ABID AZIZ SHEIKH, J.---This is a suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (Ordinance), seeking recovery of Rs,560,159,831/- together with costs, expenses and costs of funds against the defendants Nos,1 to 10. The remaining defendants have been impleaded as pro forma defendants.
2. Brief facts as per averments of the plaint are that plaintiff bank allowed various finance facilities to the defendant No,1, company (defendant company) in year 2003. The said finance facilities were approved, renewed, guaranteed, rescheduled, restructured, and disbursed from time to time to defendant Company. The said finance facilities were secured through mortgages and charges on the assets of defendant Company and defendants Nos,2 to 10 furnished personal guarantees in favour of the plaintiff bank to secure the said facilities. As per para 27 of the plaint, the following amounts are outstanding against the defendants Nos,1 to 10:- Sr.No.Nature of FacilityPrincipal OutstandingMarkup OutstandingTotal (Principal = Markup)
Outstanding
1. ERF-11 Rs,0.00 Rs,6,723,295/-Its.6,723,295/-
2. FAFB/FBPRs,218,210,000/-Rs,16,605,347/-Rs,234,815,347/- (2.a)PCF Rs,250,000,000/- Forced Finance(Rs,0.00/-) Rs,250,000,000/- (2.b)ERF-1 0.00/- Rs, I ,048,952/-Rs,1,048,952/-
3. Demand FinanceRs,65,000,000/-Rs,2,572,237/-Rs,67,572,237/- Total Rs,533,210,000/-Rs,26,949,831Rs,560,159,831/- 3.In response to notices, defendants Nos,1 to 10 have entered appearance and filed their PLAs Nos,130-B, 131-B, 132-B of 2013, hereinafter referred as PLAs for leave to appear and defend the suit, filed by plaintiff bank.
4.Learned counsel for the applicants/defendants while arguing the aforesaid PLAs made his submissions separately in respect of each finance facility claimed by the plaintiff bank. In respect of FAFB facility, he submits that documents executed on 01.04.2009 and 12.10.2010 were blank documents lying with the plaintiff bank since 2008 and filled up subsequently; that documents (at page 307 of the plaint) show that it was executed in Corporate Branch whereas no corporate branch was in existence at the relevant time; that amount disbursed through FAFB, facility is not reflected in the current account statement of the defendant company that FAFB, statement of account is not certified by the Branch Manager; that no foreign bill exchange is attached with the suit to prove that payment was made by foreign order; that the current statement of account No,214-2 admitted in para 4 of the suit has not been attached with the plaint to prove debit and credit entries made in the FAFB account. Regarding ERF-11/1, he submits that said facility was created on blank documents available with bank; that the amount against said facility was not disbursed in the current account statement. In respect of demand finance facility, he argued that statement of account attached for said facility (at pages 61 and 62 of the suit), is of Messrs Amtex Ltd., and not of defendant company (M/s. Chenab Ltd.); that demand finance facility was initially credited in 2003 and total payable amount was Rs,283/- million including Rs,33/- million markup payable within five years. Submits that as per statement of account attached at pages 61 and 62 of the plaint, total amount of Rs,283/- million was paid, therefore, the claim of Rs,50/- million against demand finance facility is beyond the agreed amount payable including markup, of Rs,33/- million in the original demand finance agreement; that excess amount of markup has been charged. Submits that in given circumstances, defendants Nos,1 to 10, make out a case for grant of leave to appear and defend the suit. Reliance, is placed on the following judgments:- "Messrs Haq Feed Industries Pvt. Ltd. through Chief Executive and 7 others v. National Development Finance Corporation (2007 CLD 975), Faysal Bank v. Generetch Pakistan Ltd. And 6 others (2009 CLD 856), Bankers Equity Ltd. through Principal Law Officer and 5 others v. Messrs Bentonite Pakistan Ltd. And 7 others (2003 CLD 931), Askari Bank Ltd. v. Waleed Junaid Industries and 2 others (2012 CLD 1681), Messrs United Dairies Farms Pvt. Ltd. and 4 others v. UBL (2005 CLD 569), Apollo Textile Ltd. and others v. Soneri Bank Ltd. (PLD 2012 SC 268), Habib Metropolitan Bank Ltd. v. Abid Nisar (2014 CLD 1367), Messrs Dharala. Oil Mills v. The BOP through Branch Manager (2014 CLD 153) and Pak Oman Investment Co. Ltd. v. Chenab and 9 others (2016 CLD 1903).
5. Learned counsel for the plaintiff bank in response to arguments on PLAs contends that it is a case of admitted liability. He submits that availing of finance facilities and execution of documents are not denied by the defendants; that the defendants have not given detail of amount availed, repaid and outstanding amount against defendants as required under section 10(4) of the Ordinance, therefore, these PLAs are liable to be dismissed on this ground alone; that no blank documents were subsequently filled up; that the stamp on the documents is of corporate head because in every region, there is a corporate branch with a corporate head, hence it cannot be said that at relevant time, there was no corporate branch; that in respect of various finance facilities, the amount was duly disbursed which are evident from the statement of account; that no excess markup has been charged; that defendants should have produced their own statement of account to prove that amount was not credited in their account.
6.I have heard the learned counsel for the parties and perused the record. Respective arguments regarding each facility are discussed separately hereunder:- FAFB The first argument of the defendants is that FAFB agreement at page 347 of the suit was prepared by making copies of blank documents procured by bank in 2007 and 2008 and blank copy of same document is available at page 215 of PLA No,130 of 2013. The response of plaintiff's counsel is that no blank documents were procured in 2007 and 2008 and copy of agreement (at page 215 of PLA) was obtained by defendants in 2010 for reading purpose. I have found substance in arguments of learned counsel for the plaintiff bank firstly for the reason that agreement at page 215 of PLA, does not have bank stamp and signatures as appears in the agreement at page 347 of the plaint, secondly, agreements for years 2007 and 2008 are available at pages 244 and 267 of the suit where adhesive stamps are different from the one mentioned at agreement at page 347 of the suit, therefore, it cannot be copy of same agreements, thirdly, once bank filled up the agreements in years 2007 and 2008 and same are also available on record, it is not possible to fill up same documents subsequently for agreement in year 2010. The sanction letter dated 12.10.2010, demand promissory note along with personal guarantees executed also support the argument of the plaintiff bank that these documents were not filled in blank subsequently but same were executed after the renewal of facility.
7.The next argument of learned counsel for the defendants is that on finance agreement dated 12.10.2010, stamp of corporate head was affixed, whereas no such corporate branch in Civil Line Branch was in existence. This arguments is not supported by record. The stamp shows that same is of the corporate head. In every region of bank, there is corporate branch which is evident from letter dated 17.07.2007 (at page 594 of the plaint) written by defendant company itself and addressed to corporate branch Civil Line, Faisalabad.
8.The learned counsel for the applicants/defendants vehemently argued that disbursed amount against FAFB is not reflected in the statement of account at pages 71 to 79 of the plaint. I have carefully considered this plea in the light of available documents. The plaintiff bank in para 4 of the plaint had specifically asserted that defendants had maintained two current accounts with the plaintiff bank i,e, Current Account No,054395-8 at Civil Line Branch Faisalabad and Current Account No,214-2 at corporate branch at Kohi-e-Noor City Faisalabad.
In reply to para 4 of the plaint, the defendant No,1, in its PLA, has admitted the opening of account.
Therefore, the existence of above referred two current accounts, is not disputed. The perusal of FAFB statement of account (at pages 71 and 72 of the plaint) shows that amount of Rs,199,900,000/- was disbursed to the defendants from 19.11.2009, till 17.04.2010. The said amounts are duly reflected in the Current Account No,054395-8 appended with the plaint. The aforesaid amount of Rs, 199,900,000/- was apparently shifted from Civil Line Branch Faisalabad, to Special Asset Management Division North, Lahore. The statement of account of Special Asset Management, Division Branch from 10.05.2010 to 23.06.2011, shows that from time to time, amount of Rs,326,505,000/- was debited in the account of defendant company and during this period an amount of Rs,308,195,000/- was credited in the same account of defendant company. Learned counsel for the defendants' contention is that so far as above debit entries in the said statement of account are concerned same are disputed because they are not supported by current account statement but at the same time, defendants own the credit entries in the said statement of account and also claimed that separated receipts are available for them. I am afraid, the defendants cannot blow hot and cold in same breath. Once defendants relied on the statement of account for the purpose of credit entries, it cannot dispute the debit entries in the same statement of, account, unless defendant company produce its own current account statement of account to prove that said debit entries were not reflected in his current statement of account.
9. This Court in The BOP v. Messrs Khan Unique Developers Pvt. Ltd. (2016 CLD 29), held that when defendant assert that amount of finance facility was not disbursed to them, then they must produce and rely on their current account statement to show inaccuracy and fallacy of the claim of plaintiff bank. The relevant extract from above said judgment is as udder:- <i>"In the case of the DF facility, the disbursements have been made in the current account of defendant No,1 company and the corresponding debit entries exists in the DF account. Where in a suit the financial institution does not rely upon the statement of current account, it is a common practice to allege in the PLA that the financial institution has failed to corroborate the statement of loan account. It is a misconceived argument for a variety of reasons. In Apollo Textile Mills Limited v. Soneri Bank Limited 2012 CLD 337, the Hon'ble Supreme Court, while making reference to the provisions of section 10 of the Ordinance held that "A defending customer is thus obliged to put in a definite response to the banks accounting and has undersections 10(3) and 10(4) to compulsorily plead in answer in the leave petition his accounts as well as the facts and amounts disputed by him as repayable to the plaintiff." (emphasis supplied) The reference to the customer's accounts can only mean customer's statement of current account and in the case of a limited liability company, in addition to the statement of current account, its books of accounts or its audited accounts. The rationale for producing such accounts/statement of current account was explained in paragraph 15 of the said judgment, which reads as under. "The rationale of schematic discipline of Ordinance of 2001 is evident. A banking suit is normally a suit on Accounts which are duly ledgered and maintained compulsorily in the books of Accounts under the prescribed principles/standards of Accounting in terms of the laws, rules and Banking practices.
As such instead of leaving it to the option of the parties to' make general assertions on Accounts, the Ordinance binds both the sides to be absolutely specific on accounts. The parties to a suit have been obligated equally to definitively plead and to specifically state their respective accounts." (emphasis supplied) C.O.S. No,41 of 2010. It may be added that in terms of section 10(5) of the Ordinance, a defendant is obliged to file along with the PLA all the documents which support the questions of law and facts raised by him. Obviously, a defendant who impugns the liability set up by the plaintiff bank in its suit and asserts that amounts of finance facility were not disbursed to him<u> must rely on his current account to show the inaccuracy and fallac)4of the claim of the plaintiff bank particularly in cases where the</u> amounts of the finance facility are alleged to have been disbursed in the current account. In terms of Section 10 of the Ordinance, therefore, a <u>customer is under an obligation to rely on and append the statement of current account with his PLA if he wants to impugn the liability set up by the financial institution in the suit. </u> A defendant cannot simply put up a denial simpliciter in its PLA in answer to a claim of a financial institution in the suit which is backed up by a statement of account and other finance documents. Even otherwise, a bare denial of liability is never held to be a valid denial in law (see Order VIII, Rule 4, C.P.C.)."</i>
10. Once defendant Company itself admit that there was another current account bearing No,214- 2 at Corporate Branch Kohi-e-Noor City, Faisalabad, then to set up a case that no disbursement was made in said account, the defendant company should have produced the said current account statement. The failure on part of defendants to dispute the accounts by producing current account statement or raising dispute on the entries in the account at the relevant time, also hit by the principle of financial estoppel. Under State Bank of Pakistan circular No,2/2010, dated 05.01.2010, there is a duty on every bank to send periodic bank statement to its customers giving detail of the statement of account. When defendants have not raised any defect in the statement of account, sent by the bank, it estopped to challenge the veracity of statement of accounts in the present suit.
11. I have also noted that the principle of financial estoppel was specifically applied to defendant company in another suit (C.O.S. No,24/2014) filed against defendant company by another financial institution (Allied Bank Ltd.). The relevant para of the judgment in said suit, is reproduced hereunder:- "16. <i>There is an aspect of financial estoppel which arises in this case and to which I shall allude to. The nub of the challenge by Chenab (and other defendants) is to entries in bank statements which tend to arise in two situations (as stated by counsel for Chenab). In the first, Chenab challenges the accuracy of an entry and disputes that any payment was in fact made such as to justify a particular debit entry. In the second C.O.S. No,24 of 2014 situation, Chenab states in respect of a few entries that ABL was not entitled to debit the account at all. The question arises whether there is an account stated. "In the strict sense of the term, an account stated describes the position where an account contains items both of credit and debit, and the figures are adjusted between the parties and a balance struck." [Camillo Tank Steamship Co Ltd. v. Alexandria Engineering Works (1921) 38 TLR 134 per Viscount Cave at 143]
17. There is a duty on the bank to send periodic bank statements to its customers giving details of the state of the account in the light of the transactions since the last statement. The bank's obligations in this regard have been set down in the Circulars issued by the State Bank of Pakistan from time to time. It has not been set up as a defence by Chenab that it was not given access to the bank statement by ABL and it is inconceivable, in any case, that Chenab did not check its monthly or periodic bank statements given the sweep and extent of the finance facilities being availed by it. By any stretch of imagination, the ABL's lending to Chenab was quite substantial and it is a C.O.S. No,24 of 2014 foregone conclusion that Chenab's team of accountants and auditors must have pored over the accounts and bank statements before agreeing to renewals and restructuring of liabilities. This may not be expected of an ordinary customer but Chenab, by no means, is an ordinary customer and is a corporate customer of immense financial muscle and thus is aided by the ablest and the most efficient of professionals in their respective fields. It would thus be legitimate to invoke the doctrine of estoppel when Chenab raises the challenge to accuracy of entries in bank statements
23. Such a provision is part of the agreement between ABL and Chenab and we may only refer to the last agreement dated 14 December, 2009. Clause 6(i) reads as under: "THE sums owing from the Customer to the Bank shall be such as may be certified by a duly authorized officer of the Bank and the Customer agrees to accept the same as conclusive and waives his right to challenge the same."
24. Thus the right of Chenab to challenge the entries has been excluded by an express agreement.
This clause is a conclusive evidence clause between the parties. It imposes on Chenab an express obligation to examine its bank statements and to make those statements unchallengeable. Clear and unambiguous provision has been agreed upon to introduce into the contract a binding obligation to accept the statement as accurately setting out the debit items in the accounts. No material has been brought forth to establish that Chenab queried its bank statements and thus there is now an estoppel against it to challenge those items." </i> <u>ERF-11/1 </u>
12. In respect of ERF-11/1, the main contention of the learned counsel for the defendants is that the amount against the aforesaid facility has not been shown to be disbursed in the current account statement. I have considered the said argument and found it to be misconceived and not supported by documents. The amount of Rs,150/- million in ERF Part-II was debited in the statement of account at page 65 of the suit on 12.01.2010 and said amount was also credited in the current account No,054395-8 of the defendant at page 145 of the plaint. Similarly Rs,100/- million against ERF Part-I, was disbursed on 19.02.2010 (as per statement of account at page 65 of the suit) and same was disbursed in the aforesaid current statement of account on 19.02.2010. As per plaintiff bank, the defendants failed to repay ERF-Part I&II, therefore, force finance was created for Rs,250/- million in shape of Packing Credit Finance (PCF) as is evident from the statement of account at page 66 of the suit. <u>Demand Finance </u> 13.In respect of demand finance facility, the plaintiff argued that statement of account at pages 61 and 62 is not of defendant company but of Messrs Amtex Ltd. I have deliberated this argument in the light of available record. The name of Amtex Ltd. on statement of account appears to be an inadvertent error rather than a legal point giving rise to substantial question of law and fact. The perusal of statement of account (at pages 61 and 62) shows that name of defendant company (Chenab Ltd.) appears at the top of the statement of account and Page 63 is a continuation of the said statement of account. Further the defendants have not disputed the availing of demand finance facility but only disputed the excessive markup, therefore an inadvertent error of mentioning of wrong name of company at bottom of statement of account is not fatal to the claim of the bank under said statement of account. The aforesaid statement of account also corroborates with the current account statement and supported by finance document including sanctioned letters, company resolution and finance agreements.
14.The next arguments of the learned counsel for the defendants is that certificate at the foot of statement of account of demand finance is defective. The said argument has also no basis. There is a certificate signed by Manager and AVP, available on the statement of account, which is due compliance of section 2(8) of Bankers' Book Evidence Act, 1891.
15.Learned counsel for the defendants also argued that demand finance was availed in June, 2003, for Rs,283/- million to be payable in five years and the entire amount was already paid, hence there was no justification of rescheduling the demand finance facility. This argument is also not supported by record. The documents show that demand finance as per finance agreement dated 26.06.2003 was for five years. As per demand finance statement of account on 14.06.2007, the outstanding amount was Rs,100/- million. On the request of defendants, the said amount was rescheduled vide agreement dated 18.06.2007, (at page 254 of the plaint). This was on the request of defendants through sanctioned letter dated 14.06.2007 (at page 229 of the plaint). Under the reschedule agreement, the defendants were required to pay Rs,130/- million within a period of five years, however, the statement of account, at pages 61 and 62 shows that till 30.09.2008, Rs, 75/- million remained outstanding against the defendants, when the account was transferred to Kohi- e-Noor City Branch, Faisalabad branch. After this transfer as per terms of agreement further two payments of instalments of Rs, 5/- million each was paid and the balance outstanding amount is Rs, 65/- million for which suit has been filed. Therefore, the arguments of defendants' counsel that amount has been charged in excess of the amount determined in finance agreement dated 26.03.2003 has no force.
16.Perusal of PLA No, 131/2013, shows that defendants Nos, 7 to 10 have denied their guarantees.
This is a bald denial without any supportive documents. Further, the claim of said defendants in PLA No,131/2013, is self-contradictory as on one hand they are disputing their personal guarantees but at the same time, they are contesting the case on merit. Further during arguments, no attempt was made to show that these guarantees are not executed by defendants. It is also settled law that bare denial of signature on guarantee is no ground for leave to defend. Reliance is placed on HBL v. Orient Rice Mill Ltd. and others (2004 CLD 1289), Mst. Zamurd Begum v. IDBP and others (2002 CLD 386) and Ghazala Arif v. Union Bank Ltd. (2000 CLC 1201).
17.In PLA No, 132/2013 filed by defendants Nos, 2 to 8, the execution of documents has not been denied but their only claim is that blank documents were filled subsequently. This position has already been discussed and repelled in para 6 above. The claim of the plaintiff bank in respect of all finance facilities are supported with finance agreement, demand promissory note, hypothecation letter, showing letters renewals and personal guarantees executed by defendants, which duly supports claim of the plaintiff bank. During the course of arguments, learned counsel for the defendants have not disputed these finance documents including the personal guarantees executed by defendants. In the given circumstances, of this matter, the case law relied upon by the learned counsel for the defendants are not applicable to the facts of this case.
18. I have also noted that in PLAs, the defendants have not denied availing of finance facilities or execution of documents, therefore, defendants were obliged to give details in. their PLAs, of the amount availed, repaid and outstanding against them in terms of section 10(4) of the Ordinance.
The perusal of PLAs show that finance availed by the defendants and repayments made by them with details thereof and the amount of finance repayable by them has not been clearly stated in the D PLAs. The defendants were obliged to put a definite response to bank accounts and give particulars as required under sections 10(3), 10(4) of the Ordinance, therefore, PLAs are liable to be dismissed on this ground as well. The august Supreme Court in <u><i>Apollo Textile Ltd. and others v. Soneri Bank Ltd. </u></i> (PLD 2012 SC 268) held that non-compliance of section 10(3) and (4) of the Ordinance, will entail legal consequences of dismissal of PLAs as specified under sections 10(1), (6) and (11) of the Ordinance.
19.In view of above discussion, the defendants have failed to raise any substantial question of law and facts to entitle them to the grant of leave to defend the suit. The applications for leave to defend are, therefore, dismissed.
20.In view of dismissal of applications for leave to defend, the suit is decreed in favour of the plaintiff bank and against the defendants Nos,l to 10 jointly and severally for a sum of Rs,560,159,831/- along with costs of funds in terms of section 3 of the Ordinance.
21.The decree having been passed, the suit stands converted into execution proceedings. The particulars of the mortgaged, pledged or hypothecated property shall be filed by the decree holder bank.