' NADEEM AKHTAR, J.---Through this common judgment, we intend to dispose of the above noted 22 First Appeals filed by the appellant Pakistan General Insurance Company Limited under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, XLVI of 2001, as the facts thereof are common, they involve common questions of law and are directed against identical judgments dated 18-8-2004 and decrees dated 9-9-2004 passed by the learned Banking Court No.V at Karachi in 22 identical Suits filed by the respondent No.1-bank against the appellant and respondents 2 to 5.
2. The relevant facts leading to the filing of the these appeals are that respondent No.1 in all appeals (Muslim Commercial Bank Ltd.) filed 22 identical Suits against respondents 2 to 5 and the appellant for recovery of the amounts claimed therein. In all the Suits, it was the case of respondent No.1/plaintiff that respondents Messrs Zipy International, Messrs F. T. Enterprises, Messrs Jean Import, Messrs B.A. Traders and Messrs Roland Impex, who are respondent No.2 in these appeals, were their customers and they opened different letters of credit on their behalf for the import of different consignments from Dubai. Messrs Balaji Shipping (U.K.) Ltd., the third respondent in all appeals, was sued as the owner of the foreign vessel/carrier; and, Messrs Riazeda (Pvt.) Ltd., the fourth respondent in all appeals, was sued as the Pakistani agent of respondent No.
3. Respondent No. 5 in all appeals Messrs Akbar Plastic Recycling and Crushing Co. (L.L.C.) was sued as the exporter who had exported the goods to respondent No.2. The appellant which is a public limited insurance company, was sued in the capacity of an indemnifier on the basis of insurance coverage purportedly provided by respondent No.2 to respondent No.1 at the time of opening the letters of credit.
3. It was the case of respondent No.1/plaintiff in all Suits that they opened different letters of credit on behalf of respondent No.2 in all appeals, who provided insurance coverage from the appellant against such letters of credit; respondent No.5 in all appeals shipped the goods from Dubai to Karachi through the carrier/respondent No.3 in all appeals, who accepted the consignment on board their vessel and issued clean bill of lading in respect thereof; upon receipt of shipping documents from the negotiating bank, respondent No.1 demanded immediate payment of the amounts of import bills from all mporters/respondent No.2, who did not retire the documents; and, it transpired that they had wound up their businesses and had disappeared, and also that there was short landing in the consignments. On the basis of the above averments and allegations, the Suits were filed by respondent No.1 against respondents 2 to 5 and the appellant.
4. The Suits were originally filed before this Court in its original civil jurisdiction. However, in view of the order passed on 22-1-2001 by the learned single Judge of this Court, all the Suits were registered as Banking Suits under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act XV of 1997 (the Act XV of 1997'), as the learned single Judge was of the view that the Suits ought to have been instituted under the said Act for recovery of finances provided under letters of credit. Thereafter, the Suits were transferred to the Banking Court as their valuation was less than the minimum pecuniary jurisdiction of this Court acting as the Banking Court under the said Act. After the said transfer, the Suits were registered and renumbered in the Banking Court as Suit Nos.1486, 1487, 1488, 1489, 1590, 1591, 1592, 1593, 1594, 1595, 1668, 1669, 1670, 1671, 1672, 1673, 1674, 1675, 1832, 1833, 1834 and 1835 of 1999. The appellant and respondents 3 and 4 filed their respective applications for leave to defend. Whereas, the Suits proceeded ex parte against respondents 2 and 5 as they did not file any application for leave to defend. Upon promulgation of the Financial Institutions (Recovery of Finances) Ordinance, XLVI of 2001 ('the Ordinance of 2001'), respondents 3 and 4 filed their amended applications for leave to defend as required under section 10(12) thereof.
The appellant filed a statement before the Banking Court that its applications for leave to defend pending in all Suits be treated as amended applications under section 10(12) ibid. Thereafter, the said applications were heard, and vide order dated 27-10-2001, the same were allowed, leave to defend was granted to the appellant and respondents 3 and 4, and following four (4) issues were settled:- "(1) Whether the defendants Nos.2 and 3 fall within the definition of customers/borrowers as defined in the Ordinance No.XLVI of 2001 if so, whether they have any contractual relationship with the plaintiff's to give jurisdiction to this Court?
(2) Whether the claim against the defendants Nos.2 and 3 arises out of contract of carriage evidenced by bill of lading issued by the defendant No.2, if so, whether the Suit against the defendants Nos.2 and 3 fall under the carriage of goods by Sea Act or under the Financial Institutions (Recovery of Finances) Ordinance No.XLVI of 2001, to give jurisdiction to this Court?
(3) Whether the defendant No.4 had issued insurance cover note in favour of the plaintiff's bank or the cover note in question annexed with the plaint as annexure 'D' is a forged and false?
(4) What should the decree be?"
5. Evidence was led by respondent No. 1/plaintiff, respondents 3 and 4 and the appellant by producing their respective witnesses and documents. It is surprising to note that although Issue No.1 was framed to decide whether respondents 3 and 4 fall within the definition of "customer" as defined in the Ordinance of 2001, however, this issue was decided by the Banking Court by holding that respondents 3 and 4 do not fall within the meaning of "borrower" and "customer" as defined in the Act XV of 1997; and, while deciding this issue, the definitions of "borrower" and "customer", as given in the Act XV of 1997, were reproduced and considered in the impugned judgments.
Moreover, no such issue was framed in relation to the appellant. Issue No.2, which did not relate to the appellant, was decided by the Banking Court by relying upon the above referred order dated 22-1-2001 passed by the learned single Judge of this Court directing that the Suits be registered in this Court as Banking Suits under the Act XV of 1997.
6. While deciding Issue No.3, it was noted by the Banking Court that the appellant had denied having provided the insurance coverage as alleged by respondent No.1. However, by relying upon and reproducing a purported 'Marine (Cargo) Joint Survey Report' in the impugned judgments, this issue was decided against the appellant. It was held that as the appellant had joined the joint survey, the law of estoppel will apply against the appellant, and the appellant cannot be exonerated from its liability under Article 114 of Qanun-e-Shahadat Order, 1984. Issue No.4 was also decided on the basis of similar finding. In view of the above findings, the Suits were decreed with costs only against the appellant and the importer/customer/respondent No.2, and no decree was passed against respondents 3, 4 and 5.
7. Mrs. Seema Wasim, learned counsel for the appellant in all appeals, at the very outset attacked the impugned judgments and decrees on the ground that the Banking Court had no jurisdiction either to entertain the Suits or to pass decrees therein against the appellant as the appellant was not the customer of respondent No.1 in terms of section 2(c) of the Ordinance of 2001. It was urged that the Suits filed by respondent No.1 against the appellant were not maintainable, and the impugned judgments and decrees are liable to be set aside on this ground alone. In support of this submission, she placed reliance on (1) Messrs United Bank Limited v. Messrs Adamjee Insurance Company Ltd. And 2 others, 1988 CLC 1660, (2) EFU General Insurance Ltd. Through Executive Vice- President v. Chairman, Banking Tribunal No.1, Lahore, and 3 others, PLD 2001 Lahore 313, (3) Messrs Evergreen Press and 3 others v. Bank of Punjab, 2004 CLD 239, (4) Messrs Grace Textile Mills (Pvt.)
Ltd. And another v. Habib Bank Limited and 5 others, 2003 CLD 1685, and (5) National Bank of Pakistan (N.B.P.) and 5 others v. Punjab Road Transport Board through Managing Director and 3 others, 2003 CLD 653. Without prejudice and in addition to her above submission, the learned counsel contended that insurance coverage alleged by respondent No.1 were never provided by the appellant, nor were any insurance policies issued by the appellant; no amount on account of premium was ever received by the appellant; the alleged cover notes filed and relied upon by respondent No.1 were never issued by the appellant; and, the said cover notes were fabricated documents.
8. On the other hand, Syed Danish Qazi, learned counsel for respondent No.1, contented that the only defence of the appellant before the Banking Court was that the insurance cover notes filed and relied upon by respondent No.1 were fabricated documents; the burden to prove this assertion was squarely upon the appellant; the appellant had miserably failed in discharging the said burden as they had admittedly participated in the joint survey of the consignment; and, as such the Suits were rightly decreed against them by the Banking Court. Regarding the jurisdiction of the Banking Court in relation to the appellant, the reply of the learned counsel was two-fold. His first contention was that no such objection was raised by the appellant before passing of the decrees; in any event, the Suits, in which the appellant was a party, were ordered by the learned single Judge of this Court to be registered in the banking jurisdiction of this Court under the Act XV of 1997, although the same were originally filed as ordinary civil Suits; the appellant did not challenged the said order; and, therefore, the appellant cannot be allowed to question the decrees at this belated stage on the ground of want of jurisdiction. His second contention was that in view of the insurance coverage, the appellant was an "indemnifier" within the meaning of "customer" defined in section 2(c) of the Ordinance of 2001, as such the Banking Court had the jurisdiction. In support of his submissions, he relied upon (1) Salah-ud-Din and another v. The State and another, 2005 MLD 371,
(2) Ghulam Yasin alias Bhaidoo v. The State, 2006 YLR 1775, (3) Mst. Dur Naz and another v. Yousuf and 2005 SCMR 1906, and (4) Shakeel Abbas v. The State, PLD 2004 Peshawar 84.
9. Ms. Asmara Parveen advocate, holding brief for Mr. Shaiq Usmani, learned counsel for respondents 3 and 4, stated that the impugned judgments and decrees declining relief to respondent No.1 against respondents 3 and 4, have not been challenged by respondent No.1; therefore, the same have attained finality, and as such the said respondents are not aggrieved by them.
10. We have heard the learned counsel for the parties at length and have carefully examined the material available on record as well as the law cited at bar. It has been argued with vehemence on behalf of the appellant in all appeals that the Banking Court had no jurisdiction to entertain the Suits or to pass the impugned decrees against the appellant as the appellant was not the customer of respondent No.1. Before us, it is not relevant whether insurance coverage was provided by the appellant against the letters of credit or not. The question that has to be decided in these appeals is whether or not the appellant, which is an insurance company and which may have provided an insurance coverage to the goods imported against letters of credit opened by respondent No.1 on behalf of respondent No.2, falls within the definition of "customer" as given in section 2(c) of the Ordinance of 2001 in relation to any "finance" as defined in section 2(d) of the Ordinance of 2001. It is, therefore, necessary to appreciate, examine and decide this elementary and important question first, which goes to the root of these cases in our opinion. In order to do so, the definitions of "customer" and "finance" envisaged in clauses (c) and (d), respectively, of section 2 ibid will have to be understood, which are reproduced here for convenience and ready reference: "(c) "customer" means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier;"
"(d) "finance" includes --
(i) an accommodation or facility provided on the basis of participation in profit and loss, mark-up or mark-down in price,hire-purchase, equity support, lease, rent-sharing, licensing charge or fee of any kind, purchase and sale of any property including commodities, patents, designs, trade marks and copy rights, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate, musharika, morabaha, musawama, istisnah or modaraba certificate, term finance certificate ;
(ii) facility of credit or charge cards;
(iii) facility of guarantees, indemnities, letters of credit or any other financial engagement which a financial institution may give, issue or undertake on behalf of a customer, with a. Corresponding obligation by the customer to the financial institution ;
(iv) a loan, advance, cash credit, overdraft, packing credit, a bill discounted and purchased or any other financial accommodation provided by a financial institution to a customer;
(v) a. Benami loan or facility that is, a loan or facility the real beneficiary or recipient whereof is a person other than the person in whose name the loan or facility is advanced or granted;
(vi) any amount due from a customer to a financial institution under a decree passed by a civil Court or an award given by an arbitrator any amount due from a customer to a financial institution which is the subject matter of any pending Suit appeal or revision before any Court; any other facility availed by a customer from a financial institution."
11. It is an admitted position that no finance facility was granted by respondent No.1 to the appellant, and the facility of letters of credit was granted by respondent No.1 to respondent No.2/importer. It was the case of respondent No.1 before the Banking Court that the appellant was their customer in view of the insurance coverage provided by the appellant against letters of credit opened by them on behalf of respondent No.2. The impugned judgments are completely silent whether the appellant was held to be a customer of respondent No.1 or not as no issue to this effect was framed, although Issue No.1 was specifically framed as to whether respondents 3 and 4 fall within the definition of customers under the Ordinance of 2001. It appears that the suits were decreed against the appellant because of the words "as well as a surety or an indemnifier" included in the definition of customer given in section 2(c) ibid. The question whether an insurance company could be sued or not in the banking jurisdiction on the basis of an insurance policy issued in respect of goods imported against letters of credit, came under discussion before a learned Division Bench of this Court in the case of Messrs United Bank Limited v. Messrs Adamjee Insurance Company Ltd. And 2 others, 1988 CLC 1660, cited and relied upon by the learned counsel for the appellant. At that time, the applicable law was the Banking Companies (Recovery of Loans)
Ordinance, 1979 ("the Ordinance of 1979"). In the cited case, an objection was raised by the insurance company before the Banking Court that the Suit could not have been filed against them under the Ordinance of 1979 as they were neither borrower nor a surety or an indemnifier in terms of clause (b) of section 2 of the Ordinance of 1979. The order of the Banking Court sustaining this objection was challenged in appeal by the bank before the learned Division Bench of this Court.
Before discussing the findings of the learned Division Bench in the said case, which are relevant to the facts and circumstances of these cases in our opinion, it would be advantageous to reproduce here the definition of "borrower" given in section 2(b) of the Ordinance of 1979: "(b) "borrower" means a person who has obtained a loan from a banking company and includes a surety or an indemnifier; "
12. It is significant to note that the above-quoted definition of "borrower" in the Ordinance of 1979 is pari materia with the definition of "customer" given in section 2(c) of the Ordinance of 2001, as both include a surety or an indemnifier. Coming back to the case of Messrs United Bank Limited (supra), their lordships were pleased to hold in paragraph 5 as under: ' In our view the provisions of the Ordinance are to be construed strictly and the same cannot be extended to a case unless it is covered by the provisions of the Ordinance. We are inclined to hold that an Insurance Company, which may have issued a Marine Insurance Policy in respect of the goods which were to be imported against the L/C opened by a banking company on behalf of a borrower is not covered by the definition of "borrower" as given in clause (b) to section 2 of the Ordinance. It is true that the Insurance Company is an indemnifier but it is not an indemnifier in the sense in which it has been used in the definition of the word 'borrower' in above-quoted clause (b).
The Insurance company is an indemnifier for any losses, the insured may sustain through the agency of the sea risks insured against i.e. Any loss occurring by means of any of the perils insured against and not in relation to the loan contract. The Insurance Company is to be sued on the Insurance Policy and not on the contract of loan or contract of indemnity in relation to the loan.
Furthermore, the liability of an Insurance Company is not co-extensive with the liability of a borrower. If the borrower had obtained a loan of rupees five lacs from a banking company for opening L/C and say that the goods in transit were damaged resulting into loss say, of Rs.20,000 only, the Insurance Company would be liable under the Marine Insurance Policy to the extent of Rs.20,000 and not to the above amount of loan with interest thereon etc."
(Emphasis added)
13. The case of Messrs United Bank Limited (supra) decided by the learned Division Bench of this Court was consistently followed by a learned Division Bench and two different learned single Judges of Lahore High Court in the under mentioned cases cited and relied upon by the learned counsel for the appellant. In the case of Messrs Evergreen Press (supra), the learned Division Bench of Lahore High Court was pleased to hold that the insurance company is an indemnifier for the loss of the insured, but it is not an indemnifier in the sense of definition of borrowers or customers as set out in the Banking Laws. In EFU General Insurance Ltd. (supra), it was held that the insurance company did not indemnify against non-payment of the Suit amount. It was held inter alia in Messrs Grace Textile Mills (Pvt.) Ltd. (supra) that insurance companies were not insurers of the customer's obligations towards the financial institution under the finance agreement; they extended insurance against losses through fire or otherwise of building, machinery, etc. Under the contract of insurance; the customers were unable to show that financial obligations under the finance agreement between them and the financial institution were undertaken by the insurance companies to be settled by them upon their default; and, therefore, insurance companies cannot be held to be guarantors or indemnifiers to fall within the definition of customers under section 2(c) of the Ordinance of 2001.
14. At this stage we deem it necessary to refer to the case of Messrs Moghul and Sons through Partner v. NIB Bank Ltd. And another, 2012 CLC 1915, recently decided by a Division Bench of this Court, which was authored by one of us (Nadeem Akhtar, J.). It has been held in the said case that though a surety or an indemnifier have also been included in the definition of "customer" in section 2(c) of the Ordinance of 2001, this does not mean that any kind of indemnity or all indemnities given by a person bind such person as an indemnifier under section 2(c) ibid; and, an indemnifier shall fall within the definition of customer only if he agrees to indemnify on behalf of the principal borrower/customer.
15. In these appeals, the case set up by respondent No.1 admittedly was that the appellant provided insurance coverage against letters of credit opened by them on behalf of respondent No.2, which assertion has all along been denied by the appellant. However, if this assertion is accepted, even then the appellant cannot be deemed to be an indemnifier and does not fall within the definition of "customer" of respondent No. 1 as defined in section 2(c), ibid in view of the fact that the appellant did not indemnify against non-payment of any amount or non-fulfilment of any obligation by respondent No.2/customer/importer under the finance agreement. Consequently, it cannot be said that the appellant had committed default in the fulfilment of any obligation relating to the finance even if such default was committed by respondent No.2/customer/importer. The above view expressed by us is fortified by the cases discussed above which are fully applicable to the facts and circumstances of the instant appeals, especially the case of Messrs United Bank Limited (supra). It is, therefore, held that the appellant, being an insurance company, could be an indemnifier, but not in the sense in which it has been used in the definition of "customer" in section 2(c) ibid; and further, that the appellant is not a customer of respondent No.1 within the meaning of section 2(c) ibid in relation to any finance as defined in section 2(d) ibid.
16. The next question before us is whether or not the Banking Court had the jurisdiction to entertain the Suits against the appellant and to adjudicate upon the same. The jurisdiction of Banking Court is governed only by subsection (1) of section 9 of the Ordinance of 2001, which is reads as under:-- "9. Procedure of Banking Courts -
(1) Where a customer or a financial institution commits a default in fulfilment of any obligation with regard to any finance the financial institution or, as the case may be, the customer, may institute, a Suit in the Banking Court by presenting a plaint which shall be verified on oath in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.
17. After closely examining section 9(1) ibid, our humble opinion is that the language used therein is absolutely unambiguous and confirms that, (A) only a "financial institution" or a "customer", as defined in clauses (a) and (b), respectively, of section 2 of the Ordinance of 2001 can invoke the jurisdiction of Banking Court by instituting a Suit against one another; (B) the cause of action for filing the Suit must arise out of a breach either by the financial institution or the customer in the fulfilment of an "obligation" as defined in clause (e) of section 2 ibid; (C) such breach must be a breach with regard to any "finance" as defined in clause (d) of section 2 ibid; (D) the relationship between the parties to the Suit must be that of a financial institution and customer; and (E) such relationship must emanate from any "finance" as defined in clause (d) of section 2 ibid.
18. We do not agree with the learned counsel for respondent No.1 that the objection regarding the jurisdiction of Banking Court cannot be agitated at this stage by the appellant. It is well-settled that Courts are duty-bound to decide fundamental questions that may affect the legality of the proceedings before them, such as jurisdiction and limitation, at the earliest possible stage even if an objection to this effect has not been raised. In any event, the question of jurisdiction, being a legal one, can be raised even at the appellate stage. The judgments relied upon by the learned counsel for respondent No.1 have no bearing to the facts and circumstances of these cases as they pertain to criminal cases.
19. We have already held that the appellant is not a customer of respondent No.1 within the meaning of section 2(c) ibid in relation to any finance as defined in section 2(d) ibid. After giving due consideration to all the aspects of these cases, we have no hesitation in holding further that there is no relationship of financial institution and customer between respondent No.1 and the appellant; the Banking Court had no jurisdiction to entertain or adjudicate upon the Suits against the appellant; and, all the impugned judgments and decrees against the appellant are coram non judice. As such, the same cannot be allowed to remain in the field and are liable to be set aside.
20. Before parting with these cases, we would like to express our gratitude to Mr. Ijaz Ahmed Advocate, who took out time to assist us in these matters at our request.
21. As a result of the above discussion, all these appeals are allowed with costs, and the impugned judgments and decrees are hereby set aside.