' AMIN-UD-DIN KHAN, J.---Through this single judgment we intend to decide instant appeal as well as R.F.A. No,395 of 2004, R.F.A. No,362 of 2003 and F.A.O. No,254 of 2008 as common questions of law and fact are involved in all these matters.
2. R.F.A. No, 395 of 2005 has been directed against the judgment and decree dated 15-7-2005 whereby learned Judge Banking Court, Lahore returned the plaint on the ground that court lacks jurisdiction.
3. Brief facts are that plaintiff-appellant filed a suit against the defendants under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 before the Banking Court, Lahore on 22-11-2002 for recovery of 2,042,059.22 UAE Dirhams equivalent to Rs,3,32,85,565.28 on the grounds that plaintiff is the branch of HBL at Deira Dubai, UAE; that defendant No, 1 is a limited liability company incorporated under the Commercial Companies Law of UAE; that defendants Nos. 2 to 5 are Directors of defendant No, 1 and guarantors for repayment of advances/credit/financial accommodation allowed by the plaintiff to defendant No, 1 in UAE; that defendants availed various finance facilities and operated their various accounts till March, 2002 and that on account of reported differences between defendants Nos. 2 to 5 they stopped trading and fled the UAE in order to avoid payment of their outstanding liabilities to the plaintiff. With regard to cause of action Para 10 of the plaint is reproduced: 'The cause of action arose to the plaintiff against the defendants jointly and separately on the various dates detailed in the attached statements of accounts when the defendants availed the sanctioned finances and operated the said accounts, on various other dates including 17-4-2001 when the defendants furnished various securities including personal guarantees of defendants Nos. 2 to 5 for re-payment of the sanctioned finance-facilities, in March, 2002, when defendants stopped trading and fled the UAE to avoid re-payment of their outstanding liabilities, and the cause of action is a continuing one."
' Para 11 of the plaint relates to jurisdiction of Court, same is also reproduced:- "Defendants Nos.2 to 5 reside and carry on business at Lahore, and defendants have closed the business of defendant No, 1 in Dubai and have fled Dubai/UAE and hence this honourable Court has jurisdiction to entertain and adjudicate upon this suit."
' On the objections raised by the defendants in their PLA a preliminary issue was framed by the learned trial court i,e, "whether this court lacks the territorial jurisdiction to entertain this suit? OPD 2 to 5". - ' While deciding the preliminary issue in favour of defendants the plaint was returned.
4. Brief facts of R.F.A. No, 395 of 2004 titled "UBL v. W.R.S.M Trading Company and others" are that plaintiff-appellant, a branch of UBL at Murshid Bazar, Deira Dubai, United Arab Emirates, advanced a loan facility to defendants-respondents in UAE and on non-fulfillment of liability when defendants Nos. 2 to 5 fled UAE. A suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 has been filed in the Lahore High Court with the powers of Banking Court for recovery of 14,106,262.72 UAE Dirhams on the ground that plaintiff is a branch of UBL at Murshid Bazar, Deira Dubai, United Arab Emirates and defendant No, 1 is a limited liability company incorporated under the Commercial Companies Law of UAE. With regard to cause of action and territorial jurisdiction Para No, 16 of the plaint is reproduced for ready reference:- "That the cause of action arises in favour of the plaintiff against the defendants, within the territorial jurisdiction of this honourable Court since the defendants Nos. 2 to 5 reside and carry on business within the territorial jurisdiction of this honourable Court. The cause of action first arose on 24-3-1996 when the defendants Nos. 2 to 5 executed loan and security documents including personal guarantees to secure the finances extended by the plaintiff to the defendant No,1 and subsequently also arose when amounts were siphoned off from the plaintiff to be diverted for the use of a company, Waheed Brothers (Pvt.) Ltd. Exclusively controlled by the defendants Nos. 2 to 5 in Lahore, Pakistan. The cause of action further arose on or before March, 2002 when the defendants with intention to dishonestly evade their obligation to the plaintiff absconded and returned to their place of original and permanent domicile in Lahore, Pakistan. The cause of action further arose in April 25, 2002/June 1, 2002, when the defendants Nos. 3, 4 and 5 wrote to the plaintiff through their legal representatives in Karachi and Lahore denying any liability whatsoever to the plaintiff. It is also pertinent to mention that the defendants own and control substantial assets and properties in terms of section 17 of the Ordinance within the territorial jurisdiction of this honourable Court."
' Therefore, prayer for grant of a decree has been made.
5. On 28-4-2004 defendants Nos. 3, 4 and 5 stated that a decree has been passed on the subject matter brought before this Court by a Court at UAE rendering the suit in hand infructuous, the learned Single Judge of this Court consigned the C.O.S. No, 27 of 2002, which is subject matter of this appeal. Thereafter, the plaintiff-bank moved an application i,e, C.M. No, 136-B of 2004 with the prayer that order dated 28-4-2004 be recalled and direction be issued for production of certified copies of judgment/decree passed by the learned Dubai Court, so as to see implication of section 13 of the C.P.C. Vide order dated 29-7-2004 the learned trial Court dismissed the application on the ground that two suits for recovery of one finance facility are not maintainable and the application was also dismissed on the ground that court has become functus officio and after passing the order only a clerical mistake can be corrected under section 152 of C.P.C. Hence, this appeal.
6. Subject matter of R.F.A. No,362 of 2003 is a suit filed l y the respondent-plaintiff Bank of Oman Limited, a Banking Company incorporated in United Arab Emirates with its registered office at Dubai and a Branch at 48-Shahrah-e-Quaid-e-Azam, Lahore, for recovery of Rs,1,47,719.63 equivalent to 31650.59 UAE Dirhams before the Special Judge Banking, Lahore (Jurisdiction under the Banking Companies (Recovery of Loans) Ordinance, 1979 on 7-1-1988.
' Brief facts are that plaintiff-respondent Bank allowed a loan facility to appellant-defendant in UAE and defendant also executed an agreement dated 9-11-1984 in this regard. Loan was disbursed to the defendant and defendant by crediting his Account No,06-93-10029-4 maintained in the plaintiff's branch known as Riga Branch in Dubai and he acknowledged his liability vide letter dated 8-9-1985 and also executed 10 cheques to liquidate the same but when the cheques were presented for encashment it revealed that defendant did not deposit any amount in his account. It has been further pleaded in Para No, 2 of the plaint "Additionally, the defendant executed 10 Demand Promissory Notes which, as per law of United Arab Emirates were not required to be stamped. With regard to cause of action Para 5 of the plaint is necessary to be reproduced:- "That the cause of action arose firstly on 9-11-1984 when the agreement was executed by the defendant; secondly on 8-9-1985 when he acknowledged his liability; thirdly on different dates for which he drew cheques - the last being date 28-9-1986 and lastly about a month ago, when the defendant refused to liquidate his liability."
' Leave application was filed, the same was granted on 19-6-1999 and thereafter issues were framed and after trial ultimately vide judgment and decree dated 5-7-2003 the suit was decreed, hence, this appeal.
7. Subject matter of F.A.O. No,254 of 2008 titled "Habib Bank A.G. Zurich v. WRSM Trading Company etc." is also a suit filed by plaintiff-appellant HBL main Branch at Baniyas Square, Deira Dubai, UAE against the respondents for recovery of 1,938,328.49 UAE Dirhams equivalent to Pakistani Rs:31,400,000.
' The facts as mentioned in the plaint are that defendant No, 1 through its partners- Directors/defendants Nos. 1 and 2 opened an account on 3-5-1992 with the plaintiff's main branch, Deira Dubai, UAE and availed finance facility in the form of Over Draft, Sight Letter of Credit/PAD and loan against the Trust Receipt, which was enhanced from time to time and lastly on 1-8-1999 up to the total limit of 5,500,000 UAE Dirhams and they executed security documents as mentioned in Para 10 of the plaint and that the defendants did not clear the liability, therefore, the suit amount is recoverable from them. Para 14 of the plaint is with regard to cause of action, which is reproduced:- "That the cause of Action arose in favour of the plaintiff Bank and against the defendants firstly when they opened the current account and secondly on the various dates on which the agreements and documents mentioned above were executed. It has also accrued in view of the breaches of the agreement by the defendants on it finally arose on which the defendants despite the notice serviced by the plaintiff Bank failed to adjust their liabilities towards the plaintiff Bank which continues till the filing of the suit."
' Para No, 15 of the plaint is about jurisdiction which is reproduced:- "That the defendants reside at Lahore, therefore, this Hon'ble Court has the exclusive jurisdiction to adjudicate upon the present suit.
' Application for leave to defend was filed and objection of jurisdiction of court to entertain the suit was raised on the ground that loan was disbursed in Dubai where "Financial Institution and borrower" run their business permanently and the documents were also executed there. The learned trial court heard arguments on the PLA filed by the defendants and holding that the statement of account was not proper statement of account and this Court lacks territorial jurisdiction to entertain this suit, returned the plaint. Hence, this appeal.
8. Now we decide question in controversy relating to all the cases mentioned supra. As some reference of contract is required, therefore, we will refer the record and contract which is 'subject matter of the titled appeal i,e, R.F.A. No, 395 of 2005. The issue involved is that admittedly the bank incorporated within Pakistan having its branch in a foreign country advanced certain finance facilities to respondents at Dubai, the contract was arrived at between the parties in the foreign country and the laws of that country were applicable on that contract, whether in case of default the. Bank can file a suit in Banking. Court in Pakistan?
9. We have heard learned counsel for the parties. The arguments advanced by learned counsel for the parties were very lengthy and learned counsel for the parties referred many judgments to establish their point of view argued before us. As we have noted that the point in issue is simple one and most of the case-law referred by learned counsel for the parties is not with regard to matter in issue, therefore, no need to note all the citations referred by the learned counsel for the parties.
10. Learned counsel for the appellant has mostly referred section 20 of the C.P.C. To argue that suit was maintainable and the case-law relating to section 20 of C.P.C. Was referred. We are of the view that section 20 of the C.P.C. Is not directly applicable in this matter as section 20 of C.P.C. Is procedural in nature which speaks for place of filing of a suit, but right of filing, of a suit under special enactment is a substantial right and not only a procedural matter, therefore, for resolving the matter in issue we have to see the provisions of Financial Institutions (Recovery of Finances)
Ordinance, 2001 as well as certain clauses of the documents executed by the parties for advancement of the loan.
11. We can take benefit of clause (b) from page 2 of the Sanction Letter and clause 4 of letter of arrangement, which are respectively reproduced as follows:- Clause (b): Compliance by (WRSM Trading Co. LLC) with all local regulations, including Central Bank of UAE mandated Regulations and indemnification of HBL for any penalties levied on HBL in case of non-compliance."
Clause 4: I/We also agree that the interests under this LETTER OF ARRANGEMENT shall be calculated at the rate over the rate of interest on the fixed deposit for one year as prescribed by the UAE Currency Board from time to time or at such rate as the Bank may from time to time advise and that shall be charged on the daily balance of any overdrawn account and debited in accordance with the BANK's usual practice together with accession and other charges and expenses.
' The Letter of Arrangement shows that advancement of finance facility is interest based plus the rate will be accordingly fixed deposit for one year as prescribed by UAE Currency Board, which clearly means that the contract was arrived at between the parties in accordance with the local laws where the contract was being executed. At this stage it would be useful to refer to circulars BCD No, 13 of 1984 and BCD No, 32 of 1984 issued by the State Bank of Pakistan, which are reproduced hereunder:- "BCD Circular No,13 of 1984 STATE BANK OF PAKISTAN Banking Control Department Central Directorate Karachi BCD Circular No,13 [Dated: June 20, 1984] All Banks, Dear Sirs Elimination of 'RIBA' from the Banking System As has been announced by the Finance Minister, it is the intention of Government that the Banking System should shift over to Islamic modes of financing during the course of the next financial year.
These modes of financing have been described in Annexure I. This shift will take place according to the following programme:
(i) As from the 1st July, 1984, all banking companies will be free to make finance available in any of the modes of financing listed in Annexure I. However, as a transitional arrangement, they will also be free to lend on the basis of interest, provided that no accommodation for working capital will be provided or renewed on interest basis for a period of more than six months.
(ii) As from the 1st January, 1985, all finances provided by a banking company to the Federal Government, Provincial governments, public sector corporations and public or private joint stock companies shall be only in any one of the modes indicated in Annexure I.
(iii) As from the 1st April, 1985, all finances provided by a banking company to all entities, including individuals, shall be on the same basis as mentioned in (ii) above.
(iv) The appropriate mode of financing to be adopted in any particular case will be settled by agreement between the banking company and the client. Some possible modes of financing for various transactions have been shown in Annexure
(v) As from the 1st July, 1985, no banking company shall accept any interest-bearing deposits. As from that date, all deposits accepted by a banking company shall be on the basis of participation in profit and loss of the banking company, except deposits received in Current Account on which no interest or profit shall be given by the banking company.
(2) The instructions contained in item (i), (ii) and (iii) above shall, however, not apply to on-lending of foreign loans which will continue to be governed by the terms of the loans. Likewise, the instructions contained in item (v) above shall not apply to foreign currency deposits.
(3) The above instructions are being issued under the Banking Companies Ordinance, 1962. Further instructions, where necessary, will follow. Please acknowledge receipt. Yours faithfully (SIBGHATULLAH) Director"
"BCD Circular No,32 of 1984 STATE BANK OF PAKISTAN Banking Control Department Central Directorate Karachi BCD Circular No,13 [Dated: November 26, 1984] All Banks and Development Finance Institutions.
Dear Sirs Elimination of 'RIBA' from the Banking System Bank Charges ' Please refer to BCD Circular No,13, dated the 20th June, 1984.
(2) Vide BCD Circular No,7, dated the 28th March, 1984 bank charges except charges for home remittances, have been deregulated. The schedules of bank charges received from the banks show that the following items of bank charges are based on interest:--
(i) Mark-up in the case of import bills under important letters of credit.
(ii) Mark-down in the case of documentary bills drawn against inland letters of credit.
(3) The schedules also provide for levy of overdue/penal interest in case of non-retirement/non- payment of inland cheques, bills etc., purchased.
(4) In exercise of the powers vested in it under the Banking Companies Ordinance, 1962, the State Bank of Pakistan is pleased to direct that as from the 1st January, 1985, interest, wherever charged by a banking company/development finance institution in any of the items of bank charges, shall be replaced by a non-interest mode considered appropriate by it. Moreover, overdue/penal interest or mark-up on mark-up shall not be charged by a banking company/DFI as from that date. Instead, it may take legal steps for recovery of the overdue finance.
(5) Please acknowledge receipt. Yours faithfully (SIBGHATULLAH)
Director"
' No interest based transaction can take place in pakistan after 1-1-1985 as provided in BCD circular No,13 dated 20-6-1984. It is not out of place to mention here that BCD circulars are issued by the State Bank of Pakistan in exercise of powers under sections 3-A, 25 and 41 of the Banking Companies Ordinance, 1961 and would have a force of law. Any contract or agreement executed in violation to the BCD circular would come within the mischief of section 23 of the Contract Act being contrary to law and would therefore not be enforceable to the Banking Court established under section 5 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. If the arguments advanced by learned counsel for the appellant are accepted then it will be extending jurisdiction of the Banking Court beyond the territories of Pakistan and further when the transaction was governed by the laws of the foreign country and forum of enforcement of rights and obligations in consequences of the transaction was also available there and only on the ground that the defendant had allegedly fled from Dubai and permanent address of some of the defendants is of Pakistan, therefore, the courts in Pakistan had jurisdiction to entertain the suit.
12. The most relevant is the definition of "Financial Institution", which is provided under the definitions mentioned in section 2 of Financial Institutions (Recovery of Finances) Ordinance, 2001, which is reproduced as under:- "Financial Institution" means and includes---(i) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a government savings bank, but excludes the State Bank of Pakistan;
(ii) A modaraba or modaraba management company, leasing company, investment bank, venture capital company, financing company, unit trust or mutual fund of any kind and credit or investment institution; corporation or company; and
(iii) any company authorized by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify."
'We have thoroughly gone through this definition, under section 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001 before a Banking Court the Financial Institution or a customer can file a suit and none else. In this case when it has been claimed that plaintiff-appellant is a financial institution, the plaintiff to prove that it is "financial institution" under the definition clause of section 2 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. As we have noted supra we have carefully and thoroughly read the definition of "financial institution", what we have been able to gather from the definition of "financial institution" is that a company may be incorporated within or outside Pakistan and transacts a business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan, means that transaction must have taken place in Pakistan. It is not necessary that the branch of that company may be situated within Pakistan or outside Pakistan but for falling within the definition of "Financial Institution" the transaction must be within Pakistan. When any branch of company situated within Pakistan or outside Pakistan does not transact a business within Pakistan for that transaction that institution cannot be said to be a "financial institution". When for the purposes of that transaction the company is not a financial institution, therefore, in case of default by the other side the company cannot file a suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 in Pakistan.
13. In the light of what has been discussed above, we are clear in our mind that for the transaction in question or for filing of suit in Pakistan under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the appellant bank is not a financial institution under section 2(a) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, therefore, the order of return of plaint passed by the learned Banking Court has no exception. Resultantly, R.F.A. No, 362 of 2003 is allowed, judgment and decree impugned therein are set aside and plaint is returned. R.F.A. No,395 of 2005 as well as R.F.A. No, 395 of 2004 and F.A.O. No, 254 of 2008 are not maintainable, same stand dismissed.
Plaint returned.