C.M.A. NO. 6129 OF 2008 AZIZ-UR-REHMAN, J.---The Plaintiff Bank has filed the above suit against defendants under section 9 of the Financial Institutions [Recovery of Finances] Ordinance, 2001 [hereinafter referred to as F.I.O., 2001] for recovery of Rs,59,570,004.06 and cost of funds with the following prayers:-
[i] For judgment and decree against the defendants jointly and severally in the sum of Rs, 59,570,004.06 together with 'markup at 0.046 paisas per thousand per day from the date of institution of the suit until judgment and decree and further 'mark-up' at the same rate until realization of the entire decretal amount.
[ii] For sale of the stocks/goods pledged/charged to the Plaintiff as security as specified in Stock Reports situated in the godowns of Defendant No,1 at Quality Godown, Multan and Riaz Cotton Factory, BCG Chowk, Milian.
[iii] for a final mortgage decree for sale of Property bearing Khewat No,I36, Khatoony No,263, Khasra No,225 [area 8-0-0], 226 [area 8-0-0], 227 [area 8-0-0], 228 [area 8-0-0], 229 [area 8-8-0], 232 [area 7-16-0], 233 [area 8-18-0], 234 [area 8-18-0], 235 [area 8-18-0], 236 [area 8-0-0], 260 [area 8-18-0], 261 [area 5-0-0], 262 [area 1-17-0], and 263 [area 7-7-0], total area 106 kanals, located at Mauza Tarra, Tehsil and district Lahore and payment of the sale proceeds; towards the claim in suit.
[iv] For cost of the funds at the rate certified by the State Bank of Pakistan.
[v] Costs.
[vi] For such further and other relief or reliefs as this Honourable Court may deem, fit and proper in the circumstances of the case.
2. Precisely, the relevant stated facts are as follows:-
3. The plaintiff is a Banking Company registered under the Companies Ordinance, 1984 having its'
Principal Office at Mackinnons Building, I.I. Chundrigar Road, Karachi, and carrying on its' business of banking as defined under section 2[a][i], inter alia, at its' Cloth Market Branch, M.A. Jinnah Road, Karachi.
4. The Defendant No,1 is a Partnership firm and has been sued in its capacity as the principal customer. Defendants Nos.2 to 8 besides partners of Defendant No,1 are guarantors and Defendant No,9 is a mortgagor, all fell within the meaning of section of 2[c] of F.I.O., 2001, and are thus customers. According to the Plaintiff Bank, at the request of Defendants, the Plaintiff Bank extended finance facility in the nature of FIM facility[ies] from time to time including FIM facility of Rs,183,522,849 in June, 2005. While, an amount of Rs,148,500,000/- on account of the aforesaid facility, was outstanding, then at the request of Defendant No,1, the Plaintiff Bank, established Letter of Credits for the import of 15,000 metric tons of fertilizer of Russian origin of the value of US $ 4,410,000.00 equivalent to Pak Rs,263,629,800/- in favour of foreign supplier against security, inter alia, against the pledge of the imported stock. In this regard, two letters of Defendant No,1 dated 16th August, 2005 and 19th August 2005, Letter of Credit dated 20.08.2005 and Agreement of Finance on 'mark-up' basis dated 24th September, 2009 are available on record.
5. For availing of the aforesaid facility, Defendant No,1 duly signed, executed and delivered to the Plaintiff Bank an Agreement for Financing on 'mark-up' basis dated 24.09.2005 [Annexure B to the plaint]. Per the said Agreement for Finance, the Defendant No,1, expressly agreed to pay the Plaintiff Bank, the agreed 'purchase price' in the sum of Rs,300,488,000.00 on or before 23.9.2006. The three debits entries against PAD of the L/C are as follows:-
[i] Rs,31,698,900 on 24.9.2005
[ii] Rs,31,699,080 on 28.9.2005
[iii] Rs,174,344,940 on 30.9.2005
6. The total of the aforesaid amount comes to Rs,237,742,920/- after receipt of payment of margin.
Towards acknowledgment of the liability and as a security for the repayment of the facility so granted to and availed, the Defendant No,1 signed, executed and delivered Demand Promissory Note dated 24.9.2005 in the sum of Rs,300,488,000/- [Annexure 'B-1' to the plaint], letters of pledge of the Stocks all dated 24.9.2005. Apart from the above documents, duly signed, executed and delivered by the Defendant No,1 to the Plaintiff Bank. The Defendants Nos.2, 5 and 6 also signed, executed and delivered to the Plaintiff Bank their continuing personal guarantees [Annexure 'B-6 to 'B-8' to the Plaint]. On arrival of the imported consignment of 15,000 metric tons of MAP, the same was stored under the pledge of the Plaintiff Bank, at places as mentioned below:-
[i] 4342 M/Tons at Plot No,185/A, Haroonabad, SITE, Karachi.
[ii] 4691 M/Tons at Quality Godown, Multan.
[Hi] 2727 M/Tons of Riaz Cotton Factory BCG Chowk, Multan and [iv] 3240 M/Tons at Tobacoo Godown Satghara Chowk, Okara.
The above stock/goods at all relevant times, of course, remained as continuing security for and towards the repayment of the finances extended by the Plaintiff to Defendant No,1. No doubt, the facility so extended was fully availed by Defendant No,1. The Defendant No,1, as per its request, cleared the pledged stocks, stored in the Godowns at Karachi and Okara and partly adjusted from the sale proceeds thereof its outstanding liability, leaving behind a balance of Rs,106,127,000.00 as outstanding amount.
7. Upon the request of Defendant No,1, for renewal/extension of time, the aforesaid facility was renewed in terms of Agreement for Financing on 'markup basis dated 21.9.2006 [Annexure 'D' to the plaint] in favour of Defendant No,1. The 'purchase price' mutually settled between the Plaintiff Bank and Defendant No,1, under the aforesaid Finance Agreement of 21st September, 2006, is Rs,123,107,500.00. For and to secure the repayment of the purchase price, the Defendant No,1, also signed and executed Demand Promissory Note dated 21.9.2006 in the sum of Rs,123,107,500/- [Annexure 'D-1' to the plaint] and letter of pledge dated 21.9.2006. Apart from the aforesaid documents, the Defendants Nos.1, 2 to 8 also signed, executed and delivered their continuing personal guarantees for securing and ensuring the repayment of the outstanding amount of 'financial facility' extended to and availed by the Defendant No,1. Notwithstanding, the execution of aforesaid documents and commitments, the Defendants, however, failed and/or avoided to liquidate their outstanding liabilities.
8. Later on, manifestly due to the Defendant No,1 's in-ability to adjust/liquidate the outstanding liability, the Defendant No,9, at the instance of Defendant No,1 requested the Plaintiff Bank for the grant of further time for repayment of the dues, however, only after the Defendant No,9 offered 'additional security' in its capacity as a mortgagor. The Defendant No,9 thus deposited the 'original title documents' of its immovable property located at Mouza Tara, Tehsil and District Lahore,.
Measuring 106 Kanals, with intention of creating an equitable mortgage in favour of the Plaintiff Bank as security for the repayment of the outstanding. The 'original title document' i.e, registered Beynama of 08.3.2004, with intention to create mortgage thereon was thus deposited [See annexure 'E' to the plaint]. The 'title documents' of the aforesaid property having already been deposited is still lying and is in the custody of the Plaintiff Bank. The Defendants despite, fully availing the financial facilitypes] by the Defendant No,1, and notwithstanding of making some repayments, nonetheless, despite 'repeated requests and reminders, failed and/or avoided to liquidate the balance outstanding amounts i.e, in the sum of Rs,59,570,004.06 as on 13.03.2008. The 'break-up' of the amount of finance availed, the amounts repaid and the balance outstanding amounts is as follows:- S.No,Description Amount The amount of finance availed by the Defendant No,) from the PlaintiffRs,237,742,920.00 Amount P aid by the Defendant No,1 upto.Rs,181,399,920.00 The amount of finance and other amount relating to the finance payable by the Defendants to the Plaintiff Bank upto the date of institution of the suit [including amount of `mark-up'
Rs, 3,227,004.06 with effect from 1.10.2007 to 13.3.2009]Rs, 59,570,004,06
9. For repayment of the aforesaid outstanding amounts, legal notices were also issued to the Defendants Nos.1 to 9, but all the defendants obviously in their own wisdom failed and/or neglected to repay the outstanding dues to the Plaintiff Bank. Moreover, the Defendant No,1, also failed to allow inspection of the pledged stocks lying in Multan. The Defendant No,9, in its capacity as a mortgagor, was also issued a legal notice dated 14.3.2008, demanding thereby, the repayment of the outstanding amounts. All the Defendants including the Defendant No,9, however, failed to liquidate the outstanding amounts.
10. Upon filing of the above suit 'inter alia' for recovery of the outstanding amounts of Rs,59,570,004.06, when the same came-up before the Court on 26.3.2008 for orders on C.M.A.
No,2439 of 2008, and C.M.A. No,2440 of 2008 then the following order was passed:- "1. For Orders on CMA No: 2439 of 2008 2. For Orders on CMA No: 2440 of 2008 26.03.2008 Mr. Akbar H. Mirza, Advocate along with Mr. Murtaza Advocate for the Plaintiff.
'Allowed.
That the Plaintiff's Bank had extended finance facility in the name of Defendant No,1 including FIM facility against the pledged stocks lying at Multan. He further contended that the defendant No,) and other defendants in collusion with each other always evaded and prevented the representatives/officials of the Plaintiff Bank from carrying out the inspection of pledged stock with ulterior motives, hence there is a strong apprehension that they will remove the pledged stocks from two godowns. Notice to the defendants Nos.1 to 8 and in the meanwhile, they are restrained not to transfer/alienate, parting with possession or otherwise, encumbering, charging, disposing of the pledged stocks lying at Riaz Cotton Factory BCG Chowk Multan and Quality down. Nazir of this Court is also appointed as receiver w inspect and prepare inventory of pledged stocks lying at the above godown with the assistance of a reputed surveyor. Tentatively the fees of the Nazir is fixed at Rs, 50,000/- (Rupees Fifty Thousand Only), [Underlining is mine].
11. Later on, process under section 9151 of the 2001, was issued to the Defendants Nos.1 to 9. Upon service and in response thereto, Defendants Nos.1 to 3 and 5 to 8 and Defendant No,9 filed their 'Leave to Defend Applications' bearing C.M.A. Nos.6128/2008 and 6129/2008 respectively, under section 10 of F.I.O., 2001, On 14.12.2010, in view of the admissions by Defendants Nos.1 to 3 and 5 to 8, by consent of the learned counsel for the parties, an 'INTERIM DECREE' in the sum of Rs,42,584,848/- was passed. The relevant operative part of order dated 14.12.2010 reads as follows:- "Learned counsel for Defendants Nos.] to 3 and 5 to 8 submits that through this suit plaintiff has prayed for a decree in the sum of Rs,59,570,004.06 plus cost of funds from the date of default till its realization and cost of the suit. Learned counsel for Defendants Nos.1 to 3 and 5 to 8 submits that according to the working of defendants an amount of Rs, 42,584,848/- is payable by the defendants to the plaintiff He says that remaining amount which has been claimed in the suit is disputed by the defendants and that can be resolved by appointing a Chartered Accountant as Commissioner to examine the accounts of parties and determine the liability of the defendants.
Parties counsel present in Court jointly submit that an interim decree in terms of section 11 of Financial Institutions [Recovery of Finances] Ordinance, 2001, be passed in the sum of Rs,4,25,84,848/- against Defendant Nos.1 to 8 and for remaining amount a Chartered Accountant, namely M/s. Haroon Zakaria & Co., Room No,211, 2nd Floor, Plot No,5, Progressive Plaza, Civil Line Quarters, Karachi, be appointed Commissioner to probe into the account of the parties and determine the liability of the defendants.
'Accordingly with the consent of learned counsel for the parties interim decree in the sum of Rs, 42,584,848/- is passed. With regard to cost of funds and other relief they will be decided at the time of conclusion of trial. M/s. Haroon Zakaria & Co., Room No,211, 2nd Floor, Plot No,5, Progressive Plaza, Civil Line Quarters, Karachi, is appointed Commissioner to enquire into the accounts of the plaintiffs and defendants and after examining the same determine the liability of the defendants. The Chartered Accountant while determining the liability of the defendants also examine as to whether any markup over markup has been charged by the bank or not. Such exercise may be completed bji the Chartered Accountant within two months from the receipt of this order. Time for commission shall commence from 10th January 2011. Parties agree for a tentative fee of the Chartered Accountant to Rs,1,00,000/- which shall be equally borne by the parties for placing their documents for determination of defendants liability.
'Leave to Defend Application [C.M.A. No,6128 of 2008] filed by Defendants Nos.I to 3 and 5 to 8 is disposed of in the above terms. However, Leave to Defend Application [C.M.A. No,6129 of 2008] shall be taken-up once the report from the Chartered Accountant is received. ' [Underlining is mine].
12. Pursuant to and in compliance with the aforesaid order of 14.12.2010, Messrs Haroon Zakaria & Co., Chartered Accountants, filed their report dated 23.5.2011. Before the Chartered Accountants, the main contention of the Defendants was to the effect, that 'mark-up' on renewed/rollover amounts could not be charged. The Chartered Accountants, nonetheless, in view of definition of 'obligation' as given in section 2[e]of F.I.0 2001, as well as upon perusal of section 3[2] of F.I.O., 2001, however, reached the conclusion that 'rollover finance' is basically an extension of time and thus is a part of 'obligation' as such 'mark-up' on it could be charged as per usual 'Banking Practice'. The Chartered Accountants, in view of this position, finally, concluded that the Plaintiff Bank besides, being within its' legal rights, is entitled to charge 'mark-up' as per banking practice. Per Chartered Accountants Report of 20th May, 2011, upon expiry of extended period(s) under the Finance Agreements on 'mark-up' basis, 'costs of fund' can only be charged in the 'shape of mark-up' as Certified by State Bank of Pakistan [for short SBP] from time to time. The Chartered Accountants, indeed, after a comprehensive drill of calculations and minute perusal and scrutinies of various financial documents signed, executed by the Defendants in favour of the Plaintiff Bank including Finance Agreements, Statement of Accounts, Facility letters and all other relevant Renewal Letters, concluded that the Plaintiff Bank is only entitled for 'mark-up' in the sum of Rs,27,626,119/- as against Rs,32,261,556/- charged by the Plaintiff Bank. Per calculations of the Chartered Accountants, the Bank was found entitled only to receive an amount of Rs,54,934,567/- instead of suit's amount in the sum of Rs .59,570,004/06.
13. The Defendants, nonetheless, filed their objections on the report of Chartered Accountants dated 20.5.2011. The Plaintiff Bank in opposition thereto had also filed its reply. Lastly, on 06.04.2015, the 'Leave to Defend Application' bearing C.M.A. No,6129/2008 filed by Defendant No,9, came-up before the Court i.e, in view of order dated 14th December, 2010. I heard Mr. Abdul Sattar Lakhani, learned counsel for Defendants and Mr. Ghulam Murtaza, learned counsel for the Plaintiff Bank and with their valuable assistance also scanned the available record before me including the Chartered Accountants' Report dated 20th May, 2011.
14. Mr. Abdul Sattar Lakhani, learned counsel for Defendants vehemently argued that Messrs Haroon Zakaria & Co., Chartered Accountants, appointed as Commissioner, under order dated 14.12.2010, passed in the above suit, had clearly acted beyond their mandate and scope of work.
According to Mr. Lakhani, the Chartered Accountants have un-necessarily, of course, on their own, embarked upon the calculations of the 'cost of funds', as the Chartered Accountants, under the mandate given to them, are/were obliged only to determine the 'principal amount' and 'mark-up' payable. Besides, the finding of the Chartered Accountants that no 'mark-up' over 'mark-up' has been charged, per learned counsel, is wrong on the face of record. Mr. Lakhani, learned counsel for the Defendants, forcefully contended that the Plaintiff Bank could not charge 'mark-up' over 'mark- up' on the Rescheduled outstanding amounts even under the fresh finance agreements including the last Finance Agreement of 21st September, 2006 [Annexure 'D' to the Plaint], as no disbursement has been made by the Plaintiff Bank in favour of Defendant No,1 partnership firm under the Finance Agreement of 21st September, 2006. Per Mr. Lakhani, the rescheduled/renewed amounts under the aforesaid, last Finance Agreement [annexure 'D' to the plaint] is not recoverable under the law inter alia for want of the actual disbursement. Per learned counsel for defendants, no doubt, rollover, rescheduling, renewal and restructuring was made 'at the request of Defendants' but in no event any additional amount and/or any further amount, on the outstanding 'debt' payable under the earlier first finance agreement i.e, Finance Agreement of 24th September, 2005, in the case in hand [Annexure 'B' to the Plaint], can be charged or recovered by the Plaintiff Bank. In view of this position, the findings of the Chartered Accountants that 'mark-up' could be charged on rescheduled amount, per Mr. Lakhani, is not only wrong, but also contrary to law/State Bank'
Circulars. Moreover, the same is also contrary to the decisions of Courts much-less to the extent that no 'markup' over 'mark-up' can legally be charged. Besides, the charging of mark-up on rescheduled amounts is 'haram' and/or prohibited under BPD's Circulars 13 and 32 of 1984.
15. Also, Mr. Lakhani contended, that the conclusion of Chartered Accountants to the extent that the Plaintiff Bank is entitled to receive Rs,54,934,567/- instead of Rs,59,570,004/06 is also wrong as the Plaintiff Bank, cannot charge any 'mark-up' over 'mark-up' on the rescheduled amounts. The mark- up claimed and/or charged by the Plaintiff,. Under the last agreement for financing on 'mark-up' basis [Annexure 'D' to the plaint] despite the fact it was signed and executed by the Defendant No,1, nonetheless, is illegal. According to Mr. Lakhani, notwithstanding the execution of the 'fresh finance agreements', the Plaintiff Bank, however, is not entitled to claim and/or charge any 'mark-up' on the outstanding amounts.
16. No doubt, on 21.9.2006, an amount of Rs,106,127,000/- only stood outstanding [i.e, debit balance] in the Statement of Accounts at Page 319 of the Plaint but such outstanding amount, under law cannot be made as 'principle amount' that is to say as 'sale price' in the fresh finance agreement for financing of 21.9.2006 [annexure 'D' to the plaint]. The 'purchase price' though per the aforesaid agreement for financing, has been mutually fixed at Rs,123,107,500/- but the same being 'mark-up' over 'mark-up' is not recoverable from the Defendant. This last agreement for finance duly signed and extended by Defendant No,1, per learned counsel, is against principle of Islamic Law. Per Mr. Lakhani, since, under the agreement for financing on 'mark-up' basis of 21 September, 2006, no fresh disbursement of the 'sale price' has been made, as such under law, the Defendants or any of them are/is not liable to pay anything over and above the 'sale price' of Rs,106,127,000/- to the Plaintiffs Bank. The charging of any mark-up under the Agreement of Financing dated 21.09.2006 [Annexure 'D' to the Plaint] is also 'haram' as such not payable. Per Mr. Lakhani, the only amount which is due and payable by the Defendants to the Plaintiff Bank is in the sum of Rs,42,584,848/- and nothing beyond that amount.
Lastly, learned counsel for the Defendants including Defendant No,9 argued that the Defendant No,9 has been dragged in the above suit unnecessarily as the Defendant No,9, has never mortgaged its property located at Mouza Tarra, Tehsil, District Lahore, measuring 106 Kanals with Plaintiff Bank against the liabilities of Defendants Nos.1 to 8, if any. Finally, learned counsel contended that since the Defendant No,9 has not signed an MoDoT Deeds as such the Defendant No,9, deserves to be granted un-conditional 'leave to defend' the suit. Against other Defendants, the suit is liable to be dismissed except for the amount as per 'interim decree' passed on 14.12.2010.
17. In support of his contention, Mr. Lakhani, learned counsel for the Defendants, placed reliance on the following case-laws:- a. 2003 CLD 1007 b. 2002 CLD 702 c. 2012 CLD 961
18. The relevant portions of the aforesaid case-laws relied upon by Mr. Lakhani, learned counsel for the Defendants read as follows:- a] Habib Bank Limited v. Al-Jalal Textile Mills Ltd. [2003 CLD 1007].
"The definition of 'finance' is almost the same in both the laws except for addition of a few more transactions. The Word 'obligation' has been introduced in the present Ordinance of 2001 and has been defined and has been reproduced hereinabove. It is clear, from the word 'obligation' that it only refers to the enlargement and extension of a time. It is not provided in the definition of obligation that restructuring or renewals would be an increase in the amount payable on the date of it being restructured, renewed or rescheduled. The question is that the Meaning has to be given in light of the existing law. For as extensive analysis, we need to look at the Act of 1997. The said Act provided for levy of interest on loan. The term 'loan' has been done away with. Loan under the Act of 1997 is defined as "(f)" 'loan' means a loan, advance and credit under the system based on interest and includes..." Doing away with the term 'loan' means that the system based on interest has also been done away with. The new law thus seems to be a consequence of the judgment by the Honourable, Shariat Appellate Bench of the Supreme Court of Pakistan in the case of Dr. M.
Aslam Khaki v. Syed Muhammad Hashmi (PLD 2000 SC 225). In that case they have held that all laws are to be brought in conjunction with the Islam and Sunnah. Naturally, the law being introduced now is and ought to have been in consequence with the Dr. Aslam Khaki's case. It will be seen that in that judgment it has been held that mark-up on the repurchase, purchaser cannot be allowed, being against the Injunction of Islam. It was held as under:- "Let us now analyse each one of these transactions separately. The first transaction mentioned in sub-clause (1) is that of mark-up in price. What is meant by this term is the transaction of Murabaha or 'Bai Mualial', the details of which have been explained in paras. Above as well as in paras. 189 and 218 of judgment of Mr. Justice Muhammad Taqi Usmani. It has been mentioned there that this technique was suggested by the Council of Islamic Ideology but was distorted to the worst extent by the banks when they applied it in practical terms. The learned Federal Shari at Court, therefore, observed that "mark-up system, as in vogue, is held to be repugnant to the.
Injunctions of Islam" (para. 262 of the judgment of the FSC) and consequently, it ordered that the word "mark-up" be deleted from this sub-clause.
We have already held that although the mark-up system as in vogue in our banks is repugnant, to the Injunction of Islam; yet it is not correct to assert that the transaction of Murabaha or Bai in itself is prohibited. If the transaction fulfils the necessary conditions spelled out above, it cannot be held repugnant to the Injunction of Islam. But the reference of this transaction in this clause, in the context of a return on a promissory note or a bill of exchange in not according to the basic principles of a Murabaha transaction. The reason is that Murabaha or Bai 'Mu'lial is a transaction of sale effected on the basis of deferred payment. One of the basic conditions of this transaction, like any other sale, is that the price is fixed at the time of the original contract of sale. This price may include a margin of mark-up (profit) added on the cost incurred by the seller. To determine the amount of mark-up, the seller may take different factors into consideration, including the deferred payment, but as already explained once the price is fixed, it will be attributable to the commodity and cannot be increased or decreased unilaterally, because as soon as the sale is accomplished, the price of the commodity became a debt payable by the purchaser. If this debt is evidenced by a promissory note or a bill of exchange it is not different from a note or a bill evidencing a loan, and no return, whatsoever, can be charged over that note or bill, because it will amount to charging interest on debt.
'Sub-clause (i) of the proviso to section 79 provides that if the purchaser in a Murabaha or Bai 'Mu'alial transaction did not pay the price, evidenced by a promissory note or a bill of exchange, a further return at the original rate of mark-up shall be payable by the purchaser for the whole period ,within which the price remained unpaid after its maturity. For example A purchased a commodity for Rs,100. B agreed to purchase it from him on a mark-up 10%. The commodity is, thus, sold to B for a price of Rs,110 to be paid after one year, say, on 31st January. A promissory note in the amount of Rs,105 is signed by B in favour of A. Now, this promissory note is nothing but an instrument evidencing a debt payable by B to A, which includes the original mark-up allowed by the Shariah. If B does not pay Rs,I 10 to A on 31st January, sub-clause (i) of the proviso to section 79 of the Act, 1881 provides that a further, return on the same rate of mark-up i.e, 10% in the above example, shall be payable by B to A for the whole period of non-payment after 31st January. This provision is repugnant to the Injunction of Islam because after the sale price becomes a debt, no return on it can be claimed by the seller from the purchaser. "
In fact the order of the Court in the Dr. Aslam Khaki's case goes further to read as under:- "If the purchaser could not pay at the due date because of his poverty, the Qur'anic command is very clear that he should be given more time till he is able to pay. The Holy Qur'an says: And if he (the debtor) is poor, he must be given respite till he is well-off.
However, if the purchaser has delayed the payment despite his ability to pay, he may be subjected to different punishment, but it cannot be taken to be a source of further 'return' to the seller on percent, per annum basis as contemplated in section 79."
It is clear that the Shariat Appellate Bench of Supreme Court of Pakistan in the aforesaid case has categorically said that the bank should, give time, but it cannot be source of further return. The new law and the intention could not be other than the pronouncement of the Supreme Court of Pakistan. The words 'interest' and 'loans' have been deleted. The word 'obligation' does not also grant any further return, but only allows "extension of time in repayment of a finance or for restructuring or renewal or for payment of extension of time in payment of relating to finance or liquidated damages is the import of the Aslam Khaki's case. It is clear this only relates to either extension of time for the restructuring of a schedule of payment, to be of 'finance'. Further in fact the word 'obligation' says "amounts relating to a finance". Under section 9 of the Ordinance, 2001 it is clear, that the Legislature uses the word "obligation with regard to any finance". This obligation would mean, only an obligation vis-a-vis the 'finance' and nothing more. The word finance does not contemplate any addition to a debt. In fact it is only the amount due under contract mentioned therein, that are debts. It is only this amount that is due I am clear in my mind, therefore, that no addition or mark-upon mark-up can be allowed and roll over or rescheduling or restructuring can be done but without any addition of any amount on the debt payable under the first agreement"... [Underlining is mine]. b). Messrs Bolan Bank Limited through Attorney v. Messrs Al-Aslam International through Proprietor and another [2002 CLD 702] "5. ... All that he could say was that an equitable mortgage upon the property of respondent No, 2 had been created in terms of section 58(f) of the Transfer of Property Act inasmuch as title documents of the property were still in possession of the appellant-Bank. Indeed, the aforesaid provision does enable an equitable mortgage to be created by deposit of title deeds.
Nevertheless, we are clearly of the view that no such mortgage can be created in respect of property the title whereof does not vest in the mortgagor, or the mortgagor does not have any explicit authority to create a charge upon such property. In V.E.R.MA.R. Chettyar Firm v. Ma Joo Teen and others (AIR 1933 Rangoon 299), a Full Bench of the Rangoon High Court held that "a document of title to immovable property mentioned in section 58(t) of the Transfer of Property Act, 1882, must disclose an apparent title of the property in, the mortgagor or to some interest therein"... [Underlining is mine].
6. ...We are constrained to observe that money was advanced by the appellant-Bank to the respondent ,No, 1 without obtaining adequate security and such recklessness on the part of Bank officials, possibly acting in collusion with borrowers, cannot be provided shelter through protracted legal proceedings or by taking advantage of technical mistakes. We would, therefore, direct that a copy of this order be communicated to the President of the appellant-Bank for taking such action as he may deem appropriate" ... c] Bank of Punjab through Authorised Officer v. Messrs KNK Infrastructure (Pvt.) Ltd. Through Chief Executive Officer and 2 others [2012 CLD 961]
3. The Murabaha facility agreement has purchase price of Rs, 90 million payable on 15-1-2006. The rescheduling agreement dated 10-9-2007 claims service charges @ Rs,16.88% per annum till 30-6- 2010. Such charge is clearly in the nature of interest and cannot accrue either under law or on the terms of the Murabaha facility. Consequently, the rescheduling agreement is not enforceable with respect to service charges. On the other hand, from the date of default, namely, 15-1-2006 until date of realization, the F.1.0., 2001 creates for unpaid creditor/financial institutions an entitlement to compensation through cost of funds as determined under the provisions of section 3 of the said Ordinance" ... . [Underlining is mine]
19. Conversely, Mr. Ghulam Murtaza, learned counsel for the Plaintiff Bank, vehemently argued that the calculations of the Chartered Accountants is not only correct, appropriate but also the Chartered Accountants have correctly and truly determined the liabilities of Defendants i.e, in the sum of Rs,54,934,567/-. According to Mr. Ghulam Murtaza, learned counsel for Plaintiff Bank, the 'cost of funds' has also been rightly and correctly calculated by the Chartered Accountants, of course, strictly in accordance with law and Agreements of Financing having been duly signed and extended by the Defendant No, 1.
20. According to Mr. Ghulam Murtaza, learned counsel for the Plaintiff Bank, the Chartered Accountants are/were within its powers specifically in terms of Order 14.12.2010 to determine the liabilities of the parties and also to see and to examine as to whether any 'mark-up' over 'mark-up' has been charged by the Plaintiff or not. Per learned counsel, according to law, the Plaintiff Bank is well within its right to charge 'mark-up' on the rescheduled amounts, as rescheduling itself is a finance much-less when the re-scheduling has admittedly been done at the request of Defendants as is the case in hand. Mr. Murtaza, learned counsel for Plaintiff, next argued that it is illogical and beyond wisdom to say that the outstanding amounts under rescheduling/renewal again need to be disbursed by the Plaintiff to the Defendant No,1 . The question of 'disbursement' in such like situation does not arise, as in the rescheduling, the outstanding amount besides acknowledged was rescheduled at Defendants' own request. All the finance agreements on 'mark- up basis', duly signed and executed, per Mr. Murtaza are valid and binding upon the Defendants and in no event can be alleged as without consideration by any of the Defendants. The Defendants under the 'doctrine of promissory estoppel' are also estopped to urge it, as without any consideration, and/or otherwise, say that it is against the Islamic Laws and/or SBP' s Circulars.
21. Mr. Murtaza, learned counsel for Plaintiff also contended that under the law, one cannot approbate and reprobate, the Defendants on their 'own request' and 'wish' entered into finance agreements, as such, now they cannot wriggle out of their binding commitments/obligation as defined under section 2(e) of F.I.O., 2001 and that too at the time of repayment of 'PURCHASE PRICE' that has been mutually settled between the parties under agreements of finance etc involved in the case in hand. Lastly, it was submitted by Mr. Murtaza that the 'performance of undertaking' or 'fulfillment of promise' in terms of section 2(e) is an obligation thus binding. Moreover, the calculations of the Chartered Accountants as urged by Mr. Murtaza, are correct and valid. The Defendants in no manner now deny such calculations by taking/raising evasive false pleas. No doubt, the Defendants are liable to pay an amount of Rs,54,934.567/- as calculated by the Chartered Accountants. Finally learned counsel for Plaintiff besides asking for rejection of C.M.A.
No,6129 of 2008 tiled by the Defendant No,9 [i.e, 'Leave to Defend Application] also prayed for passing of a Final Decree against the Defendants jointly and severally.
22. Heard learned counsel for the parties and also perused the available record with their valuable assistance including the report of Chartered Accountants, placed on record in compliance with order dated 14.12.2010.
23. Before proceeding further it would be appropriate to reproduce herein section 2 of the F.I.O., 2001 [Ordinance No,XLVI of 2001], which reads as follows:- "2. Definitions.- In this Ordinance, unless there is anything repugnant in the subject or context- a) "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 authorised by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify; b) "Banking Court" means -
(i) in respect of a case in which the claim does not exceed fifty million rupees or for the trial of offences under this Ordinance, the Court established under section 5; and
(ii) in respect of any other case, the High Court. "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 copyrights, 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;
(vii) 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;
(viii) any other facility availed by a customer from a financial institution. "obligation" includes -
(i) any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and
(ii) any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment [Underlining is mine].
(iii) all duties imposed on the customer under this Ordinance; and f) "rules" means rules made under this Ordinance. "
24. From the perusal of clause (e) of section 2 of F.I.O., 2001, it is crystal clear that a customer of the Bank is under legal obligation and duty bound to perform the undertakings and promises, he made, in terms of clause (e) of section 2 of F.I.O., 2001 [XLVI of 2001] in respect of repayment of dues and other amounts relating to a finance granted to and availed by a customer under the documents that have been duly signed and executed by customers regarding availment of the finance facilities. In the present case, it is significant to note, that the Defendant No,1 has not only signed and executed Finance Agreements but also Promissory Note[s] for 'Purchase Price'. As such, the Defendants are duty bound to fulfill their obligations and repay the 'Purchase Price as mutually settled between the parties. Moreover, the Finance Agreements are also coupled with Promissory Note[s] which under section 118 of Negotiable Instruments Act, 1881 [XXVI of 1881] attach itselves presumption of truth. For ready reference section 118 of Negotiable Instruments Act, 1881 [XXVI of 1881] being relevant is reproduced hereinunder:- "118. Presumption as to negotiable instrument of consideration. Until the contrary is proved, the following presumptions shall be made:--
(a) that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed negotiated or transferred, was accepted, endorsed, negotiated or transferred or consideration;
(b) as to date: that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time- of acceptance: that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer: that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of endorsement: that the indorsements appearing upon a negotiable were made in the order in which they appear thereon;
(f) as to stamp: that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course: that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been obtained from its lawful owner; or from any person in lawful custody thereof by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him."
25. Evidently a negotiable instrument, under section 118 of Negotiable Instruments Act, 1881 [XXVI of 1881] attaches itself statutory presumption of truth. Besides, a promissory note, as being a negotiable instrument, is regulated under section 118 of Negotiable Until the contrary is proved, the following presumption shall be made:-- (a)Of consideration.---that every Negotiable Instrument was made or drawn for consideration and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;
26. The presumption attached to a negotiable instrument besides of statutory nature is/are mandatory and any person to dispel such presumption, indeed, would be required to furnish proof/cogent evidence to the contrary. In the case of Muhammad Sabir v. Khalil-ur-Rehman [2002 CLD 1545], the court while, dilating upon the presumption attached to a Negotiable Instrument under Section 118 of the Negotiable Instruments Act, 1881 [XXVI of 1881], has observed as below:- "The contention of the learned counsel for the appellant that the Promissory Note, was not executed on 24-5-1982 but on a date 6-10-1981. Such contentions cannot be sustained for more than one reason, firstly under section 118 of the Negotiable Instruments Act, presumption is attached to a Negotiable Instrument, as to receipt of consideration, date of execution, time of receipt of consideration, date of execution, time of acceptance, time of transfer, order of endorsement, as to stamp and holder in due course are presumed unless, contrary is proved. It is settled position in law, where statutory presumption is attached as to existence of any fact then any person setting up a plea in rebuttal, takes upon himself to prove such plea in rebuttal.
Defendant/appellant challenged such presumption, placing reliance that the Promissory Note, was executed along with alleged agreement executed between the parties on 6-10-1981....
Contention of the learned counsel for the appellant that once the consideration has been denied by him, burden was shifted on the plaintiff/respondent to have proved the consideration. Such arguments are fallacious in relation to inchoate instrument. Section 118(a) of the Act lays down a special rule of evidence contrary to the general rule of burden of proof as already discussed above. Burden to dispel statutory presumption is always on a party seeking to negotiate or rebut the presumption as to existence of consideration. Once the execution is admitted then it was for the defendant/appellant to disprove consideration. For reference see Mst. Sughran Begum and 11 others v. Haji Mir Qadir Bukhsh and 2 others (PLD 1986 Quetta 232 DB) and United Bank Ltd. v. Mrs. Bilquees Begum and 3 others (1988 CLC 1613) and S.K. Abdul Aziz v. Mahmoodul Hassan and 3 others (1988 CLC 337). " [Underlining is mine].
27. As far as the contention of Mr. Abdul Sattar Lakhani, learned counsel for the Defendants, regarding non-disbursement of the amount is concerned, the same besides mis-conceived is a result of mis-understanding. It is important to note that in cases of rescheduling/ restructuring, the outstanding amount is not disbursed again rather the outstanding amount is brought forward. In view of this position, the arguments of Mr. Lakhani regarding non-disbursement of the amount already outstanding against a customer is absolutely without any merit thus repelled. On this aspect of the matter reliance can be placed on the case of Habib Bank Ltd v. Taj Textile Mills LW. through Chief Executive and 5 others [2009 CLD 1143], wherein it was observed as under:-
7. ... It is quite a simple case of rescheduling and restructuring of a previous finance; when liability of the borrower company became overdue, a request was made by it for the renewal/restructuring thereof; in this behalf the resolution of the company dated 21-9-2002, the offer of the Bank dated 23-10-2002 and. the agreement dated 11-12-2002, are sufficient to prove the case of the plaintiff. Obviously, in the cases pertaining to restructuring the amount is not disbursed, rather is brought forward envisaging as liability of the customer, and therefore, to argue that as no physical disbursement of the amount was made, resultantly, the claim of the Bank is false or unfounded, is a submission which is misconceived and without merit. I am also not convinced if there has been any fraud or misrepresentation on the part of the Bank in inducing the defendants (except defendant No,6) asking for rescheduling or the execution of all the relevant documents in that regard including the guarantees and the finance agreement. The bald and baseless allegations of fraud cannot be termed as the substantial questions of facts, in the light of admittedly executed documents on account of which the leave can be solicited or granted. I am also not convinced that the plaint lacks in fulfilling the requirements of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. The relevant backdrop of the finance arrangement between the plaintiff and the defendants has been appropriately given in the plaint, which is supported by the requisite documents. In view of the above restructuring/rescheduling, it was not obligatory and incumbent upon the Bank to have brought on record the statements of accounts prior to the agreement dated 30-9-2001, through which the restructuring has been made as this was/is an admitted amount duly acknowledged by the defendants. There is no question of the disbursement of the amount involved in the matter, as it is a case of restructuring and not in the nature of a fresh finance, in which the disbursement may become relevant. No vice, illegality or error has been pointed out in the statements of accounts appended with the plaint in support thereof either in view of the provisions of the Ordinance or Bankers' Books Evidence Act. " [Underlining is mine].
28. Moreover, the contentions of Mr. Lakhani, that the various documents including the last Finance Agreement and Promissory Note both dated 21st September, 2006 for the scheduled amount, that was obviously rescheduled at the request of Defendant.No,1, are voidable in terms of section 19 of Contract Act, 1872 is of no force, particularly when the execution of all the documents annexed with the plaint, has not been denied. Needless to say, on account of the Defendant No,1 's default, the rescheduling was requested and accepted by the Plaintiff Bank. As such, the Defendants, now cannot say, that the documents, duly signed and executed by them, are void and/or otherwise, not enforceable. The contention of Mr. Lakhani that the Plaintiff Bank, is not entitled to claim 'Purchase Price'/mark-up price, as in the case in hand, markup has been charged on the 'outstanding due amount' which has now been shown as 'sale price' in the Finance Agreement of 21st September, 2006, is also without any force as such rejected. Regarding this aspect of the matter, reliance is placed on the case of Muhammad Arshad and another v. Citibank N.A., Lahore [2006 SCMR 1347] wherein it was as under:- "4. ... We are not at all impressed by the contention raised on behalf of the petitioners that the genuineness and authenticity of the agreement, dated 26-6-1999 is not above board as the relevant columns were left blank and filled in subsequently by the Bank. For the sake of argument even if it is admitted then why the agreement dated 26-6-1999 was acted upon and pursuant whereof ten installments had been paid and the outstanding liability was reduced from Rs, 21,05,280 (mark-up price) to Rs,17,95,176. In fact the above installments were made as per repayment schedule which was inseparable part of the agreement dated 26-6-1999. It must not be lost sight of that the main object to get the renewed agreement was restructuring of the finance facility and not liquidation of the liability. We have no hesitation in our mind to hold that agreement dated 26-6-1999 was authentic, genuine and executed between the parties and acted upon. A careful perusal of the agreement dated 26-6-1999 would reveal that mark-up was charged in accordance with the terms and conditions and stipulated therein. It is to be noted that in the agreement dated 26-6-1999 it has been stipulated in a categoric manner that the petitioners had also entered into mark-up agreement which was executed on 21-6-1995 and thus, it stood admitted by the petitioners. It would not be out of place to mention here that an amount of Rs,21,05,280 was mentioned as mark-up in the last agreement.. .It is well-settled by now that "Negotiable Instruments Act provides that where one person signs and delivers to another paper stamped in accordance with law, either wholly blank or having written thereon incomplete negotiable instrument, in order that it may be made, or completed into negotiable instrument, he thereby gives prima facie authority to person who receives that paper to make or complete it as case may be into negotiable instrument for any amount. Furthermore, section 118 of Negotiable Instruments Act, provides that presumptions are attached to negotiable instruments, which, inter alia includes that negotiable instrument was made or drawn for consideration and that every instrument bearing date was made or drawn on such date. Held: Documents were given blank as canvassed by appellants even then appellants are estopped to challenge legality, validity and genuineness of said documents. M.P. R.M. Irulandi Mudaliar v. Syed Ibrahim AIR 1962 Mad. 326; National Bank of Pakistan v. Azizullah Hassan 1984 MLD 1035; Messrs Mach Knitters (Pvt.) Ltd. v.
A.B.P. 2004 CLD 535; Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation PLD 1971 SC 550; United Bank v. Business Investment Ltd. 1982 CLC 1101; Karim v. Zikar Abdullah 1973 SCMR 100...
Presumption, held, would arise under section 118(b) regarding a negotiable instrument bearing a date as having been made or drawn on such date". National Commercial Bank Ltd. v. Muhammad Younus Butt 1980 CLC 90. 'We are conscious of the fact that "party to proceedings could discharge burden of proof placed upon him under provisions of section 118 of Negotiable Instruments Act either by producing definite evidence showing that consideration had not been passed or by relying upon facts and circumstances of case and also by referring to flaws in evidence of plaintiff and then contending that presumption had been rebutted". Chandan Lal v. Messrs Amin Chand Mohan Lal AIR 1960 Punjab 500; Sundar Singh v. Khushi Ram AIR 1927 Lab. 864 which could not be done. " [Underlining is mine].
29. Needless to say that under section 2(e) read with section 3 of F.I.O., 2001 the customers of Financial Institutions are under legal obligation and duty bound to fulfill their promises and discharge their duties regarding liquidation of the outstanding dues faithfully otherwise, B they will be committing offence in terms of the provisions of section 20 of F.I.O., 2001. The Defendants herein, it is worth to note, have not denied their signatures on various documents annexed with the plaint or otherwise, they have disputed it, which manifestly, leads to draw, the only an un-escapable conclusion, that the claim of the Plaintiff Bank in the present suit, is genuine and based on valid and authentic documents. Moreover, the provisions of F.I.O., 2001 which is a special law overrides all other laws in terms of section 4 of F.I.O., 2001 [XLVI of 2001]. Under section 2[e] of F.I.O., 2001, it is the un-escapable obligation of the customer, of a Financial Institution to fulfill their obligations, and commitments made by them inter alia regarding repayment of a finance or payment of other amounts relating to a finance i.e, (i) any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and (ii) any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise; and (iii) all duties imposed on the customer under this Ordinance.
30.From the above, it is quite evident that a customer of Financial Institutions is under legal obligation to fulfill its obligations and commitments regarding repayment of finance or payment of any other amounts relating to a finance or performance of an undertaking/ fulfillment of a promise which in terms of section 3 of F.I.O., 2001 is the duty of customer. It is significant to mention that re- scheduling, restructuring and renewal of finance[s] in actual fact, is a facility or accommodation which is granted by a Financial Institutions to the customers on it's request. In rescheduling etc., the outstanding amount, is not required to be disbursed as having been misunderstood, rather the outstanding is brought forward. Even the statement of account prior to the last Finance Agreement of rescheduling needs not be filed with the plaint. Reliance on this aspect of matter is placed on the case of Citibank N.A. through Branch Manager v. Ameer Alam [2015 CLD 429 DB], wherein it was held as follows:- "8. The concept behind Renewal/Restructuring/Rescheduling is that the renewal/rescheduling/restructuring of financial facility only ensues upon default, non-payment or inability in payment of outstanding liability by the customer who normally seeks such concession and upon admission of liability. By soliciting rescheduling or restructuring, a customer in a sense requests postponement of repayment of finance on renewed terms as agreed between the parties. By approving rescheduling/ restructuring of a financial facility the bank (as in the present case) foregoes its immediate right of recovery and enforcement of securities against the customer. The effect of rescheduling or restructuring of finance facility is mutually agreed by the parties to be absorbed by future interest or mark up till the agreed date of liquidation of liability.
Thus, we are of the opinion that rescheduling, restructuring and renewal is also a facility or accommodation granted by bank to the customer. This facility has been recognized as "obligation" defined in section 2(e) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Reliance is placed on Habib Bank Limited v. Service Fabrics Ltd. and others (2004 CLD 1117)
(Lahore).
9. As far as the observation by Judge Banking Court No,1, Faisalabad that the appellant-bank had not attached the statement of accounts w.e.f, 1995; it is suffice to observe that in the cases pertaining to restructuring the amount is not disbursed, it is brought forwarded in case of restructuring/ rescheduling of previous finance; <u> bank is not obliged to have brought on record the statement of accounts prior to the agreement through which restructuring has been made as this is an admitted amount duly acknowledged by the borrower. " [Underlining is mine].
31. Like-wise, as held in the case of M/s. Dadabhoy Cement Industries Ltd. and 6 others v. National Development Finance Corporation Karachi [PLD 2002 SC 500] mark-up on the rescheduled amount, mutually agreed between the parties is permissible and cannot be said as illegal or prohibited under the law. The relevant observation from the case of Dadabhoy Cement Industries Ltd reads as follows:- "7.The argument that the respondent by adding further interest/mark-up on the amount on which interest/mark-up had already been paid, played fraud, has no substance, for, this fact was already in the knowledge of the petitioners as they had agreed to pay the same on rescheduling of the outstanding amount, which has been admitted by the petitioners in their Suit No,4I6 of 1996, as such, they being the privy to the rescheduling of the loan, cannot turn around to say that further mark-up was fraudulently charged. It is settled law that where allegation of fraud is levelled, it must be specified and details thereof should be given. The contents of MOU were mutually agreed upon between the parties and there is nothing to suggest that the same as executed by fraud, misrepresentation or under duress or coercion," [Underlining is mine].
32.In rescheduling and restructuring the outstanding amount needs not be disbursed as has been held in the case of Habib Bank Ltd. v. Taj Textile Mills Ltd., through Chief Executive and 5 others [2009 CLD 11431. The relevant portion therefrom reads as under:- "7. .. .Obviously, in the cases pertaining to restructuring the amount is not disbursed,' rather is brought forward envisaging as liability of the customer, and therefore, to argue that as no physical disbursement of the amount was made, resultantly, the claim of the Bank is false or unfounded, is a submission which is misconceived and without merit" ....
33.In view of the above, the contention of Mr. Lakhani regarding non-disbursement of the amount rescheduled and non-charging of mark-up thereon in terms of the finance of the last Finance Agreement dated 9th September, 2006 [Annexure 'D' to the plaint], is without any substance as such rejected.
34.The agreement of finance dated 21.09.2006 is a conscious agreement wherein the 'Sale Price' in the sum of Rs, 106,127,000/- and 'Purchase Price' in the sum of Rs,123,107,500/- have been mutually settled by the parties thereto and has also been executed by the Defendant No,1, of course, out of its 'free-will' and 'wish' and by doing so, it had agreed to pay voluntarily the 'Purchase Price mentioned therein. The Finance Agreement of 21st September, 2006 thus is a valid and legal agreement and enforceable under the law. Rescheduling has been defined in the HAND BOOK OF BANKING TERMS BY Fazul Suleiman Kazi, as under: "Reschedule Changing the maturity date for payment of loans due to inexorable circumstances of financial stringency with consent of the lender and borrower and revising the payment schedule to help and enable borrower to make repayment on time.
Rescheduling, is to seek respite from loans payments. Depreciating currency, declining exports, increasing expenses, inveigh the ability to service loan repayments. Rescheduling is merely the deferment of payment to a future date that later rebounds with inflated future amounts of loan payments with added interest.[Underlining is mine].
Debt ridden countries with scarce foreign exchange reserves unable to service debt repayments seek modifications in terms of existing debt payments for easy terms for interest payments. Revise the repayment programme to favour borrowers in impecunious conditions owning' to its inability and incapacity to gear the loan installments. Rescheduling allows extension of time to make loan repayments breathing space."
35. In so far as, the liability of guarantors/Defendants Nos.2 to 8 is concerned, it is needless to say that under a contract of guarantee, rights and liabilities of the parties are to be determined vis-a- vis the terms and conditions of the letters of guarantees. The guarantors, under law cannot take advantage of any condition incorporated in the principal agreement, unless the same is also reflected in a contract of guarantee. Under the law, the liabilities of the principal and of guarantors are co-extensive and in an action initiated by a creditor against principal and guarantors, the creditor is only required to establish the liability of the principal debtor and occurrence of default or breach of the terms and conditions, leading to the liability. The guarantors under law, could not resort to technicalities with a view to defeat the claim of the creditor. Even, where the principal contract becomes un-enforceable, then too the guarantors would still be liable unless there is any covenant in the letters of guarantee to the contrary. In the case in hand, even the liabilities of Defendants Nos.2 to 8, in the terms of letters of guarantees is coextensive with that of Defendant No,1. For ready reference the common clauses 1, 2, 4, 13 and 15 from the letters of guarantees of Defendants Nos.2 to 8 are reproduced as under:-
1. My/Our liability under this guarantee shall be co-extensive with that of principal debtor and you may at your option hold me/us primarily responsible for all the liabilities of the Customer. Your written demand for payment under this guarantee shall be conclusive evidence of the default of the Customer.
2. This guarantee shall continue to-remain binding on me/us in respect of the amount(s) due or which may be due from time to time and at any time from the Customer in relation to the Finances or any renewal thereof/grant of fresh Finances or any future arrangement in respect thereof until receipt by you of written notice of discontinuance thereof and notwithstanding such notice I/we shall continue to remain liable to you for all amount that may be due and owing to you by the customer whether certain or contingent and up to the time of receipt by you of such notice and also for any credit established of the Customer and/or all instruments drawn on you or accepted by you, for the benefit of the Customer and purporting to be on a date on or before the date of receipt of such notice even though actually paid or honored after that date.
4. You may as you think fit and without reference to me/us grant to the Customer time or other indulgence or make or accept any arrangement or composition with him in respect of any payment hereby guaranteed and also vary or renew any agreement(s) under or pursuant to which Finances were extended or released, realized, or in any way deal with any securities or rights now or hereafter held by you in respect of the sums due under the said Finances.
13. You shall be at liberty but not bound to resort for your own benefit, to any other means of payment at any time and in any order you think fit without hereby diminishing my/our liability and you may put this guarantee in force either for the payment of the ultimate balance after resorting to other means of payment so long as any monies remain due from the Customer to you.
15. Until such time as all Finances extended to and availed off by the Customer have been, repaid, to you. 1/we shall continue to be liable as guarantor(s) hereunder and 1/we shall not either by paying off any sum recoverable hereunder or by any other means or ground, claim any set-off or counter claim against the Customer in respect of any liability or claim or prove in competition with you in respect of any payment by me/any of us hereunder or be entitled to claim or have the benefit of any set-off counter claim or make any claims against the Customer's estate or have the benefit of any other security which you may now or hereafter hold for any money or liabilities due or incurred by the Customer to you or to have any share therein.
36. Manifestly, on account of renewal, rescheduling and restructuring etc. the guarantors could not claim any discharge of their liability, evidently in view of their 'advance consent' in terms of Letter of Guarantees regarding variation etc. On this aspect of the matter, the rule pronounced upon an elaborate discussion of the case laws in paras 10.1, 11 and 11.2 from the case of Bank of Baroda [AIR 1992 Karnataka 108], is as follows:- "10.1. In City-hank N.A., New Delhi v. Jugilal Kamalapat Jute Mills Co. Limited, Kanpur, AIR 1982 Delhi 487, differing from the view expressed in the aforesaid Pearl Hosiery Mills; case (AIR 1961 Pun). 281), it has been held that it was not necessary for the Legislature to provide the words in the absence of any contract in section 133 or 135 or 141, because the sections themselves speak of consent of the surety regarding variance in the terms of the contract between the principal debtor and the creditor and composition with the principal etc. It has also been further held that in the presence of the words 'without the surety's consent, the words in the absence of any contract to the contrary, would have been surplus. Therefore, following a decision of the Privy Council in Hodges v.
Delhi and London Bank Ltd. (1900) 27 Ind. App. 168 and A.R. Krishnaswami Ayyer v. Travancore National Bank Ltd. (AIR 1940 Mad. 437), it has been held that the rights conferred on the surety under section 133, 135 or 141 of the Act could be waived by specific agreement in the deed of guarantee, that as a matter of fact, such an agreement would amount to consent within the meaning of the aforesaid sections of the Act. [Underlining is mine]. 11. ... The words 'unless it is otherwise provided in the contract' occurring in section 128 of the Act will also govern the other provisions contained in the Chapter VIII of the Act and enable the surety to give up the rights available to him under sections 133, 134, 135 and 141 of the Act. It is a settled legal position of law that a legal right can be given up provided such giving up of a legal right under any contract is not hit by section 23 of the Act. Section 133 of the Act makes it clear that any variance made in the contract between the principal debtor and the creditor without the consent of the surety, discharges the surety as to transactions subsequent to variance. This consent of the surety can be obtained either at the time of the contract is made between the principal debtor and the creditor to which the sitrety gives the guarantee, for making any change or alteration in the contract to be made or not to claim any right or benefit under Chapter VIII of the Act. In other words, in the surety-bond/guarantee-bond itself the surety can agree to waive his rights available to him under the various provisions contained in Chapter VIII of the Act. Such waiving of his right by the surety is permissible under section 133 read with section 128 of the Act.
11.1 ... The rights available to the surety under Chapter VIII of the Act, as already pointed out, can be waived by the surety. Therefore, such waiving of right by the surety is neither intended to defeat nor does it defeat any provisions of law. Therefore it is also not possible to hold that the consideration and the object of the agreement of guarantee have the effect of defeating any provisions of law. A recital in the surety bond in question that surety will not be entitled to any of the rights conferred by sections 133, 134, 135, 139 and 141 of the Act cannot be held to defeat the provisions of Chapter VIII of the Act. The rights conferred on the surety under Chapter VIII are not inalienable rights nor those rights have anything to do with the public policy as such. Those rights relate to the contracts entered into by individuals. It is not the case of defendant-3 that the aforesaid recital in the surety bond has been obtained either fraudulently or it involves or implies injury to the person or property of another. It is also not possible to view such a recital as immoral or opposed to pubic policy. Public policy is not to defeat the debt of the creditor, it is to ensure that the money of the creditor, is secured and is recoverable in accordance with law; and the debtor or the surety is not absolved from his liability to discharge the debt except in accordance with law. Therefore, we are of the view that it is not possible to agree with the view as extracted above, expressed in Pearl Hosiery Mills' case AIR 1961 Punj. 281 by the High Court of Punjab. We agree with the aforesaid view expressed in City-bank's case AIR 1982 Delhi 487 by the High Court of Delhi and also approve the view expressed by Kulkarni, J. in R. Lilavati's case AIR 1987 Kant. 2.
37.Insofar the present case is concerned, from record, it transpires that the only object of the Defendants is to prolong the proceedings inter alio by way of filing of frivolous objections even to the Chartered Accountants reports who, no doubt, appointed by consent of parties long ago in the year, 2010 i.e, vide order dated 14.12.2010. The report(s) of Chartered Accountants of 20th May, 2011 besides, accurate is perfect thus not open to any objections. The Defendants, however, seem in a drill to forestall the repayment of the outstanding amounts and lawful mark-up accrued thereon, in terms of the Finance Agreement of 21st September, 2006 is disputing the same without any justification. All the pleas urged, are not only mis-conceived, afterthought but also based on technicalities which besides, against the law, is against the law of equity as well. Needless to say, in the Contract Act, 1872 [IX of 1872] or any other law there is nothing like that to prohibit the parties from varying or altering the terms of the original contract by executing a new contract mutually to substitute the old one i.e, for the purpose of rescheduling and/or renewal of facility[ies]. Indeed, all documents of finance including finance agreement for rescheduled amounts, are valid and absolutely binding against the parties inter alio on the basis of 'doctrine of promissory estoppel'. At this point of time I would like to refer to section 114 of Qanun-e-Shahadat Order, 1984 which reads as below:- "114. ESTOPPEL. When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing."
38. On the above aspect of the matter, if, any case law needs to be cited then I would like to quote the case of Arfan Hameed, S.D.O. Mirpur and 42 others v. Secretary, Education AJ&K Government Civil Secretariat, Muzaffarabad and 3 others [2005 CLC 564], wherein it was held as under:-
10. The rule of promissory estoppel is that where one party has, by his word or conduct made to the other party, a clear promise which is intended to create a legal relationship or effect a legal relationship to arise in future knowing or intending that it would be acted upon by the other party to whom promise is made and it is, in fact so acted upon by the other party; that promise would be binding on the party making it and he is not entitled to resile from it.
39. Besides, the certified statement of accounts [annexed with the plaint] also attach itself, the statutory presumption of correctness particularly when the 'debits' and 'credits' entries made therein have not been specifically challenged. Evasive and bald assertions/denials in the eyes of law are no denials. The mere, sham and bald assertions, of course, would be of no avail to the Defendants. Regarding this aspect of the matter reliance is placed on the case of United Bank Ltd. v. Messrs Sartaj Industries through Qaisar lqbal, Managing Partner and 6 others [PLD 1990 Lahore 99], wherein it was observed as under:- "20...The statement of account annexed with the plaint which has been certified under the Bankers' Books Evidence Act, shows these deposits as having been made by the defendants and thus presumption of correctness has to be attached thereto when the entries have not in any manner whatsoever been rebutted by the defendants. The aforesaid deposits shall have to be therefore taken as having been made by the defendants on the dates on which these are shown to have been made in the books of accounts of the plaintiff Bank"</i>.... [Underlining is mine].
40.As regards the judgments relied upon by Mr. Lakhani, learned counsel for the Defendants, it is suffice to say that those are not applicable in view of the facts and circumstances of the present case. Particularly, when the Defendants admits inter alia the execution of finance agreements and promissory notes. Moreover, as far as the case of Dr. M. Aslam Khaki v. Syed Muhammad Hashmi [PLD 2000 SC 225] is concerned, so far it has not attained finality. For ready reference, clauses 2 and 3 to Article 203D and clause 2 to Article 203F of the Constitution of Islamic Republic of Pakistan, 1973 being relevant to some extent are produced as under:- "Article 203D. Powers, jurisdiction and functions of the Court. ---(2) If the Court decides that any law or provision of law is repugnant to the Injunctions of Islam, it shall set out in its decision--
(a) the reasons for its holding that opinion; and
(b) the extent to which such law or provision is so repugnant; specify the day on which the decision shall take effect [:] [Provided that no such decision shall be deemed to take effect before the expiration of the period within which an appeal therefrom may be preferred to the Supreme Court or, where an appeal has been so preferred, before the disposal of such appeal]
(3) If any law or provision of law is held by the Court to be repugnant to the Injunctions of Islam,--
(a) the President in the case of a law with respect to a matter in the Federal Legislative List or the Concurrent Legislative List, or the Governor in the ease of a law with respect to a matter not enumerated in either of those Lists, shall take steps to amend the law so as to bring such law or provision into conformity with the Injunctions of Islam; and
(b) such law or provision shall, to the extent to which it is held to be so repugnant, <u> cease to have effect on the day on which the decision of the Court takes effect. [Underlining is mine].
Article: 203F Appeal to Supreme Court. (2) The provisions of clauses (2) and (3) of Article 203D and clauses (4) to (8) of Article 203E shall apply to and in relation to the Supreme <b> Court as if reference in those provisions to Court were a reference to the Supreme Court."
41. It is significant to note that the decision in the Khaki's case has so far not attained finality.
42. In the present case, the only thing by way of defence being brought forward is to the effect 'that the Plaintiff Bank could not charge 'mark-up' in terms of the Finance Agreement dated 21st September, 2006 as it is prohibited under the law. The main object of restructuring and rescheduling of a finance facility[ies] is/are postponement of repayment of finance on renewed terms and conditions and not liquidation of liability. In view of this position the subject rescheduling agreement of 21st September, 2006 is not only authentic, but also genuine and binding. Being relevant at this juncture, I would like to reproduce herein clauses i, ii, 1, 2, 4, 6 and 11 of the Agreement of Financing for short/medium/long terms on mark-up basis of 21st September, 2006 as under:- "i. The Customer has requested the Bank to purchase certain movable property more particularly described in the stock report furnished by the Customer 'to the Bank and appended hereto or in the Schedule hereunder (hereinafter referred to as the "Goods") < coupled with the obligation of the Customer to repurchase the Goods at a marked-up price during the tenor of the agreement for financing on mark-up basis based upon the sale and re-purchase transaction(s) as aforesaid resulting on in deferment of delivery of Goods and payment of Purchase Price to the Bank; and ii. The Bank has agreed to provide finance facilities to the Customer on the basis of mark-up in price pursuant to the sale and re-purchase transaction(s) relating to the Goods entered into between the Bank and the Customer and upon the terms and conditions set forth therein.
1. The Bank confirms having bought the Goods from the Customer, prior to the execution of this agreement for a sum of Rs,106,127,000/- (Rupees One Hundred Six Million One Hundred Twenty Seven Thousand only). The price to be paid by the Bank to the Customer (hereinafter referred to as the "Sale Price") shall be made available for utilization by Customer by withdrawal from its/their/his account No,001946 with the Bank and such withdrawal(s) from time to time shall constitute payment of the Sale Price for the purpose of the Agreement for Financing Markup Basis.
2. The Customer confirms having immediately purchased the Goods from the Bank prior to the execution of this agreement at a price of Rs,123,107,500/- (Rupees One Hundred Twenty Three Million One Hundred Seven Thousand Five Hundred only) (hereinafter referred to as the "Purchase Price") which is payable to the Bank in terms of this agreement. Deposits by the Customer from time to time in its/their/his account shall constitute payment towards Purchase Price.
Any failure or neglect on the part of the Customer in-making of the Purchase Price on the dates specified in annexure I shall constitute a default in payment by the Customer in payment by the constituting a breach of duty/obligations. In such event the Bank shall be entitled in its discretion to terminate the facility and recall the entire amount of finance then outstanding, due and payable by the Customer by issuance of a written notice of demand whereupon the Customer shall become liable to pay the Bank Purchase Price then outstanding along with cost of funds as certified by the State Bank of Pakistan calculated on the outstanding Purchase Price until payment thereof and shall also be liable for payment of liquidated damages at 20% of the outstanding amount. The liability of the Customer to pay the aforesaid amounts is without prejudice the Bank's legal rights and remedies for recovery of the outstanding amounts and enforcement of securities furnished by the Customer in favour of the Bank.
6. Purchase Price shall be payable by the Customer to the Bank on or before 20-09-2007, if the Customer fails to pay the Purchase Price due under and in terms of this agreement the Bank shall be entitled and authorized to debit its account No,001949 with the amount of Purchase Price due in terms of the above and the Bank may in its discretion either debit the said account with the Purchase Price due under this agreement without prejudice to its claim for outstandings due as reflected in the said account or demand payment of the Purchase Price due under this agreement without prejudice to any other outstanding liability of the Customer for payment of other amounts due and payable to the Bank.
11. It is further agreed between the parties that the Demand Promissory Note executed by the Customer and delivered to the Bank shall be a continuing security for the payment of the ultimate balance of the Purchase Price remaining unpaid and that the Customer shall remain liable on the said promissory note notwithstanding the fact that by payments made to the Bank from time to time, the liability may have been reduced or extinguished-or even that the account may have been in credit at any point of time. " [Underlining is mine].
43. Mr. Lakhani also contended that charging of mark-up on rescheduled amount is 'HARAM' as it amounts to charging of 'mark-up' over 'mark-up' and prohibited under the circulars of SBP i.e, Circular BPD 13 and BPD 32 issued on 30.4.1984 and 30.11.1984 respectively, whereby, all interest based transaction is prohibited w.e.f, 1.1.1985. In so far as the plea of Mr. Lakhani (that charging of mark-up on rescheduled amount is 'HARAM', is concerned, the same, besides, mis-conceived is without any force as the Defendants were fully aware about the-charging of mark-up on rescheduled amount. Despite such knowledge and awareness they not only executed the Finance Agreement but also got themselves benefitted from such rescheduling. The Defendants, now cannot be permitted to say that the mark-up in terms of Finance Agreement, though voluntarily signed and executed by them is not payable, as it is 'HARAM'. Now it does not lie in the mouth of Defendants to avoid the payment of 'agreed mark-up' by saying that it is 'HARAM' or otherwise, prohibited under SBP Circulars. If the Defendant No,1, did not want to pay mark-up on the rescheduled amount then, it should have not requested the rescheduling of the amount. In terms of last Finance Agreement, the Defendant No,1 has consciously agreed for payment of 'mark-up', on the scheduled amount. In view of this position, the Defendants or any of them could not be permitted to wriggle out from their promises, commitments and obligations much-less on the pretexts that 'mark-up' on the rescheduled amount is 'IMAM' and/or otherwise prohibited under the SBP's Circulars.
44. Apart from the above, the plain reading of the aforesaid circulars would show that it do not prohibit the parties who wish to enter into any Finance Agreement out of their own free-will and wish. In the present case, it is worth to mention, at the request of the Defendant No,1, a Finance Agreement of 21st September, 2006 was executed whereby, the Defendant No,1 voluntarily agreed to pay 'mark-up' on the rescheduled amount in the shape of 'Purchase Price'. Under the said Finance Agreement etc., the Plaintiff Bank has acquired vested rights which cannot be disturbed and/or taken away. The vested rights, so created, indeed, are based on the theory of promissory estoppel. No doubt, the circulars of SBP, have the force of law but basically they are notifications having been issued by the SBP under the strength of powers derived from the State Bank of Pakistan Act/Banking Companies Ordinance, 1962. Nonetheless these circulars cannot be termed as legislative instruments which could curtail the vested rights accrued in favour of the creditors.
Otherwise, also they cannot be considered documents of the nature to override the provisions of law. In this regard reliance can be placed on the case of Hala Spinning Mills Ltd. v. International Finance Corporation [2002 SCMR 450], wherein it was observed as under: "27. Learned counsel contended that the winding-up petition against appellant was premature in view of Circular No, 19 (Banking Policy and Regulation Department) because under the Scheme introduced through this Circular appellant had an opportunity to settle its outstanding dues with interference of State Bank of Pakistan, therefore, for this reason the process of winding-up of the company was liable to be deferred for a considerable time. Suffice it to observe that conditions of Circular No, 19 legally cannot be considered a document to override the provisions of section 305 of the Ordinance and on account of issuance of Scheme under the Circular the proceedings under section 305 of the Ordinance initiated by respondent-Corporation (1FC) against the appellant were not liable to be postponed"
45. With regard to the contentions of Mr. Lakhani, that the Defendant No,9 has never signed any MEMORANDUM OF DEPOSIT OF TITLE DEEDS wherefrom, it is established that the Defendant No,9 has mortgaged its' immovable property, it is suffice to say, that the MEMORANDUM OF DEPOSIT OF TITLE DEED, is not a requirement of law. Reference in this regard can be made to Section 58(0 of Transfer of Property Act, 1882. Under the aforesaid provision of law, the delivery of the 'title documents' of the immovable property, to a creditor or his agent with an intention to create security thereon, is called MORTGAGE BY DEPOSIT OF TITLE DEEDS. In view of this legal provision, the arguments of Mr. Lakhani, learned counsel for the Defendants, is devoid of any merits thus also rejected. For ready reference Section 58(0 of Transfer of Property Act, 1882 being relevant is reproduced as under:- "58(J) Mortgage by deposit of tide-deeds. Where a person in the town of Karachi, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds. "
46. For all the foregoing reasons and discussion, while, refusing leave to defend the suit to Defendant No,9 and also rejecting the Defendants' objections to the Chartered Accountants' reports, CMA No,6129 of 2010 filed by Defendant No,9 stands dismissed. Consequently, the Plaintiffs suit by amending/varying the ' interim decree' passed on 14.12.2010, in the sum of Rs,42,584,484/- by enhancing the sum by a sum of Rs,12,349,719/- is decreed against the Defendants jointly and severally for a total sum of Rs,54,934,567/- [Rupees Fifty Four Million Nine Hundred Thirty Four Thousand & Five Hundred Sixty Seven only] plus cost of funds in terms of section 3 of FIO, /001 from the date of default till realization of the amounts. Besides, final decree for the sale of pledged stocks and for sale of immovable property as per prayer clauses (ii) and (iii) is also passed.
47. Cost of the suit is also awarded.
48. Suit stands decreed.