JAWAD HASSAN, J.---This is an Appeal, filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the "Ordinance") against judgment and decree dated 21.11.2017, passed by the learned Judge Banking Court, Bahawalpur (the "Banking Court").
Submissions of the Appellant
2. Learned counsel for the Appellants states that the Appellants filed the suit for rendition of accounts and declaration before the Banking Court under section 9 of the Ordinance against the Respondents Bank Alfalah Limited (the "Bank"). He states that the Bank filed petition for leave to defend under section 10 of the Ordinance (the "PLA") and when the case was fixed for arguments on the said petition, the Banking Court rejected the plaint of the Appellant. He states that the Banking Court had no authority to reject the plaint but to decide the PLA first and then to decide the matter accordingly. He further states that the Bank has also filed recovery suit against the Appellant which was pending when this judgment was passed, therefore, it ought to be consolidated.
Submissions of the Respondents/Bank
3. On the other hand, counsel for the Respondent Bank appeared and stated that the Banking Court has rightly passed the judgment as the plaint is liable to be rejected due to non-compliance of the provisions of section 9(2) and (3) of the Ordinance and as per law laid down by the superior Courts of Pakistan in Apollo Textile Mills Ltd. and others v. Soneri Bank Ltd. (PLD 2012 SC 268), Muhammad Azam v. Askari Leasing Limited and others (2014 CLD Lahore 1462) and Irfan Industries (Pvt.) Limited v. Standard Chartered Bank and another (2017 CLD 223).
4. We have heard the arguments at length advanced by both the parties and perused the record available with the file.
5. It is reflected from perusal of record that the Appellants/Plaintiffs filed a suit for declaration and rendition of accounts (the "Suit") in which they alleged that they availed finance facilities from the Bank and cleared the same in accordance with the agreement. They also alleged that the Bank has adjusted the repaid amount towards the markup instead of principal amount and further charged illegal markup. They further alleged that the Bank in order to recover the illegal markup has issued fake finance facilities by forging finance documents.
6. The record demonstrates that the Appellants/Plaintiffs did not attach any document with the Suit to prove their case, rather merely submitted certificates of the Bank dated 12.2.2011, 17.10.2011, 26.11.2013, 20.1.2014, 22.11.2014, 3.3.2015 and seven (7) certificates dated 19.2.2015. In all these certificates, the Bank has certified that they have recovered markup of the amount mentioned therein for specific period. These all certificates are not addressed to any specific person and states that the certificates were issued on request of the customers without any obligation on part of the Bank. The Plaintiffs/Appellants have also attached letter of the Bank dated 12.2.2015 asking to adjust the outstanding principle up to date markup.
7. The record further transpires that the Bank applied for the leave to defend under section 10 of the Ordinance on the ground that the Appellants/Plaintiffs have not fulfilled the requirements of section 9(2) and (3) of the Ordinance and they are also defaulters. After hearing the parties, the learned Banking Court passed an order and decree dated 21.11.2017 and dismissed the Suit of the Appellant/Plaintiff on ground that the same is not supported by the statement of accounts which is the violation of section 9(2) of the Ordinance. Thus, the Appellants/Plaintiffs filed the Regular First Appeal challenging the Impugned Order and Decree before this Court under section 22 of the Ordinance.
Nub of the Appeal
8. The moot point involved in this Appeal required to be decided is that; whether the Appellant while filing the Suit has complied with the requirements under section 9 of the Ordinance by filing Statement of Accounts and showing the default of an obligation. Before rendering judgment and deciding the instant Appeal, it is essential to see the statutory requirements of Section 9, which is as follows:
9. Procedure of Banking Courts.-
(1) Where a customer or a financial institution commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a 'Plaint' which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.
(2) The plaint shall be supported by (1) a statement of account which in the case of a financial institution shall be duly certified under the Bankers Books Evidence Act, 1891 (XVII of 1891), and all other (2) relevant documents relating to the grant of finance. Copies of the plaint, statement of account and other relevant documents shall be filed with the Banking Court in sufficient numbers so that there is one set of copies for each defendant and one extra copy.
(3) The plaint, in the case of a suit for recovery instituted by a financial institution, shall specifically state
(a) the amount of finance availed by the defendant from the financial institution;
(b) the amounts paid by the defendant to the financial institution and the dates of payment; and
(c) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit. ... (emphasis added)
Determination.
It transpires from Section 9 of the Ordinance that a customer or a financial institution can file a suit under section 9(1) of the Ordinance before the Banking Court with respect to the default in fulfillment of obligations with regard to any finance which has to be verified on oath. The basic interpretation of subsections of section 9 of the Ordinance is that the words mentioned in section 9(1) have to be read altogether in which there must be a (i) default in fulfillment of an (ii) obligation regarding any representation, warranties and covenants by (iii) Financial Institution or (iv) the Customer. If this is not shown in the plaint along with the documents then the suit cannot be filed.
This Court in case titled Amtex Limited through Director v. Bank Islami Pakistan Ltd. and 8 others (2016 CLD 2007) has held as under: "Default in fulfilment of any obligation with regard to any finance is a sine qua non and confers a right on customer or financial institution to bring a suit under S. 9 of Financial Institutions (Recovery of Finances) Ordinance, 2001."
This Court has further held which is as under: Intent of the legislature under S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 was to file a suit on the ground of default in fulfilment of obligation regarding any representation, warranties and covenants by financial institution. Such construction lent credence to the scheme and policy of Financial Institutions (Recovery of Finances) Ordinance, 2001, which had been enacted primarily to act as an engine of recovery of defaulted finance by financial institution and not vice versa. Customer might have a cause of action but that was enforceable in the Court of general jurisdiction only. Definition of term 'obligation' had restricted meaning of the term within a certain periphery. High Court directed the plaintiff to present the suit for declaration, injunction and cancellation of document in proper Court as the Banking Court lacked jurisdiction.
Plaint was returned in circumstances."
Mandatory Requirement of the Statement of Accounts Section' 9(2) of the Ordinance further requires that such plaint/suit is supported by a statement of account and all other relevant documents relating to the grant of finance. This subsection also requires a Banking institution to duly certify such statement of account under the Bankers' Books Evidence Act, 1891. Furthermore, section 9(3) of the Ordinance is applicable to the financial institutions and requires it to specifically state in the plaint/suit: (a) the amount of finance availed by the defendant from the financial institution; (b) the amounts paid by the defendant to the financial institution and the dates of payment; and (c) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit. These all are the mandatory requirements that have to be fulfilled by the customer or the financial institution under Section 9 of the Ordinance for filing a plaint/suit competently.
9. Since the instant suit/plaint was filed by the customer of the Bank, and not the financial institution, they have to comply with the mandatory requirements of section 9(2) of the Ordinance.
As per the statutory requirement, the Appellants/Plaintiffs were required to support their statement by a statement of account and all other relevant documents relating to the grant of finance. The law in this regard has also been settled by this Court in Gulistan Textile Mills Ltd. v.
Askari Bank Ltd. (2013 CLD 2005 (Lahore)), in which the Court has made a distinction between requirements of filing the suit/plaint by a customer and the financial institution, and has held as follows:
16. A plaint under section 9 must disclose a cause of action which spells out the "default in fulfillment of any obligation with regard to any finance." It is for this reason that section 9(2) of the Ordinance prescribes that the plaint must be supported by statement of account, which is applicable to both the parties i,e,, customer and the financial institution. There is an additional requirement for the financial institution to get their statement of account certified under the Bankers' Books Evidence Act, 1891. The requirement of the Statement of Account is to quantify the default complained of under the Finance Agreement(s) entered between the parties. The default or breach, arising out of the contract between the parties or in fulfillment of any obligation with regard to any finance, must be numerically quantified and reflected through the Statement of Account. Section 9(2) further states that the plaint shall be supported by all other relevant documents relating to the grant of finance.
In this case, this Court rejected the plaint/suit under Order VII, Rule 11 of the Code of Civil Procedure ("C.P.C.") as it failed to disclose any cause of action and also held that in such cases there is no need for this Court to consider the applications for leave to defend filed by the defendants.
10. It was also held in the case of Soneri Bank Ltd. v. Classic Denim Mills (Pvt.) Ltd. and others (2011 CLD 408 Karachi), that fulfilment of the requirements of Section 9(2) of the Ordinance has to be checked at the first instance: Whether the defendants have fulfilled requirements of subsections (3) and (4) of section 10 of the Ordinance, 2001 or not, this could only be taken into consideration provided the plainitiff first should 1 1 requirement o subsection 2 section 9 of the Ordinance, 2001. ... Though, in the leave to defend application, the defendants have tried to show the compliance of subsections (3) and (4) of section 10 of the Ordinance, 2001, however, at this stage, non fulfilment of requirement of subsections (3) and (4) of section 10 of the Ordinance, 2001 cannot be strictly enforced, unless the defendants are provided complete statement of account and suit is instituted in accordance with the subsection (2) of section 9 of the Ordinance, 2001. .... The filing of complete and accurate statement of account with the plaint is a mandatory requirement which defect cannot be rectified through replication. If leave to defend application is dismissed on the basis of incomplete statement of account, it will tantamount a violation of Ordinance, 2001 and will also amount an infringement of newly secured and guaranteed fundamental right under Article 10-A of the Constitution of Pakistan .... (emphasis added)
Section 9(1) Be Read With Section 9(2)
11. Section 9(1) of the Ordinance allows the parties to institute a Suit by presenting a 'Plaint'. The 'Plaint' has to be filed after its verification on oath under Section 9(2) of the Ordinance with the mandatory requirements mentioned therein (a) Statement of Accounts, (b) relevant documents relating to finance. The emphasize was made to the documents relating to the grant of finance in section 9(2) of the Ordinance. It is unequivocal that the requirement of a Suit is the relevance of the documents with the Statement of Accounts. However, there is plethora of case law available for a financial institution to file a plaint/suit under section 9(1) and fulfilling the mandatory requirements of section 9(2) of the Ordinance. The Hon'ble Supreme Court in Apollo Textile Mills Ltd. and others v.
Soneri Bank Ltd. (PLD 2012 SC 268), has settled the law in this respect and has held that: Subsection (2) of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 makes it mandatory for a Banking institution to support its plaint in a suit against the customer by a statement of account duly certified under the Bankers' Books Evidence Act, 1891 and also by all other relevant documents relating to grant of finance. Without such a 'Statement of Account' filed along with the plaint, a customer will obviously remain totally unaware of the amount advanced, mark up charged and the basis, break up, premise mode of calculation of account nature of default and the actual amount of Bank's claim against the defendant-customer. He will thus be unable to frame his defence within the limited period prescribed by law, to show reasonable, serious and plausible grounds of contest to be able to seek and obtain leave to defend the suit.
Absence of filing the requisite statements of account along with the plaint, will essentially amount to absence of providing adequate, proper and reasonable opportunity of defence to the defending customer. ... Upon the compliance a Banking Company with the provisions of section 9(2) of the Ordinance, depends the right of defence of a defendant in the summary suits as visualized under the Ordinance, wherefor, the filing of duly certified statements of account by a Banking company along with its plaint, cannot be taken to be a mere formality or a technicality.
This provision can only be held to be mandatory. Without strict compliance wherewith, the plaint is incomplete and cannot become basis of a suit under this law. ....
12. The Sindh High Court has recently also relied on the above case law of the Hon'ble Supreme Court to arrive at the same above conclusion in Meezan Bank Ltd. v. A.H. International (Private)
Limited and 7 others (2017 CLD 29 Sindh). The Sindh High Court has also, in Pak Oman Investment Company Ltd. v. Chenab Limited and others (2016 CLD 1903 (Sindh), has rejected the plaint by following the principle of Apollo Textile supra, and has held as follows:
21. From the mandatory obligations imposed by section 9 of F.1.0., 2001, it is quite clear that a Defendant in a suit filed by the 'Financial Institution' for recovery must and, of course, be confronted with the best possible re-structured/well framed case that a Plaintiff can put forward from the very inception. The foundation of a banking suit, which normally is a suit 'on accounts' thus inter alia must be supported with a 'certified statement of account' which shall be duly 'certified' within the meaning of section 2(8) of Bankers' Books of Evidence Act, 1891 [Act XVIII of 1891]. The production of a 'certified 'statement of account' in 'support' of the 'plaint' is thus not only 'mandatory' but also a very necessary 'pre-condition' for charging the Defendant(s)] with any liabilities in a suit for recovery filed by a 'Financial Institution' .
13. In another case titled Elbow Room and another v. MCB Bank Ltd. (2014 CLD 985 (Sindh)), the Division Bench of the Hon'ble Sindh High Court has described the Statement of Accounts and has mentioned its mandatory requirements and rational:
7. Therefore, the statement of account is a basic document that is filed by a financial institution in discharge of its mandatory duty under section 9(2) of Ordinance, 2001. If such statement of account is not filed along with the plaint, a customer will obviously remain totally unaware of the amount advanced, mark-up charged and the mode of calculation of account, nature of default and the actual amount of Bank's claim against the customer. He will thus be unable to frame his defence within the limited period prescribed by law to show reasonable, serious and plausible grounds of contest to enable the customer to seek and obtain leave to defend the suit.
8. It follows from the bare perusal of the provision of section 2(8) of the Bankers' Books Evidence Act, 1891 that a certificate, which is to be given at the foot of the copy of statement of account, so as to make it certified copy of the statement of accounts, must state the following facts:--
(i) it is true copy of the such entry,
(ii) such entry is contained in one of the ordinary's books of bank,
(iii) it was made in the usual and ordinary course of business,
(iv) such book is still in the custody of the bank,
(v) it must be dated; and
(vi) subscribed by the principal accountant or manager of the bank with his name and official title.
14. In Sheikh Murshid Ali and others v. United Bank Limited (2016 CLD 1471 (Lahore)), the Division Bench has also concluded that the statement of accounts must show all transactional entries, debit and credit entries, rate of mark up, rate of excise duty and rate of commitment charges etc., and one pager accounts attached by the plaintiff can be categorized as the Certificates of Balances, which cannot be considered as true accounts. It was held as follows:
11. The alleged statements of accounts above referred annexed by the bank with the plaint do not show all transactional entries, debit and credit entries, rate of mark up, rate of excise duty and rate of commitment charges etc. The plaintiff/respondent bank claimed these documents to be statement of accounts. But we are not convinced with this stance of respondent due to the reasons that these documents can at maximum be called respondent's Certificate of Balances.
These statements cannot be termed or defined as a Statement of Account which is required to show each and every entry as pertaining in the ledger or account book of a Banking Company. In the absence of Statement of Account showing all debits and credits entries and dates thereof as entered by the respondent-bank in the ledgers and books of accounts from the disbursement to the date of the suit, no presumption of admissibility in terms of Bankers' Books Evidence Act, 1891 can be given to the above-said Certificate of Balances. The above mentioned alleged Statement of Accounts attached by the Bank with the plaint can only be treated as certificate regarding alleged balance amounts but the same cannot be treated or admitted as true statement of account prepared and certificated under the provisions of Bankers' Books Evidence Act, 1891.
Analysis
15. It transpires from the above case laws that a plaint/suit under section 9 of the Ordinance must disclose a cause of action identifying the "default in fulfillment of any obligation with regard to any finance" and the plaint/suit must be supported by the statement of accounts, which is applicable to both the parties i,e,, customer and the financial institution. The word 'default' is not defined but the word 'willful default' has been added in section 2(g) through amendment in the year 2016 which too is for the Financial Institution. As the intention is to safeguard the Financial Institution. 'Willful Default' means (i) 'deliberate or intentional failure to repay' (ii) 'utilization of finance' for which such finance had been obtained-. However, under section 3 of the Ordinance the duty of the 'Customer' has been defined in the term that 'it shall be the duty of a customer to fulfill his obligations to the financial institution.
16. Further, there is an additional requirement for the financial institution to get their statement of account certified under the Bankers' Books Evidence Act, 1891. Section 9(2) further requires that the plaint must be supported by all other relevant documents relating to the grant of finance. Although section 9 of the Ordinance clearly states that if the customer or financial institution commits default in fulfillment of his obligation, both can file suit but that has to be filed with the proper statement of account by showing the obligation and its nonfulfillment results into default. The statement of account is a basic document and it is quite clear that a Defendant in a suit, filed by the Plaintiff, be confronted with the best possible re-structured/well framed case that a Plaintiff can put forward from the very inception. The foundation of a Banking suit, which normally is a suit 'on accounts' thus inter alia must be supported with the statement of account. These all conditions have to be checked at the first instant by the Banking Court to see if the plaint/suit fulfills the mandatory requirements of Section 9(2) of the Ordinance. The rationale behind this is to aware the other party of the amount advanced, mark up charged and the basis, break up, premise mode of calculation of account nature of default and the actual amount of the claim so that the other party is able to frame its defence within the limited period prescribed by law, to show reasonable, serious and plausible grounds of contest to be able to seek and obtain leave to defend the suit. Absence of filing the requisite statements of account along with the plaint amounts to absence of providing adequate, proper and reasonable opportunity of defence to the other party.
17. As far as the instant appeal is concerned, it is apparent that the plaint/suit of the Appellants/Plaintiffs is not supported by the statement of accounts and only the certificates have been attached with the plaint/suit, which do not show the complete picture, relationship between the parties and financial documents, and thus the plaint/suit has been filed in a slipshod and sketchy manner. The certificates attached with the plaint/suit do not contain the entire transaction and do not qualify as the statement of accounts. The documents attached with the plaint/suit have failed to demonstrate the obligations and duties of the Bank which have been defaulted by the Bank, and have not attached all other relevant documents and agreements relating to the grant of finance. Thus, the Appellants/Plaintiffs have not complied with the mandatory provisions of section 9(2) of the Ordinance, therefore, the Banking Court has rightly dismissed the plaint/suit of the Appellants/Plaintiffs.
18. On the touchstone of the above discussion, this Appeal being devoid and bereft of merit is dismissed. No order as to costs.