' SHAHID KARIM, J.---This is a suit for the recovery under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (Ordinance, 2001) of an amount of Rs,1,629,507,809.75 as outstanding on 22.08.2009. The cost of the suit and the cost of funds have also been prayed to be decreed in favour of the plaintiff and against the defendants.
2. Application for leave to defend was filed on behalf of the defendants Nos.1 to 5 under section 10 of the Ordinance, 2001 for the grant of unconditional leave to defend the suit which is being decided through this judgment.
Relevant Facts:
3. The plaintiff is a banking company, established under the Bank of Punjab Act, 1989 and is a financial institution for the purposes of Ordinance, 2001. The defendant No,1 is a private limited company incorporated under the Companies Ordinance, 1984 (Ordinance, 1984) with its registered office at 17-C/II, M.M. Alam Road, Gulberg III, Lahore. It maintains an account with the plaintiff at the main branch situated at 1st Floor, .7-Egerton Road, Lahore. The defendants Nos.2, 3, 4 and 5 have been arrayed as guarantors for the grant of finance facilities to the defendant No,l. It has been averred in the plaint that the defendants Nos.2, 3, 4 and 5 having executed personal guarantees and corporate guarantees in favour of the plaintiff-Bank and are jointly and severally liable along with defendant No,1 for the suit amount.
4. The objects of defendant No,1/Company include the manufacture and supply of Liquefied Natural Gas (LNG) and re-gasified LNG (RLNG). The defendants Nos.2 and 3 are the Directors of the Company as also its sponsoring shareholders too. From the contents of the plaint, it has been brought forth that the defendant No,1 has been the customer of the plaintiff-Bank since the year 2006 and upon a request by the defendant No,1, approved and provided various finance facilities to the Company for the Liquefaction of Natural Gas Project (the Project). Primarily, three finance facilities were approved for the Project upon the request of the Company. The TF-I (Terms Finance) facility was an amount of Rs,60.00 million whose expiry, according to the last facility offer letter, was to be on 13.7.2014. The second facility viz. TF-III is a Musharika financing facility of Rs,659 million with an expiry date of 21.12.2014. The third facility TF-II is a sub-limit of the second facility and is a letter of credit of Rs,1122.428 million with an expiry date of 8.3.2015. These facilities were approved vide offer letter dated 28.9.2006 upon an application form submitted by the defendant No,1 Company. The offer letter is at page 102 of the plaint. By the offer letter on 28.9.2006, the approval was with regard to a fresh Term Finance for Rs,60 million which was an advance payment against import L/C Line II.
L/C Sight (Inland/Foreign) facility for 1000 million was also approved. It also envisages a Musharika demand facility of 116 million in order to finance the capital expenditure. The finance agreement for TF-I is at page 123 with the plaint and the date of the finance agreement is 24.9.2006. The facility had a span of eight years from disbursement and was to last till 13.7.2014. As stated above, an L/C Sight (Inland/Foreign) facility of Rs,1000 million was also approved which was modified to TF-II facility as a sub-limit of Line II. In terms of the change brought about in this facility, the facility was reduced to 920 million. The finance agreement to this effect is at page 132 with the plaint and is dated 19.12.2006. The Musharika facility (TF-III) was for an amount of Rs,116 million as mentioned above and the finance agreement to this facility is annexed at page 362 of the plaint and is dated 21.12.2006. The expiry period of this facility was 21.12.2014. A structure of security documentation also accompanied the approval of these facilities and the execution of finance agreements and reference in this regard has been made in the plaint and the documents have also been appended with the plaint. Nothing much turns on this aspect.
5. The defendant No,1-Company applied for the enhancements and in certain cases reduction in the original finance facilities. This application was approved and granted vide offer letter dated 27.4.2007 which is at page 117 of the plaint. In terms of the second facility offer letter an enhancement in the LC-Sight (Inland/Foreign) facility was made from 1000 million to 1202.428 million. The TF-II facility which is a sub-limit of Line-II was enhanced from Rs,920 million to Rs,1122.428 million. Likewise, an enhancement in the Musharika demand finance facility was brought about from Rs,116 million to Rs,659 million. It is the case of the plaintiff that no documents were executed with regard to LC-Sight (Inland/Foreign) facility and, therefore, no claim has been made in this suit with regard to this facility. It has been alleged in the plaint that the defaults in the obligations cast upon the defendants, on account of the terms of finance agreement, has given rise to the cause of action to the instant suit. In the final analysis, an amount of Rs,67,933,649/- has been claimed with regard to TF-I facility; an amount of Rs,685,595,936/- in respect of TF-III Musharika financing facility and Rs,875,978,224,75 in respect of TF-II facility has been claimed as outstanding against the defendants for which the defendants are liable jointly and severally.
Baseline Question:
6. An objection was taken by the defendants which gives rise to a baseline question regarding the maintainability of this suit and the entitlement of the defendants to the unconditional grant of leave to defend on the basis of this question. The question has its provenance in the suit (C.O.S. No,178 of 2009) which was filed by the plaintiff on 06.10.2009 and encapsulated the same cause of action and the matter in issue was directly and substantially the same as in the present suit. Also the suit was between the same parties and was filed before a Court having jurisdiction to grant the relief claimed. On these facts, the parties are on common ground. The learned counsel for the defendants has made a frontal attack on the maintainability and filing of the instant suit as according to him the earlier suit was withdrawn by the plaintiff-Bank under Order XXIII, Rule I of the Code of Civil Procedure (C.P.C.) without permission having been sought to file a fresh suit and, therefore, present suit is barred by section 12 of the C.P.C. Section 12 of the C.P.C. reads as under: "12. Bar to further suit.--(1) Where a plaintiff is precluded by rules from instituting a further suit in respect of any particular cause of action, he shall not be entitled to institute a suit in respect of such cause of action in any Court to which this Code applies.
(2) Where a person challenges the validity of a judgment, decree or order on the plea of fraud, mis-representation or want of jurisdiction, he shall seek his remedy by making an application to the Court which passed the final judgment, decree or order and not by a separate suit."
7. In a nub, the learned counsel for the defendants contends that: A plaintiff having instituted a suit and having sought permission to withdraw that suit unconditionally, cannot file a fresh suit as that would make Order XXIII, Rule 2 as redundant and without purpose. Order XXIII, Rule 2(a) and (b) is an exception to the general rule and must be construed strictly by the Courts. What cannot be achieved directly cannot also be achieved indirectly.
8. The facts with regard to the filing of the earlier suit and its withdrawal are admitted between the parties. As stated above, C.O.S. No,178 of 2009 was filed and an objection was taken by the defendants to the authority of the persons who had filed the suit on behalf of the plaintiff-Bank. The lack of authority and its sufficiency in law was conceded to by the plaintiff-Bank and C.M. No,658-B of 2010 was filed on 11.12.2010 through which the earlier suit was sought to be withdrawn. This application was under Order XXIII, Rule 1, C.P.C. On 28.4.2011, this Court while allowing the application, passed the following order: "Learned counsel for the plaintiff states that this suit has been incompetently filed without proper authorization and an objection in this behalf has been taken by the opposite side, which is conceded, hence he wishes to withdraw the suit as he has already filed another suit against the defendants i,e, C.O.S. No,138/2010. Consequently this suit is dismissed as withdrawn."
' Another fact on which the parties are not at variance is that while the earlier suit was pending, the present suit was filed on 12.8.2010. As noted above, the earlier suit was withdrawn on 28.4.2011.
Therefore, the ineluctable fact is that the present suit had already been instituted when the earlier suit was withdrawn on 28.4.2011.
10.The learned counsel for the defendants does not deny the fact that when the earlier suit was withdrawn, the fact regarding the filing of the instant suit was already in the knowledge of the defendants. This fact was also disclosed in the application C.M. No,658-B of 2010 in paragraph 2 as under; "2. That the Defendants in the titled suit have raised an objection as regards the authority under which the titled suit has been instituted. Since the Applicant/Plaintiff concedes the formal defect in the authority to institute the titled suit, the Applicant/Plaintiff seeks to withdraw the titled suit, having already instituted a fresh suit bearing C.O.S. No,138/2010 under valid authority against the Defendants on the same cause of action. C.O.S. No,138/2010 is also pending before this Hon'ble Court."
11. From a reading of the paragraph, reproduced above, it was duly informed by the plaintiff-Bank that the earlier suit was being withdrawn on account of a technicality and a formal defect in the authority to institute the suit with full disclosure that the present suit had already been instituted and was pending before the same Court and on the same cause of action. The substantial facts, therefore, lend themselves to some simplification and the proposition of law canvassed by the learned counsel for the defendants can be analyzed in the backdrop of these facts.
12.For facility, Order XXIII, Rule 1 is reproduced in extenso:
1. Withdrawal of suit or abandonment of part of claim-(1) At any time after the institution of a suit the plaintiff may, as against all or any of the defendants, withdraw his suit or abandon part of his claim.
(2) Where the Court is satisfied -- (a)that a suit must fail by reason of some formal defect or (b)that there are other sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim, it may, on such terms as it thinks fit, grant the plaintiff permission to withdraw from such suit or abandon such part of a claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of a claim.
(3)Where the plaintiff withdraws from a suit, or abandons part of a claim, without the permission referred to in sub-rule (2), he shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.
(4)Nothing in this rule shall be deemed to authorize the Court to permit one of several plaintiffs to withdraw without the consent of the others.
13.The learned counsel for the defendants by invocation of section 12 of the C.P.C. submits that clearly Order XXIII, Rule 1(2)(3), C.P.C. precludes the institution of a fresh suit in respect of such subject matter or such part of the claim which was involved in the suit which was withdrawn without the plaintiff having been granted permission to institute a fresh suit. Section 12, C.P.C. by its terms bars the institution of a fresh suit where such institution is precluded by rules in the C.P.C.
Section 12 is merely a reiteration of the prohibition contained in Order XXIII, Rule 1(3) of the C.P.C. As if it was not enough to have provided the prohibition in sub-rule (3) as a general rule, it was further provided in section 12 to apply to all cases where the plaintiff is precluded from instituting a fresh suit in respect of any particular cause of action. Section 12 as a general rule serves two purposes in my opinion. Firstly, it precludes the plaintiff from instituting a fresh suit in respect of any particular cause of action in case the plaintiff is precluded by rules in this respect. Therefore, section 12 does not lay down any fresh or new prohibition but merely echoes the prohibitions which are contained in any such rule. However, the second part of subsection (1) of section 12 is of some significance. It prohibits the institution of a fresh suit on the same cause of action in any Court to which the Code applies. (Underlining is mine). The only significance in enacting the underlying portion of subsection (1) of section 12 is perhaps to prohibit and preclude the institution of a further suit in any Court to which the Code applies. Therefore, it may not necessarily be the same Court to which the preclusion has been mandated by rules but by the terms of section 12, C.P.C. the prohibition extends to any other Court to which the Code applies. However, this question is not in issue in the objection taken by the defendants and therefore, this issue may not detain us any further.
14. Upon a dissection of Rule I of Order XXIII, C.P.C., it becomes evident that in terms of sub-rule (1) the plaintiff may withdraw his suit A or abandon part of his claim and for this purpose no permission of the Court is required. However, it is the terms of sub-rules (2) and (3) which have been invoked by the learned counsel for the defendants to urge that the present suit is caught by the mischief of these provisions and is, therefore, barred. Sub-rule (2) gives the power to the Court, upon its satisfaction, to permit the withdrawal of a suit or to abandon part of a claim with liberty to institute a fresh suit in respect of the subject matter of such suit or such part of a claim. This permission shall be granted to the plaintiff upon the plaintiff requesting such a permission and the Court may while doing so attach such terms as it thinks fit. By sub-rule (3), any plaintiff who withdraws from a suit without the permission referred to in sub-rule (2) shall be precluded from instituting a fresh suit in respect of such subject matter. Thus there is a bar on the filing of a fresh suit in case an earlier suit has been withdrawn without the permission having been sought from the Court. At first blush, it may be noticed that sub-rules (2) and (3) of Rule I of Order XXIII, C.P.C., relate to the seeking of a permission for withdrawal of a suit and thereafter filing a fresh suit in respect of the same subject matter or part of the claim. The entire concept, therefore, is with regard to a permission to withdraw a suit in order to file a fresh suit. It does not relate to a situation where a permission to withdraw a suit has been sought while a fresh suit has already been filed and is pending adjudication before a competent Court of law. According to the learned counsel for the defendants, these two situations are synonymous and it makes little difference that the subsequent suits had already been instituted when the earlier suit was withdrawn and if this course was permitted to be followed, this would be tantamount to playing fraud on the provisions of Order XXIII, Rule 1, C.P.C. This submission of the learned counsel for the defendants is flawed and has no legal legs to stand upon.
15. In the first instance, from the terms of Order XXIII, Rule 1, C.P.C., it is difficult to cull out the proposition sought to be urged by the learned counsel for the defendants. I am not prepared to read into Order XXIII, Rule 1 any such thing as the learned counsel for the defendants invites this Court to do. Order XXIII, Rule 1 simply concerns itself with the withdrawal and adjusting of suit. The permission that is sought by the plaintiff and granted by the Court relates to the institution of a fresh suit in respect of the subject matter of the pending suit and no occasion for such a permission would arise in case a suit had already been instituted for it would be otiose for a plaintiff to seek permission to withdraw the suit in order to file a fresh suit if that fresh suit has already been instituted. The intention of the law is not that in both the situations a permission be sought because that would be making a mockery of the law. In this regard, a reference to section 10, C.P.C. may also be made. Section 10 is to the following effect:
10. Stay of suit-- No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in Pakistan having jurisdiction to grant the relief claimed, or in any Court beyond the limits of Pakistan established or continued by the Central Government and having like jurisdiction, or before the Supreme Court.
16.Section 10 encapsulates the principle of res sub judice. Section 10 provides that a Court shall stay its hands in proceeding with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties. For, what section 10 prescribes is for a Court not to proceed with the trial of any such suit. Therefore, it may happen that two suits be filed in which the matter in issue is directly and substantially the same and which suits are between the same parties and are pending in either the same Court or any other Court in Pakistan having jurisdiction to grant the relief claimed. Therefore, the law contemplated a situation where two such suits may be pending at the same time. In my opinion, the present is a situation which has a closer nexus to the situation referred in section 10. If the arguments of the learned counsel for the defendants were accepted, that would in fact, make the provisions of section 10 as redundant and superfluous. In the instant case, had the two suits been pending, at worst the latter suit would have been stayed by the Court. Also the law does not envisage a bar on the course of action which was adopted by the plaintiff in instituting a fresh suit and thereafter seeking the withdrawal of the earlier suit. If the law does not create a bar or prohibit the adoption of this modus operandi, no such prohibition can be read into the C.P.C. The provisions of Order XXIII, Rules 1(2) and 3 cannot be stretched to cover a situation of the kind which we are concerned with in this matter.
Since the plaintiff did not require permission to institute a fresh suit having already instituted that suit, the prohibition contained in Order XXIII sub-rule (3) read with section 12, C.P.C., cannot be applied to the instant suit.
17.Let us consider the array of scenarios which would confront the plaintiff if the earlier suit had not been withdrawn. That plaint, in all probability, would be rejected under Order VII, Rule 11, C.P.C.
However, by rule 13 of Order VII, rejection of plaint would not have precluded the plaintiff from presenting a fresh plaint. Also had the earlier suit not been withdrawn, the subsequent suit (the instant one) would have to be stayed in terms of section 10, C.P.C. Upon the rejection of the plaint of the earlier suit, the instant suit would be resurrected and proceeded to be tried without any legal objection presenting itself. The point that needs to be driven home is that rejection of plaint does not operate as res judicata and a fresh plaint can be presented on the same cause of action.
18.The learned counsel for the plaintiff-Bank submits that the withdrawal of the earlier suit was made by acknowledging that a defect had crept into the authority to file the earlier suit and which constrained the plaintiff-Bank to withdraw that suit. It was also informed that the plaintiff had already instituted a suit on which notices had been issued by this Court.
19.The learned counsel for the defendants has relied upon a cluster of judgments in support of the proposition that the instant suit is barred by the terms of Order XXIII, Rule 1, C.P.C. The first of these judgments is Anjuman Masjid New Town through Secretary and another v. Muhammad Shahid Zaki and 12 others (PLD 2011 Karachi 550). This is a Single Bench judgment and it was held that the withdrawal of the earlier suit by the plaintiff was barred by the terms of Order XXIII, Rule 1, C.P.C. although the fresh suit had already been instituted when the plaintiff withdrew the earlier suit. A reliance was also placed on section 12, C.P.C. in coming to the conclusion that such a course was precluded by rules. However, this judgment is per curiam, in that, it does not take into consideration the various judgments of the superior courts and in particular the dilation of the Supreme Court of Pakistan on the subject. In Karamat Ali Khan and another v. Sardar Ali and 29 others (PLD 2001 SC(AJ&K) 30), the learned counsel has relied upon the following observations of the AJ&K Supreme Court: "...In the instant case the subsequent suit was filed during the pendency of the former suit and the prayer for withdrawing the first suit was made after so may years. Even the prayer was for withdrawal of suit not to reinstitute the fresh suit but to introduce an amendment in the subsequent suit. The principle which we have laid down that in presence of first suit the subsequent suit without the permission of Court to reinstitute the first suit on the basis of formal defects squarely applies to cases which are being withdrawn. The provisions of Order XXIII, sub- rule (3) cannot be defeated by instituting a fresh suit before withdrawing the previously filed suit. It is well-settled principle of law that what is not allowed to be done directly cannot be allowed to be done indirectly. Therefore, sub-rule (3) mentioned above applied to the present case."
20.It may be seen that the AJ&K Supreme Court arrived at the conclusion that the withdrawal of the earlier suit after the fresh suit having been instituted would be tantamount to defeating the provisions of Order XXIII, sub-rule (3). However, the precedents relied' upon by the Supreme Court of AJ&K did not, in fact, lay down any such rule and were distinguishable on facts. Moreover, it is difficult to subscribe to the conclusion drawn by the Supreme Court of AJ&K that such a course of action will defeat the provisions of Order XXIII, sub-rule (3) since as stated above, Order XXIII, sub- rule (3) merely concerns itself with the permission to withdraw a suit for filing a fresh suit and there is no prohibition in the entire length and breath of C.P.C. with regard to the filing of a suit during the pendency of an earlier suit and thereafter withdrawing the earlier suit. It is a recognized canon of law that what is not prohibited is deemed to be permitted. Also the effect of section 10 was not considered by the AJ&K Supreme Court.
21.The learned counsel for the defendants laid great stress on the observations of the Supreme Court of Pakistan in Muhammad Ali and others v. Province of Punjab and others (2009 SCMR 1079), which read as under: "...Moreover, it was evident from the record that the third suit was filed by the petitioners during the pendency of the second one and was as such liable to be stayed in view of the mandatory provisions of section 10 and could proceed only after the disposal for the second one. The moment petitioners abandoned their claim and unconditionally withdrew the second suit they could be held barred from pursuing the third suit on the same cause of action in terms of the spirit of Order XXIII, Rule 1. With profound respects in our humble opinion the provisions of section 10, ought to be read along with Order XXIII, rule 1 because otherwise the object of the latter could possibly be defeated. Nevertheless since a somewhat contrary view appears to have been taken by a two Member Bench of this court in the case of Jeewan Shah v. Muhammad Shah and others reported (PLD 2006 SC 202) we would avoid entering this controversy and leave it to a larger Bench to resolve the same in an appropriate case."
22.It can be seen from the above that the matter was left to be determined in another case and for a future day by the Supreme Court of Pakistan in the precedent cited by the learned counsel for the defendants. In doing so, a reference was made to a judgment reported as Jeewan Shah v.
Muhammad Shah and others reported (PLD 2006 SC 202) to which I shall refer in the later part of this opinion. Therefore, this judgment for all intents does not decide a question of law and a reliance on it for the present purpose is inapt.
23. The learned counsel for the defendants also relied upon the judgment reported as Messrs Artisans Craftsmen, Rehabilitation Society and 2 others v. Mst. Asif Jahan Begum and 10 others (1990 MLD 1702) and Dr. Akhtar Hussain v. S.M. Hanif and 2 others (1990 MLD 1652), both from the Karachi High Court and Single Bench judgments. The holding of these judgments should receive a shot shrift in my opinion in view of the fact that these judgments do not take into consideration the judgments of the Supreme Court of Pakistan reported as The Commissioner of Income Tax NCA Circle, Karachi and another v. Haji Ashfaq Ahmad Khan and 10 others (PLD 1973 SC 406) and Ghulam Nabi and others v. Seth Muhammad Yaqub and others (PLD 1983 SC 344). Also it has not taken into account the earlier judgments to the contrary passed by the Karachi High Court and reported as Haji Ashfaq Ahmad Khan and others v. Custodian of Evacuee Property Pakistan and others (PLD 1966 Kar. 597) and Irshad Ali v. Islamic Republic of Pakistan and others (1981 CLC 111) and, therefore, these judgments too are in per curiam and no reliance can be placed on these judgments.
24. In The Commissioner of Income Tax, the following observations of the Supreme Court of Pakistan are pertinent for our purposes: "This withdrawal was made at the time when Writ Petition No,638 of 1962 was pending. No material has been placed before us to indicate why Writ Petition No, 416 of 1962 was withdrawn. In the case of Hira Singh v Puran and another (AIR 1930 Lab. 599(1)), it was held that the provisions of Order XXIII, rule 1 of the Code of Civil Procedure did not apply where the second suit was already pending on the date of the withdrawal of the first suit. With this view the High Court in the present case agreed. We agree with the views of the High Court. We do not think that in the facts and circumstances of the case Writ Petition No, 638 of 1962 was not maintainable. This view finds support from the decision in Daryao v. State of U.P. (AIR 1961 SC 1457. In the case under report six writ petitions under Article 226 of the Indians Constitution had been moved and were rejected by the High Court. Thereupon the petitioners filed six writ petitions under Article 32 of the Constitution before the Supreme Court of India. It was argued on behalf of the respondents that the dismissal of a writ petition filed by a party for obtaining an appropriate writ creates bar of res judicate against similar petition filed in the Supreme Court under Article 32 of the Indian Constitution on the same and similar facts and praying for the same and similar writ. It was held. Inter alia, that if the petition before the High Court was dismissed as withdrawn, it could not be a bar to a subsequent petition under Article 32 of the Constitution because in such a case there had been no decision on the merits by the Court. Although this observation upon the facts of the case is confined only to the question of res judicate; it applied as a general proposition to a previous writ petition which was withdrawn at the time a second writ petition was pending."
25. The Commissioner of Income Tax was followed in Ghulam Nabi and others. The case law was squarely with regard to the interpretation of Order XXIII, Rule 1 in the context of the subsequent suit having been instituted when the permission for withdrawal of the earlier suit was sought. The Supreme Court of Pakistan was emphatic in rejecting the proposition that the institution of a fresh suit was visited with the same consequences as spelt out in Order XXIII, Rule 3 if the fresh suit was filed while the earlier suit was still pending. The Supreme Court of Pakistan refused to extend the prohibition contained in sub-rule (3) of Order XXIII to such a situation. It was held that:
8. The next objection to the maintainability of the suit based on the provision of Order XXIII, rule 1, C.P.C. is that the earlier suit having been withdrawn without permission of the Court to institute a fresh one, the subsequent suit being for the same subject-matter is barred. Under this rule, where the Court is satisfied that (1) the suit must fail by reason of some formal defect or (2) there are other sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of the suit or part of the claim, it may grant the plaintiff permission to withdraw such suit but where the plaintiff withdraws the suit without such permission, then he is precluded from instituting a fresh suit in respect of such subject-matter or such part of the claim. A fresh suit envisaged in the rule is one filed subsequent to the withdrawal of the earlier suit. On the question whether the rule barred a suit which at the time of the withdrawal of the earlier suit had already been instituted and pending, we find that in Ram Mal v. Upendra Datt (AIR 1928 Lab. 710) relying on P. Surja Reddi v.
Sabba Reddi ((1916) 39 Mad. 937), lit was held that a second suit will not be barred in the case of withdrawal of a previous suit unless conditions of Order XXIII, rule 1, C.P.C. are fully satisfied lied and that if the subsequent suit was already pending at the time of the withdrawal of the previous suit, the provision could not be attracted. A Division Bench of the Lahore Court in Mungi Lal v. Radha Mohan (AIR 1930 Lab. 599) held that "Order XXIII, rule 1 refers to permission to withdraw a suit with liberty to institute a fresh suit after the first one has been withdrawn. It appears to me that the section cannot be read so as to bar a suit which has already been instituted before the other suit had been abandoned or dismissed." This judgment had been followed in Abdullah v. Bashiran (PLD 1981 Lah. 336) and it had been held that a fresh suit which had been pending at the time of withdrawal of a previous suit was not barred. The view taken in Mungi Lal's case had also been followed by this Court in Commissioner of Income Tax v. Ashfaq Ahmad (PLD 1973 SC 406), wherein it had been held that where one writ petition had been filed during the pendency of a previous writ petition, the withdrawal of the previous writ petition before reaching the stage of hearing on merit would not affect the maintainability of the second petition which could legally proceed in spite of the withdrawal of the previous petition. The Sindh High Court has also been of the same view which is reflected in its judgments reported as Ashfaq Ahmad Khan v. Custodian of Evacuee Property (PLD 1973 SC 406) and Irshad Ali v. Islamic Republic of Pakistan (1981 CLC 111). We are, therefore, not inclined to agree that the suit in question was affected by Order II, rule 2 or Order XXIII, rule 1, C.P.C.
26.In the course of laying down the proposition of law, reproduced above, the Supreme Court of Pakistan took a survey of the case law on the subject, both pre-partition and post-partition and also referred to a judgment reported as Mangi Lal and another v. Radha Mohan and another (AIR 1930 Lahore 599). This has been mentioned on account of a specific submission made by the learned counsel for the defendants that that judgment has been set aside in a subsequent judgment reported as Amir Din Shahab Din v. Shiv Dev Singh Jhanda Singh (AIR (34) 1947 Lahore 102). Suffice to say that the Supreme Court of Pakistan approved the view taken in Mangi Lal and another and the later judgment and its conclusion becomes inconsequential. The threshold objection raised by the learned counsel for the defendants does not, ipso facto, give rise to a substantial question of law and fact.
Substantial Questions of Law and Fact: 27.Having narrated the primary and essential facts, the contents of the application for leave to defend will be adverted to in order to gauge whether the application discloses substantial questions of law and fact. As a prefatory, it is common ground and the defendants do not dispute that the agreements were executed by the defendants, or the amounts of the financial facilities (or a portion of the amount) were not disbursed to the defendants and, therefore, the defendants did not avail the finance facilities.
28.The basic stance is encapsulated in paragraphs 10 to 14 of the preliminary submissions in the application for leave to defend. The defendants have brought forth in the application for leave to defend that the defendant-Company was set up as a special purpose company to establish an independent stand-alone project in the form of LNG production unit being the first of its kind in the sub-continent. The plaintiff-Bank was, after much deliberation, appointed as the project's sole financier. In this regard, the defendants provided the plaintiff with detailed forecast and projections as also the available draft supply contract being negotiated with M/s Chart Energy and Chemicals (CEC), a supplier based in the United States of America. It has been brought forth in the application that the agreements were signed for the provision of finance facilities and in particular the facility for the setting up of Sight LC for the importation of machinery from the foreign buyers. The essence of the entire transaction was the timely disbursement of the amounts under the finance facilities as in terms of contract with CEC, the delivery was due in September, 2007. Despite reminders, according to the contents of the application, the plaintiff-Bank failed to establish the required LC until January 27, 2007, i,e, with a delay of four months. The application for leave to defend then proceeds to recount the events which ensued subsequently and harps on the contention that owing to the delay on the part of the plaintiff-Bank, the Project schedule was adversely affected as also resulted in cost escalation. For this reason, during February/ March the defendant No,1 Company requested the plaintiff-Bank to allow certain enhancements in the Project facilities. It is not denied that during this time a second facility offer letter dated 27.4.2007 was issued by the plaintiff-Bank which represented an enhanced credit package. In paragraph 13 of the preliminary submissions, the defendants have referred to the change in the political government which correspondingly resulted change in the senior management of the bank and which change, according to the defendants, had an adverse impact on the future course of the Project.
29.It can be seen from the contents of the application for leave to defend and the defence set up by the defendants in that application that the nub of the defence put forth by the defendants is the allegation of default in the obligations cast upon the plaintiff-Bank and a recantation of its contractual obligations which gave rise to circumstances under which the future prospect of the Project became bleaker by the day and which in turn resulted in default on the part of the defendants. In other words, the defendants invite this Court to grant leave to defend on the ground that since corresponding obligations on the part of the plaintiff-Bank went a begging, therefore, the defendants are not liable to repay the amounts sought to be recovered in the instant suit and this gives rise to substantial questions of law and fact.
30.Before I proceed further to consider the defence set up by the defendants, it would be appropriate to consider whether the defendants have complied with the obligation cast upon then in terms of section 10(4) of the Ordinance, 2001. The only compliance which has remotely been made by the defendants finds mention in paragraph 16 of the preliminary objections. To reiterate in terms of section 10(4) of the Ordinance, 2001, a duty has been cast on the customer to specify in the application for leave to defend the amount of finance availed by the defendant, the amount paid by the defendant to the financial institution along with the dates of payment, the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution up to the date of institution of the suit and the amount if any which the defendants, as payable to the financial institution and facts in support thereof. In the column, which has been inserted in paragraph 16, none of the conditions required to be fulfilled have been complied with by the defendants. In the said column, the defendants have out rightly denied the ailment of any amount in terms of the alleged finance agreement appended with the plaint and the word 'Nil' has been mentioned against all three finance facilities. In respect of the column regarding amount repayable as of this date, once again the word 'Nil' has been mentioned against all three facilities.
This compliance, to say the least, leaves a lot to be desired. By the terms of subsection (6) of section 10, an application for leave to defend which has not complied with the requirements of subsection (4) shall be rejected unless the defendant discloses sufficient cause for his inability to comply with any such requirements. The defendants have not disclosed in the application for leave to defend any sufficient cause for their inability to comply with any such requirements. Since the non-compliance of subsection (4) of section 10 entails penal consequences specified in subsection (6), this fact alone constitutes sufficient reason for the rejection of the application for leave to defend. The Supreme Court of Pakistan emphatically lays down in Apollo Textile Mills Ltd. and others v. Soneri Bank Ltd. (2012 CLD 337) that: "17. Non-impleadment under subsections (3) and (4) of section 10 and section 9(3) ibid of accounts in terms of the said provisions, entails legal consequences under subsections (1), (6) and (11) of section 10 of the Ordinance, 2001."
18. The Financial Institutions (Recovery of Finances) Ordinance, 2001 i,e, is a special law. It provides a special procedure for the banking suits. The provisions of the Ordinance, 2001 under section 4 thereof override all other laws. The provisions contained in the said Sections require strict compliance. Noncompliance therewith attract as above referred, consequences of rejection of leave petition along with decree etc. etc.
21. The similarity of the provisions legislated in sections 9 and 10 ibid, as discussed above, leads to identical consequences in the absence of the demanded Accounts and the documents. Suit of the plaintiff institution will be rejectable while defendants' leave petition will be exposed to rejection etc. A Plaintiff institution may be rendered unable or deficient in appropriately setting up its answers to the accounts, disputed amounts and facts of the defendant in reply to the leave application as per section 10(8) ibid. And that in the absence of the requisite accounts and the facts etc. in defence filed by a defendant in the leave petition, a plaintiff will remain unaware of the admitted or denied or disputed accounts and facts of the defendants, to adequately, seriously and reasonably pursue the suit and its trial. This will obviously defeat the intent and the object of the provided provisions of The Financial Institutions (Recovery of Finances) Ordinance, 2001) </i>
31. The fundamental sinew and the foundational basis of the defence taken in the application for leave to defend is on the basis of a nuanced distinction sought to be drawn between the Project financing and the conventional corporate financing. In paragraph 5 of the preliminary submissions in the application for leave to defend, it has been sought to be brought forth that the financing which is the subject matter of the instant suit was in the realm of Project financing and cannot be viewed through the prism of conventional corporate financing. The essence of the defence as narrated in paragraph 5 of the preliminary submissions is reproduced as under: <i>"...In particular; in ordinary corporate financing the primary source of repayment for investors/lenders is an Existing Company with a history of yielding healthy annual cash flows, thus assuring lenders of a high degree of probability of servicing any New Finance envisaged by them.
On the contrary, in Green Field Projects like the one under discussion, repayment of Project Finance principally relies on success or failure of the Project to Generate Cash flows in a Timely Manner as envisaged in the projections. Thus, the overall success of the project itself is the primary consideration. In consequence thereof, the risks (and returns) are borne not by the sponsors alone, but by different classes of investors such as equity holders and debt providers (such as the plaintiff). It is also significant to point out that once the financing decision is made, in view of promising projections and feasibilities, the investors/creditors impliedly undertake to ensure the project's completion. The relationship is thus not one of a creditor and debtor but rather a strategic partnership where in the parties share the risks and rewards alike; a relationship based on mutual trust and commitment."
32. While setting up the defence and relying upon it as the foundation of the defendants' case, the defendants in the application for leave to defend have not referred to any clause in the agreement to this effect and whose breach has been alleged to be committed by the plaintiff-Bank. In other words, neither the application nor the learned counsel for the defendants during, the course of his arguments, alluded to any term in either of the three agreements under consideration in which it has been mentioned and agreed upon by the parties that the financing is in the nature of the Project financing and the plaintiff-Bank was under a corresponding obligation with regard to the fulfillment of the duties cast upon it. Also the application is bereft of any reference to a document which would substantiate the defence taken by the defendants on the basis of concept of Project finance as distinguishable from corporate financing. This has not been broached in any of the correspondence annexed with the application for leave to defend and shall be taken as an afterthought and a stance which has for the first time been taken in the application for leave to defend. The learned counsel for the defendants has relied upon the distinction brought forth in the report of International Finance Corporation (IFC) titled "Project Finance in Developing Countries". It is in the following terms: "BASICS OF PROJECT FINANCING"
"As already noted, project finance is tailored to meet the needs of a specific project. Repayment of the financing relies on the cash flow and the assets of the project itself. The risks (and returns) are borne not by the sponsor alone, but by different classes of investors (equity holders, debt providers, quasi-equity investors). Because risks are shared, one criterion of a project's suitability for financing is whether it is able to stand alone as a distinct legal and economic entity. Project assets, project-related contracts, and project cash flows need to be separated from those of the sponsor. There are two basic types of project finance: non-recourse project finance, and limited- recourse project finance."
"Traditional finance is corporate finance, where the primary source of repayment for investors and creditors is the sponsoring company, backed by its entire balance sheet, not the project alone.
Although creditors will usually still seek to assure themselves of the economic viability of the project being financed, so that it is not a drain on the corporate sponsor's existing pool of assets, an important influence on their credit decision is the overall strength of the sponsor's balance sheet, as well as their business reputation. Depending on this strength, creditors will still retain a significant level of comfort in being repaid even if the individual project fails. In corporate finance, if a project fails its lenders do not necessarily suffer, as long as the company owning the project remains financially viable. In project finance, if the project fails investors and creditors can expect significant losses."
33. This distinction, referred to by the learned counsel for the defendants, is not generally in dispute.
However, as stated above, the distinction would have assumed relevance in case the documents executed between the parties would lead to the conclusion that the financing was, in fact, based on the concept of project finance and not in the nature of a traditional corporate finance. From the study of the documents, their perusal as also the correspondence attached with the plaint as well as the application for leave to defend, the only conclusion that can be drawn is that the instant was a case of a traditional corporate finance and the financing was made available on the overall strength of the sponsors balance sheet and business reputation. None of the facility offer letters nor the agreements signed between the parties would depict the financing to be on the basis of the concept of project financing or that corresponding obligations were cast upon the plaintiff- Bank. Be that as it may, the learned counsel for the defendants has failed to specifically point out to any of the obligations which were, in fact, cast upon the plaintiff-Bank and the breach of which resulted in the failure of the Project. From perusal of the FOLs, which are at pages 102 and 117 of the plaint, these offers seem to be an amalgam of the enhancement of existing facilities as also the approval of fresh sanctions of certain facilities. Also in the request letter made by the defendant No,1 Company, there is no mention of any obligations which are associated with project financing as also there is no mention of any consequences of any default with regard to the alleged obligations on the part of the plaintiff-Bank. The agreements which were executed are simple agreements for financing for short/medium/ long term on a markup basis. These are standard agreements employed by the bank to disburse traditional corporate financing. In short, none of the documents, which form the basis of the relationship between the parties makes a reference to the concept of project financing to permeate that relationship and to form its basis.
34. The learned counsel for the defendants has referred to various documents including sanction advice as also the facility offer letter in order to bring home that the terms and conditions of the financing that envisages corresponding obligations to be cast on the plaintiff-Bank. The learned counsel concedes that with regard to TF-I facility an amount of Rs,60 million was disbursed.
Subsequently, vide agreed approval by the plaintiff-Bank which is at page 110 of the plaint, the LC amount was enhanced from one billion to 1.2 billion rupees. TF.II facility was enhanced from one billion to Rs,1.2 billion as well and Musharika facility was enhanced to 659 million. Correspondingly, the running finance facility was reduced to Rs,15 million. The learned counsel further referred to the sub-heading Initial Cost Projections on the same document which mentions that a total investment of approximately 1.41 billion rupees is expected to be raised by the defendant No,1 Company. The learned counsel then referred to page 112 of the plaint which is part of the document titled Agreed Approval and in which the following has been relied upon by the learned counsel: "However; the client will maintain debt equity ratio as approved earlier i,e, 79:21 and inject additional equity in proportion to enhanced amount to maintain the same. The present portion of equity PKR 362.163 M will be enhanced to PKR 389.913 M."
35. The above portion has been referred in respect of the assertion that the defendants complied their part of the obligation in contributing the portion of the equity as required of them. It was thus left to the bank to do the needful on its part. It may be stated that the injection of equity by the defendants is the issue around which the instant case primarily revolves. The circumstance which triggered the filing of the instant suit seems to be the allegation on the part of the plaintiff-Bank that the defendants had reneged on their obligation to make equity contribution. It is the case of the plaintiff-Bank that there was in fact no equity injection by the defendants after the second facility offer letter. It has also been contended that the initial injection of equity is also a highly suspicious even and there is no proof forthcoming which would show that the equity was contributed by the defendants in terms of the agreement. The only document, according to the learned counsel for the defendants, which gives an inkling of the equity contribution by the defendants is a document at page 45 of the replication filed by the plaintiff-Bank. This is a certificate by the auditors/Chartered Accountants of the defendant No,1 Company which merely certifies that as per the books of accounts of the defendant-Company, the sponsors of the Company had invested an amount of Rs,362.163 M in the shape of share deposit money in the Company. Further, that this amount represents the advance given to the machinery supplier M/s. Chart Energy and Chemicals (CEC). The certificate further mentions that it has been issued at the specific request of the client. Firstly, apart from this certificate, no other document has been attached with the application for leave to defend in order to bring home that the contribution of equity was, in fact, made by the defendants. According to the learned counsel for the plaintiff- Bank, this documents is dubious and cannot be relied upon. Also, according to the learned counsel, this aspect is the subject of investigation by National Accountability Bureau (NAB). Interestingly, this amount is precisely the amount which was disbursed by the plaintiff-Bank with regard to TF-H facility and the statement of account to this effect is annexed at page 360 of the plaint. In the entry dated 9.3.2007 is mentioned an amount of Rs,362,341,125.00 which, according to the learned counsel for the plaintiff-Bank, is the amount which translates into PKR when converted from Dollars.
In any case, the learned counsel submits that no equity was injected into the project after the second FOL in April, 2007, which was a condition precedent for the disbursement of the facilities after their enhancement as per second FOL and this circumstance alone was sufficient for the plaintiff-Bank to terminate the contract and to recall the facilities.
36.As stated above, the issue whether the defendants contributed the equity in terms of the obligations cast under the agreement seems to be at the heart of the controversy. Apart from the letter of auditor, no other document has been produced by the defendants which would reflect their contribution of equity. In any case, there is no evidence of the contribution made by the defendants in pursuance of the second FOL under which the debt equity ratio had to be maintained after enhancement of facilities which seems to have gone begging on the part of the defendants. In rebuttal, the learned counsel for the defendants vehemently contended that upon change of management of the plaintiff-Bank, technical valuation by approved valuators was held by the plaintiff-Bank. In this regard, the letter of 21.5.2008 is sought to be relied upon. Audit reports were finalized and submitted by the valuators which have been annexed at page 278 with the application for leave to defend and the attention of this Court has been drawn to page 297 of this report and the following observation of the valuators: "Direct advances made by the sponsors and financiers to beneficiary M/S Chart Energy and Chemicals, Inc., USA Performa Invoice No,1055200 dated September 30, 2006 Petrofina Invoice No,1053416 dated August 30, 2006 and Performa Invoice No,1036644 dated July 06, 2006 Annexure- III, Clearance charges nil.
' Rs,497.372 Million"
37.The above observation does not support in any manner the contention of the learned counsel for the defendants. Firstly, the report is by valuators and cannot substitute the audited accounts of a company or balance sheets prepared by the auditors of the company which have not been produced by the defendants in order to rebut the contention of the plaintiff-Bank with regard thereto. Secondly, the observation reproduced above refers to direct advances made by the sponsors and financiers and, therefore, it does not, with any decree of certainty, establish the exact amount of equity contributed on the part of the defendants. Once again, even if it were believed for a moment that the equity contribution was made by the defendants to comply with the terms of First FOL, no evidence regarding the contribution to comply with the terms of second FOL has been produced by the defendants.
38. With regard to the TF-II facility, which was primarily an LC facility, according to the learned counsel, LC No,67/22 was open for import purposes on 27.1.2007 and was for an amount of $ 11.925 M which converts to Rs,725 M. The contract between the defendant No,1 and the supplier is annexed at page 181 of the application for leave to defend and at page 214 is the payment terms agreed between the parties. Only two payments according to the learned counsel were made under this LC; i) Advance payment of Rs,362.341 M on 9.3.2007 and ii) An amount of Rs,206.211 M was disbursed by the Bank.
39. The second LC No,608/07 is dated 17.3.2007 for an amount of $ 4.68 M (Rs,288 M). The payment was made in three trenches on 26.9.2007, 18.12.2007 and 10.12.2009 for an amount of Rs,67 M, 5.7 M and 31.656 M respectively. No disbursement was made in respect of the third LC facility of 607/07 dated 17.9.2007. Accordingly, against a sanction amount of Rs,1.202 billion with regard to LC facility an amount of Rs,775.562 M stands disbursed by the Bank which comes to 68% of the sanction amount.
40. The agreement with regard to TF-III facility is at page 362 of the plaint. This is Musharika financing facility. According to the learned counsel, the terms of the payment with the foreign supplier are annexed at page 216 of the application for leave to defend and the first amount of $ 331,250 was paid by the defendants and the second payment was made by the Bank. Further payments were also made by the Bank under this facility. However, the remainders of the payments were not made. The learned counsel for the defendants has referred to a series of correspondence between the defendants and the foreign suppliers in order to establish and as per the contention that on account of delay caused by the plaintiff-Bank the Project suffered enormously and the milestones were not achieved. Also that the FOL was issued in terms of the payment schedule which is at page 265 of the application for leave to defend and which was agreed to between the defendant-Company and representative of the foreign supplier. The learned counsel then laid great stress on the political change in the country and as a result the corresponding change in the management of the plaintiff-Bank during February/March, 2008.
Upon this change, the available and sanctioned facilities by the plaintiff-Bank were frozen. In this regard, the assertions made in the application for leave to defend and the replies to those assertions made by the plaintiff-Bank in its replication have been referred to by the learned counsel for the defendants. Although, in the replication a reference has been made to the political connections of the defendants and the influence which was brought to bear on the plaintiff-Bank in obtaining the finance facilities has been made, that was merely in response to such facts having been brought forth in the application for leave to defend. However, suffice to say that that issue is not the pivotal issue in the determination of the instant application nor has the learned counsel for the plaintiff-Bank relied upon this fact to assert that the facilities were recalled and terminated on this ground alone. The transaction has been depicted as a purely commercial transaction and the filing of the suit is premised on the default in the obligations cast upon the defendants as customers. Nothing much, therefore, turns on this aspect. With regard to the Musharika facility, an amount of Rs,606 M is admitted to have been disbursed to the defendants by the plaintiff-Bank.
41.Much emphasis was laid by the learned counsel for the defendants on the fact that the establishment of LC should have taken place in September, 2006. This has been stated at page 11 of the application for leave to defend (para 10). This event, according to the learned counsel for the parties, was the major cause of the delay in the Project and the supply of the machinery in the terms of the suppliers agreement and which spawned into cost escalation and other factors which adversely impacted the Project. However, from the documents brought forth on record, the facts are otherwise. The application for the establishment of the LC was made by the defendant Company, on 27.1.2007 which is at page 167 annexed with the plaint. Further correspondence at pages 227 and 228 with the application for leave to defend also reflect that by 18.1.2007 (the date of the correspondence) the suppliers were not entirely convinced that the LC to be established by the plaintiff-Bank was acceptable to them or not. Therefore, these facts belie the contention of the learned counsel for the defendants that there was a fault on the part of the plaintiff-Bank establishing the LC during September, 2006.
42.From the entire facts and circumstances of the case and the record produced by both the parties, there is no evidence that the LC established by the plaintiff-Bank was dishonored at any stage. According to the learned counsel for plaintiff-Bank, TF-II facility arises out of the LC facility.
He also submits that new Board of Directors of the plaintiff-Bank was constituted in March, 2008 and this change in the constitution of the board had no relevance with the case of the defendants nor was it a paradigm event which caused a change of heart with the managers of the plaintiff- Bank to either cap the facilities or to withdraw them unilaterally without reasonable cause. The learned counsel for the plaintiff-Bank referred to a letter dated 9.5.2008 written by the defendants to the plaintiff-Bank which according to the learned counsel for the plaintiff-Bank has not been denied by the defendants. The contents of this letter, according to learned counsel, would show ineluctably that the entire defence set up in the application for leave to defend is a sham and does not have any basis at all. The letter of 9.5.2008 makes an interesting reading and the relevant portions are being reproduced as under: "This Project of Liquefaction of Natural Gas is quiet asset concentrated and hence, its total cost had been calculated for Rs,2.35 Billion. At that stage the management has approached The Bank of Punjab to become a business partner at that infancy stage of the project, by way of financing.
Bank's competent authority had sanctioned a credit package to support the projects installation cost, process of imports of machinery; purchase of local machinery and its all preoperational expenses.
' Thereafter By the grace of All Mighty Allah this project was set in to its implementation phase by having 12 Acers land at Shorkot Cantt. in the vicinity of SNGPL main supply point. Civil contracts with various parties including Fast Builders and Sajjid Ali Construction Company for the construction of the site building are about to finish and more than 70% of the construction work has been completed.
' Foreign supply contracts with various parities including Chart Engineering USA, PBG Poland, Caterpillar Switzerland and Venzetti Engineering Italy for the import of main components of the plant were made and at present more then 50% Equipment has been arrived and installed at the plant and main shipment is arriving in the 2nd week of June 2008.
We are very much proud to quote the excellence of the services provided by the Bank of Punjab for the success of our project. Its whole team does really put their united efforts to prove the standard of bank's matchless services towards its client's satisfaction. We especially name Mr. Hassan Khan, Mr. Maqsood Ahmed, Mr. Ali Khan, Mr. Ali Shan and Mr. Ashraf for their kind cooperation and support to our project and our team thereto.
' The said project is entirely a new technology of its kind in Pakistan; therefore we have to face number of uncertainties till it was set into implementation. These may includes the change in the design, Selection and appropriate harmony among the local and imported components, Power crises leads us to shift on the power generation units, induction of Soft Starter Technology to control the automation, Electricity load diversion to 4MW from 2MW connection, induction of Water treatment plant due to poor water conditions at site, induction of residential block for the manpower due to remote location of the site and poor availability of skilled manpower in the locality, Steel crises, Cement non-availability, Fuel crises in the world, Raise in the dollar parity, Increase in the bank interest rate and overall impact inflation in the economy.
' Moreover as the project cost is approximately 76% allocated towards the imports of components so, the fluctuation in the dollar parity leads a huge impact on the foreign trade payments. The detail, enclosed for your reference, reflects the overall increasing impact of Rs, 423 (M) due to above mentioned challenges under various head (detail is attached for your review). <u>We are very much satisfied with the pace of the project implementation and we are of confident of its completion and starts of its operations by the last quarter of this year. You are therefore requested:</u> 1.Please provide us an additional cousin of PKR 334 Million, which is 79% of this aforementioned enhancement, in our Musharika where as rest of 89 Million shall be contributed by the company from its own Equity sources by the Shareholders.
' Secondly 2.Defer the Re-payment of the loan against term Finance I and II for another 6 months beginning from end of the first quarter 2009.
' In the end we once again thanks to the Bank of Punjab and its entire concerning team either named above or not for their true confidence and corporation with the company for the success of its LNG Project."
43. What comes forth starkly out of reading of the contents of this letter reproduced above is that none of the factors or grouses raised in the application for leave to defend have remotely been alluded to in the contents of the letter. On the contrary, the Chief Financial Officer on behalf of the defendant-Company is full of praise for the excellent services being rendered by the plaintiff-Bank towards the Project. The letter is replete with adulation and commendation of the officers of the Bank. The reasons given in the letter are entirely different from the ones which have been taken as grounds of defence in the application for leave to defend. No blame has been put on the plaintiff- Bank in this letter to assert the default on the part of the Bank. Also the letter does not convey an impression that the Project was equity-based in which the plaintiff-Bank was a contributing partner and was thus equally liable in all respects. In fact, the letter makes a mention of the plaintiff-Bank being a business partner by way of financing. In the end, complete satisfaction was expressed with regard to the pace of the Project implementation and the start of its operation by the quarter of that year. The contents of the letter of 9.5.2008 pays put to the stance taken by the defendants in their application for leave to defend. This letter has not been denied by the defendants and in my opinion, is sufficient to stunt and nullify the contradictory stance which has been set up in the application for leave to defend. The defendants cannot be permitted to blow hot and cold and to raise a defence which runs counter to the one which has been taken in the letter referred to above.
44.The learned counsel for the plaintiff-Bank has flagged the two requests made in the letter by the defendants. One was for the provision of an additional cushion of PKR 334 M which enhancement was to be made in the Musharika facility and it was offered that an amount of Rs,89 million shall be contributed by the Company from its own equity. The second request relates to the deferment of the repayment of the loan against Term Finance-I and II for another 6 months. These two requests, according to the learned counsel for the plaintiff-Bank, was the last straw which broke the camel's back. These were utterly not acceptable to the plaintiff-Bank and, therefore, the Bank was constrained to terminate the facilities and to recall them. The requests so made through this letter will also have the dual effect of it deflecting the defendants' contentions that the withdrawal of the facilities and their termination was motivated by political considerations. Be that as it may, no such evidence has been brought forth which would establish that the change of management in the plaintiff-Bank was the sole factor behind the withdrawal of the facilities.
45.The learned counsel has submitted that there were two FOLs, one of 28.9.2006 and the other of 27.4.2007. The first offer letter was acted upon in all respects and the facilities were availed by the defendants as also the amounts under the LC were also disbursed against documents. By the second facility offer letter, a request was made for the enhancement for the amount sanctioned by the defendants. And this is a pattern which became the norm with the defendants depicted by the letter dated 9.5.2008 when the defendants seek further enhancements. The learned counsel has referred to the letter by the plaintiff-Bank at page 563 of the plaint dated 21.10.2008 which is by way of a reminder to the defendants intimating them that there was a failure in the deposit of the equity part of proposed LC enhancement. The defendants were required to arrange for the amount as part of the equity for the aforesaid enhancement so that the LC could be settled. Therefore, according to the learned counsel for the plaintiff-Bank, the only negotiations were for the enhancements of the facilities already granted and availed by the defendants and there is no evidence at all that the plaintiff-Bank reneged on its obligations under the two FOLs. The learned counsel has, in order to hammer in his point, referred to the opening of the LCs and the disbursements made under them. LC 607/07 was issued on 27.1.2007 and it was re-issued on 16.4.2007. LC 608/07 was issued on 17.9.2007 and it was enhanced on 10.11.2007 and was entirely availed by the defendant-Company. LC 609/07 was established on 17.9.2007 and this LC was not availed by the defendants on account of the defendants' failure to honor the commitment with the supplier. Lastly, LC 375/07 was established on 26.11.2007 which too was not availed. This contradicts the stance of the defendants that there was a default in the obligations regarding the establishment of LCs by the plaintiff-Bank. These LCs were duly established and funds were made available. However, for some unknown reason these were not availed by the defendants. At this juncture, according to the learned counsel for the plaintiff-Bank, the letter dated 9.5.2008 was received at the offices of the plaintiff-Bank which led to the conclusion being drawn by the management of the plaintiff-Bank that the Project had by now become unviable and there was no point in putting more money into a black hole. It was also evident by then that the chances of the Project being set up had virtually evaporated.
46. With regard to the Musharika facility, the statement of account has been annexed at pages 374 and 375 of the plaint which shows disbursement to have been made to the defendant-Company till at least 23.6.2009. With regard to this facility, a total disbursement of 606.683 M has been made to the defendant-Company as against the total limit of the facility to the tune of Rs,659 M and, therefore, merely an amount of Rs,53 M was not availed by the defendants. The learned counsel for the plaintiff-Bank submits that there is no evidence on record that the facility was capped or terminated without reasonable cause. The contention of the learned counsel for the plaintiff-Bank has substantial force and indeed the assertion made by the defendants in this regard is without any substantial proof. In this regard, another exchange of correspondence between the parties has been referred to by the learned counsel for the plaintiff-Bank. At page 175 with the replication is a letter written by the plaintiff-Bank dated 13.9.2008. This letter is in response to an earlier letter by the defendant-Company dated 12.9.2008. By the letter dated 12.9.2008 the defendant-Company made an impassioned appeal to the Bank to pay personal attention to the Project and to expedite the sanction of enhancement to support and to unfreeze the present available credit lines. Again in the letter written by the Company dated 12.9.2008, no reference has been made to purport default in the obligation by the plaintiff-Bank. That letter too rests the case of the company on factors which have no relation with any of the obligations of the plaintiff-Bank. In reply, the plaintiff-Bank has in its letter of 13.9.2008 simply conveyed its stance to the effect that it was not obligatory for the bank to fund the cost over-runs while financing the Project. The Bank in its reply recalled that it had already accommodated first cost over-runs incurred by the Project to the extent of 739.000 M in April, 2007 and any delay in the Project cannot be passed on to the Bank. The learned counsel for the plaintiff-Bank has categorically stated that there was no equity injection by the defendants after the facility offer letter of 27.4.2007.
47.The learned counsel for the plaintiff-Bank has pointed out that after the letter by the defendant-Company dated 25.8.2008, an amount of Rs,230 M was disbursed to the defendant- Company. Further reference has been made to the correspondence placed on the record by the defendants themselves to show that the entire focus of the defendants was on the enhancement in the existing facilities to the tune of PKR 352 M. Thus, there were two streams of requests running parallel to each other. One was for capping the Musharika facility and for directing the unavailable funds to the establishment of LC and the other request was for enhancement of the facilities to the tune of Rs,352 M. Therefore, the pivotal point and the watershed moment in the relationship between the parties was the letter of May 9, 2008 which convinced the management of the plaintiff-Bank that the Project had become unviable and not worthy of further indulgence by the Bank in terms of enhancement of the facilities. By this time, the original facilities had already been enhanced to the extent of 52%. Further, the learned counsel for the plaintiff-Bank contends that no equity injection was forthcoming on behalf of the sponsors despite the Bank's insistence upon it and reminders in this regard. The letter issued by the auditor and annexed at page 45 with the reply to the application for leave to defend was not sufficient to establish that the equity had been contributed by the defendants. Moreover, the NAB had by the time embarked upon an investigation of the entire case.
48.It is clear from the above that the events which led to the decision by the plaintiff-Bank to recall the facilities and to file the instant suit was, in fact, a failure on the part of the defendants/ sponsors to inject their part of the equity in the Project which was an obligation cast upon them in terms of the FOLs. The letter of 9.5.2008 written by the defendant-Company further lends credence to the view that the sponsors were not in a position to complete the Project and to make it operational and, therefore, the unviability of the Project was scaring in the face of the plaintiff-Bank.
These two according to the learned, counsel for the plaintiff-Bank were the primary causes for the recall of the facilities and a claim for the recovery of the amounts disbursed. I have no reason to doubt that these were the circumstances which compelled the plaintiff-Bank to take that decision and the stance taken by the defendants with regard to political influence having been brought to bear on the decision is unsupported and unsubstantiated.
49. This begs the question: Are the defendants entitled to the grant of leave to defend on the mere allegation of a breach in the fulfillment of its objections by the plaintiff-Bank? Does that entitle the defendants to skirt its obligation under the provisions of Ordinance, 2001 and refuse to repay the amounts disbursed to it and availed towards the setting up of the project? The answer is clearly in the negative. At best, the defendants may have a case to lay claim for damages (which they have by filing a suit which is pending) but cannot be heard to say that they are relieved of their obligation to repay the amounts utilized as finance facilities. In particular, since the agreements are admitted and the application does not bring forth any claim by way of set off. Also because the conduct of the defendants and their stance is diametrically opposed to their stance in prior correspondence.
50.The learned counsel for the defendants has placed reliance on two judgments. In Messrs Menahil Textile Mills (Pvt.) Ltd. through Chief Executive and 3 others v. Muslim Commercial Bank Ltd.
(2005 CLD 1787) a Division Bench of this Court proceeded to accept the appeal filed by the customer and to grant leave to defend. The facts of M/s. Menahil Textile Mills are in contradiction to the facts of the present case. In the cited precedent, the appellant had not received any amount of Finance directly from the bank nor had the machinery for which the loan was sanctioned, was delivered. It was the bank itself which had invited quotations for the supply and manufacture of the machinery and the amount was directly disbursed to the manufacturer by the bank. It was under these circumstances that the Division Bench of this Court as of the opinion that there were certain questions which required evidence to be taken down and which could not be resolved at the leave granting stage.
51.Zeeshan Energy Ltd. and others v. Faysal Bank Ltd. (2014 SCMR 1048) was relied upon by the learned counsel for the defendants as bearing identical facts in which the Supreme Court of Pakistan proceeded to accept the appeal and to grant leave to defend to the appellants. However, upon a reading of the entire judgment in Zeeshan Energy Ltd., it is evident that the factual matrix in that case has no similarity with the facts in the instant matter and the reason which weighed with the Supreme Court of Pakistan to accept the appeal and to grant leave to defend was a letter by the bank which encapsulated and delineated the relationship bet been the parties and according to which letter dated 23.8.1994 the bank in that case without equivocation confirmed that the bank shall invest in the equity of the company to the extent of 25% of paid up capital. By another letter, the bank agreed to underwrite the public subscription to be issued by the company for the purpose. Another letter was produced by the controller of capital issues to the effect that the project was equity-based and the bank was to contribute 25% of the paid up capital. These facts are sufficient to show that in the Zeeshan Energy Ltd. the project was conceived as based entirely on equity and not banking finance. There were documents on record which were relied upon by the Supreme Court of Pakistan to conclude with regard to this aspect. There are no documents of a similar nature in the instant suit upon which the defendants have relied upon. There is no iota of evidence which would show that the Project was conceived as equity-based as also that the plaintiff-Bank had invested in the equity of the defendant-Company or had taken up any portion of its paid up capital. Therefore, the reliance of the learned counsel for the defendants on the Zeeshan Energy Ltd. is inapt.
52.From the contents of the preceding paragraphs adumbrated, it is evident that no substantial questions of law and fact have been raised by the defendants in their application for leave to defend. This application for leave to defend is therefore, dismissed.
M ain Case 53.In view of the dismissal of the application for leave to defend, the suit is decreed in favour of the plaintiff-Bank and against the defendants jointly and severally for an amount of Rs,1,629,507,809,75 along with costs of funds in terms of section 3 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. The costs of the suit are also granted.