1. SHAMS MEHMOOD MIRZA, J.---This is a suit filed under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance) seeking recovery of Rs,90,478,321 from the defendants on account of Demand Finance facilities granted to defendant No,1 and default by it of its payment obligations.
2. Brief facts of the case are that defendant No,1 was availing various finance facilities from the plaintiff bank. Vide letter dated 23.05.2009 and 18.06.2009, defendant No,1 approached the plaintiff bank for rescheduling/restructuring of its existing liabilities. The said request was acceded to by the plaintiff bank which issued offer letter dated 28.07.2009 whereby demand finance (DF-I) (Serviceable) facility of Rs,90 Million was granted by clubbing the principal amounts of running finance, TF-I, TF-II and TF-Ill, facilities. Demand Finance (DF- II) (un-serviceable) facility of Rs,10.088 Million was granted for payment of the accrued mark up on TF-I, TF-II and TF-III facilities. DF-I facility was repayable in 55 monthly instalments commencing from 31.07.2009 to 31.01.2014 as per the repayment plan attached with the aforementioned offer letter whereas DF-II facility was payable in 11 monthly installment commencing from 31.07.2009. As the defendants committed default of their obligations in terms of payment of the instalments under DF-I and DF-II facilities, the plaintiff bank was constrained to file the present suit.
2. In pursuance of the summons issued by this Court, the defendants entered appearance and filed a joint application to leave to defend bearing PLA No,54-B of 2013.
3. It is stated that the statement of accounts are not certified in accordance with the provisions of the Bankers' Books Evidence Act, 1891; the suit has not been instituted by a duly authorized person the name of defendant No,2 is liable to be deleted from the array of the defendants as it was neither principal borrower nor the surety; the plaintiff bank has charged and recovered markup beyond the expiry period of DF-I facility, and; the amount of DF-II facility contains markup which was not due.
4. The examination of the statements of accounts show that they have been duly certified in accordance with the provisions of the Bankers' Books Evidence Act, 1891 in that the certificate at the foot of such statements bears the date, signature and stamp of the manager of the plaintiff bank branch. The certificate thus fulfills the requirement of section 2(8) of the Banker's Books Evidence Act, 1891.
5. The suit has been instituted by Mehboob ul Hassan, Head SAMD, whose power of attorney is also appended with the plaint. Section 9 of the Ordinance empowers three categories of persons to file a suit (a) the branch manager (b) an officer authorized by a power of attorney and (c) an officer who is otherwise authorized by a financial institution. It is quite clear that an officer of a financial institution who holds a power of attorney in his/favour need not append anything else other than the said power of attorney to demonstrate his authority to institute the suit under section 9 of the Ordinance. Had it not been so, section 9 of the Ordinance would have required production of further documents other than the power of attorney by the attorney holder to demonstrate the authorization of the person executing the power of attorney. The suit of the plaintiff bank has, thus, competently been filed.
6. It was next contended by the learned counsel for defendants that fresh disbursement of amounts did not take place under DF-I facility, therefore, markup could not have been charged thereon. This objection has no valid basis. The restructured finance facilities i,e. DF-I and DF-II facilities were created at the specific request of the defendants made through letters dated 23.05.2009 and 18.06.2009 wherein the outstanding amounts were admitted.
7. Such restructuring of finance facilities is recognized by section 2(e)(i) of the Ordinance.
8. Upon restructuring of finance facilities and with the execution of a fresh agreement, the debt under the previous agreement(s) is covered by the fresh agreement and becomes the liability of the customer and in order for the latter agreement to become binding and enforceable, it is not necessary to disburse funds under it to show consideration. The restructuring of the finance itself becomes the consideration for adjusting the previous liabilities together with promise to pay mark up on the restructured finance. In this regard, the definition of "obligation" as mentioned in section 2(e)(i) of the Ordinance is relevant and is reproduced hereunder.
(e) "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.
9. In Habib Bank Limited v. Service Fabrics Limited etc. 2004 CLD 1117, the scope of renewal/rescheduling/restructuring of finance facilities was discussed with specific reference to section 2(e) of the Ordinance and it was held as follows.
10. Renewal/rescheduling/restructuring of financial facilities only ensues upon default non- payment, delayed payment or inability, in payment of outstanding liability by a customer who normally seeks such concession upon admission and determination of liability. By soliciting rescheduling or, restructuring, as the case may be, a customer, in essence, either requests postponement of repayment of a finance on renewed terms as agreed between the parties or asks for reorganization/refurbishing of financial basis of a finance and its liquidation. By approving rescheduling/ restructuring/renewal of a financial facility, the bank forgoes its immediate right of recovery and enforcement of securities against the customer. The effect of rescheduling, restructuring and renewal of finance facility is mutually agreed by the parties to be absorbed by future interest, mark-up charges or commissions till the agreed date of liquidation of liability as has been done in the present compromise decree. Rescheduling, restructuring and renewal is also thus a facility or accommodation granted by the bank to a customer. This facility has been recognized as an "Obligation" defined in section 2(e) of Financial Institutions (Recovery of Finances) Ordinance, 2001.
11. It is thus clear that restructured finance comes within the definition of finance and the customer at whose instance such a restructuring is granted is liable to pay mark up thereon.
12. It was also submitted that defendant No,2 has unnecessarily been arrayed in the present suit as it was neither the principal borrower nor the surety and that no allegation in the plaint was made against the said defendant. The examination of the plaint as well as documents appended therewith show that nothing was attributed to defendant No,2 in the plaint and there is no document available with the plaint to connect defendant No,2 with the loan facility. It was simply stated in paragraph No,3 of the plaint that defendant No,2 is a sister concern of defendant No,1, having the same directors as defendant No,1. It is clear that defendant No,2 does not come within the definition of "customer" as defined in the Ordinance. The name of defendant No,2 is, therefore, ordered to be struck off from the array of defendants.
13. The learned counsel for the defendants has submitted that the amount of DF-II facility, which comprises of accrued mark up of various finance facilities, was incorrectly worked out. He drew the attention of this Court towards the statement of mark up pertaining to running finance facility which shows that the mark up from 09.10.2007 till 28.09.2009 was charged whereas the last finance agreement in respect of RF facility shows that the RF facility expired on 28.07.2007.
14. This position is further reinforced from the contents of plaintiff bank offer letter dated 28.08.2009 and the repayment schedule appended therewith. The statement of mark up account in respect of RF facility shows that an amount of Rs,2,153,427/- was charged and recovered from defendant No,1 after the expiry of the said facility. Furthermore, an amount of Rs,1,370,140/- was parked in the DF-II account under the restructuring arrangement. It is, therefore, clear that the amount of Rs,3,523,567/- is liable to be deleted from the claim of the plaintiff bank as the said amount was recovered and charged beyond the contract period of RF facility.
15. In the present suit, C.M. No,249 of 2013 was filed by Pakistan State Oil Company Limited for becoming party in these proceedings. Under the provisions of the 'Ordinance, a banking suit can be filed by a financial institution against its customers and vice versa. The provisions of the ordinance was particularly section 9 thereof do not contemplate impleading of a person who is not a customer or a financial institution. This application being misconceived is accordingly dismissed.
11. The finance facilities were granted at the specific request of defendant No,1 made through letters dated 23.05.2009 and 28.07.2009 wherein the amounts of RF-I, TF-I, TF-II and TF-III facilities were categorically admitted. The offer letter along with repayment schedule was accepted by defendant No,1 which subsequently passed resolution dated 08.08.2009 acknowledging the rescheduling/restructuring package granted by the plaintiff bank.
16. Defendant No,1 vide letter dated 04.05.2011 again acknowledged the availment of DF-I and DF-II facilities and sought further restructuring thereof on account of the reasons mentioned therein. The finance facilities and the amounts thereof thus stand admitted by the defendants. The claim of the plaintiff bank is substantiated by the finance agreements and other documents available on the record together with the statements of accounts.
17. The defendants have not been able to raise any dispute on facts requiring recording of evidence. Except for defendant No,2, the PLA filed by the other defendants is, therefore, dismissed. This suit is accordingly decreed in favour of the plaintiff bank and against defendants Nos.1, 3 to 5, jointly and severally, in the sum of Rs,86,954,754/- together with cost of funds as contemplated by section 3 of the Ordinance. Costs of the suit are also granted.