' SYED SAEEDUDDIN NASIR, J.---This 1st Appeal is directed against order dated 10.10.2011 passed by the learned Judge, Banking Court No.IV at Karachi, dismissing the leave to defend application under section 10 of the Financial Institutions (Recovery of Finances) Ordinance 2001, whereby the learned Banking Judge was pleased to pass Judgment dated 21.11.2011 and Decree dated 03.12.2011 in favour of the respondent in Suit No.48 of 2011, in the sum of Rs.12,894,907/-.
1. Facts giving rise to the instant appeal are that the appellant No.!, being the proprietorship concern of Muhammad Saleem Varind, (the appellant No.2), was sanctioned/granted finance and had utilized the finance of Rs.12 million by the plaintiff's bank, vide an offer letter dated 01.03.2008, against the execution of an agreement for financing on markup basis, a letter of continuity, a letter of arrangement, a confirmation, undertaking and a promissory note, all dated 04.03.2008. The appellant No.2 also mortgaged his two immovable properties as a security for the repayment of aforesaid finance facility and executed such mortgaged deeds as well as a memorandum of deposit of title deeds etc. first in the month of February, 2008 and the other in August, 2008. The mortgage deeds with regard to the said properties were already executed In the months of March and August, 2008. The appellants allegedly failed to make repayments of the finance as per agreement for financing and offer letter, constraining the defendant to file a suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance 2001, (hereinafter called the "Ordinance, 2001), in the banking Court against the appellants, for recovery of Rs.12,894,907/- inclusive of markup, with future cost of fund, from the date of default till realization of entire dues.
2. The required publication of notices was made through daily "Jang" and "Dawn" Karachi both dated 10.03.2011, in response to said publication, the appellants appeared along with their counsel and filed an application for grant of leave to defend the suit, which was dismissed by this Court, vide an order dated 10.10.2011, directing the parties to file their detailed breakups/statement of accounts. In compliance thereto, the respondent filed breakup/statement of account, whereas the appellants did not file the same.
3. Thereafter, the suit was decreed against the appellants vide; judgment dated: 21.11.2011 and decree dated: 03.12.2011. Mr. Munawar Ali, learned counsel appearing for appellants has inter alia argued that the respondent bank without complying with the express statutory requirement contemplated by the Financial Institutions (Recovery of Finances) Ordinance, 2001 filed a suit against the appellants, due to which the suit should have been dismissed by the Banking Court No ,IV, Karachi; that the appellants had filed application under section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and raised serious questions of law and facts, which were required to be decided by the trial Court in accordance with law, however, the learned Banking Court No.IV dismissed the same without taking into consideration the legal and factual controversies present in the case; that the respondent did not properly fulfill mandatory requirement of law in accordance with the provisions of Article 17 of Qanun-e-Shahadat Order, 1984 with regard to the loan documents, upon which the signatures of the appellant No.2 were obtained in blank, which were also prepared by the bank, wherein the amounts were subsequently filled in by the bank; that the respondent was not entitled to received mark up of 3 months KIBOR rate plus 450 bps when the respondent had agreed to charge the same @ KIBOR 2.50 and the respondent was not at all entitled to unilaterally and arbitrarily enhance markup rate without information to or consent of the appellants from 3 months KIBOR + 450 bps to 6.00% per annum; that the respondent was not authorized under the law to charge markup on the running finance facility granted to the appellants after 18.2.2009 when the same had come to an end; that the respondent was not at all entitled to transfer various amounts under the garb of "Opinion Charges", "Valuation Charges" and "Cost Charges" etc. from the running finance facility of the appellants without their consent and even information; that the alleged statement of account is not prepared in accordance with section 2, subsection (8) of the Bankers Books Evidence Act, 1891; that the suit filed by the respondent was not maintainable inasmuch as the same had been filed without the Resolution passed by the Board of Directors of the respondent Corporation as required under section 8, subsection (2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
4. The learned counsel finally contended that the trial Court, without applying its judicial mind and without deciding the serious questions of law and facts raised by the appellants before it, proceeded to pass judgment and decree in favour of the respondent in a haste, therefore, the same are liable to be set aside.
5. In order to substantiate his arguments the learned counsel for the appellants placed reliance on cases reported in (1) Elbow Room and another v. MCB Bank Ltd. -- 2014 CLD 985 [Sindh], (2) M/s. Liaqat Flour and General Mills v. M/s. Muslim Commercial Bank Ltd -- 2007 CLD 188 (Lahore), (3) M/s. C.M. Textile Mills (Pvt.) Ltd. v. Investment Corporation of Pakistan -- PLJ 2005 Lahore 1147 (DB), (4)
United Bank Ltd. v. M/s. Ilyas Enterprises -- 2004 CLD 1338 [Lahore], (5) Bank of Khyber v.
Nazamuddin and another -- 2010 CLD 1792 [Karachi], (6) Ahmed Deen v. Zarai Taraqiati Bank Ltd. -- 2014 CLD 119 [Lahore], (7) Habib Bank Ltd v. Karachi Pipe Mills Ltd.--2006 CLD 842 [Karachi], (8)
Emirates Global Islamic Bank Ltd. v. Muhammad Abdul Salam Khan -- 2013 CLD 129 [Sindh], (9)
United Bank Ltd. v. M/s. Usman Textiles -- 2007 CLD 435 [Lahore], (10) M/s. Dhrala Oil Mills v. The Bank of Punjab -- 2014 CLD 153 [Lahore].
6. Controverting the arguments of the learned counsel for the appellants, Mr. Zubair Qureshi, Advocate appearing for the respondent Bank has, while supporting the impugned judgment and decree opposing the contentions of the learned counsel for the appellants, inter alia argued that the running finance facility granted by the respondent to the appellants was in fact revolving credit, having a debit and credit entry in the statement of account as and when the same was operated either by withdrawal or deposit, despite the fact that no formal agreement was signed by the appellants for continuing previous agreement, however, the intention was to continue with the arrangement of running finance facility on the same terms and conditions as before. The conduct of the borrower in the present case is that of implied consent for the renewal of the agreement of finance facility as they continue to avail without raising any objection with regard to non-signing of any agreement to such effect. Since the finance facility was continued to be utilized by the appellants, it showed their intention to continue with such implied renewal of finance facility which had been extended by the Bank at their request. He further argued that the respondent bank has filed an adequate statement of accounts, which is based on the entries of principle limit, the amount disbursed, amount paid by the appellants, mark-up and total recoverable amount, which is also duly certified by the authorized Officers of the bank in accordance with Bankers' Books Evidence Act, 1891.
7. In order to substantiate his arguments the learned counsel for the respondent has relied upon the case law reported in M/s. U. I. G. (Pvt. ) Ltd. v. Bank Al-Falah Ltd. -- 2015 CLD 452 [Sindh].
8. We have heard the arguments of the learned counsel for the parties, perused material available on the record of the case as well as R&P called from the Banking Court No.IV, Karachi and carefully examined the case law with the able assistance of the learned counsel for the parties.
9. In our view the scheme of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is that when a suit is filed by the Financial Institution against the borrower the same is fundamentally is a suit on accounts which the Financial Institution is under an obligation to ledger and maintain compulsorily in the Books of Accounts in terms of the A relevant laws, rules and banking practice.
Therefore, the statement of account is the most important and the basic document which is mandatorily required to be filed by the Financial Institution along with the plaint for the recovery of finances against the borrower under section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, provides that the plaint shall be supported by a statement of account which shall be duly satisfied under the Bankers' Books Evidence Act, 1891.
10. For the sake of convenience section 9(2) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 is reproduced as under:- Section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
"(2) The plaint shall be supported by a statement of account which in the case of a financial institution shall be duly certified under the Bankers' Books Evidence Act, 1891 (XVIII of 1891), and all other relevant documents relating to the grant of finance. Copies of the plaint, statement of account and relevant documents shall be filed with the Banking Court in sufficient so that there is one set of copies of each for each defendant and one extra copy."
11. It would be equally advantageous to reproduce hereunder section 2(8) of the Bankers' Books Evidence, Act, 1891 inasmuch as it has to be read in conjunction with the aforesaid section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001:- Bankers' Books Evidence, Act 1891 section 2(8),
(8) "Certified copy" means a copy of any entry in the books of bank together with a certificate written at the foot of such copy that it is a true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the bank, such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title".
12. Upon bare reading of the aforesaid two provisions of law, it becomes abundantly clear that at the time of institution of the suit for recovery of finances by a Financial Institution, the plaint must be supported by a duly certified statement of account under section 2(8) of the Bankers' Books Evidence Act, 1891 which is maintained by the Financial Institution in the Books of Accounts in its ordinary course- of business. Meaning thereby that if the plaint is not supported by a duly certified statement of account, the borrower would not be able to show reasonable cause, serious and plausible grounds and triable issues in his application for leave to appear and defend the suit before the Banking Court inasmuch as the borrower would be totally oblivious to the exact amount advanced to him and utilized by him, mark-up charged thereon and the mode of calculation of account, nature of default alleged to have been committed by the borrower and the actual amount of the bank's claim against the customer. -The case law relied upon by the learned counsel for the appellants supports his contentions.
(1) In the case of Elbow Room and another v. MCB Bank Ltd supra it is held that where the suit has not been filed along with a proper statement of account in terms of the Bankers' Books Evidence Act, 1891 in section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance 2001, the suit shall not be deemed to have been filed according to law, under the circumstances the High Court set aside judgment and decree of the Banking Court and remanded the case to decide the application filed by the defendants for leave to defend the suit afresh.
(2) In the case of M/s. Liaqat Flour and General Mills v. M/s. Muslim Commercial Bank Ltd. supra it is held that where the statement of account is not filed in accordance with law, the same cannot be taken into consideration by the Banking Court while pronouncing judgment and decree. High Court in exercise of appellate jurisdiction set aside the judgment and decree passed by the Banking Court remanded the case back for adjudication afresh.
(3) In the case of M/s. C.M. Textile Mills (Pvt.) Ltd. v. Investment Corporation of Pakistan supra it is held that in the ' absence of statement of account filed along with the plaint is not according to section 9(2) of Financial Institutions (Recovery of Finances) Ordinance 2001, and section 2(8) of the Bankers' Books Evidence Act, 1891, the suit is filed by the respondent based on legally inadmissible document, which is liable to be dismissed. Suit was remanded back to the Banking Court for deciding the same afresh, after setting aside the judgment and decree.
(4) In the case of United Bank Ltd. v. M/s. Ilyas Enterprises supra it is held that where the certifications of statement of accounts were not found to be in accordance with the definition of certified copy under section 2(8) of the Bankers' Books Evidence Act, 1891, the same were not to be treated as certified copies of the entries of the Books of Accounts.
(5) In the case of Bank of Khyber v. Nazamuddin and another supra it is held that charging of mark-up after role-over, would amount to converting a mark-up base facility into interest bearing facility, which is not permissible under the law.
(6) In the case of Ahmed Deen v. Zarai Taraqiati Bank Ltd. supra it is held that Banking Court rightly rejected claim of the bank regarding excess mark-up charged after the expiry of period of finance and allowed cost of funds for such period in terms of section 3 of Financial Institutions (Recovery of Finances) Ordinance 2001.
(7) In the case of Habib Bank Ltd. v. Karachi Pipe Mills Ltd. supra it is held that Financial Institutions (Recovery of Finances) Ordinance 2001, withdrew power of Courts to grant mark-up and substituted the same with the power to award only cost of funds under section 3 of the Ordinance.
(8) In the case of Emirates Global Islamic Bank Ltd. v. Muhammad Abdul Salam Khan supra it is held that Upon dismissal of leave to defend application the entire suit of the plaintiff is not to be decreed as prayed without examining the claim of the plaintiff. The plaintiff becomes entitled to a decree only to the extent of such amount which is permissible by law.
(9) In the case of United Bank Ltd. v. M/s. Usman Textiles supra it is held that Mark-up cannot be charged beyond the period mentioned in the Finance Agreement.
(10) In the case of M/s. Dhrala Oil Mills v. The Bank of Punjab supra it is held that the suit filed on the basis of defective statement of account cannot be decreed inasmuch as the statement of accounts revealed that in most of the entries, particulars of transactions were not given and therefore, no presumption of truth could be attached to such incomplete statement of accounts.
13. Further guidance can be taken from the case of Soneri Bank v. Compass Trading Corporation
(Pvt) Ltd. Reported in 2012 CLD 1302 [Sindh], wherein it is held that certification of statement of accounts to be filed along with the suit before the Banking Court must be subscribed by the "principal accountant", which would include the Chief Financial Officer as identified by section 2(8) of the Bankers' Books Evidence Act, 1891. The statement of accounts which did not specify name and title of its signatories, such statement of accounts was not duly certified within the meaning and for the purposes of the said Act inasmuch as it did not comply with specific statutory requirements section 2(8) of the Bankers' Books Evidence Act, 1891.
14. Turning now to the case of UIG (Pvt.) Ltd. v. Bank AI-Falah Ltd relied by the learned counsel for the respondent Bank, it is held that despite the fact that no formal agreement was signed by the borrowers for continuing previous agreement with the bank, however, intention was to continue with arrangements of running finance facility on the same terms and conditions as before. The Conduct of the borrower was one that of implied renewal of agreement of finance facility, as they continued to avail the same without raising any objections with regard to non-signing any agreement to such effect.
15. Upon perusal of the statement of accounts in the present case, which has been filed at pages Nos.129 to 139 of the instant appeal, we have observed that same is incomplete and not subscribed by the principal accountant and Manager of the Bank-with his name and official title and therefor, does not fulfill the mandatory requirements of law and does not qualify as a statement of accounts as contemplated by the provisions of section 9(2) of the Ordinance of 2001 and section 2(8) and section 4 of the Bankers' Books Evidence Act, 1891 inasmuch as it does not contain the entire details of transactions between the appellants and respondent bank during the limit of finance nor does it bear any date and particulars of the sanction and disbursement of the finance facility, payment of liability, date and period of charging mark-up. Furthermore, the statement of accounts is undated and has been subscribed by of some -authorized officers of the respondent bank instead of being subscribed by the principal accountant or Manager of the Respondent Bank along with his name and official title as required under section 2(8) of the Bankers' Books Evidence Act, 1891.
16. Since the statement of account signed and subscribed by the authorized officer of the bank and not by the principal accountant or Manager of the respondent bank, the same cannot be treated as duly certified copy within the meaning of under section 2(8) of the Bankers' Books Evidence Act, 1891.
17. It appears that while dismissing the application filed by the appellant for leave to defend the suit, the learned Judge of the Banking Court No.IV, Karachi has totally ignored the mandatory provisions contemplated by section 9(2) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 and sections 2(8) and 4 of the Bankers' Books Evidence Act 1891 and erroneously relied upon the un-certified statement of accounts which admittedly did not mention the requisite information and the detail as required by law.
18. Therefore, we allow the instant appeal and set aside the impugned Judgment dated 21.11.2011 and Decree dated 03.12.2011 in favour of Respondent and order on leave to defend application dated 19.10.2011 and direct the learned Judge of the Banking Court No.IV, Karachi to decide the application of the appellants for leave to defend the suit afresh in accordance with law. However, the respondent shall be at liberty to file the proper statement of account in accordance with section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and sections 2(8) and 4 of the Bankers' Books Evidence Act, 1891, whereas the appellants, upon filing of fresh statement of accounts by the respondent, shall also be entitled to raise/file such objections thereon as they may deem fit.