AYESHA A. MALIK, J. --- This appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("F10") is directed against judgment and decree dated 19.11.2013 passed by the Judge Banking Court-II, Lahore.
2. At the very outset, learned counsel for _the Appellants states that the Appellants raise only two grounds in the instant appeal. The first ground is that the mark-up in the amount of Rs, 7,776,427/- is beyond the contract period, hence the Appellant is not liable to pay the same. Second that cost of funds in the amount of Rs, 3, 064,967/- and Rs, 26,040,014/- has been wrongly levied and the Appellants are not liable to pay the same.
3. The basic facts of the case are that suit for recovery of Rs, 46,124,889f- was filed and the suit was decreed in the amount of Rs, 46,084,889/-. The Appellants then filed this appeal against the judgment and decree dated 19.11.2013 and during the pendency of the appeal winding up proceedings by the Security and Exchange Commission of Pakistan ("SECP") were initiated in which it was argued that an expert was appointed to determine the exact quantum that is due to the Respondent Bank to reconcile the accounts between the decree-holder and the judgment-debtor.
As per the report of the expert an amount of Rs, 7,776,427/- is claimed as mark-up for the period 12.3.2008. Also as per the report, cost of funds alongwith liquidated damages and other charges in the amount of Rs, 3,064,967/- and Rs, 26,040,014/-. Learned counsel for the Appellants submitted that the basic liability of Rs, 19.48 Milion is accepted by the Appellants, however the Appellants dispute the levy of cost of funds and mark-up for the period 12.3.2009. Learned counsel stated that the agreement dated 12.1.2008 for cash finance facility expired on 30.11.2008 whereas mark-up is being claimed for the period 12.3.2009 which is beyond the contract period. With respect to cost of funds, learned counsel argued that cost of funds has to be determined by the Court on the basis of the State Bank of Pakistan notifications issued specifically with reference to the financial institutions.
4. On behalf of the Respondent Bank, it was argued that cash finance facility was availed on similar terms to a running finance facility and so long as the amount was in the utilization of the Appellants, they are liable to pay the mark-up. Reliance is placed on Habib Bank Ltd. v. Messrs Doaba Corporation through Proprietor and another (2009 CLD 845) and Messrs U.I.G. (Pvt.) Ltd. through Director and 6 others v. Bank Al-Falah Ltd. (2015 CLD 452). As to cost of funds, learned counsel for the Respondent Bank has submitted the breakup of the cost of funds showing the period for which cost of funds has been levied and the notification issued by the State Bank of Pakistan on the basis of which cost of funds has been charged.
5. We have heard the learned counsel for the parties at length and have also gone through the record. The impugned judgment dated 19.11.2013 decreed the suit in the amount of Rs, 46,084,889/- alongwith cost of funds to be determined under Section 3 of the FIO and excluded Rs, 40,000/- as lawyer fee. As per the record in CO No, 46/2010, an expert was appointed to reconcile the accounts of the decree-holder bank and the judgment-debtor company. The report of the expert is accepted by both the parties, however the Appellants dispute the amount of Rs, 7,776,427/- as mark-up beyond the contract period. Although the learned counsel for the Bank has tried to demonstrate from the statement of account that the mark-up charged for the period 12.3.2009 is not beyond the contract period, we find that we are in agreement with the arguments of the Appellants. The contention of the counsel for the Appellants that the agreement expired on 30.11.2008 and that the amount of Rs, 7,776,427/- as mark-up is beyond the contract period is evident from the record. The statement of account does not suggest that the cash finance facility was treated as a running finance facility as the debit and credit entries do not show rolling utilization of amounts by the Appellants, meaning that statement of account does not suggest that the cash finance facility should be treated as a running finance facility. Under the circumstances, the Appellants are not liable to pay mark-up in the amount of Rs, 7,776,427/-.
6. The second argument with respect to cost of funds which have been calculated by the experts in the amount of Rs, 3,064,967/- and Rs, 26,040,014/- and have been included in its report. The contention of the Appellants that only the Court can calculate the cost of funds is misconceived as Section 3(2) of the FIO clearly provides that Where the customer defaults in the discharge of his obligation, he shall be liable to pay, for the period from the date of his default till realization of the cost of funds of the financial institution as certified by the State Bank of Pakistan from time to time apart from such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force. Hence the Appellant is liable to, pay the cost of funds calculated as per the State Bank of Pakistan notifications. In this case the expert has calculated cost of funds as per the notification dated 21.3.2011 issued by the State Bank of Pakistan hence no illegality is made out in this regard. 6-A. In view of the aforesaid, the impugned judgment and decree dated 19.11.2013 passed by the Judge Banking Court-II, Lahore is modified to the extent that markup in the amount of. Rs, 7,776,427/- being beyond the contract period, is set aside and the amount of cost of funds in the amount of Rs, 3,064,967/- and Rs, 26,040,014/ is maintained.
7. The instant appeal is partly allowed and the impugned judgment is modified in the above terms. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.