RASAAL HASAN SYED, J.---This appeal under section 22 of the Financial Institutions (Recovery of Finances )
Ordinance, 2001 (the "Ordinance") impugns judgment decree dated 24.9.2 009 of the learned Judge Banking Court-II, Lahore.
2. Facts of the case are that the appellant filed a suit for recovery of its dues pursuant to lease facilities extended to the respondents which included an amount of Rs.10,82,991/- in respect of Facili ty No.1 under lease agreement dated 08.7.2005; an amount of Rs.13,54,132/- as Facility No.2 under lease agreem ent dated 31.8.2005; an amount of Rs.48,81,459/- as Facility No.3 under finance agreement dated 10.2.2006; and an amount of Rs.77,04,916/- under Facility No.4 pursuant to lease agreement dated 26.6.2006. The total amou nt claimed as recoverable from the respondents as on 12.9.2007/14.9.2007 was Rs.1,50,23,498/- which was required to be paid along with costs and future mark-tip from the date of filing of suit till the date of its realization. The respondents filed their application for leave to defend. After considering the version of both sides the learned Judge Banking Court granted decree, in a sum or Rs.98,35,187/- in favour of appellant and against the respondents jointly and severally with costs along with costs of fund under section 3 of the Ordinance.
3. Learned counsel for the appellant submitted that exclusion of the Agreed Loss Value in respect of Facility No.4 was unjustified and the same was liable to be granted. Learned counsel for the respondents on the other hand opposed this objection.
4. Perusal of record reveals that four finance facilities as mentioned supra were extended to the respondents. The suit for enforcement of contractual commitments qua all four finance facilities was filed. Facilities included lease finance facility for purchase of two units of Toyota Hilux; a lease finance facility for procurement of one Honda accord; a finance facility for an amount of Rs.50,00,000/- and a , lease finance facility for acquisition of certain machinery . Finance facilities were secured by execution of inter alia finance agreements, demand promissory notes, personal guarantees and mortgage deeds. The respondents failed to keep up with timely payment of the installments due and on failure to pay off their liabilities and fulfill their contractual commitments, recovery suit was filed.
5. The treatment of the claim of appellant with regard to Finance Facility Nos. 1, 2 and 3 by the Banking Court has not been seriously challenged in appea l by the appellant leasing company; however , the exclusion of amount claimed as Agreed Loss Value against Facility No.4 was strenuously challenged on the ground of being without lawful justification.
6. On due consideration of the plaint, statement of account annexed therewith, the Lease Agreement in respect of Facility No. 4, including its schedule, it is manifest that as per schedule forming part of lease agreement, the finance amount of lease was Rs. 7,500,000/- repayable in 18 installments; the respondents deposited security in the sum of Rs.1,125,000/- i.e. 15% of asset's cost; the actual finance availed was Rs. 6,375,000/-; being so, total amount invested by appellant as asset's cost was Rs. 6,375,000/-, which was to be reimbursed by respondents, in 48 monthly rental installments and calcula ting on this basis the respondent's liability for payment was Rs.8,781,120 (Rs.1,82,940 x 48). In terms of lease finance agreement, on default the respondents had agreed to pay balance investment of amount, which was defined as "Agreed Loss Value" in the agreement. For the repayment the respondent provided post-dated chequ es of each installment. The post-dated cheques dated 01.10.2006, 01.11.2006, 01.12.2006, 01.1.2007, 01.2.2007, 01.3.2007, 01.4.2007, 01.5.2007, 01.6.2007, 01.7.2007 and 01.8.2007 drawn on Saudi Commercial Bank Limited, Lahore on presentation were not encashed by the said bank and were returned with slips that the paym ents could not be made due to insuf ficient funds. These cheques related to first 11 installments and total amount thereof was Rs. 21,78,800/-. In view of the default, the appellant bank resorted to the filing of suit, wherein the claim made against Facility No. 4 comprise d the overdue rental against the dishonored cheques; the Agreed Loss Value and additional recitals/delay-charges with the costs of suit and costs of funds. The amounts as such claimed in the plaint were Rs.21,78,800/- as overdu e rentals i.e. the amount against 11 dishonored cheques; Rs. 52,57,920/- as Agreed Loss Value (equivalent to remaining, outstanding lease rentals); and Rs.2,68,196/- as additional lease rental/delayed payment charges. Deeper examination of details in the statement of account and also the facts given in the plaint reveal that the amount of Agreed Loss Value i.e. Rs.52,57,920/- which was equivalent to the remaining lease finance had not been paid while Rs.21,78,800/- was overdue rental payment against the dishonored 11 cheques. The total claim was in the sum of Rs. 77,04,916/- after deduction of terminated cheques as on 12.9.2007 which was claimed along with costs of suit and costs of funds. In the given circumstances, the claim of appellant was required to be considered in the light of relevant clauses of Lease Agreement which read as follows:- " 5.7. Notwithstanding anything contained ill foregoing provisions of this clause 5 in the event that the whole of the Equipment(s) is/are lost and/or rendered useless (including but not limited to damage incapable of economic repair and infringement or ownership) for any reason whatsoever the lessee shall pay to the lessor forthwith on demand the Agreed Loss V alue."
"20.9 Agreed Loss Value: means the value of loss of the lessor in relation to this Lease Agreement and the Equipment(s) at any point of time due to default and/or termination of this lease Agreement prior to the completion of the Primary Lease T erm or the Renewed T erm as the case may be, and as specified in item (8) of the Schedule."
(emphasis supplied)
"12.5(b). To terminate the Lease Agreem ent and to immediate demand from the Lessee the full amount of the Agreed Loss Value payable on the date of the termination of the Lease Agreement and in addition thereto to claim from the Lessee compensation for all costs and damages suffered by the Lessor including but not limited to loss or profit if applicable and until the entire amount of the Agreed Loss Value is paid by the Lessee to the Lessor to declare that the Lessee is no longer m possession of the Equipment(s) with the consent of the Lessor and to take possession of The Equipment(s) and/or demand of its return ."
(emphasis supplied)
7. It is discernible from the record that the amount of lease facility was Rs.7,50 0,000/-. It was repayable in 48 installments, security deposit was Rs.1,125,000/- and. as such, the amount invested by appellant, as cost of assets, was Rs. 6,375,000/-. The respondent committed default as 11 cheques towards the initial monthly rental installments were dishonored. At the time of termination of the agreement not only the 11 rentals were overdue but also, rentals for remaining period of lease were also payable. In terms of clause 20 of the Lease Agreement, the "Agreed Loss Value" was defined as value of loss of rental in relation to the lease agreement and the equipment at any point of time due to default or on termination of the Lease Agreement. As per clause 12.5(b), on termination of lease, the leasing company could demand from the lessee the full amount of the Agreed Loss Value payable on the date of termination .of the lease agreement. In the instant case, the appellant claim ed the payment of the overdue rentals which could not be realized due to non-encashment of 11 cheques and also the remaining amount of lease finance, invested towards cost of assets, and payable in installments, which could not be realized due to termination of agreement. Being so, the total claim comprised of the amount of the overdue rentals plus the remaining amount of lease finance investment rentals, which would become the amount of Agreed Loss. The learned Banking Judge, assumed as if the claim in column 1 of the statement was described as outstanding rentals though it was in respect of the overdue lease rentals only and the same was to be added in the remaining investment of lease finance so as contractually reckon the actual loss sustained by leasing company . In this view of the matter the appellant could not be declined the amount of Agreed Loss Value along with overdue rentals,' the total whereof would become the amount of Agreed Loss Value. In "Messrs Najia Spinning (Pvt.) Limited, and others v. Saudi Pak Leasing Company Limited and others " (R.F.A. No. 945 of 2011) and "Saudi Pak Leasing Company Limited v. Adil Textile Mills Limited and others" (R.F.A. No.51 of 2015) it as observed by this Court that the leasing company on termination of lease due to default would be entitled to recover the Agreed Loss Value, which would be equivalent to the unpaid installments which in the present case are overdue rentals and also the remaining amount of lease finance which was payable in the remaining period of lease through installments. The learned Judge Banking Court committed an error of law in excluding the amount of Agreed Loss Value from the appellant's claim despite the fact that the respondent was under obligation to pay the overdue rentals. To this extent, the impugned judgment is set aside, and appellants are held entitled to receive the Agreed Loss Value along with overdue rentals inclusive of the unpaid 11 cheques i.e. Rs. 77,04,916/- against Lease Facility No. 4. The impugned decree shall stand modified accordingly and the appellant shall be deemed to have been allowed to recover Rs.77,04,916/- against Finance Facility No. 4 as also amounts allowed against claim for Lease Facility Nos. 1, 2 and 3, with costs of suit and cost of funds.
8. In result, the instant appeal is allowed , and the impugned decree is modified in the above terms.