mortgaged properties. This application was dismissed on 23.1.2008 but the time for furnishing the bank guarantee was extended for another 20 days. On account of non-compliance by the appellants in the submission of the bank guarantee the final decree was passed on 15.5.2009 for a sum of Rs, 38,075,958/-(hereinafter referred to the "Final Decree").
3. For the sake of completeness of facts, it may be stated that the appellants filed a regular first appeal bearing RFA No, 236 of 2007 against the Interim Decree, which was dismissed on 17.2.2011 on the statement of the counsel for the respondent that the same has become infructuous in view of the filing of the present appeal against the Final Decree.
4. Learned counsel for the appellants has argued that the imposition of the condition for submission of bank guarantee in the Interim Decree was onerous and that in any event the said condition could not have been imposed in view of the availability of adequate security in the shape of mortgaged properties. He has relied upon the judgments reported as Haji Ali Khan & Company etc. v. M/s. Allied Bank of Pakistan Limited (PLD 1995 SC 362) and M/s. S.M. Ayub & Co. And others v.
National Bank of Pakistan and others, 1983 CLC 2828 to support his contention that the learned Banking Judge could not have imposed the condition of furnishing the bank guarantee while granting leave to defend the suit. Learned counsel for the appellant has also made reference to various paragraphs of judgment dated 25.4.2007 whereby leave to defend was granted in order to show that there were serious questions of facts involved in the case. It was also the case of the learned counsel for the appellants that the Interim Decree passed by the learned Banking Judge had merged with the Final Decree and, therefore, the appellants could challenge the passing of the Interim Decree in the present appeal
5. Learned counsel for the respondent bank, on the other hand, has also referred to various paragraphs of judgment dated 25.04.2007 to demonstrate that the appellants had raised a defence which was illusory and not bona fide and, therefore, the imposition of the condition for furnishing the bank guarantee was thoroughly justified in the facts and circumstances of the case.
It was stated that the learned Banking Judge of this Court had discretion in terms of Section 10(9) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance) to impose the condition for furnishing of the bank guarantee. He has relied upon the judgments reported as Kan Rafique Saigol and another v. Bank of Credit and Commerce international (Overseas) Limited and another (PLO 1996 SC 749) and M/s. Shaheen Pumps (Pvt.) Limited v. M/s. Beacon Engineering Industry and another (2006 M LD 1709) to support his case.
6. In order to appreciate the contentions of the learned counsel for the parties, it is imperative to go through the various provisions of the Ordinance governing the issue of passing of interim and final decrees. Section 11 of the Ordinance deals with the passing of interim decree and insofar as it is relevant reads as follows:--- "11. INTERIM DECREE:- (1) If the Banking Court on a consideration of the contents of the plaint, the application for leave to defend of the defendant and the reply thereto, is of the opinion that the dispute between the parties does not extend to the whole of the claim, or that part of the claim is mainly limited to a part of the principal amount of the finance or to any other amounts relating to the finance, it shall, while granting leave and framing issues with respect to the disputed amounts, pass an interim decree in respect of the that part of the Claim which relates to the principal amount and which appears to be payable by the defendant to the plaintiff.
7. Similarly Section 17(1) of the Ordinance deals with passing of the final decree by a banking Court and reads as follows:--- "17. FINAL DECREE:- (1) The final' decree passed by a Banking Court shall, provide for payment from the date of default of the amounts found to be payable on account of the default in fulfilment of the obligation, and for costs including, in the case of a suit filed by a financial institutions costs of funds determined under Section 3."
8. The above provisions of the Ordinance clearly show that the Banking Court is empowered to pass an interim decree for an amount which is undisputed after consideration of the pleadings of the parties as also the documents appended therewith. In this regard, reference may be made to paragraphs 15 and 44 of judgment dated 25.4.2007 (interim Decree), which are reproduced hereunder.
"15. Counsel for the parties have been heard and the record appended perused. With reference to the: defence to be offered by principal debtor(s) it has been noticed that grant and availing of the facilities in question has not been disputed. There is also no dispute inter se the plaintiff and defendants with regard to payments made by said defendants nor is it alleged that such payments are not reflected in the statements of accounts. In fact for all intents and purposes, liability to the extent of Rs, 43,447,583.89 has been admitted in the PLA and it has merely been claimed that value of the allegedly pledged goods be adjusted therefrom.
"44. The upshot of the above discussion is that no defense whatsoever has been set up with respect to the amount of Rs, 1,23,98,584 for which the plaintiff is entitled to an immediate interim decree. With reference to the equitable set off the pledged goods, the claim in this behalf of the defendants does not appear to be well-founded in fact, in law in equity and the defence taken is at best illusory. Consequently, it would be appropriate for the defendants to furnish the bank guarantee for the amount claimed as set off if they seek leave to defend the suit." (Emphasis supplied).
9. It is thus apparent that there was no doubt in the mind of the learned Banking Judge that the appellants had failed to raise any substantial question of fact in regard to claim of Rs, 43,447,583.89 set up by the respondent bank. The learned Banking Judge also came to the conclusion that the defence raised by the appellants with regard to the equitable set off for the pledged goods was illusory and accordingly passed the decree for Rs, 12,398,584/- and granted conditional leave to defend the suit to the appellants subject to furnishing a bank guarantee for the amount claimed as set off.
10. On account of default by the appellants in furnishing the bank guarantee, the learned Banking Judge passed the following judgment/order on 15.05.2009 (Final Decree).
"Vide order dated 25.4.2007 an interim decree was passed jointly and severally against the defendants for a part of the amount claimed. Leave was granted in respect of the balance amount subject to the defendants furnishing bank guarantee for a sum of Rs, 3,10,49,000/- within 30 days. Till date the bank guarantee has not been furnishing. Thus, the condition for grant of leave to defend the suit has not been fulfilled. Consequently, the PLAs filed by the defendants are dismissed."
' A perusal of the record reveals that the plaintiff is entitled to a sum of Rs, 5,04,74,542/- which included principal and mark-up lawfully due and as the interim decree has already been passed for a sum of Rs, 1,23,98,584/-, therefore, a decree in the sum of Rs, 3,80,75,958/- is now passed jointly and severally against the defendant."
11. It is, therefore, clear that the learned Banking Judge had passed the Interim Decree for Rs, 12,398,584/-and the Final Decree was passed in the sum of Rs, 38,075,958/-. These two decrees were distinct and independent and were passed in respect of two separate amounts constituting the entire claim of the respondent bank n the suit. It is equally clear that the final Decree was not adjudication on merits but was Passed .In consequence of the default by the apoilaots in submitting the bank guarantee. In the circumstance, as it cannot be said that with the passing of the Final ' Decree the Interim Decree had merged into it entitling the appellants to challenge the same.
12. The learned counsel for the appellants stated that a learned Division bench of this Court while disposing of RFA No, 236 of 2007 held that the Interim Decree had merged in the Final Decree. Order dated 17.02.2011 reads as follows: "This appeal is filed against the interim order dated 02.04.2007 which has merged into final decree dated 10.5.2009. Accordingly learned counsel for the respondents submits that this appeal has become infructuous."
' The submission made by learned counsel has force. Insofar as the claim by the learned Local Commission contained in C.M.No, 1206/2010 is concerned that may be taken up for determination in the appeal filed against the final decree bearing RFA No, 293/2009. Accordingly in view of the afore noted R.F.A.No, 293/2009, this appeal is dismissed as having become infructuous.
13. While order dated 17.02.2011 passed in RFA No, 236 of 2007 is not directly in issue in the present proceedings, the learned counsel for the appellants still took the position that the Interim Decree has merged in the Final Decree on the basis of the afore-mentioned order. We do not subscribe to the contention of the learned counsel for the appellants that the Interim Decree merged with the Final Decree or that any' such finding was conclusively given by the learned Division Bench seized of RFA No, 236 of 2007, which would have binding effect on the decision of this appeal. The principle of merger of decrees is limited to situations where the decree of a lower Court is modified or altered by the Appellate Court, which results in merger of the decree of the lower Court with that of the higher Court While discussing the scope of preliminary and final decree(s) and the appeals filed there-against, the Peshawar High Court in a judgment reported as Gul Muhammad and others v. Habib Muhammad Khan and another (PID 1960 (W.P.) Peshawar 37) held as follows.
"Preliminary decrees in cases where the statute makes a provision for them stand on and independent footing as independent entities and there is no question of merger of these decrees in the final decrees that follow them preliminary decree does not become extinct after the passing of the final decree, nor does the latter affect the maintainability of an appeal against the former and this will be so even if the appellant has not asked for stay of proceedings after the institution of his appeal or has not filed an appeal against the final decree."
' Similarly, the Hon'ble Supreme Court in a judgment reported as Sultan All v. Khushi Muhammad (PLJ 1983 SC 339) held that "... The preliminary decree stands on its own terms and the Court after taking further proceedings thereon cannot go behind it, nor can the final decree passed in such proceedings amend or go behind the preliminary decree on a matter determined by the latter...."
14. In the same vein, the Indian Supreme Court in a judgment reported as Venkata Reddy and others v. Pethi Reddy (AIR 1963 SC 992) held that "A preliminary decree passed, whether it is in a mortgage suit or partition suit, is not a tentative decree but must, insofar as the matters dealt with by it are concerned, be regarded as conclusive."
15. The ratio of the above judgments coupled with the language of Section 11 of the Ordinance makes it quite clear that the matters dealt with by the Interim Decree were conclusive and final and were unalterable through any proceedings that were taken subsequently in the suit filed by the respondent bank. A fortiori, the Interim Decree did not merge in the Final Decree and both the decrees retained their independent legal status in terms of filing of execution and appeals. We also observe that in the present appeal the appellants did not challenge the Interim Decree and also did not append the certified copy of the Interim Decree with the appeal. We are also of the opinion that with the dismissal of RFA No, 236 of 2007, without adjudication on merits, the basis for challenging the Final Decree is no longer available to the appellants. The Final Decree was passed merely as a consequence for non-fulfilment of the condition attached to the grant of leave to defend the suit. This Court in present proceedings cannot go behind the Final Decree and pass judgment on the merits of the Interim Decree, which did not merge with the Final Decree and was never challenged by the appellants in the present appeal. The judgments relied upon by the learned counsel for the appellants had no relevance to the facts of this case.
16. As regards the attachment of condition to the grant of leave to defend the suit, the Banking Court can do so in terms of Section 10(9) of the Ordinance, which reads as under:- "In granting leave under sub-section (8), the Banking Court may impose such conditions as it may deem appropriate in the circumstances of the case, including conditions as to deposit of cash or furnishing of security."
17. The above provision shows that the Banking Court has the discretion in the matter of imposition of condition while adjudicating upon the application for leave to defend. The learned Banking Judge exercised this discretion by ordering for furnishing of the bank guarantee as he came to the conclusion that the defence set up by the appellants in their application for leave to defend the suit was illusory and not bona fide. The defence of the appellants, according to judgment dated 25.04.2007, was not in respect of the finance facilities or the amounts due there-under rather it was to set off the liability owed by them towards the respondent bank with the pledged goods under the possession of the respondent bank. As the liability was not denied, the learned Banking Judge imposed the condition of furnishing the bank guarantee for the grant of leave to defend the suit.
The discretion for imposing the condition on the appellant was thus rightly exercised by the learned Banking Judge to which no exception can be taken. Reference in this regard may be made to the judgments reported as Mian Rafique Saigol and another v. Bank of Credit and Commerce International (Overseas) Limited and another (PLD 1996 SC 749) and M/s. Shaheen Pumps (Pvt.)
Limited v. M/s. Beacon Engineering Industry and another (2006 M LD 1709). As the appellants did not fulfill the condition attached to the grant of leave to defend the suit, the learned Banking Judge again rightly passed the Final Decree.
18. As regards the claim of the National Bank of Pakistan over the pledged stocks, this matter can very well be decided by the executing Court as we are not entering into any inquiry regarding the status of the available pledged stocks.
19. This appeal having no merit is accordingly dismissed. All the pending applications shall also be deemed to have been disposed of. RFA dismissed.