IJAZ ANWAR, J.---This is an appeal under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, read with section 96, C.P.C. against the judgment and decree dated 01.11.2016 passed by learned Judge, Banking Court-I, Peshawar, whereby the suit filed by the respondent No.1 was decreed.
2. Brief facts of the case are that M/s. Panther CNG Station, Ring Road, Peshawar, plaintiff- respondent No. 1, filed a suit against M/s. Askari Bank Limited through its Manager, defendant No.1 appellant, and the State Bank of Pakistan, defendant-respondent No.2 herein, for declaration to the effect that the plaintiff is eligible for the fiscal relief package under SMEFD Circular No. 11 of 2010, issued by the State Bank of Pakistan on 01.7.2010, and the late payment charges levied by the Askari Bank against the plaintiff or the lease finance facility are unlawful, unjustified and against the circular of the State Bank of Pakistan, besides asking of rendition of account.
3. The defendants the present appellant and respondent No.2, contested- the suit by filing application for leave to defend. The application was accepted and the parties were given opportunity to lead their respective evidence on the issues framed in the suit. Both the parties produced their respective evidence, whereafter suit of respondent No.1/M/s. Panther CNG Station was decreed against the defendant No. 1/Askari Bank Ltd for the recovery of Rs. 419,176.00.
4. Learned counsel for the appellant argued that the whole case of the respondent No.1 was based upon the State Bank of Pakistan's circular No.11 dated 1.7.2010 regarding subsidy on interest-markup given under the Prime Minister Fiscal Relief Package to rehabilitate the economic life in Khyber Pakhtunkhwa, FATA and PATA. He argued that, admittedly, the appellant is a leasing company while the circular No.11 was specifically made applicable to all business loans, outstanding as on 31.12.2009, in the Banks, Development Finance Institutions (DFIUs) and Micro Finance Banks. He referred to the letter dated 26.2.2010 and argued that the Askari Leasing limited was amalgamated w.e.f 3.3.2010 and, thereafter, it assumed the status of Bank, however, by the time when the target date about the outstanding loan given i.e., 31.12.2009, the Askari leasing limited was in existence for all practical purpose, therefore, the circular has no application to the case of the respondent.
Learned counsel further argued that the State Bank has also regretted the request of the respondents, hence, the loan in question did not qualify under the Relief Package. Learned counsel referred to the judgment of this Court dated 02.2.2011 and argued that the Banking Court has got no jurisdiction in the matter and the plaintiff has to approach the civil court of plenary jurisdiction instead of invoking the jurisdiction of the Banking Court. He argued that even the direction of this Court in W.P No. 58/2011 was not adhered to by the learned Banking Court to see about the retrospectivity of the circular/notification dated 01.7.2010. Learned counsel draws a distinction between a Leasing company and Development Finance Institution and argued that the Leasing company is regulated by the Security and Exchange Commission of Pakistan, while the DFIs are by the State Bank of Pakistan. Learned counsel placed reliance upon 2003 CLD 363 and argued that the matter in issue was beyond the scope of the jurisdiction of Banking Court. He also placed reliance on 2012 SCMR 864 on the issue of retrospectivlty of the circular of the State Bank, which, according to him, is not applicable to the appellant.
5. Learned counsel for the respondent, on the other hand, while referring to section 2 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, argued that leasing companies comes within the definition of Financial Institution, therefore, the respondent was having no other forum, but to invoke the jurisdiction of Banking Court, moreso, when his Writ Petition No. 58/2011 regarding the same matter was disposed of by this Court with the direction to approach the Banking Court. He argued that the leasing company comes within the definition of Development and Financial Institution. He argued that the learned Banking Court has correctly dealt with this question in issues Nos. 3 and 4. Learned counsel further referred to circular No. 11 dated 1.7.2010 of the State Bank of Pakistan and argued that there is no Financial impact on the appellant then why they remained reluctant in submitting the case of the respondent to the State Bank of Pakistan because such amount, if any, shall be reimbursed from the State Bank of Pakistan as per guideline given in the said circular.
6. We have considered the submissions of learned counsel for parties and gone through record of the case.
7. Two very important points emerged from the arguments of the learned counsel for the parties:-
(i) Whether the Banking Court has the jurisdiction to entertain the suit where the respondent is claiming a relief package as notified by the State Bank of Pakistan?
(ii) Whether the appellant being leasing company at the relevant time i.e. 31.12.2009, can be subjected to incentive/relief package of the State Bank of Pakistan, vide Circular No.11 of 2010 notified on 1.7.2010?
To thrash out these questions, we will first refer to section 33(B) of the Banking Companies Ordinance, 1962, whereunder the Circular No.11 of 2010 was notified. It is reproduced as under:- 33-B.Guidelines by the State Bank.---The State Bank may at any time either on the request of any open or more banking companies or the Federal Government or suo motu, lay down general guidelines for facilitating recovery of bad or doubtful loans, advances or finance by giving incentives to borrowers or customers to make repayments within a specified time frame by making adjustments or remissions in relation to interest or mark-up or part of the principal amount in cases in which all full recovery is not possible by reason of inadequacy of security or as part of a general scheme for the rehabilitation of sick units.
Now, it is to be seen as to whether such circular/schemes issued by the State Bank of Pakistan can be taken to the Banking Court for its implementation. Section 2(a) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, defines "financial institutions", which, for convenience, is reproduced below:-
2. (a) "financial institution" means and includes:- "(i) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and include a government servings bank, but excludes the State Bank of Pakistan;
(ii) a modaraba or modaraba management company, leasing company, investment bank, venture capital company, financing company, unit trust or mutual fund of any kind and credit or investment institution, corporation or company; (iii)
(Underlines, italics and bold letters have been supplied for emphasis)
Section 2(a)(ii) includes leasing company as a financial institutions, thus, needs no further deliberation. Section 2(c) defines customer, which reads as follows:-
(c) "Customer" means a person to whom finance has been extended by financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier.
(Underlines, italics and bold letters have been supplied for emphasis)
Since learned counsel for the appellant has vehemently argued and referred to the definitions of finances as given in section 2 (d) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, and, according to him, the scheme introduced by the State Bank of Pakistan does not come within the definition of finance, therefore, for ready reference, it is reproduced, infra:- (d)"finance" includes, "(i) an accommodation or facility provided on the basis of participation in profit and loss, mark-up or markdown in price, hire-purchase, equity support, lease, rent-sharing licensing charge of fee of any kind, purchase and sale of any property including commodities, patents, designs, trademarks and copy-rights, bills of exchange, promissory notes or other instrument with or without buy-back arrangement by a seller, participation term certificate musharika, morabaha, musawama istisnah or modaraba certificate, term finance certificate;
(ii) facility of credit or change cards; (iii)facility of guarantees, indemnities, letters of credit or any other financial engagement which a financial institution may give, issue or undertake on behalf of a customer, with a corresponding obligation by the customer to the financial institution; (iv)
(v)
Section 9(1) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, is the main section, wherein all the above referred terms have been used and under this section customer or financial institution can file a suit in the Banking Court in case of nonfulfillment of any obligation with regard to any finance, which is reproduced below:-
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 office of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.
(2)
(3)
(4)
(5)
The combined study of section 2(a)(c) and section 9 of the Ordinance, ibid, would reveal that "financial institution," includes leasing company, customer means a person to whom finance has been extended by a financial institution, whereas section 9 of the Ordinance, provides procedure where a customer or a financial institution fail to fulfill any of obligations with regard to any finance, they, as the case may be, can sue by presenting a plaint duly verified on oath, to the Banking Court.
8. There is no cavil with this proposition that leasing with the respondent comes within the definition of finance, however, the main question that has cropped up is whether the subject scheme/package can be regarded as fulfillment of any obligations with regard to any finance.
Obligation has been defined in 2(e) of the Ordinance, which, for ready reference, is reproduced as under:-
(e) "obligation" includes:-
(i) any agreement for the repayment or extension of time in repayment of a finance or for its restricting or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; (ii)any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representation, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise".
(iii)
A look at the above definition would reveal that any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise besides all duties imposed on the customer under this Ordinance are comes within the definition of obligation. In the case of United Bank Limited v. Messrs Azmat Textile Mills Limited (2002 CLD Karachi-542), it was held that the circular scheme issued under the Banking Companies Ordinance, 1962, in view of section 33(B), has the force of law and it is considered as obligatory upon the Banking Companies etc to implement such incentive schemes. Similarly, in the case of "Try Star v. State Bank of Pakistan" (2004 CLD 257), it was held that "enforcement of the scheme as sought by the appellant comes within the definition of obligation which could be effectively enforced by filing a suit. The controversy raised in this petition could only be thrash out by adducing evidence. Such exercise cannot be undertaken in exercise of writ jurisdiction". After having said so the writ petition was dismissed by the learned Division Bench of Sindh High Court at Karachi.
9. Similarly prior to approaching the Banking Court, the respondent No.1 has filed writ petition in this Court for the same relief and the Division Bench of this Court, vide judgment and order in W.P.58 of 2011 dated 02.02.2011, dismissed the writ petition by observing that:- "We take serious notice of such surrender of the bank to the Government, which is independent entity established under the Act of Parliament and has possesses sufficient sovereign power but leaving apart this opinion and legal position, in our view, these writ petitions are not maintainable because the customer i.e. the petitioner may approach the Banking Court because the law on the retrospective of Circular/Notification conferring benefits has been interpreted by the apex court in the cases of "Messrs Army Welfare Sugar Mills Ltd and others v. Federation of Pakistan and others (1992 SCMR 1652), State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited (1997 SCMR 1244 and Anoud Power Generation Limited and others v. Federation of Pakistan and others (PLD 2001 SC 340) and the Banking Court may take guidance from the view so held by the apex court while entertaining the grievance of the petitioner.
10.We are, thus, lurking no doubt in our mind in holding that the incentive schemes notified by the State Bank of Pakistan under section 33(B) of the Banking Companies Ordinance, 1962, was an obligation purely related to the finance/lease and, therefore, the respondent No.1 has rightly invoked the jurisdiction of Banking Court within the meaning of section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
11.Now, we will embark upon the second point taken by the appellant about the non-applicability of the State Bank of Pakistan Circular No. 11 of 2010. The relevant Para of the Circular is reproduced as under:- Fiscal Relief to Rehabilitate the Economic Life in Khyber Pakhtunkhwa, FATA and PATA payment of mark-up rate subsidy on business for the period from 01.01.2010 to 30.06.2010.
In pursuance of Prime Minister's announcement of Fiscal Relief Package to rehabilitate the economic life in Khyber Pakhtunkhwa, FATA and PATA and subsequent release of budgetary allocation by the Ministry of Finance, Government of Pakistan on account of interest/mark-up rate differential for first six months (from 01.01.2010 to 30.06.2010) following procedure has been devised for payment of mark-up rate, differential to the borrowers of above areas:- Reduced Mark-up Rate on Existing Business Loans @ 7.5% or KIBOR whichever is lower: A) Scope and eligibility criteria. i) Effective January 1,2010, Banks, Development Finance Institutions (DFIs) and Micro Finance Banks
(MFBs) shall charge mark-up rate on all business loans (Corporate, SMEs, Agriculture and Microfinance) outstanding as on 31.12.2009 of the borrowers of Khyber Pakhtunkhwa, FATA, PATA7.5% p.a. or six month KIBOR-offer side, whichever is lower, for next two years (i.e. upto 31.12.2011) except loans extended to Cigarette, Textile, Cement, Sugar and Beverages Sectors".
It is pertinent to mention that, admittedly, the appellant-leasing company, i.e, Askari Leasing Limited was merged with the Askari Bank Limited with effect from 03.03.2010. Thus, by the time, when the State Bank of Pakistan Circular No.11 of 2010 was issued on 01.07.2010, the appellant's Leasing Company was already merged with Askari Bank Limited for all intents and purposes. This Court while disposing of W.P. No. 58/2011 in its judgment and order dated 2.2.2011 also took serious notice of the objection regarding the non-applicability of the Circular No.11 of 2010 while specifically referring to judgment of the Superior Courts about its retrospectivity.
12.Apart from the above, the learned Banking Court while discussing issues Nos.3 and 4 has discussed the status of the Askari Bank Limited/Company and has rightly held so that it can be termed as Development Finance Institution in the peculiar circumstances of the case where the Askari Leasing was primarily a subsidiary company of the Askari Bank Limited Company even prior to its merger.
13.There is yet another very important aspect of the case, which is clause (d) of Circular (b) (v)
No.11 of 2010 of the State Bank of Pakistan. The Banks, DFIs and MFBs would seek re-imbursement from SBP-BSC (Bank), Peshawar, as per the guideline mentioned in the Circular on submission of claim, certified by compliance or internal audit as per the claims form. Thus, there is no financial liability on the appellant and we are at a loss to comprehend as to why they have involved the respondents in such litigation.
14.Above being factual and legal position of the case, learned counsel for appellant is unable to make out any mis-reading or non-reading of the evidence on record. The impugned judgment of the learned Judge, Banking Court, being based on proper appraisal of the evidence on record requires no interference from this end.
15.Accordingly, the appeal in hand, being devoid of merit, is hereby dismissed with no order as to costs.