AYESHA A. MALIK, J. This RFA along with connected RFAs No.54270/17, 50966/17, 67900/20 have been filed under Section 96 of the C.P.C., wherein the Appellants have impugned judgment and decree dated 14.4.2017 passed by the Civil Judge 1st Class, Lahore ("Impugned Judgment").
2. The Appellants include financial institutions being banking companies and a non-banking company as well as the Central Depository Company of Pakistan Limited ("CDC"). In this regard, it is noted that the CDC (RFA No.67900/2017) is only aggrieved to the extent of the decision on Issue No.14-H in the Impugned Judgment. The remaining Appellants have impugned the judgment and decree in its entirety praying therein that it be set aside and that they be declared the lawful owners with all rights of the disputed sukuks and as a consequence ijara rentals with accumulated mark up/profits be paid to them. In the alternative they pray that the Appellants be paid damages by Respondent No.1, Wapda First Sukuk Company Limited ("Sukuk Company") for the loss suffered not only with respect to the amounts paid by the Appellants for the' disputed sukuks but also equivalent to the ijara rentals due to the Appellants.
3. The Respondent No.1 Sukuk Company is a public limited company wholly owned by Respondent No.2, Wapda. Respondent No.1 issued sukuk certificates for the purpose of raising money for the Mangla Dam Project which became the subject matter of a dispute between the parties.
Respondent No.1, the. Sukuk Company and Wapda filed an interpleader suit under Section 88 of the Civil Procedure Code, 1908 ("C.P.C.") against the Appellants on 12.12.2009 praying therein that the court decide which of the defendants (Appellants before this Court and NFC) is the true and lawful owner of the disputed sukuk certificates. The Appellants each filed their written statement in the suit. Issues were framed. One of the parties, Bank Islami Pakistan Limited ("Bank Islami") was proceeded ex-parte on 21.5.2015. They are Respondent No.3 in the instant RFA and also have an ownership claim of 10000 sukuk certificates. The parties produced their respective evidence, documentary as well as oral, after which the trial court concluded through the Impugned Judgment that National Fertilizer Corporation Pakistan (Private) Limited ("NFC"), Respondent No.3 was the lawful owner of the disputed sukuk certificates, and ijara rentals including the 7th ijara rental should be paid to NFC. Hence these appeals.
The dispute
4. The dispute between the parties relates to the ownership of sukuk certificates. The basic transaction documents giving rise to the sukuk certificates is a Purchase Agreement signed on 15.11.2005 wherein Respondent No.1 purchased from Respondent No.2, ten turbines installed at the Mangla Hydel Power Station for Rs.8,000,000,000 (Rupees eight billion) which became the trust assets. Though the Purchase Undertaking dated 15.11.2005, Respondent No.2 undertook to buy back the ten tribunes on maturity of the sukuk certificates. An Ijara Agreement was also executed between Respondents Nos.1 and 2 and Muslim Commercial Bank ("MCB") whereby the turbines were leased back to Respondent No.2, Wapda for which rental payments were to be paid semi annually. Under the Declaration of Trust, the Sukuk Company issued sukuk certificates to the public, as issuer and also took on the role of trustee for the trust assets. The rights of the certificate holders were set out in the Declaration of Trust, which included the right to receive Periodic Distribution Amounts ("PDA"), being the profit on the sukuk certificate, twice a year. Under the Agency, Agreement, Wapda Bonds Cell was appointed as the Registrar, Transfer Agent and Replacement Agent with respect to the sukuk certificates. Wapda Bonds Cell is a part of Respondent No.2, Wapda and not a separate entity. NFC purchased 300 physical sukuk certificates, each certificate representing 500 sukuk units, of the value of Rs. 750,000,000 (Rupees seven hundred and fifty million) on 24.01.2006 and subsequent thereof the Sukuk Company has been paying ijara rentals to NFC.
5. A dispute arose on the basis of letter dated 12.2.2009 (Ex.P24) when purportedly Deputy General Manager, Accounts of NFC stated that NFC had sold 72 sukuk certificates (being 36000 sukuk units) worth Rs.180,000,000 (Rupees one hundred and eighty million), out of its holding of Rs.750,000,000 (Rupees seven hundred and fifty million) to Swift Engineering Solutions ("SES") and consequently 72 sukuk certificates were transferred to SES. On the request of SES, Wapda Bonds Cell replaced the 72 sukuk certificates with 6 certificates representing 6000 sukuk units each on 14.3.2009. SES then sold its 6 sukuk certificates to Al-Meezan Investment Management Company Limited ("AIMC") for Rs.190,792,800 (Rupees one hundred and ninety million, seven hundred ninety two thousand and eight hundred) and thereafter AIMC sold its sukuk certificates to Bank Islami. Other claimants are Soneri Bank Limited ("SBL") and Meezan Bank Limited ("MBL") who purchased sukuk units through the CDC and received ijara payments until the dispute arose.
6. In the meantime, in April 2009 NFC inquired as to why they had not received their full profit on their sukuk certificates, to which they were informed that vide letter dated 12.2.2009 (Ex.P24) NFC informed the Sukuk Company that have sold their sukuk certificates to SES. NFC denied all claims of having sold the sukuk certificates and they accordingly informed the Sukuk Company that they made no such sale. Wapda constituted a team of officers to inquire into the matter and also stopped future transfers by informing the CDC. A complaint was registered with the Federal Investigation Agency ("FIA") and FIR No.28/2009 dated 5.8.2009 was registered against SES along with employees of Wapda whereby criminal proceedings commenced, to inquire into the fraudulent sale. The FIA issued an interim report which finds that the transfer to SES was fraudulent as the real certificates are still in the possession of NFC.
Litigation between the Parties
7. In the meantime, the Appellants filed suits for declaration, permanent injunction and damages before the Sindh High Court, and NFC and Respondents Nos.1 and 2 filed suits in Lahore, the details of which are as under: a) Suit No.1497/2009 filed by AIMC for declaration, injunction and damages filed on 22.10.2009 titled Al-Meezan Investment Company and others v. WAPDA First Sukuk Company and others praying therein that demand of refund of ijara rentals is illegal, hence Wapda should be restrained from taking any action which would adversely affect the rights of the Appellant in respect of ijara rentals and/or their ownership of sukuk certificates (Ex.D2- 36); b) Suit No.1269/2010 filed by SBL for declaration, mandatory injunction, recovery of monies and damages filed on 10.8.2010 titled Soneri Bank Limited v. WAPDA First Sukuk Company and Others praying therein that SBL is the owner of 4000 certificates and that Wapda be directed to pay ijara rentals and damages of Rs.4,000,000/- along 'with profit of 15% from the date of default or alternately (if the plaintiff is not declared rightful owner) then direct UBL to return the consideration amount and UBL and CDC pay damages and profit at the rate of 15% along with costs offend; c) Suit No.726/2012 (previous Suit No.187/2009) filed by MBL for declaration, mandatory injunction and recovery filed on 26.12.2009 titled Meezan Bank v. WAPDA First Sukuk Company and others praying therein that Appellant is the owner of 22000 sukuks and entitled for ijara payments and that Wapda be directed to pay PDA and other payable dues. Wapda be also directed to make donation to charity as required by clause 3.6 of ijara agreement dated 15.11.2005 along with cost of fund and cost of suit (Mark D6-B); d) Suit No.40163/2015 filed by NFC before the civil court at Lahore against Wapda and the Sukuk Company for recovery of Rs.466,972,916/- along with loss of profits and damages on 21.10.2015 titled National Fertilizer Corporation of Pakistan (Pvt.) Limited v. Wapda First Sukuk Company Limited and others praying therein for recovery of Rs.466,972,916/- along. with up to date profits at the rate of 13% on the above said amount till realization. NFC also prayed in the suit for recovery of the profits earned on the PDA/ijara rentals and dissolution distribution amount, earned either on account of the above amounts deposited by defendants Nos.1 and 2 into the civil court pursuant to their interpleader suit and invested by the court into a profit bearing scheme or earned by defendants Nos.1 and 2 during the time they utilize the above amount (not exhibited). e) Suit No.15370/2020 filed by the Sukuk Company and Wapda before the Senior Civil Judge, Lahore for recovery on 20.4.2020 titled Wapda First Sukuk Company Limited and others v. Al-Meezan Investment Management Limited and others against Al-Meezan Investment Management, praying for recovery of Rs.13,640,900/- plus mark up accruing at 20% on the principal amount of Rs.13,640,900/- from the date of payment of the said amount to the AIMC (defendant No.1) on 21.4.2009 till realization of full payment plus costs.
Interpleader Suit
8. Respondent No.1, Sukuk Company Limited filed an interpleader suit under Section 88 of the C.P.C. on 12.12.2009 against all the Appellants including CDC praying therein that the court decide which of the defendants is the true and lawful owner of the disputed sukuk certificates so that it can make the requisite payments to the owner. The defendants filed their written statements and on 21.5.2010 the suit was dismissed for being not maintainable. This order was challenged before this Court through RFA No.779/2010 which was allowed vide judgment dated 17.2.2015. This judgment of 17.2.2015 was challenged before the august Supreme Court of Pakistan whereby the appeal was dismissed and the suit was remanded vide order dated 10.10.2016. Thereafter a review was filed before the august Supreme Court of Pakistan by the CDC in which a clarification was issued on 21.8.2017, where after the review was disposed of.
9. Hearing before the trial court after the remand commenced on 3.4.2015 and Issues Nos.1 to 14 were framed on 19.1.2017 as follows:
1. Whether the Interpleader suit has been instituted with valid authorization? OPP
2. Whether forgery or fraud took place as alleged by the plaintiffs and defendant No.1 and such forgery or fraud vitiated the transfer of the Sukuk (with the face value of Rs.180 Millions) to the defendants Nos.2, 3, 4 and 6? OPP and OPD-1.
3. Whether the plaintiffs are stopped from denying independent title of defendants Nos. 2, 3, 4 and 6 to the Sukuk and Ijara thereon? OPD 2, 3, 4 and 6.
4. If forgery or fraud took place, the plaintiffs are vicariously liable to the holders or Sukuk Certificate for such forgery or fraud committed by their employees, and the plaintiffs are liable to their negligence, for an amount equivalent to the value the Sukuk and the Ijara thereon? OPD 2, 3, 4 and 6.
5. Whether the suit is barred under the provisions of Order XXXV Rules 1 and 5, C.P.C.? OPD 1, 2, 4, 5 and 6.
6. Whether the suit is barred in terms of Section 10 and Section 88 CPC as the suit of defendants Nos. 2 and 5 was already pending adjudication before the Hon'ble Sindh High Court Sindh at the time of instituted of the instant suit? OPD 1, 2, 4, 5 and 6.
7. Whether the plaintiffs have approached the court with unclean hands in order to avoid their obligations to pay Ijara Rentals to defendants? OPD 1, 2, 4 and 6.
8. Whether the suit in hand is an attempt to deprive defendant No.1 from its entitlement to the Sukuk certificate and benefit? OPD-1.
9. Whether the plaintiffs are barred from filing the instant suit because they are agents/trustees of defendant No.2? OPD 2 and 4
10. Whether the suit is incompetent for non-joinder of necessary parties? OPD 2 & 6.
11. Whether the Sukuk certificate valuing Rs.180 Millions constitute the same debt, same money or other property being claimed by the defendant No.2 and those claiming title there-from? OPP.
12. Whether the suit is barred in terms of the provisions section 88, C.P.C.? OPD 4 and 5
13. Whether the defendant No.1 is an absolute owner of the Certificates of Rs.750,000,000/- including the certificate of - Rs.180,000,000/- bearing serial Nos.512029 to 512100 and that the Certificates of Rs.180,000,000/- bearing serial No.512029 to 512100 are deemed to be never transferred to swift engineering solutions or to the defendants Nos.2 to 5 and that the defendant No.1 is exclusively and solely entitled to be paid all Ijara Rentals including the 8th Ijara rental? OPD-1
14. Whether the sale in favour of Swift Engineering Solutions and purported subsequent transfers/sale in favour of defendants Nos.2 to 4 and 6 of the certificate of Rs.180,000,000/- are void ab initio unauthorized, fraudulent, illegal, unlawful and of no legal effect OPD-1
15. Relief.
Thereafter eight additional issues were framed on 15.2.2017 being 14-A to 14-H as follows: 14-A Which of the defendants is the true and lawful owner of the Sukuk certificate of the value of Rs.180 Million? OPD 1, 2, 4 and 6.
14-B Whether the suit is not maintainable under law for seeking a decision from the court as to who is the true and lawful owner and to whom payments shall be made when the plaint itself discloses the knowledge of the plaintiffs as to the rightful claimant? OPD-1 14-C Whether the plaintiffs have committed serious breach of the trust and contract and have failed to discharge their obligations, duties and responsibilities and are thus not entitled to obtain indemnity for themselves? OPD 1, 2, 4 and 6 14-D Whether the plaintiffs have no right or cause to seek the equitable relief under section 88 and Order XXXV, C.P.C. as they themselves have committed fraud, breach of trust negligence and default in discharging their solemn duties and obligations? OPD 1, 2, 4 and 6 14-E Whether the plaintiff No.1 on March 09, 2009 confirmed to Global Securities Pakistan Limited (the "Broker") that after completing all the required formalities, it had transferred the six Jumbo physical certificate representing 36,000 Sukuk Certificate in the name of the answering defendant in its capacity as Trustee of Mezaan Islamic Income Fund? OPD-5 14-F Whether the plaintiff No.1 on 13.03.2009 returned the six transfer deeds pertaining to 36,000 Sukuk Certificates verifying and confirming the holding of the said Sukuk Certificates in the name of the answering defendant in its capacity as Trustee of Mezaan Islamic Income Fund? OPD-5 14-G Whether upon receipt of the duly verified transfer deeds, the answering defendant No.5 on 14.03.2009 made a deposit request to the plaintiff No.1 that the six physical certificate constituting 36,000 Sukuk certificate be converted into scripless form and be transferred in the CDC account of the Fund and whether this deposit request was subsequently approved by the plaintiff No.1? OPD-5 14-H Whether there is a bar on the rectification of the Central Depository Register in light of section 11 of the CD Act? OPD-5.
10. After framing of issues parties were directed to produce their respective evidence in support of their respective claims. In order to prove their case, the plaintiffs (Respondents Nos.1 and 2) produced Masood Raza, Additional Director Wapda Bonds Cell and Accountant Sukuk Company as PW-1. The stated Respondents produced the following documents: Sr.
No.Description of documents Dated Exhibits
1. Authority Letter from WFSC 03.03.2017 Ex.P1 2.Minutes of 13th Meeting showing Mr. Masood Raza as Chief Accountant14.07.2009Ex.P2 3.Authority Letter from WAPDA 03.03.2017Ex.P3 4.Appointment Letter of Mr. Masod Raza as Director WAPDA Bond Cell14.10.2006Ex.P4
5. Authority Letter Anwar Ul Haq Board Resolution of WFSC 01.12.2009Ex.P5 6.Minutes of Meeting (certified copy) 01.12.2009Ex.P6
7. Memorandum of association of plaintiff No. 1 Ex.P7 8.Memoradum of association of plaintiff No. 1 Ex.P8 9.Articles of association plaintiff No.1 30.09.2005Ex.P9 10.Authority letter of Anwar Ul Haq No. 749/1997 @ Sr. 33 of list of reliance 01.07.1997Ex.P10 11.Office order posting DG (CPCC) 09.01.2006Ex.P11 12.Purchase agreement along with photocopy of personal guarantee 15.11.2005Ex.P12 13.Purchase undertaking 15.11.2005Ex.P13 14.Ijara agreement between plaintiff and WAPDA and MCB 15.11.2005Ex.P14 15.Agency agreement 15.11.2005Ex.P15 16.Declaration of Trust 15.11.2005Ex.P16 17.Citigroup's letter along with list of invertors and list of investors opting for the physic Sukuk certificate 24.01.2006Ex.P17 18.List of eligible Sukuk holders for the periods April and October 2007, 2008 & 2009
1. 19.04.2008 Ex.P18 (11 page)
2. 19.10.2007 Ex.P19 (11 page)
3. 19.04.2007 Ex.P20 (10 pages) Ex.P18 to Ex.P23
4. 18.10.2008 Ex.P11 (11 pages)
5. 21.04.2009 Ex.P22 (12 page)
6. 20.10.2009 Ex.P23 (09 page)
19.NFC's letter to Director Finance Bond Cell WAPDA to transfer the Certificates 12.02.2009Ex.P24 20.SES letter by Akhtar Saleem CFO 13.02.2009Ex.P25 21.Cancelled physical Sukuk from Nos. 512029 to 512100 Ex.P25/1 to Ex.P25 / 72 22.Al Meezan Investment Management saying it had purchased Certificate from Swift04.03.2009Ex.P26 23.6 Certificates surrendered by Al Meezan from serial No. 512390 to 512395 Ex.P26/1 to Ex.P26/6 24.6 transfer deeds by Al Meezan/Swift Ex.P26/7 To Ex.P26 / 12 25.SES letter by Akhtar Saleem CFO to WFSCL 06.03.2009Ex.P27 26.WFSC letter about transfer 09.03.2009Ex.P28 27.WFSC letter informing about transfer 20.02.2009Ex.P29 28.CDC fax about verification of 6 certificate 12.03.2009Ex.P30 29.Letter CDC to WSFC regarding transfer of 6 certificate (3 page of annexures)14.03.2009Ex.P31 30.WSFC to CDC about use to Global Terminal 17.03.2009Ex.P32 31.NFC letter about 7th Ijara payment (along with photo copies of 2 enclosures, letters from Citibank dated 22.04.2009 and 22.10.2008) 24.04.2009Ex.P33 32.NFC to WFSC 25.04.2009Ex.P34 33.WFSC to NFC 27.04.2009Ex.P35 34.NFC to WFSC about 8th Ijara payment letter # A/C 1925 26.11.2009Ex.P36 35.NFC to WFSC about 8th Ijara payment letter # A/C 1926 23.10.2009Ex.P37 36.NFC to WFSC about 8th Ijara payment letter # A/C 1527 23.10.2009Ex.P38 37.NFC to Manager Citibank Letter No. 1530 23.10.2009Ex.P39 38.NFC to WFSC about 8th Ijara payment 10.11.2009Ex.P40 39.Letter from WFSC to CDC for closure of WAPDA First Sukuk Transfer Books 25.03.2009Ex.P41 40.Letter from WFSC to Citibank 24.04.2009Ex.P42 41.Legal Notice Ijaz and Ijaz 25.11.2009Ex.P43
11. Respondent No.3, NFC produced Muhammad Sageer Khan, Deputy General Manager Account, NFC as Dl-DW1 and Faiz Ali Bokhari as D1-DW2. Respondent No.3 produced the following documents in evidence:- Sr.
No.Description of documents Dated Exhibits
1. NFC's Board Resolution Authorizing 26.03.2017Ex.D1-1
2. Certificate of incorporation 11.08.1973Ex.D1-2
3. Memorandum of association Ex.D1-3
4. Articles of association Ex. D1-4 5.Citi Bank's letter along with cheque dated 22.04.2009 (but cheque not exhibited)22.04.2009Ex.D1-5 6.NFC's letter to Citi Bank upon receiving Ijara Rental on Rs.570 m as opposed to Rs.570m 24.04.2009Ex.D1-6 7.NFC's letter to WAPDA denying letter for transfer of any Certificates28.04.2009Ex.D1-7 8.WAPDA's letter to WAPDA top NFC: Formation of Fact Finding Committee29.04.2009Ex.D1-8 9.NFC's letter to WAPDA provided one original physical Sukuk certificate05.05.2009Ex.D1-9 10.WAPDA's office order establishing Fact Finding Committee 29.04.2009Ex.D1-10
11. Fact Finding Committee Report 08.05.2009Ex.D1-11 12.WAPDA's letter to NFC: seeking an undertaking for 7th Ijara Payment13.07.2009Ex.D1-12 13.NFC's reply to WAPDA: gave an undertaking "subject: PROVISIONAL. PAYMENT OF SUKUK CERTIFICATES"29.07.2009Ex.D1-13 14.WAPDA's letter to NFC 7th Ijara Rs. 180m received by NFC from WAPDA, along with pay order28.08.2009Ex.D1-14 15.WAPDA minutes of Authority Meeting 'held on June 22.2010 in respect of payment of 8th and 9th Ijara on undertaking02.07.2010Ex.D1-15 16.NFC's undertaking to WAPDA.
"Subject: PROVISIONAL PAYMENT OF SUMUK CERTIFICATES"20.07.2010Ex.D1-16 17.FIA letter to NFC asked NFC for original 72 certificate for forensic analysis12.11.2009Ex.D1-17 18.NFC's receiving regarding receipt: of original 72 certificate from FIA17.11.2009Ex.D1-18 19.FIA of receiving 72 Sukuk from NFC 10.12.2009Ex.D1-19 20.FIA letter to NFC no objection to return back 72 Sukuk Certificates12.12.2009Ex.D1-20 21.NFC's petition under section 516-A, Cr.PC for the custody of (Superdari) of the original Sukuk certificate Ex.D1-21 22.Copy of FIA forensic report 26.11.2009Ex.D1-22 23.Original 72 certificate of NFC Ex.D1-23/1 to Ex.D1- 23/72 24.Guarantee of President of Pakistan 13.12.2005Ex.D1-24 25.Challan 18.10.2010Ex.D1-25 26.Challan Interim 08.03.2010Ex.D1-26 27.Challan Interim 24.11.2010Ex.D1-27 28.Challan supplementary 03.12.2010Ex.D1-28 29.Attested copy of Statement of Anwar Ul Haq Ex. D1-29 30.Attested copy of Statement of Hammad Rasool Ex. D1-30 31.Attested copy of Statement of Munir Shah Ex. D1-31 32.Judgment of Special Judge (Central), Lahore 13.09.2013Ex.D1-32 33.NFC's extract of Board: Resolution by Circulation 11.02.1975Ex. D1-33 34.NFC's delegation of power 22.02.2002Ex. D1-34 35.NFC's letter to WFSC regarding 7th Ijara Rental 29.04.2009Ex.D1-35 36.NFC's letter to WAPDA 04.05.2009Ex. D1-36 37.NFC's letter WFSC regarding 7th Ijara Rental 08.05.2009Ex.D1-37 38.NFC's letter to WFSC regarding provisional payment of Sukuk Certificate05.08.2010Ex.D1-38 39.NFC's letter to WFSC regarding provisional payment " of Sukuk Certificate16.08.2010Ex.O1-39 12: Respondent No.7, AIMC produced Syed Awais Wasti Company Secretary/Chief Finance Officer ANC as D2-DW1. Respondent No.7 produced the following documents in evidence: Sr.
NoDescription of documents DatedExhibits
1. Internal Notings of WAPDA Ex.D2-1
2. Register of physical Sukuk Certificates (ownership) Ex.D2-2
3. FIR No.28/2009 attested copy 05.08.2009Ex.D2-3
4. Audit accounts + auditor's report for 2015 (13 pages) 18.09.2009Ex.D2-4 5.WAPDA letter No. GM FP/6615- 18 (to CDC Stop further transfer (0 page serial No 31)29.04.2009Ex. D2-5
6. CDC letter to WAPDA 06.05.2009Ex.D2-6
7. Al Meezan letter No. Amim 09/267 09.05.2009Ex.D2-7
8. WSFC letter to Al Meezan No. WSFC 2159/61 09.09.2009Ex.D2-8
9. WAPDA regulations: new SOP's for scrutiny/transfer of Sukuk 09.05.2009Ex.D2-9 10.Cover letter No. 1611 alongwith letter December, 2009 and audit report refraud13.12.2009Ex.D2-10 11.Masood Raza's statement as PW-2 before Special Judge (Central), Lahore (page 18) Ex.D2-11 12.Syed Fiaz Ali Bokhari's statement as PW-16 before Special Judge (Central), Lahore Ex.D2-12 13.Receipt Global Ex.D2-13 14.Letter from Al Meezan Investment Management' to Trustee, Meezan Islamic Income Fund05.03.2009Ex.D2-14 15.Receipt Global Ex . D2- 15 16.Letter from Swift Engineering to CDC Trustee 13.03.2009Ex.D2-16 17.Letter from Al Meezan Investment Management to Trustee, Meezan Islamic Income Fund13.03.2009Ex.D2-17 18.MCB Bank's statement of Account Ex. D2-18 19.CDC's account balance report Ex.D2-19 20.Citi Bank's letter to Al Meezan Investment Management 22.04.2009Ex.D2-20 21.Letter from Al Meezan Investment Management to WFSC 29.09.2009Ex.D2-21 22.Letter from Al Meezan Investment Management to trustee, Meezan Islamic Income Fund18.05.2009Ex.D2-22 23.Letter from Invest and Finance Security Ltd. to CDC Trustee 18.05.2009Ex.D2-23 24.Letter from Al Meezan Investment Management to trustee, Meezan Islamic Income Fund23.06.2009Ex.D2-24 25.Letter from Invest and Finance Security Ltd. to CDC Trustee 23.06.2009Ex.D2-25 26.Letter from Al Meezan Investment Management Trustee, Meezan Islamic Income Fund23.06.2009Ex.D2-26 27.Letter from Invest and Finance Security Ltd. to CDC Trustee 23.06.2009Ex.D2-27 28.Habib Metropolitan Bank's statement of Account Ex.D2-28 29.Bank Al Falah's statement of account Ex.D2-29 30.Civil Review No.2016 in CA 104-L/2015 filed by Al Meezan Investment Management Ex.D2-30 31.Memorandum and Article of Association of Al Meezan Investment Management Ex.D2-31 32.Sub-Power of Attorney Ex.D2-32 33.Power of Attorney Ex.D2-33 34.Al Meezan Investment Management. Extract of meeting dated 24.01.2011 Ex.D2-34 35.Trust Deed of Meezan Islamic Income Fund and between Al Meezan Investment Management Ex. D2- 35 36.Suit No.1497 titled "Al Meezan Management v. WFSC and others" before Sindh High Court. Ex. D2- 36
13. Respondent No.5, SBL produced Qaisar Samdani AVP and Credit Incharge, SBL, Clifton Branch Karachi as D4-DW1. Respondent No.5 produced the following documents in evidence: Sr. NoDescription of documents Dated Exhibits
1. CDC's Activity Report Ex . D4-1
2. Authority letter in favour of Qaisar Hamdani Ex. D4-2
3. GPA Ex.D4-3
4. Letter from UBL Al Amin 18.09.2009Ex.D4-4
5. Advice of outright sale transaction 28.09.2009Ex.D4-5
6. Receipt RTG-suit Ex. D4-6
7. Letter dated 02.11.2009 02.11.2009Ex.D4-7
8. Letter from WAPDA 03.11. 2009Ex . D4-8
9. Letter dated 25.11.2009 25.11.2009Ex. D4-9
10. CDC's letter 11.12.2009Ex. D4-10
11. Letter of Citi Bank Ex. D4-11
12. Letter of Citi Bank Ex. D4-12
13. Suit titled "Soneri Bank v. WFSC and others"10.08.2010Ex.D4-13
14. Respondent No.6 produced Muhammad. Khurram Manager Legal Compliance CDC Karachi as D5-DW1. Respondent No.6 produced the following documents in evidence:- Sr.
NoDescription of documents Dated Exhibits 1.CDC letter CDC/CS/LC- MNK/238/09 to First Sukuk Company (Company with regulation 13.7.1A)25.09.2009Ex.D5-1 2.CDC letter CDC/CS/LC- MNK/258/09 to First Sukuk Company (reason/order for letter dated 29.04.2009 till awaited)06.11.2009Ex.D5-2 3.CDC letter CDC/CS/LC- MNK/277/09 to First Sukuk Company (reasons provided as far)12.12.2009Ex.D5-3 4.CDC letter CDC/CS/LC- MNK/021/10 to First Sukuk Company (rectify the discrepancy)19.10.2010Ex.D5-4 5.CDC letter CDC/CS/LC-MNK/029/10 to First Sukuk Company (reasons for notice re stoppage of transaction)04.02.2010Ex.D5-5 6.CDC letter CDC/CS/LC-MNK/277/10 to First Sukuk Company (no action by First Sukuk Company)23.12.2010Ex.D5-6 7.CDC letter CDC/CS/LC-MNK/012/11 to First Sukuk Company (no power to stop transaction)07.02.2011Ex.D5-7 8.Authority letter for the witness Ex.D5-8 9.Board resolution of CDC 10.04.2017Ex.D5-9 10.Copy of letter for verification of transfer deeds from WFSC 13.04.2009 Mark-D5- A 11.Copy of letter for refund of Ijara Rental payment 02.10.2009Mark-D5- B
15. The Appellant MBL produced Nasir Mehmood Vice President Legal Affairs, MBL as D6-DW-1. The Appellant produced the following documents in evidence:- Sr. No.Description of documents Dated Exhibits
1. CDC statement Ex. D6-1
2. CDC statement Ex.D6-2
3. Special Power of Attorney Ex. D6-3
4. Memorandum and Article of Association Ex. D 6-4
5. Letter from Investment and Finance Securities Ltd. 23.06.2009Ex.D6-5
6. CDC Report Ex . D6-6
7. RTGS regarding payment of Rs . 60 .532, 200/- 02.11.2009Ex.D6-7
8. Letter from Investment and Finance Securities Ltd. 29.06.2009Ex.D6-8
9. RIGS regarding payment of Rs.49,814,750/- Ex.D6-9
10. Meezan Bank's letter to WFSC 30.10.2009Ex.D6-10
11. Attested copy of Sindh High Court suit of Meezan Bank Ex . D6-11
12. Copy of GPA Mark-D6-A
13. Office copy of plaint titled "Meezan Bank v. WFSC etc. Mark-D6-B
16. Respondent No.4, Bank Islami was also a party in the interpleader suit as they claim ownership of 10000 sukuk certificates. However after remand from the High Court on 17.2.2015, they failed to appear before the trial court and were proceeded ex-parte on 21.5.2015. Against this order, they filed an application under Order IX, Rule 13 read with Section 12(2), C.P.C. for suspension of the Impugned Judgment. Through order dated 13.10.2017 the application of suspension of the Impugned Judgment was dismissed on account of the pendency of the instant appeal along with connected RFAs before this Court. This order dated 13.10.2017 has been impugned in FAO No.181619/2018 wherein the Appellant Bank seeks suspension of the Impugned Judgment till the final decision on the main application filed by the Appellant under Order IX, Rule 13 read with Section 12(2), C.P.C. Hence they have not filed any claim in the interpleader suit and for the purposes of the FAO, it has become infructuous and hence has been dismissed vide a separate order of even date.
The facts of the dispute
17. (i) In the year 2005, Respondent No.2, Wapda launched a scheme for raising money through sukuk certificates. Several agreements were executed between Wapda, the Sukuk Company as well as with MCB and Jahangir Siddiqui and Company Limited. The transaction was such that a Purchase Agreement (Ex.P12) was executed wherein the Sukuk Company purchased from Wapda, 10 hydel power generation units (turbines) installed at Mangla hydel power station for Rs.8,000,000,000 (Rupees eight billion);
(ii) These hydel power generation units were leased back to Wapda by the Sukuk Company under the Ijara Agreement (Ex.P14) wherein the rentals were to be paid twice a year on the 22nd of April and 22nd of October of each year until the maturity date;
(iii) A Declaration of Trust (Ex.P16) was executed by the Sukuk Company wherein it assumed the role of the trustee for the trust assets for the benefit of the certificate holders. The rights of the certificate holders were submitted in the Declaration of Trust which includes the right to receive payment of the PDA. The profit on the Sukuk was to be paid inter alia on the basis of the rent paid by Wapda for the lease of the turbines under the Agency Agreement (Ex.P15);
(iv) An Agency Agreement was executed between the Sukuk Company and Wapda which appointed the Wapda Bonds Cell as the Registrar, the transfer agent and replacement agent with respect to the sukuk certificates. Citibank was appointed as the paying agent and Jahangir Siddiqui and Company was the reference agent. Wapda Bonds Cell also acted as the mercantile agent responsible for the buying and selling of physical sukuk certificates which meant that the physical sukuk certificates had to be bought and sold through the Wapda Bonds Cell;
(v) Subsequently the sukuk units were transferred in book entry form through the CDC which meant that the subsequent sales were not of physical certificates but of sukuk units through the CDC;
(vi) The relevant regulations were the Wapda Sukuk Certificates (1st Issue) Regulations, 2005 issued by the Government of Pakistan on 28.11.2005;
(vii) NFC was one of the initial subscribers as it purchased 300 physical certificates valuing Rs.750,000,000 (Rupees seven hundred and fifty million) (Ex.P17). Letter issued by Citibank to Wapda Bonds Cell provides that 300 sukuk certificates were despatched to the NFC amongst others; (viii)Payments were made to the subscribers without any dispute upto the sixth ijara payment (Ex.P18 to .Ex.P23) being letters issued by the Sukuk Company to Citibank regarding the payments of ijara rentals;
(ix) On 12.2.2009 (Ex.P24) a letter was issued to Wapda Bonds Cell by Faiz Ali Bokhari, Deputy General Manager (Accounts), NFC that NFC has no objection in transferring 72 sukuk certificates to SES. Hence Wapda Bonds Cell should verify the transfer deeds regarding the physical certificates.
These sukuk certificates were also exhibited being 72 certificates along with transfer deeds presented to Wapda Bonds Cell for verification (Ex.P25/1 to Ex.P25/72);
(x) On 20.2.2009 the Sukuk Company issued a letter to SES stating therein that against 72 certificates that were issued to them, 6 new physical certificates having denomination of Rs.30 Million each has been issued (Ex.P29). Consequently 72 certificates were replaced by 6 new physical certificates of equal value.
The physical certificates were exhibited as Ex.P26/1 to Ex. P26/6;
(xi) Letter dated 4.3.2009 (Ex.P26) was issued by AIMC to the Sukuk Company wherein it claimed that they have purchased 6 sukuk certificates from SES and required processing of transfer of the same;
(xii) On 6.3.2009 a letter was issued by SES confirming the sale in favour of AIMC (Ex.P.27). The transfer deeds were verified and approved by the Sukuk Company on 7.3.2009 (Ex.P.26/7 to P26/12); (xiii)On 9.3.2009 the Sukuk Company issued a letter to Global Securities Pakistan Limited ("Global Securities"), confirming the transfer in favour of Respondent No.7 (Ex.P28). On 12.3.2009 CDC sought verification of the transfer deeds from the Sukuk Company (Ex.P30);
(xiv) On 14.3.2009 CDC confirmed that 6 sukuk certificates transferred by SES to Respondent No.7 have been verified and confirmed (Ex.P31) and required that the physical certificates be transferred to the Central Depository System ("CDS");
(xv) On 24.4.2009 NFC issued a letter to the Sukuk Company with reference to the payment of the 7th ijara rentals stating therein that they had not been paid complete rental owed to them on their investment of Rs.750,000,000 (Rupees seven hundred and fifty million). Hence NFC communicated to the Sukuk Company that they had not received the full ijara payment (Ex.P.33). This letter was issued by Faiz Ali Bokhari, Deputy General Manager (Accounts), NFC;
(xvi) On 25.4.2009 NFC communicated to Wapda that they have been informed that certificate valuing Rs.180,000,000 (Rupees one hundred and eighty million) have been transferred from NFC as per the books maintained by Wapda whereas NFC had not made any such transfer and they still retain their investment of Rs.750,000,000 (Rupees seven hundred and fifty million) (Ex.P.34). This letter was issued by Faiz Ali Bokhari, Deputy General Manager (Accounts), NFC;
(xvii) On 27.4.2009 the Sukuk Company informed NFC that NFC had transferred 72 certificates to SES for Rs.180,000,000 (Rupees one hundred and eighty million) after fulfilling all codal formalities and that 72 original certificates along with duly signed transfer deeds were transferred to SES (Ex.P35).
18. On the basis of these facts a dispute arose with reference to the ownership of NFC's certificates worth Rs.180,000,000 (Rupees one hundred and eighty million). Subsequent thereof, sukuk certificates of various denominations were sold to Respondent No.7, AIMC and then to Investment and Finance Security Limited ("IFSL") (Ex.D-2/22 to Ex.D-2/29). They then sold some certificates to MBL (Ex.D6/5 to Ex.D6/9). SBL and Bank Islami also purchased sukuk certificates from the market around this time. The Appellants are claimants with reference to the sukuk certificates who seek their entitlement to the principal and rental payments on the sukuks. Respondent NFC is also claimant in whose favour the Impugned Judgment has been passed who seeks the principal and rental payments on the sukuks certificates. Hence the interpleader suit was filed by the Sukuk Company and Wapda. Currently the Appellants and NFC before the Court claim to be the owners of sukuk units in the following amounts: Meezan Bank Limited 22000 Al Meezan Investment Management Company Nil Soneri Bank Limited 4000 NFC 36000 Arguments of Appellant in RFA No.54274/17, MBL
19. Learned counsel for MBL argued that MBL acquired good title to the disputed sukuks because NFC and the Sukuk Company along with Wapda failed to establish a case of fraud and forgery and the Impugned Judgment failed to take into consideration the plea of bonafide purchaser raised by MBL. Learned counsel argued that there is no independent evidence of fraud or forgery and that there is no forensic analysis to establish that letter dated 12.2.2009 (Ex.P24) was fake or that the signatures were forged. Learned counsel argued that burden of proof is on the person denying signatures and claiming fraud and forgery to establish the same which burden has not been discharged. He further argued that SES was not made a party in the suit and yet the Impugned Judgment has declared SES to be a fake entity without any evidence on this issue whatsoever. He further argued that the Impugned Judgment has totally failed to consider the evidence of MBL in favour of its transfer which establishes that the Wapda Bonds Cell and the CDC recognize and acknowledged the transfers in favour of MBL. He further argued that the effect and process of transfer on the CDC was not taken into consideration nor the concept of trading in the CDS as prescribed under the Central Depositories Act, 1997 ("CD Act"). Learned counsel argued that it was not the case of NFC or the Sukuk Company that MBL had played any part in the fraud or had knowledge of the fraud. Under the circumstances, the case of MBL as bonafide purchaser was not considered. Learned counsel further argued that the Impugned Judgment has relied upon a decision of the criminal court which is not relevant in civil proceedings. Learned counsel places reliance on Section 31 of the Securities and Exchange Ordinance, 1969 which protects title of a person who acquires title on the floor of the stock exchange for being bona fide purchaser. Learned counsel argued that the interpleader suit filed by Wapda is simply to avoid any responsibility as fraud admittedly was committed by their own employees against which Wapda has not taken any action. Learned counsel argued that Wapda is vicariously liable for the action of its employees.
Hence if this Court were to decide in favour of NFC then MBL in the alternative seeks damages for the loss suffered by it for not being paid the PDA and for the transaction amount paid by it as well as ijara rentals due to it.
Arguments of Appellant in RFA No.50966/17, SBL
20. Learned counsel for the Appellant adopted the arguments advanced by the learned counsel for the Appellant MBL in RFA No.54274/2017. Learned counsel further added that the Impugned Judgment ignored the transaction documents, their sanctity and their contractual relevance in favour of the Appellant, SBL. He argued that the entries of transfer and title are available in electronic form on the CDS which aspect of the matter was also ignored. He argued that admittedly the employees of Wapda were involved in the fraud and in order to avoid any liability, they have filed an interpleader suit claiming therein that the only dispute relevant is as to who is the lawful owner of the sukuk certificates and not of any loss or compensation to the Appellants. He argued that the Appellant being a bonafide purchaser, having good title on the CDS, having no knowledge of any fraud is the authentic owner of 4000 sukuk certificates which aspect of the matter has not been considered.
Arguments of Appellant in RFA No.54270/17-AIMC
21. Learned counsel for the Appellant adopted the arguments advanced by the learned counsel for the Appellant in RFA No.54274/2017. Learned counsel states that the Appellant manages amongst others Meezan Islamic Income Fund ("MMF") which is a collective investment scheme in accordance with the provisions of the trust deed of that fund. CDC is the trustee of MIIF. They not only act as the regulator of the sukuk certificates but also as the trustee of MIIF.
The Appellant through the CDC purchased 6 sukuk certificates from the SES through Global Securities (the Broker). Payment for these sukuks was made by the Appellant into the account of SES maintained with MCB Bank Limited, Main Market Gulberg Branch, Lahore (Exs. D2-15, D2-16). A total of Rs.190,792,800/- was paid by the Appellant to SES for the 36000 sukuk units with the face value of Rs.180,000,000 (Rupees one hundred and eighty million). Vide letter dated 4.3.2009 (Ex.P26), the AIMC requested the Sukuk Company to transfer -6 physical sukuk certificates (Ex.P26/1 to Ex.P26/6) against 36000 sukuk units issued to it in the name of the CDC, Trustee MIIF. This request was complied with after completing all codal formalities and the 6 sukuk certificates were transferred in favour of the Appellant. This transfer testifies to the fact that Wapda Bonds Cell verified the transaction. Subsequently the Appellant received ijara 'rentals (Ex.D2-20). However on 29.4.2009 Wapda sent a letter whereby it requested the CDC to stop any further transfer of ijaras in favour of the Appellant. The Appellant questioned the stoppage of ijara payment, however they were not informed. Thereafter on 18.5.2009 and 23.6.2009, the Appellant sold 6 sukuk certificates to IFSL (Ex.D2-22 to Ex.D2-29) for a total consideration of Rs.181,570,600/- and 'therefore the ijara amount was ultimately passed on to the subsequent buyer. The Appellant is now aggrieved by the Impugned Judgment to the extent of demand for the , refund of ijara rentals paid to it, Learned counsel argued that the Appellant had no notice of the fraud nor was it aware of any forgery and was a bonafide purchaser without notice whose case was not duly considered in the Impugned Judgment. Learned counsel argued that the Impugned Judgment has wrongfully applied the principle that fraud vitiates the most solemn proceedings. Learned counsel argued that as per the Special Audit 'Report (Ex.D2-10), the Sukuk Company and Wapda were grossly negligent with respect to the issuance of the sukuks for failure to make the rules at the right time and for the fraud committed by their employees. He argued that interpleader suit is merely a, device used to transfer the loss caused by Wapda and the Sukuk company on to either NFC or subsequent buyers like the Appellant. Hence the Appellant also seeks a declaration that it was the lawful owner of 36000 sukuks and that it had lawfully received the ijara payments.
Arguments of Appellant in RFA No.67900/17-CDC
22. The Appellant is the CDC which is aggrieved by the findings rendered in Issue No.14-H. Learned counsel stated that Section 11 of the CD Act has been wrongfully interpreted as the protection under Section 11 is applicable in all cases including fraud. Learned counsel argued that fraud has not been established and the CDC being the Central Depository Company is not concerned with whom the court concludes to be the lawful owner of the sukuks. However, its concern and grievance is with respect to the findings rendered while interpreting Section 11 of the CD Act. Hence the Appellant prays for setting aside the findings on issue No.14-H in the Impugned Judgment.
Arguments of Respondents Nos.1 and 2 - Wapda and the Sukuk Company
23. Learned counsel on behalf of Respondents Nos.1 and 2 has raised an objection with respect to the scope of the interpleader suit. She stated that an interpleader suit is filed under Section 88 of the C.P.C. on the basis whereof two or more persons have claims that are adverse between one another on the same debt or money or property from another person, who has no interest in that claim, then the interpleader suit will decide, only to the extent as to whom the payment should be given to and it cannot award damages or compensation in the manner argued by the Appellants.
Learned counsel argued that in this regard admittedly the Appellants have all filed civil suits which are still pending where they have raised their claim for damages and compensation. Hence this Court in the interpleader suit cannot decide on the issue of damages or. compensation. She further argued that in order to award damages or compensation, the Court has to consider evidence and in this case there is no evidence on this issue. Hence she has raised objections with regard to the alternative prayer made by the Appellants. She argued that interpleader suit is distinct form of lis available to any applicant who is in possession of res in which they have no interest in the claim and where it is unclear as to whose claim is genuine. Therefore the Appellants cannot raise their own claim for compensation or damages in the interpleader suit.
24. With reference to the case of the Appellants on fraud and bona fide purchaser, learned counsel argued that the issue of fraud was made out against SES to whom it is suggested that sukuk certificates were sold. She argued that NFC tendered in evidence the original 72 sukuk certificates as Ex.D1-23/1 to D1-23/72. Since NFC holds the original certificates, the issue of fraud is patently clear and the transfer so alleged is fake. She further argued that fraud vitiates the most solemn proceedings and any subsequent transfers made after the fraudulent transfer to SES are illegal and as such do not create title in favour of any of the Appellants. She argued that it is settled law that the seller can only pass title of property as good as his own title. Hence all subsequent transfers whether physical or in book entry form in the CDS stand vitiated.
25. On the issue of Wapda's liability, she argued that the of vicarious liability only arises in case of negligence, where there is proof of the same and proof of cause of action and damages. For the Appellants to claim damages or compensation, they would first have to show that there is breach of duty and that they suffered damages on account of the breach of duty. She argued that the party claiming damages must specifically prove damages. In this regard, she stated that there was no issue with respect to damages and the Appellants did not lead any evidence on damages.
Wapda has also filed a suit against AIMC. She stated that Wapda has filed suit No.15370/2020 being a suit for recovery in which it has prayed for recovery of Rs.13,640,900 plus mark up which is pending. She further argued that if at all there is a case of negligence against Wanda and its employees, the same will be dealt with in accordance with law. However that does not justify or substantiate the claim of the Appellants to be compensated in the event that NFC is found to be the true and lawful owner of the sukuk certificates.
Arguments of Respondent No.3, NFC
26. Learned counsel for the NFC argued that the Impugned Judgment is in favour of NFC. The fundamental issue of fraud has been decided in favour of NFC. That NFC still has in its possession the original 72 sukuk certificates, meaning thereby that the alleged transfer to SES as depicted in letter dated 12.2.2009 is totally without basis. Learned counsel argued that the Appellants have failed to make out a case of ownership and title as fraud vitiates all actions and decisions. That NFC has discharged its burden through oral and documentary evidence to, show that fraud was made out, hence the sale in favour of SES is illegal and void and all subsequent transfers become void as it is based on fraud. Learned counsel also argued that the argument of bonafide purchaser is not relevant to the dispute in hand as they are barred under law to claim good title, given that no title was ever passed in favour of SES. He argued that protection to a bonafide purchaser cannot be given to transferees with defective title. He supported the contention of counsel for Wapda on the scope of interpleader suit and argued that even if this Court finds that a case of fraud is made out in favour of NFC, the Appellants would not be entitled to any compensation or damages in the interpleader suit. He stated that in this regard their own suits are pending before the learned Sindh High Court. Learned counsel stated that NFC has already filed Suit No.40163/2015 before the civil court at Lahore against Wapda and the Sukuk Company wherein they have sought up to date profits as earned on the PDA/ijara rentals or in the alternative to be paid to them as damages.
27. The issues raised before this Court from the. Impugned Judgment fall into three broad categories: the element of fraud and its effect on the transaction; title and who is the owner of the sukuk certificates and finally the nature and scope of the interpleader suit and the jurisdiction to grant relief therein. We note that on the issue of maintainability of the interpleader suit has been dealt with in Issues Nos.6, 12 and 14-B. Vide judgment dated 21.5.2010, the trial court held that the interpleader suit was not maintainable. This decision was challenged by the Appellants but ultimately, the issue of maintainability of the interpleader suit was decided by the august Supreme Court of Pakistan in Al-Meezan Investment Management Company Limited and 2 others v.
WAPDA First Sukuk Company Limited, Lahore and others (PLD 2017 SC 1) holding the interpleader suit to be maintainable notwithstanding the fact that at the time, one suit was pending before the Sindh High Court as filed by AIMC. Hence we proceed with these RFAs on the basis of the issues of fraud, title and the relief to be granted in the interpleader suit.
The issue of fraud and its effect on the transaction
28. The trial court framed issues Nos.2 and 14 on the question as to whether there was fraud and forgery in the sale transaction of 72 sukuk certificates from NFC to SES and the effect of the fraud, if any. The burden to prove Issue No.2 with reference to proving fraud and forgery was on the plaintiff Wapda, the Sukuk Company and NFC whereas the burden to prove fraud with reference to the sale in favour of SES being Issue No.14 was on NFC. These issues decide the basic dispute between the parties which decided the outcome of the interpleader suit. The Impugned Judgment has essentially decided Issue No.14 and concluded that SES was a fake entity and that Ex.P24, the letter issued by NFC's D1-DW2 informing Wapda Bonds Cell of the sale of 72 sukuk certificates valuing Rs.180,000,000 in favour of SES, was a forged and fabricated document as per the evidence and the record. The Impugned Judgment further concluded that undisputedly, the SES was fake body therefore it was the duty of the defendant No.2 (AIMC) to prove that the letter dated 12.02.2009 Ex.
P24 was validly issued by the defendant No.1 (NFC) and that the letter dated 13.2.2009 Ex. P25 along with 72 Sukuk Certificates as Ex. P25/1 to Ex. P25/72 were genuine. So the Impugned Judgment concluded that AIMC was the beneficiary of the fraud, hence had to prove the genuineness of the transaction in favour of SES, with reference to the disputed 72 sukuk certificates.
On the issue of fraud, the Impugned Judgment finds that fraud is admitted by defendant No.2, AIMC and has placed reliance on the criminal proceedings and judgment by the Special Judge Central, Lahore (Ex.D1-32) along with the forensic report of the 72 sukuk certificates (Ex.D1-22).
Consequently on the issue of fraud, the Impugned Judgment finds that the 72 sukuk certificates transferred in the name of SES on the basis of Ex.P24 was fake and fraudulent and that all subsequent transfers to defendants Nos.2, 3 and 6 (Appellants before this Court) were consequently illegal and void. The Impugned Judgment declared NFC to be the lawful owner of the disputed 72 sukuk certificates and therefore entitled to the payment of ijara rentals.
29. The Appellants have challenged the Impugned Judgment with reference to Issues Nos.2 and 14 on several grounds, essentially being that there was no evidence on the basis of which the Court concluded that SES was a fake entity and that the transfer from NFC to SES was fraudulent. They argued that there was no independent evidence of fraud or forgery and that reliance on the criminal proceedings and judgment was not relevant for the purposes of the civil suit. In this regard, reliance has been placed on Muhammad Khurshid v. The State (PLD 1963 SC 157) and Ghulam Rasool v. Muhammad Waris Bismil (1995 SCMR 500). They also argued that the disputed letter dated 12.2.2009 (Ex.P24) issued by NFC was never established to be a fraudulent or a forged document before the trial court as there was no forensic analysis of the signature on the letter and the burden to establish that this was a forged letter was placed on the author of the letter, who did not discharge his burden in accordance with law. Reliance is placed on Land Acquisition Collector, Sargodha and another v. Muhammad Sultan and another (PLD 2014 SC 696) and Allah Dino and 2 others v. Mohammad Umar and 2 others (1974 SCMR 411).
30. One of their main arguments made was that as per the record, employees of the Wapda Bonds Cell were party to the fraud and that the NFC failed to establish that it was not party to the fraud or had no knowledge of the fraud. Hence if at all there was any fraud at best it made the transaction voidable and it did not vitiate the transfers in favour of the Appellants. The Appellants have also argued their case of bonafide purchaser stating that the Impugned Judgment failed to consider their plea of bonafide purchaser and has wrongfully concluded that fraud has vitiated the transactions subsequent to the transfer to SES, such that title did not pass on to the Appellants as it never passed on to SES. It is their contention that the Impugned Judgment did not consider the record and the significance of the transaction documents nor did it consider the argument of bonafide purchaser in its true perspective as per the cases relied upon, hence failed to decide the issue as per law.
31. On behalf of Wapda, the Sukuk Company and NFC, the Impugned Judgment was defended as it was argued that the issue of fraud was established in favour of NFC. Consequently NFC was declared the owner of the disputed sukuk certificates as NFC specifically denied the execution of Ex.P24 and the sale of the sukuk certificates, the transfer deeds (Ex.P25/1 to Ex.P25/72 and Ex.P26/1 to Ex.P26/12) including the surrender of 72 sukuk certificates (Ex.P25/1 to Ex.P25/72) by SES for issuance of 6 sukuk certificates in their place. NFC has relied upon the original 72 sukuk certificates (Ex.D1- 23/1 to Ex.D1-23/72) which it states are still in its possession, hence the question of sale in favour of SES does not arise. They have essentially argued that as the sale in favour of SES was fraudulent, then all subsequent transfers are void as SES could not transfer valid title in favour of any of the Appellants. They further argued that once their witness Faiz Ali Bokhari, D1-DW2 appeared and denied the execution of Ex.P24, thereafter the burden shifted on the Appellants to establish that the transfer to SES was not fraudulent. Learned counsel for Respondents Nos.1 and 2 has relied upon Talib Hussain and others v. Member, Board of Revenue and others (2003 SCMR 549), Abdul Hameed through L.Rs and others v. Shamasuddin and others (PLD 2008 SC 140), Reddaway v.
Banham ([1896] AC 199) and Lazarus Estates Ltd v. Beasley ([1956] 1 Q.B.702) to establish the point that fraud vitiates all transactions and on the effect of fraud on a transaction Learned counsel for NFC has relied upon the following judgments in support of their contention that fraud vitiates the most solemn of proceedings and that the burdeif to prove the transaction shifts on the beneficiary of that transaction that is Lal Din and another v. Muhammad Ibrahim (1993 SCMR 710), Government of Sindh through the Chief Secretary and others v. Khalil Ahmed and others (1994 SCMR 782), 2003 SCMR 549 (supra), Baja through L.Rs and others v. Mst. Bakhan and others (2015 SCMR 1704) and Administrator Municipal Corporation, Peshawar v. Taimoor Hussain Amin and others (PLD 2020 SC 249).
32. In order to appreciate the arguments made with reference to fraud and its effect, the relevant facts based on the evidence are as follows:
(i) 72 physical sukuk certificates owned by NFC valued at Rs.180,000,000/-;
(ii) Letter dated 12.2.2009 (Ex.P24) was issued by Faiz Ali Bokhari, Deputy General Manager (Accounts) NFC (D1-DW2) to the Director Finance, Wapda Bonds Cell, Lahore which provides that NFC has sold 72 physical sukuks in favour of SES having serial Number from 512029 to 512100 amounting to Rs.180 Million. Further provides that NFC has no objection in transferring these physical certificates in favour of SES;
(iii) Internal noting on file (Ex.D2-1) shows SES inquired about the procedure for transfer of the 72 sukuks to SES in the form of physical certificates having serial No. from 512029 to 512100 amounting to Rs.180 Million. It was requested to verify the transfer deeds regarding the physical certificates from Serial No. from 512029 to 512100;
(iv) On 13.2.2009 a letter was issued by Akhtar Saleem, Chief Financial Officer, SES to the Director Finance, Wadpa Bonds Cell, Lahore (Ex.P25) requesting for transfer of the physical sukuk certificates from Serial No. 512029 to 512100 to SES's name and to issue 6 new physical certificates in the denomination of Rs.30 Million each. The 72 sukuk certificates were presented by SES to Wapda Bonds Cell (Ex.P25/1 to Ex.P25/72);
(v) On 20.2.2009 (Ex.P29), a letter was issued by Masood Raza, Deputy Director Finance, Sukuk Company (PW-1) to Akhtar Saleem, Chief Financial Officer, SES enclosing therewith 6 new physical sukuk certificates having denomination of Rs.30 Million (Ex.P26/1 to Ex.P26/6);
(vi) Entry in the Register of Certificates Holders (Ex.D2-2) maintained by Wapda Bonds Cell which shows the transfer in favour of SES. Letter dated 4.3.2009 (Ex.P26) issued by AIMC to Masood Raza, Deputy Director Finance, Sukuk Company (PW-1) stating that they have purchased 72 sukuk certificates of the Sukuk Company;
(vii) Letter dated-4.3.2009 by Global Securities, Broker of AIMC to CDC Trustee, MIIF confirming purchase from SES (Ex.D2-13);
(viii) Letter dated 5.3.2009 (Ex.D2-14) from AIMC to Trustee, MIIF, Karachi, seeking transfer of 72 sukuk certificates amounting to Rs.180,000,000/- in value. The letter also states that initially the sukuks will be physically transferred in the name of CDC Trustee Meezan Islamic Fund ("CDC Trustee MIIF") and then will be lodged with CDC into the Central Depository System (CDS);
(ix) Letter dated 13.3.2009 from SES to CDC Trustee (Ex.D2-16) confirming purchase of sukuk certificates as on 18.3.2009, transfer on the CDC (Ex.D2-19).
33. Respondents Nos.1 and 2 produced only one witness namely Masood Raza, Additional Director Wapda Bonds Cell and Accountant Sukuk Company as PW-1 and exhibited 43 documents which included correspondence and the transfer deeds of the sukuk certificates. PW-1 admitted to having received letter dated 12.2.2009 (Ex.P24) by NFC and letter dated 13.02.2009 (Ex.P25) issued by Akhtar Saleem, Chief Financial Officer, SES to the Director Finance, Wadpa Bonds Cell, Lahore. He explained the verification process followed by Wapda Bonds Cell when NFC sold 72 sukuk certificates to SES.
He admitted that the 72 certificates were returned by SES against which 6 new certificates were issued to SES vide Ex.P29 by Wapda Bonds Cell. He admitted to the issuance of the sukuk certificates under his signatures (Ex.P26/1 to Ex.P26/6). He deposed on the verification process and security measures adopted by Respondents Nos.1 and 2 to transfer the sukuk certificates physically. Hence Respondents Nos.1 and 2 admitted to the transfer from NFC to SES and also admitted to having replaced 72 sukuks with 6 sukuk certificates after due verification. PW-1 does not state that these transactions were fraudulent or that SES was a fake entity. In fact in his cross- examination he states no knowledge of SES being a fake entity:
34. Respondent No.3, NFC produced Muhammad Sageer Khan, Deputy General Manager Account, NFC as D1-DW1 and Faiz Ali Bokhari as D1-DW2 and exhibited 39 documents which included the original 72 sukuk certificates Ex.D1-23/ I to Ex.D1-23/72. So far as the two witnesses are concerned, they produced no evidence to establish that SES was a fake entity. D1-DW1 in his evidence stated that NFC never sold its 72 sukuk certificates and the fraud came to light during the fact finding inquiry by Respondents No.1 and 2. He stated that since NFC has the original certificates, they had no knowledge of the fraud and it is only when the FIA commenced proceedings on Wapda's complaint that this matter was brought to their attention. In his evidence D1-DW1 stated that Ex.P24 was fake as were the transfer deeds in favour of SES (Ex.P25/1 to Ex.P25/72). He also admits that NFC never carrieDd out any forensic analysis of Ex.P24 nor was any internal fact finding committee established to look into the matter. The second witness namely Faiz Ali Bokhari appeared as D1- DW2. He made a categoric statement that he did' not execute Ex.P24 nor did NFC sell 72 sukuk certificates to SES. He also admits that he never had his signatures on Ex.P24 checked by a handwriting expert. Therefore in terms of the witnesses produced by NFC, they denied execution of Ex.P24 and the sale in favour of SES.
35. Respondent No.7, AIMC produced Syed Awais Wasti, Company Secretary/Chief Finance Officer as D2-DW1 as their witness and 36 documents were exhibited. D2-DW1 stated that he had no knowledge of any fraud and that they purchased 6 sukuk certificates from SES in 2009 through Global Securities and went through the verification process set out by Wapda Bonds Cell. He also stated that the sale in favour of AIMC was verified by the broker, Global Securities as well as CDC Trustee, MIIF. So far as Respondent No.5 SBL is concerned, they produced Qaisar Samdani AVP and Credit Incharge SBL, Clifton Branch Karachi as D4-DW1 as their witness and 13 documents were exhibited. Respondent No.6 CDC produced Muhammad Khurram Manager Legal Compliance CDC Karachi as D5-DW1 as their witness and 11 documents were exhibited in support of the sale of sukuk certificates in their favour which was essentially through the CDS and not a physical sale. They also relied on the verification process to show that they were bonafide purchasers of their sukuk certificates.
36. Essentially the dispute between the parties with reference to issues of fraud and forgery is whether the sale in favour of SES by NFC was a valid and legal sale or whether it was a sale based on fraud and forgery as NFC claims that Ex.P24 was not executed by Faiz Ali Bokhari as D1-DW2.
Subsequent to the sale in favour of SES, AIMC purchased sukuk certificates and thereafter the other Appellants before this Court also purchased sukuk certificates. Hence the dispute essentially in the interpleader suit was who is the lawful owner of the sukuk certificates that is whether NFC is still the owner of the 72 disputed sukuk certificates which it claims they never sold to SES or whether the Appellants are lawful owners of their sukuk certificates which they claim they bought in accordance with law with no knowledge of fraud and forgery. In this regard, we note that all parties produced documentary as well as oral evidence which had to be appreciated in its entirety in order to determine the issues set out by the trial court. We have examined the Impugned Judgment with reference to Issues Nos.2 and 14 and find that the trial court failed to appreciate the evidence in its entirety. In fact we note that for the purposes of determining fraud and forgery, the trial court failed to discuss the evidence produced by Wapda in particular as well as the evidence produced by NFC and the subsequent purchasers. The Impugned Judgment has not discussed Ex.P24, Ex.P25, Ex.P26 and Ex.P29 in its entirety and has not discussed the consequence of the verification process undertaken by the Wapda Bonds Cell or the issuance of 6 sukuk certificates against 72 sukuk certificates originally issued. We find that the evidence on this issue was relevant because the entire case of NFC is that Ex.P24 was never executed by Faiz All Bokhari, Dl-DW2. He made a categoric statement that he did not execute Ex.P24. However, this statement had to be seen in conjunction with the evidence on record. The Appellants have relied on the Register of Certificates Holders (Ex.D2-2) maintained by Wapda Bonds Cell to establish the transfer in favour of SES and from SES to AIMC. They also rely on their internal noting (Ex.D2-1) to establish the issuance of 6 new sukuk certificates to SES. We have examined Ex. D2-1 and find that it discusses the procedure to be followed for the transfer of sukuk certificates in favour of SES in great detail. This is relevant as it shows the procedure adopted by Wapda Bonds Cell to transfer the sukuk certificates from NFC to SES and the re-issuance of 6 new certificates to SES. We have also examined Ex.D2-2 which is the Register of Certificate Holders maintained by Wapda Bonds Cell. We note that there is an entry in favour of NFC in the Register of Certificates Holders on 5.1.2006 as owners of certificates having Serial Nos.012029 to 012328 and thereafter another entry showing transfer of sukuk certificates in favour of SES on 17.2.2009 being Serial No.512029 to 512100 and thereafter re-transfer of 6 sukuk certificates in favour of SES on 18.2.2009 from Serial Nos.012390 to 012395. The entries in the Register of Certificates Holders maintained by Respondents Nos.1 and 2 is not denied nor is its genuineness denied by PW-1. NFC has also not questioned its genuineness nor have they stated that the entries are fraudulent. Furthermore the subsequent transfer in favour of AIMC is also reflected in Ex.D2-2 and the payments made to SES are shown in Ex.D2-18. These transfers and payments were verified and accepted by Wapda Bonds Cell for whom Ex. D2-2 represents the names of title holders of the sukuk certificates. Hence for the purposes of title and ownership, Respondents Nos.1 and 2 have relied on Ex.D2-2 as it mentions each certificate holder as owner of the sukuk certificates. These entries are neither denied nor questioned by Respondents Nos.1 and 2 or even by NFC. In fact PW-1 states that Wapda was neither negligent nor did it play fraud in these transfers: In his evidence PW-1 categorically states that Wapda did not commit fraud. This is significant and relevant because for the purposes of the trial court and the evidence before it, the transfer in favour of SES has not been denied by Respondents Nos.1 and 2 nor have they stated that the transfers to SES and from SES were fraudulent. In fact PW-1 has relied on the internal notings and Register of Certificate Holders as well as the numerous correspondence with SES to establish that a valid transfer of physical sukuk certificates was made in favour of SES.
37. One of the most relevant set of facts in this case is that initially 300 sukuk certificates were physically transferred in favour of NFC, which is evident from the entries in the Register of Certificate Holders (Ex.D2-2). Thereafter, 72 physical certificates were transferred to SES, which is again evident from Ex.D2-2. For the purposes of the physical transfer, the witness PW-1 admits to the process undertaken for the transfer and the verification of the transfer. This is all detailed in the internal notings of Respondents Nos.1 and 2. This verification process of the 72 sukuk certificates took place several times with reference to SES, that is when it bought the 72 certificates from NFC and again when it substituted 72 certificates with 6 certificates and again when AIMC purchased 6 sukuk certificates from SES. In fact independent of the Wapda Bonds Cell verifications of the transfers made by SES, the broker, Global Securities and the CDC also confirmed the transfers after verifying the same which goes to the fact that SES bought and sold sukuk certificates. Ex.D2-13 being correspondence of Global Securities, the broker with MIIF, the CDC Trustee, confirming the purchase by AIMC of sukuk certificates from SES. Ex.P27 is a letter issued by SES to Respondents Nos.1 and 2 dated 6.3.2009 which encloses the 6 certificates and transfer deeds sold to AIMC. The transfer deeds (Exs.P26/1 to P.26/12) reflect the sale in favour of AIMC from SES, which is also reflected in the internal noting by Wapda and the Register of Certificate Holders (Ex.D2-1 and Ex.D2- 2). The witness PW-1 vide letter dated 9.3.2009, Ex.P28 confirmed the sale in favour of AIMC from SES, after due verification. The witness confirmed that he issued Ex.P28 and that he verified the transaction. Hence PW-1 does not deny corresponding with SES and there is no evidence to assert or show that the correspondence with SES is fake or fraudulent. Further PW-1 states that all required approvals were taken to verify and confirm the transfers and that they were duly carried out.
Accordingly he does not allege fraud in his evidence. Furthermore independent of Respondents Nos.1 and 2 and NFC, the CDC Trustee MIIF also verified the sale in favour of AIMC from SES as did the broker Global Securities vide Ex.D2-15 which finds mention in Respondents Nos.1 and 2 records, (Ex.D2-1) and which is admitted by PW-1. Finally, the 6 sukuk certificates were transferred to the CDS on 17.3.2009 (Ex.P32 and Ex.D2-19), which fact is also not denied. Payments made by AIMC to SES were also produced in evidence, Ex.D2-18 and confirmed by Syed Awais Wasti Company Secretary/Chief Finance Officer AIMC as D2-DW1 and Muhammad Khurram Manager Legal Compliance CDC Karachi as D5-DW1. These payments are not denied or contested by PW-1 or by D1-DW1, D1 DW2. So Respondents Nos.1 and 2 have repeatedly verified the transfer to and from SES as have Global Securities and CDC and the issue of fraud or it being a fake entity is not in the evidence of Respondents Nos.1 and 2 and NFC.
38. On the issue of SES being a fake entity, the trial court concluded that SES is a fake entity yet interestingly there is no evidence on this issue nor was any document or witness relied on. The trial court has relied on the decision of Special Judge Central, Lahore (Ex.D1-32) and a forensic report (Ex.D1-22) to conclude that SES was a fake entity. We note that on this issue, there was no independent evidence before the trial court to conclude that SES was a fake entity. In this regard, it appears that the trial court accepted Respondents Nos.1 and 2 and NFC's version based on Ex.D1-22 and Ex.D1-32 without due appraisal of the evidence before it. What is also important to note is that SES was neither a party in the suit nor was SES called as a witness by any of the parties. So without any evidence from SES or against SES, the trial court concluded that it was a fake entity.
Furthermore there is nothing in Faiz Ali Bokhari's D1-DW2 evidence to suggest that SES was a fake entity. He merely denies the execution of Ex.P24, however he does not state that SES is a fake entity.
We find that NFC did not provide any evidence with reference to SES to establish that it did not exist and that it was a fake entity. So far as PW-1 is concerned, he denies any knowledge of SES being a fake entity. In this regard, neither Respondents Nos.1 and 2 nor NFC were able to explain Ex.D2-1 and Ex.D2-2 with reference to entries showing payments received by SES from AIMC nor did they adduce evidence to establish SES as a fake entity nor did they rely on Ex.D1-32 to endorse the decision of Special Judge (Central) Lahore.
39. The issue of fraud and forgery came to the knowledge of Respondents Nos.1 and 2 on 24.4.2009 (Ex.P33) when NFC wrote to Respondents Nos. 1 and 2 that they had not been paid the full amount of the 7th ijara tentals payment as per the value of the 300 sukuk certificates. They again wrote on 25.4.2009 (Ex.P34) that they did not sell any certificates to SES. Respondents Nos.1 and 2 informed NFC of the sale in favour of SES vide letter dated 27.4.2009 (Ex.P35) and NFC claimed that it never sold any certificate to SES vile letter dated 28.4.2009 (Ex.D1-7). Thereafter Respondents Nos.1 and 2 formed a fact finding committee on 29.4.2009 which issued its report on 8.5.2009 (Ex.D1-11). It is in this Report that discrepancies are pointed out with the procedure followed for the sale of transfer of the sukuk certificates by Wapda Bonds Cell.
40. As per the face finding report dated 8.5.2009 (Ex.D1-11), the employees of Wapda Bonds Cell were questioned regarding 72 sukuk certificates, its transfer to SES and also the issuance of 6 new sukuk certificates to SES. A comparison of the original certificates retained by NFC with the ones stated to have been transferred by NFC to SES was made, which revealed some discrepancies.
Importantly, the fact finding committee concluded that employees of the Wapda. Bonds Cell were negligent and did not comply with its contractual duties. Further that a forensic analysis should be carried out of the 72 sukuk certificates and related documents on the basis of which the sale by NFC to SES was made. On 5.8.2009 FIR No.28/2009 was registered by the FIA (Ex.D2-3) under Sections 409, 419, 420, 467, 468, 471, 109 of the Pakistan Penal Code, 1908 ("PPC") read with Section 5(2)47 of the Prevention of Corruption Act, 1947 ("PCA") for investigating the fraudulent transfer to SES on a complaint by Anwar ul Haq, General Manager Finance, Wapda. Interim challan was submitted in the FIR Ex .D1-26 and Ex. D1-27, on 8.3.2010 (Ex . D1-25) and supplementary challan on 3.12.2010 (Ex.D1-28). The allegation in the FIR was that 72 sukuks were prepared and used fraudulently causing loss to Wapda. It was not Wapda's case that SES was a fake entity. This matter was brought up during the criminal investigation while finding that Mohammad Fajid, the account holder for SES, was allegedly. impersonated for opening SES accounts, but we note that even during the investigation by the FIA, he was never called as a witness nor was any investigation made on this issue of impersonation. Furthermore the Special Judge Central Lahore relied on the use of a PCO fax machine to establish that SES was a fake entity. Most importantly the investigation primarily involved Wapda Bonds Cell employees and Faiz Ali Bokhari who was also questioned.
However Ex.P24 and Ex.D2-2 were not considered. Even the correspondence with SES in its entirety was not considered. Ultimately, Special Judge Central, Lahore rendered his judgment (Ex.D1-32) and convicted some employees of Wapda Bonds Cell without actually giving any finding on the fraud. The Impugned Judgment has placed reliance on the criminal court's judgment as well as on the forensic report obtained with reference to the 72 sukuk certificates (Ex.D1-22) which finds that 72 sukuk certificates issued in favour of SES are fake certificates. What emerges from the Special Judge Central's judgment (Ex.D1-32) is that some officers of the Wapda Bonds Cell have been held responsible for forging and fabricating 72 sukuk certificates, which were statedly sold by NFC to SES.
However there is no evidence on the forgery of Ex.P24. We also find that the offences under Sections 409, 419, 420, 468 and 471 of Pakistan Penal Code, 1908 were investigated by the FIA which are for offences committed by public servants being employees of Wapda, depriving it of a huge sum of money. So the judgment of Special Judge Central, Lahore essentially decides that Wapda was defrauded by some of its employees.
41. In a civil case where fraud is alleged, the general rule is that the person who pleads fraud must establish fraud. So the burden is on the person alleging fraud. The requirement of law is that the alleged fraud must be detailed, such that the person alleging fraud must set out all the details of the fraud that was committed with clarity and certainty. This is because the allegation of fraud is a serious allegation with significant consequences. Fraud is a term with wide connotations and cannot be construed within a strict definition. It has to be appreciated within the set of facts it is alleged in and it has to be asserted through evidence. Although fraud in general is a false representation or concealment of material facts made to induce a person to act upon it, the injured party has to provide the details of the fraud, has to show how they were deceived and the loss they have suffered so that its context can be assessed and the loss if any ascertained. In Taj Muhammad Khan through L.Rs and another v. Mst. Munawar Jan and 2 others (2009 SCMR 598), the august Supreme Court of Pakistan held that the ingredients of fraud have to be narrated and stated by the person alleging it. In Ghulam Shabbir v. Mst. Nur Begum and others (PLD 1977 SC 75) the august Supreme Court of Pakistan held that the person alleging fraud has to provide details of the fraud and has to provide clear and cogent evidence of the fraud. In Mst. Sahib Noor v. Haji Ahmad (1988 SCMR 1703) the august Supreme Court of Pakistan has held that fraud must be described fully in the pleadings and the person alleging fraud must establish that a fake representation was made, that the representation was untrue and that the injured party acted on the untrue representation. Order VI, Rule 4, C.P.C. provides that in all cases in which fraud has been alleged, particulars have to be stated in the pleading. In a case of fraud, the pleadings have to clearly spell out a case of fraud. Further we find that when a deed is fraudulent it is a void transaction but if it is a voidable transaction then the court has to decide the matter accordingly.
We also find that this case required the court to ascertain first and foremost whether fraud was proved from the evidence and then whether the fraud rendered the transaction void or voidable, which was fundamental to this case.
42. In this context, the standard of proof in civil cases is on the balance of probabilities that is what fact is more likely to have happened based on the evidence. This means every fact becomes relevant, its falsity is relevant, the deceitor's intent is relevant and the injury is relevant. The court will first ascertain the facts and once the facts are established decide whether they amount to fraud.
Reliance is placed on Abdul Wahid v. Mst. Zamrut (PLD 1967 SC 153). In Zaheer Ahmed Qureshi through Legal Heirs v. Syed Iftikhar Hussain Shah (1999 SCMR 2605) the august Supreme Court of Pakistan has held that both parties lead their evidence in respect of an issue, then the issue is to be decided on the basis of the evidence produced and placing onus to produce on one or the other party looses significance as the issue has to be decided on the preponderance of evidence. In Zakaullah Khan v. Muhammad Aslam and another (1991 SCMR 2126) the august Supreme Court of Pakistan has held as follows: The circumstances of each case must determine whether a prudent man ought to act upon the supposition that the facts exist from which a liability is to be inferred. What circumstances will constitute proof can never be the subject of a general definition. But one thing is clear that in Civil cases what is required or considered sufficient is preponderance of probability, while, in Criminal cases, owing to the serious consequences of an erroneous condemnation both to the accused and the society, the persuasion of guilt must amount to such a moral certainty as convinces the minds of the tribunal, as reasonable men, beyond all reasonable doubt, Parket, B. in R. v. Sterne cited in "Best on Evidence", 11th Edition, page 34, In the Queen v. Madhub Chander Giril (1873)/1 W.R.Cr.13)
The august Supreme Court of Pakistan further held that: In ordinary Civil cases, a Judge of fact must find for the party in whose favour there is a preponderance of proof, although the evidence be not entirely free from doubt. In Criminal cases, no weight of preponderant evidence is sufficient, short of that which excludes all reasonable doubt.
The party accused is entitled to the benefit of the legal presumption in favour of innocence, and in doubtful cases that may suffice to turn the scale in his favour.
Therefore as per the dicta of the august Supreme Court of Pakistan it is mandatory for the court in a civil trial to lqok at the entire evidence and decide the case on the basis of the evidence before it.
Hence the overall appreciation of evidence is relevant and the burden of proof looses significance as that is relevant only to set out who is to adduce evidence. Also relevant is that the civil courts need to determine what facts are `proved' or 'disproved' because it is on the basis of the facts that a case of fraud is to be established. This has been highlighted in Mst. Bakht Bibi v. Muhammad Aslam Khan and others (2016 LD1411) is the instant case, the trial court neglected to ascertain what 'facts are proved and whether on the basis of the proven facts, a case of fraud is made out.
43. The Qanun-e-Shahadat Order, 1984 provides for the rules of evidence on the basis of which the' relevancy of facts, of proof, production and effect of evidence is made out. Essentially the person asserting a fact has to prove that fact, and a fact is proved when a court either believes it to exist or considers its existence to be probable, such that a prudent man ought to believe its existence.
The balance of probabilities in civil cases gives the court the ability to determine whether a fact has occurred' or is likely to have occurred. Hence the trial court tries to ascertain the factual truth from the evidence before it in its entirety. This is why the august Supreme Court of Pakistan has held that placing burden on one or the other party looses significance as the issue has to be decided on the preponderance of evidence. In a recent judgment, Messrs Sazco (Pvt.) Ltd. v.
Askari Commercial Bank Limited (2021 SCMR 558), the august Supreme Court of Pakistan has held that fraud requires strict proof and the onus to prove fraud remains on the asserter who must assert fraud through clear and cogent evidence. This means that the evidence adduced has to not only be proven but must also be relevant. Relevance has the tendency to make a fact more or less probable, for the purposes of evidence, otherwise the evidence cannot be fully appreciated. We find that the basic rules of evidence and appreciation of the same have not been followed by the trial court especially since this case relies a great deal on documentary and oral evidence which had to be considered in its entirety.
44. In this regard, the Respondent NFC has relied a great deal on cases to establish that it had satisfied the burden to prove fraud by denying the execution of Ex. P24, hence they argue that the burden shifted on to AIMC who was a beneficiary of the transactions in dispute. Even the Impugned Judgment has repeatedly held that the burden shifted on AIMC and the other subsequent buyers to establish the genuineness of Ex.P24 and the sale of the 72 sukuk certificates. NFC has relied on a host of cases wherein it has been held that it is the duty and obligation of the beneficiary of a transaction or document to prove the same. We have examined these cases and, find that they are not relevant for the dispute at hand. The cases relied on deal with obligations inter se parties based on an agreement to sell (2015 SCMR 1), mutation (2010 SCMR 1370), (2010 SCMR 1358), sale deed (2010 SCMR 1351), gift (2005 SCMR 236). In these cases the beneficiary of the transaction was asked to establish the genuineness of the transaction being cases where the plaintiff asserted fraud and based on the plaintiff's evidence, the burden shifted to the beneficiary. In the cases before us, an interpleader suit was filed by Respondents Nos.1 and 2 to ascertain who is the owner of the 72 disputed sukuks. Respondents Nos.1 and 2 do not allege fraud in the suit. They claim they came to know of the forged letter when NFC informed them vide Ex.P33. NFC claims that it did not execute Ex.P24, hence it has discharged its burden to allege fraud and that AIMC had to establish the genuineness, of Ex.P24 and the sale transactions in its favour. This assertion is incorrect as there is no set of facts or documents on the basis of which NFC has proved its assertion that Ex.P24 was not executed by D1-DW2. We note that the signatures of D1-DW2 were not compared with other signatures of D1-DVV2 on letters produced in evidence nor was an expert consulted or any forensic made of Ex.P24 to establish that it was a forged document. Even the trial court of its own accord did not attempt to compare the letter head or contents or signatures of Ex.P24 with admitted documents of D1-DW2. In this regard, the cases relied upon by NFC as S.M. Zahir v. Pirzada Syed Fazal Ali Ajmeri (1974 SCMR 490), Ghulam Rasool and others v. Sardar-ul-Hassan and another (1997 SCMR 976) and Muslim Commercial Bank Ltd. through General Attorney and another v.
Amir Hussain and another (1996 SCMR 464) do not support their contention, as in these cases the court made a comparison itself from admitted documents before concluding on fraud. AIMC established the transactions in its favour which issues have been decided in its favour (Issues Nos.14-E, 14-F and 14-G). Hence AIMC established its case of being the owner of 72 sukuk certificates. Furthermore, in these cases the relationship between the parties is tripartite, that is the buyer, the seller and Respondents Nos.1 and 2 who have a contractual obligation to the certificate holders on the basis of Ijara Agreement (Ex.P14) and Declaration of Trust (Ex.P16). Therefore the contractual obligations had to be considered. Furthermore AIMC and the other Appellants are subsequent purchasers and if at all a case of fraud was asserted, their plea of bona fide purchaser with no knowledge of the fraud had to be examined based on the evidence adduced. Hence the reliance on the cases by NFC and Respondents Nos.1 and 2 do not support their case.
45. In this context, Respondents Nos.1 and 2 assert fraud came to their knowledge from letter dated 24.4.2009 (Ex.P33) when NFC wrote to Respondents Nos. 1 and 2 with reference to the 7th ijara payment and it not being paid as per the required value of their sukuk certificates. Respondents Nos. 1 and 2's only witness PW-1 does not give any particulars of the fraud or deceit rather exhibits all the relevant letters, transfer deeds, registers etc. to establish the procedure followed by Wapda Bonds Cell for the transfers made in favour of SES and the subsequent buyers'. PW-1 does not rely on Ex.D1-32 to assert a case of fraud. In fact he affirms that Respondents Nos.1 and 2 took all necessary care and precaution while verifying the transfer of the sukuk certificates from NFC to SES, from SES to AIMC and subsequent thereof. During examination in chief PW-1 deposed that: He also deposed during his cross-examination: Therefore we find that Respondents Nos.1 and 2 failed to establish a case of fraud or forgery. So far as NFC is concerned, they relied upon the forensic report of the 72 sukuk certificates (Ex.D1-22) which cannot be relied upon because the author of the report was never examined in court. For the purposes of the trial court, the author of the report had to appear in court as a witness and had to be subjected to cross-examination. Without this, the evidence is inadmissible as this fact has not been proven. Reliance is placed on PLD 2014 SC 696 (supra) and 1974 SCMR 411 (supra). So far as the judgment in the criminal case (Ex.D1-32), this also could not form the basis of a decision for the trial court, especially since the Impugned Judgment failed to examine the total evidence before it.
Reliance is placed on PLD 1963 SC 157 (supra) and 1995 SCM R 500 (supra) wherein the august Supreme Court of Pakistan has held that a court has to judge upon the facts in its case, established by evidence and cannot rely on the findings in some other case. The august Supreme Court of Pakistan also held that the findings in a criminal case are not binding on a civil court because the findings in a criminal case are not relevant for a civil dispute which has to be decided on the preponderance of probabilities. Reliance is placed on Mst. Mehrun Nisa v. Zainul Abidin and 5 others (1995 SCMR 1139). Once again the emphasis in these cited cases is on the balance of probabilities and appreciation of the entire evidence before the court. Therefore we find that reliance on the criminal judgment in totality is misconceived and against the law. The only other aspect of NFC's case of fraud is that they have in their possession the original sukuks Ex.D1-23/1 to Ex.D1-23/72. However these were never examined in evidence nor were Ex.P25/1 to Ex.P25/72 or Ex.P26/1 to Ex.P26/6 examined for being fraudulent or fabricated. Hence to this extent their entire case is that they have in their possession Ex.D1-23/1 to Ex.D1-23/72 which they claim were the original sukuk certificates issued, by Wapda Bonds Cell in their favour yet they did not attempt to have these examined during evidence to compare them with the so called fraudulent sukuk certificates.
46. We have examined the record and the evidence and find that for the purposes of establishing clearly that fraud and forgery took place NFC had to establish its case of forgery of Ex.P24 and also had to establish its case that the certificates issued to SES were not the original certificates.
Respondents Nos.1 and 2 have placed heavy reliance on the statement of PW-1, however, he provides no evidence or details of the fraud and is not able to explain how fraud or the forgery was committed by the employees of Wapda Bonds, Cell. In fact he does not depose on the issue of fraud as he claims that the sale to SES by NFC was genuine and if at all there is fraud it was against Respondents Nos.1 and 2 and not by them. The emphasis placed on Ex.P24 being the letter issued by Faiz Ali Bokhari (D1-DW2) dated 12.2.2009 instructing Wapda Bonds Cell to transfer 72 sukuk certificates in favour of SES was denied by D1- DW2 yet there was no forensic examination of the said letter and there was no comparison of the signatures by a handwriting expert. The author of the letter Faiz Ali Bokhari (DI-DW2) merely stated that he did not write the said letter and did not sign the same but he gave no other evidence to establish that Ex.P24 was a forged document.
Interestingly while Respondents Nos.1 and 2 formed an internal fact finding committee to ascertain who amongst its employees were responsible for carrying out the forgery and the fraud yet NFC never conducted any internal inquiry with reference to Ex.P24 nor did they submit any independent evidence to establish that the letter Ex.P24 was a forged and fabricated letter. This fact is admitted by their witness D1-DW1 and D1- DW2. We also note that Ex.P24 was not discussed in the judgment rendered by the Special Judge Central, Lahore nor was any finding given with reference to the signatures and its forgery as alleged by NFC. As already stated the evidence on the transfer deeds and the noting on its back side showing the transfer from NFC to SES and then from SES to AIMC is not denied by PW-1 (Ex.P25-1 to Ex.P25-72 and Ex.P26-1 to Ex.P26-6). The Register of Certificate Holders (Ex.D2-2) which testifies to the transfer taking place is not denied. NFC did not have its original 72 sukuk certificates examined in evidence by the trial court nor was any independent forensic report called,for or relied upon in the proceedings before the trial court with reference to the forged sukuk certificates being Ex.P25-1 to Ex.P25-72 or the subsequent 6 sukuks being Ex.P26/1 to Ex.P26/6. Hence there is no evidence in the trial court on the forgery and fraud of the sukuk certificates or any evidence to establish that the certificates issued to SES were fraudulently made and the ones in NFC's possession are genuine. Also NFC did not produce, any bank statement or account statement to show that at the relevant time, it never received any payment from SES. So if there was any fraud the trial court failed to aster in the beneficiary of the fraud and forgery.
Furthermore the Impugned Judgment has relied totally on the findings given in the forensic report (Ex.D1-22) issued with reference to the sukuk certificates which as we have already held it could not have. We find that since the transfer from NFC to SES was made through physical sukuk certificates, the evidence of Respondents Nos.1 and 2 was vital as they carried out the entire transaction and were responsible for the physical verification of the sukuk certificates. As they admit to the transaction and do not allege fraud, they cannot assert that a case of fraud has been established.
47. We have also examined the evidence of NFC through the D 1-DW1 and DI-DW2 as well as the documentary evidence with reference to the issue of fraud and forgery. Even if the trial court were to rely on the judgment of Special Judge Central, Lahore (Ex.D1-32) at best a case of criminal breach of trust of public servants and negligence is made out .against the employees of Wapda and the Sukuk Company. This means that even if the trial court were to give some consideration to Ex.D1-32, it had to balance the evidence produced by the Appellants, particularly with reference to the transfer of the sukuk certificates to the subsequent buyers and their plea of bona fide purchasers. Also the transfer into the CDS and the effect thereof should have been duly considered.
Most importantly, the transaction documents and the relationship of the parties under the transaction documents should have been considered. The Purchase Agreement (Ex.P12) shows that the Sukuk Company is the purchaser of turbines from Wapda who is the seller. Along with this Purchase Agreement, a Purchase Undertaking (Ex.P13) was issued by Wapda whereby it provided an irrevocable undertaking in respect of the turbines to the Sukuk Company. The Sukuk Company entered into an Ijara Agreement (Ex.P14) with Wapda and MCB as the delegatee. As per this Agreement, rental payments had to be paid by Wapda, semi-annually to the investor in the sukuks issued by the Sukuk Company pursuant to the Declaration of Trust (Ex.P16). The parties also executed an Agency Agreement (Ex.P15) with Jahangir Siddiqui and Company Limited as the reference agent, where Wapda Bonds Cell is the Registrar, Transfer Agent and Replacement Agent for the sukuk certificates. As per this agreement, Wapda Bonds Cell, which is not a separate entity but part of Respondent No.2, was appointed as the Registrar and Transfer Agent in respect of the ukuk certificates and ' as Replacement Agent of the certificates. The duty of the Registrar that is Wapda Bonds Cell was to register all transfers, receive documents in relation to or effecting the title of any certificate and maintain prope record of the details of the documents and certificates, and prepare a list of certificate holders amongst others. As the Transfer Agent, Wapda Bonds Cell was required to implement the regulations set out in the Agreement for the transfer of certificates. The Agreement provided that Wapda Bonds Cell can make regulations for the purposes of the transfer of the sukuk certificates and that it can also issue replacement of the certificates and cancel certificates. As per the Agency Agreement, the owner of the certificate should be clearly reflected in the Register of Holders of Certificates. This document essentially sets out the rights of the certificate holders and the obligations cast upon the trustee with reference to the rights of the certificate holders. Admittedly,. Respondents No.1 and 2 did not issue any regulations until 9.5.2009 for transfer of the sukuk certificates, when Wapda issued the SOP's for transfer of the certificates through its notification dated 9.5.2009 (Ex.D2-9) which means that for the purposes of the disputed transfer from NFC to SES and for SES to AIMC, the relevant process for transfer is contained in the internal noting of Respondents Nos.1 and 2 Ex.D2-1 and reflected in Ex.D2-2. We therefore find that the transaction documents creates several obligations on the part of Respondents Nos.1 and 2 to maintain, verify and transfer the sukuk certificates and it offers certain guarantees and warranties to certificate holders. Significantly the name in the Register of Certificate Holders is the name of the owner of the sukuk certificates which document is not challenged or denied.
48. The other relevant factor which was not considered was the concept of trading through the CDC system. As per the record and the evidence before us the initial sale in favour of NFC was through physical sukuk certificates, the sale from NFC to SES was also on the basis of physical sukuk certificates, however the sale in favour of AIMC from SES was not only in the form of physical certificates but it was also registered on the CDS and subsequent thereof the sales were through the CDC. The Appellants provided evidence in respect to their contention that they had no knowledge of the fraud, were not party to the fraud as the sukuk certificates were purchased through the CDS in book entry form. Hence they argued that the effect and process had to be considered. We find that these facts and the evidence relied upon were also relevant because the issue of fraud is between Respondents Nos.1 and 2, NFC and SES. The Appellants are all subsequent purchasers who as per the evidence of Respondents Nos.1 and 2 and NFC were not involved in the fraud or forgery. Furthermore, for the purposes of .the transfer in favour of the Appellants, the CD Act and the Central Depository Company of Pakistan Limited Regulations ("Regulations") had to be taken into consideration. PW-1 recognizes this fact and acknowledges it in his evidence that once the trade began through the CDC, their rules and regulations were applicable and Wapda's SOPs were no longer relevant. This means that the sale in favour of AIMC and the subsequent buyers, being the Appellants before this Court had to be seen in the context of the CD Act and the Regulations and their rights had to be determined accordingly.
49. What transpires from the above is as follows:
(a) Wapda did not prove fraud or forgery with reference to the sale in favour of SES by NFC;
(b) NFC did not prove fraud or forgery with reference to the sale in favour of SES by NFC;
(c) NFC did not prove that Ex.P24 is a forged document nor did it prove that D1-DW2, Faiz Ali Bokhari did not execute Ex.P24;
(d) The record shows the transfers in favour of SES and by SES were verified and confirmed on the basis of Ex.D2-1 and Ex. D2-2 and the evidence of PW-1;
(e) Consequently Issues Nos.2 and 14 are decided such that no fraud or forgery took place with respect to the transfer of 72 sukuk certificates in favour of SES and therefore the subsequent transfers were not vitiated.
Title
50. Issues related to title that is who is the lawful owner of the disputed sukuk certificates have been decided through Issues Nos.3, 8, 13, 14-A and 14-E, 14F and 14G. Amongst these the relevant issues are Issue No.3, 13 and 14-A which are with reference to the title of the Appellants and the title of NFC. The burden to prove Issue No.13 was on NFC. The Impugned Judgment concluded that since the original 72 sukuk certificates were produced in evidence as Ex.D1-23/1 to Ex.D1-23 / 72 and since the sukuk certificates surrendered by SES being Ex.P25/1 to Ex.P25/72 are forged and fraudulent, consequently no valid transfer was made in favour of the Appellants, hence NFC is the true and lawful owner of the 72 sukuk certificates. With reference to Issue No.3, the burden was placed on the Appellants and the Impugned Judgment concluded that since the 72 sukuk certificates (Ex.P25/1 to Ex.P25/72) were transferred in favour of SES fraudulently, hence the transferees stepped into the shoes of SES and do not have valid title in their favour. The Impugned Judgment concluded that the issuance of 6 new sukuk certificates (Ex.P26/1 to Ex.P26/6) in substitution of the 72 sukuk certificates does not create a new debt, hence it cannot be said that the Appellants are the owners of any sukuk certificate. Issue No.14-A was consequently decided against the Appellants and in favour of NFC.
51. The Impugned Judgment has relied upon its finding on Issues Nos.2 and 14 with reference to fraud while deciding in favour of NFC but again it has not considered the evidence of the Appellants or the evidence produced by Respondents Nos.1 and 2. In this regard, PW-1 has not denied the sale in favour of SES by NFC and the sale in favour of AIMC. We have already given details of the evidence in favour of the transfer where reliance has been placed on Ex.D2-1, the internal noting of Wapda Bonds Cell and Ex.D2-2 being the Register of Certificate Holders. We have also relied upon the repeated verifications made by Wapda Bonds Cell confirming the transfers in favour of SES (Ex.P25 and Ex.P29). F W-1 also does not deny that he issued letter dated 20.2.2009 (Ex.P29) for issuance of 6 sukuk certificates against 72 sukuk Certificates originally issued to SES.
The 72 sukuk certificates were presented by SES to Wapda Bond Cell (Ex.P25/1 to Ex.P25/72) and Wapda Bonds Cell issued 6 new physical certificates valuing Rs.180,000,000 (Ex.P26/1 to Ex.P26/6) in place of 72 sukuk certificates. This transfer is duly noted in Ex.D2-1 and registered in Ex.D2-2 and accepted by PW-1. From the evidence we note that it is an admitted position that at the time of issuing 6 new sukuk certificates, Wapda Bonds Cell carried out its verifications and verified the transfer in favour of SES. The Impugned Judgment in Issue No.11 held this exchange to be part of the same debt, which is not questioned by the Appellants before us. SES then sold its 6 sukuk certificates to AIMC which is evident in letter dated 4.3.2009 (Ex.P26) by AIMC to the Sukuk Company intimating the purchase of 6 sukuk certificates from SES. This sale was carried out by Global Securities, the broker of AIMC who wrote to the CDC Trustee, MIIF and confirmed the purchase in favour of SES (Ex.D2-13 and Ex.D2-15). Thereafter AIMC issued letter dated 5.3.2009 to CDC Trustee, MIIF issuing instructions for the purchase of 6 sukuk certificates (Ex.D2-14).
Subsequently letter dated 13.3.2009 from SES to CDC regarding purchase of 6 sukuk certificates by AIMC (Ex.D2-16) and thereafter letter dated 13.3.2009 (Ex.D2-17) confirming the purchase. In this regard, we note that this evidence has not been denied or questioned by NFC. In fact the correspondence issued by SES has also not been challenged or questioned for being fraudulent or by a fake entity. The payment made by AIMC to SES was produced-in evidence as Ex.D2-18 which shows payment of Rs.190,792,800/- on 16.3.2009 and entries in favour of AIMC in the Register of Certificate Holders in place of NFC. This fact is verified and confirmed by PW-1 confirming the same through his evidence: This sale in favour of AIMC of 6 sukuk certificates was then transferred to the CDS. Again PW-1 verifies and testifies to this fact in his evidence as does D2-DW1. In continuation of this transaction, ijara payments were made to AIMC (Ex.D2-20) which was also confirmed by PW1 in his evidence.
D2-DW1, the witness of AIMC also testifies to the facts of verification, payment and' transfer on the CDS. He suggests no knowledge of the fraud and states AIMC to be the owner of the 6 sukuk certificates. In this context, Issue No.14-E was framed with reference to the confirmation to Global Securities of the transfer of 6 sukuk certificates in the name of AIMC, which the court concluded in favour of AIMC holding that this transfer did take place. Issue No.14-F was framed regarding 6 transfer deeds pertaining to 72 sukuk certificates verifying and confirming AIMC as the owner of the sukuks, which the court decided in favour of AIMC. Furthermore Issue No.14-G was framed pertaining to the verification of transfer deeds and that six physical certificate replacing 72 sukuk certificates be converted into scripless form and be transferred in the CDC account. We note that this issue was also decided in favour of AIMC, based on the evidence. Hence for the purposes of the sale from SES to AIMC, we find that the same stands established from the record and decided in favour of AIMC.
52. AIMC sold its 6 sukuk certificates (representing 36000 units) to IFSL in the open market on 18.5.2009 and 23.6.2009. In this regard the evidence produced by AIMC was Ex.D2-22 to Ex.D2-27 which basically includes letter dated 18.5.2009 from AMIC to CDC Trustee-MIIF (Ex.D2-22) regarding the sale of sukuk through three transactions being 10000, 12000 and 14000 sukuk units, letter dated 18.5.2009 (Ex.D2-23) from IFSL to CDC Trustee, MIIF regarding the purchase of 10000 sukuks, letter dated 23.6.2009 (Ex.D2-24) from AIMC to CDC Trustee MIIF regarding sale of 12000 sukuks, letter dated 23.6.2009 (Ex.D2-25) from IFSL to CDC Trustee MIIF regarding purchase of 12000 sukuks and letter dated 23.6.2009 (Ex.D2-26) from AIMC to CDC Trustee, MIIF confirming sale of 14000 sukuks.
Sale consideration received by the CDC Trustee, MIIF in its accounts were exhibited as Ex.D2-28 and Ex.D2-29. This evidence stands proven and is neither denied nor questioned by Respondents Nos.1 and 2 and NFC. Presently AIMC is not the owner of any sukuk certificate.
53. Thereafter IFSL sold its 22000 sukuks in favour of MBL through the CDC which is evident from letter dated 23.6.2009 issued by IFSL to MBL for the confirmation of the sale of 12000 sukuks (Ex.D6- 5). The second transaction was through the CDC as is evident from letter dated 23.6.2019 from Al Falah Securities (Private) Limited to MBL (Ex.D6-6) confirming purchase of 10000 sukuks, MBL produced RTGs message dated 24.6.2009 (Ex.D6-7) for Rs.60,532,200/-, RTGs message dated 29.6.2009 (Ex.D6-9) for Rs.49,814,750/-. In this regard MBL made payment in the amount of Rs.110,346,950/- and thereafter entry of MBL in the Register of Certificate Holders was also made.
Furthermore entry was also made in the CDC record regarding MBL. Its witness D6- DW1 also testified in favour of the purchase having no knowledge of the fraud. He testified to the purchase, the verification and payment and asserts MBL to be the owner of the sukuk certificates. Presently MBL is the owner of 22000 sukuks.
54. Thereafter SBL being Appellant in RFA No.50966/2017 purchased 4000 sukuks and received ijara payments until the dispute arose. On 18.9.2009 UBL offered 4000 sukuks originally issued by the Sukuk Company having face value of Rs.20,000,000 to SBL which were available in electronic/scripting form on the CDC system. On 28.9.2009 SBL agreed to purchase the sukuks and subsequently the said sale was confirmed by the broker and the CDC on 29.9.2009. SBL has relied upon Ex.D4-1 being CDC's Activity Report dated 29.9.2009 showing ownership of SBL of the sukuk certificates on the CDC system as a purchaser from UBL Amin, letter dated 18.9.2009 (Ex.D4-4) from UBL Amin to SBL offering outright sale of the sukuk certificates, letter dated 28.9.2009 (Ex.D4-5) acceptance of letter dated 18.9.2009 issued by UBL Ameen communicating its acceptance of UBL Ameen's offer. Ex.D4-6 is Rts/X System Report demonstrating confirmation of transaction between SBL and the UBL Ameen regarding sukuk certificates. Its Witness D4- DW1 also testified in favour of the purchase in its favour having no knowledge of the fraud. He testifies to the purchase, verification and payment and asserts SBL to be the owner of the sukuk certificates. Presently SBL is the owner of 4000 sukuk certificates. Bank Islami was proceeded against ex-parte by the trial court vide order dated 21.5.2015. Presently Bank Islami claims ownership of 10000 sukuk certificates.
55. The evidence which goes to the root of the issue of title is Ex.D2-2, the Register of Certificate Holders. The Register of Certificate Holders records the Appellants as owners and is not denied by PW-1 or DW1-D1 or DW1-D2 being the witnesses of NFC. The Declaration of Trust (Ex.P16) executed by the Sukuk Company provides that a certificate holder is one whose name is in the Register, thereby certifying to the title. Hence the Register of Certificate Holders is the document of title, which is binding on all parties as it names the owner of the sukuk certificate. As per the terms and conditions of the certificates contained in the Declaration of Trust (Ex.P16), title to the certificates passes only by transferer in the CDS and registration in the Register of Certificate Holders kept by the issuer, the Sukuk Company. As per this document, the registered holder of a certificate is the absolute owner of the sukuk certificates for all purposes. Then there is the Agency Agreement (Ex.P15) wherein clause 19.4 also provides that each registered holder of a sukuk certificate is the absolute owner of the sukuk certificates. As the Register of Certificate Holders is admitted by PW-1 and each registered owner is also accepted by PW-1, this Register testifies to the title of the owners registered in it.
56. From the evidence adduced by PW-1, it is clear that PW-1 accepts all the transfers and states that every transfer is a valid transfer certifying their ownership. Furthermore PW-1 has not questioned any transfer of sukuk certificates or units nor alleged any to be fraudulent. In the same way neither has NFC denied the title in the Register of Certificate Holders. Therefore on the basis of the transaction documents for all intents and purposes since the Appellants are all registered in the Register of Certificate Holders they are the lawful owners of their sukuk certificates. Issues Nos.3, 8, 13, 13A and 14A are decided such that the Appellants are the lawful owners of their sukuk certificates entitled to all ijara payments and NFC is not the owner of the 72 sukuk certificates under dispute.
Section 11 of the CD Act and its effect
57. Connected with the issue of title, is the effect of the trade through the CDC and its impact on the rights of certificate holders. In this regard, CDC, Respondent No.6 has filed RFA No.67900/2017 limited with respect to Issue No.14-H which is whether there is a bar on the rectification of the Central Depository Register in light of section 11 of the CD Act. The Impugned Judgment concluded that Section 11 of the CD Act cannot override fraud, if it is established as it is settled law that fraud vitiates the most solemn of proceedings and any structure built on a foundation of fraud will fall like a house of cards. The court concluded on the basis of its findings on Issue No.14 that the sukuk certificates in favour of SES were fraudulent. Hence the entire transaction and subsequent transactions are fraudulent and Section 11 of the CD Act does not protect these transactions.
58. Learned counsel for Respondent CDC stated that the CDC is the Central Depository registered with the Securities and Exchange Commission of Pakistan ("SECP") which operates as a central depository system for securities under the CD Act and the Regulations framed thereunder. It is a Non-Banking Finance Company ("NBFC") which provides services as a trustee to various NBFCs including AIMC. Learned counsel argued that interpretation of Section 11 of the CD Act as given in the Impugned Judgment is contrary to the basic mandate of the law and that the trial court has not given due consideration to the effect of Section 11 of the CD Act and the role of the CDC.
Learned counsel argued that the CDC's role in the sale/purchase of the sukuk certificates was that of trustee and it has acted in accordance with the instructions of the AIMC as per clause 9 of the Trust Deed. Learned counsel further argued that transfers on the CDC are not in physical form but through a book entry system. He explained that CDS was established in accordance with the Regulations wherein accounts are opened and maintained with the Central Depository by the account holder so as to record the title of the account holder to book entry securities entered in their accounts. Transfers on the CDC are affected electronically and Sections 6 and 7 of the CD Act regulates the transfers under the book entry system and its effect. He further explained that Section 11 of the CD Act clearly provides that where an account holder does not give its consent to transfer of any book entry security from or to his account or where the name of account holder is fraudulently entered or omitted from the CDS, the aggrieved party can apply to the court for relief and can be awarded damages but they cannot order for the rectification of the Central Depository Register. Learned counsel explained that Central Depository Register is a computerized electronic register in respect of book entry securities which evidences the name of the holders of the securities. These names are protected by virtue of Section 11 of the CD Act, particularly in the case of fraud and therefore the finding that fraud vitiates the most solemn of proceedings with reference to the entry in the CDS is totally without basis. Respondent No.6, CDC produced one witness namely Muhammad Khurram son of Muhammad Zikar, Manager Legal Compliance CDC, Karachi as D5-DWI and relied on Ex.D5-1 to Ex.D5-9 and Mark D5-A and Mark D5-B to show the transactions made through the CDS and its correspondence with the Sukuk Company with reference to the rectification of the entries in the CDS as well as stoppage of transaction through the CDS.
59. We have examined the documents and the evidence deposed by D5-DW1 and find that the transfers on the CDS are regulated by the CD Act and the Regulations. Important to note is that the registration of book entry transfers on the CDS are not denied by PW-1 nor were they questioned by the witnesses of D 1-DW1 and D1-DW2. The initial transfers were in physical form from NFC to SES and from SES to AIMC. However, the physical certificates were converted into electronic scripless form and entered on the CDS in the account of the CDC trustee with reference to the transfer in favour of AIMC. As per the CD Act, the Central Depository Register is a computerized electronic register maintained by the Central Depository in respect of book entry securities. A transfer of the book entry security made under the CD Act is a valid and effective transfer of title of the securities represented by the book entry securities in terms of Section 6 of the CD Act. Section 11 of the CD Act reads as follows: Bar on rectification of central depository register. Notwithstanding anything contained in section 152 of the Companies Ordinance, 1984 (XLVII of 1984), if
(a) an account-holder or a sub-account holder did not consent to a transfer of any book-entry securities from, or to, his account or sub account, as the case may be; or
(b) The name of any account-holder or sub-account holder is fraudulently or without sufficient cause entered in, or omitted from, the central depository register, The aggrieved party may apply to the court for relief and the court may award damages to the aggrieved party but shall not order rectification of the central depository register.
The purpose of Section 11 of the CD Act is essentially to allow the smooth transfer of securities on a reliable and regulated system, such that it not only protects the transaction but also the title of the security holders. PW-1 admits to this fact and also admits that the transfer in favour of AIMC or the other Appellants and admits that subsequent sales were all verified from the CDC. Hence again Respondents Nos.1 and 2 have not denied the ownership rights of the Appellants as selected on the CDS: So far as the interpretation of Section 11 of the CD Act is concerned, the Impugned Judgment has relied upon the judgment of the august Supreme Court of Pakistan, in this case, in review being C.M.A. No.3443-L/2016 in C.R.P. Ni1/2016 in C.A No.104-L/2015 and C.R.P. 71-L/2016 in C.A 104-L/2015 dated 21.8.2017 where the august Supreme Court of Pakistan clarified its order in PLD 2017 SC 1 (supra) that the interpretation given is peculiar to the set of facts of this case and that the observation made shall not affect the authority of the CDC or the finality of its record. In this regard we find that the CDC, is the only securities depository in Pakistan, established for handling electronic transactions, in book entry form. This means that the system issues and transfers securities electronically where the physical existence of the security does not have any relevance.
Section 11 of the CD Act prohibits any rectification on the CD Register and requires the aggrieved party to approach the court for relief in the form of damages. However the CD Register cannot be ordered to be rectified. Clearly this means that even in a case of fraud at best, the aggrieved party can seek damages but cannot seek rectification of the CD Register. The sanctity attached to the register which depicts title is clearly protected under the CD Act and is fundamental to investor trust, for the CDC to function effectively. So far as the decision of the august Supreme Court of Pakistan is concerned in the review, the stance of the CDC was accepted. Hence we find that the matter in issue has also been decided by the august Supreme Court of Pakistan in favour of the CDC. Furthermore since we have relied on the CDS for the purposes of title and ownership, the findings in the Impugned Judgment on issue No.14-H are totally without basis. Therefore Issue No.14-H is decided in favour of CDC, such that statutory protection under Section 11 of the CD Act is available to the transactions on the CDC, even in cases of fraud.
The scope of an Interpleader Suit '
60. The objection raised by the counsel for Wapda is with respect to the scope of the interpleader suit. This objection has been partially discussed in issue No.4, 14-C being, If forgery or fraud took place, the plaintiffs are 'vicariously liable to the holders or Sukuk Certificate for such forgery or fraud committed by their employees, and the plaintiffs are liable to their negligence, for an amount equivalent to the value the Sukuk and the Ijara thereon? and Whether the plaintiffs have committed serious breach of the trust and contract and have failed to discharge their obligations, duties and responsibilities and are thus not entitled to obtain indemnity for themselves?.
61.. As per the contention of the counsel for Respondents Nos.1 and 2, the interpleader suit in terms of Section 88 of the CPC will decide the question of ownership of the disputed sukuk certificates and the alternative relief that the Appellants seek in the form of damages and compensation cannot be granted in the interpleader suit. On the other hand, the Appellants contend that the dispute has to be decided in its entirety before this Court in the RFAs as Respondents Nos.1 and 2 have to be made responsible for payments due to the Appellants in the form of the principal amount, ijara payments and mark up, the court not declare in their favour. They argue that the scope of interpleader suit has to be construed liberally so as to ensure that the Appellants are not deprived of their right to raise claims against Wapda and the Sukuk Company. Under the circumstances, it is necessary to examine the scope of an interpleader suit and whether the alternative prayer for damages and compensation for the Appellants can be adjudged in the interpleader suit. The Impugned Judgment finds that Wapda and the Sukuk Company are not liable for the transfer in favour of SES because they had no knowledge of the fraud and acted in good faith on the instructions of NFC. The Impugned Judgment finds Wapda and the Sukuk Company to be victim of fraud, hence not liable for breach of trust or negligence.
62. Section 88 read with Order XXXV of the C.P.C. provides for the interpleader suit in the following terms: Section 88, C.P.C.
Where inter-pleader suit may be. instituted.--Where two or more persons claim adversely to one another the same debt, sum of money or other property, movable or immovable, from another person, who claims no interest therein other than for charges or costs and who is ready to pay or deliver it to the rightful claimant, such other person may institute a suit of interpleader against all the claimants for the purpose of obtaining a decision as to the person to whom the payment or delivery shall be made and of obtaining indemnity for himself; Provided that where any suit is pending in which the rights of all parties can properly be decided, no such suit of interpleader shall be instituted.
Orde XXXV, C.P.C.
1. Plaint in intetpleader. suits. In every suit of interpleader the plaint shall, in addition to other statements necessary for plaints, state--(a) that the plaintiff claims no interest in the subject matter in dispute other than for charges or costs;
(b) the claims made by the defendants severally; and , (c)' that there is no collusion between the plaintiff and any of the defendants.
2. Payment of thing claimed into court.--where the thing claimed is capable of being paid into Court or placed in the custody of the court the plaintiff may be required to so pay or place it before he can be entitled to any order in the suit.
3. Procedure where defadant is suing plaintiff,-- where any of the defendants in an interpleader suit is actually suing the plaintiff in respect of the subject matter of such suit, the Court in which the suit against the plaintiff is pending shall, on being informed by the court in which the interpleader suit has been instituted, stay the proceedings as against him; and his costs in the suit so stayed may be provided for in such suit; but if and in so far as, they are not provided for in that suit, they may he added to his costs incurred in the interpleader suit.
4. Procedure at first hearing.-(I) At the first hearing the Court may-
(a) declare that the plaintiff is discharged from all liability to the defendants in respects of the thing claimed, award him his costs, and dismiss him from the suit; or b) if it thinks that justice or convenience so require, retain all parties until the final disposal of the suit.
(2) Where the Court finds that the admissions of the parties or other evidence enable it to do so, ft may adjudicate the title to the thing claimed.
(3) Where the admissions of the parties do not enable the Court so to adjudicate it may direct--
(a) that an issue or issues between the parties be framed and tried, and
(b) that any claimant be made a plaintiff in lieu of or in addition to the original plaintiff and shall proceed to try the suit in the ordinary manner.
5. Agent and tenants may not institute interpleader suit. Nothing in this Order shall be deemed to enable agents to sue their principals, or tenants to sue their landlords, for the purpose of compelling .hem to interplead with any persons other than persons making claim through such principals or the landlords.
63. As per this Section, where there are rival claimants with respect to the same debt against the same person, which person being the stakeholder claims no interest in the debt other than for charges or cost, who is ready to pay or deliver the debt to the rival claimants then such a person can institute a suit of interpleader against all claimants for the purposes of obtaining a decision as to whom the payment or delivery must be made to. The interpleader suit therefore is filed by a person to determine the rightful owner of a debt or property amongst rival claimants so as to avoid multiplicity of litigation, and conflicting judgments. It is a joinder device whereby all those who claim any interest in the same debt or property are joined in one action within which they may assert their claim against the debt or property. In terms of the requirements of Section 88, C.P.C., the rival claimants must all seek a claim, against the same debt, against the same person who claims no interest in the debt and is willing to make payment or delivery of the debt or property to the lawful claimant. So the party which is confronted with conflicting claims from rival claimants does not itself have any claim in the debt and may in good faith interplead various different claimants so as to ensure that conflicting rights or claims against the same property or debt are decisively determined in one case, such that to whom the debt has to be paid. It is imperative that the party faced with the rival claimants must not have any interest in the debt itself and must be willing to discharge its liability in totality towards those seeking the debt. Hence the purpose of the interpleader suit is not only to avoid multiple litigation but also to protect the stakeholder from conflicting claims to the same debt or property. The logic being that when all actions are joined together then all claims are adjudged with respect to the same debt or property in the same suit to determine who is entitled to the same debt or property. This avoids the expenditures and inconvenience of multiple cases which may also result in conflicting orders and adverse rulings by different courts.
64. In this regard, it is important to note that in the instant case, the interpleader suit was originally filed on 12.12.2009 but was rejected by the trial court vide order dated 21.5.2010 on the ground that interpleader suit is not maintainable. Wapda then filed an appeal being RFA No.779/2010 before the Lahore High Court, Lahore which concluded that the interpleader suit was maintainable vide its judgment dated 17.2.2015 in WAPDA Firs& Sukuk Company through Director/Company Secretary and another v. National Fertilizer Corporation of Pakistan (Pvt.) Ltd. through Chief Executive and 4 others (2015 CLC 934). Against this judgment, the Appellants went to the august Supreme Court of Pakistan in PLD 2017 SC 1 (supra) which also concluded that the interpleader suit was maintainable and a direction was given to the civil court to proceed with the interpleader suit on a day to day basis and decide the same as soon as possible. Against this judgment, a review was filed by the CDC with reference to their own grievance which was decided on 21.8.2017. The august Supreme Court of Pakistan in PLD 2017 SC 1 (supra) held that the law of interpleader may have its origins in equity but since it has been codified in the CPC, equity must yield to law. The august Supreme Court of Pakistan also held that there are certain condition precedents which are required to be satisfied before an interpleader suit can be filed. First there must be rival claimants, second it must be for the same debt, sum of money or property movable or immovable claimed by two or more claimants and third the person from whom the debt, sum of money etc. is being claimed must, have no interest in the debt or property. The august Supreme Court of Pakistan further held that interpleader suit brings all claimants of the disputed sukuk certificates before the civil court at Lahore and it is in this interpleader suit that it can be definitively decided as to who is the true and original owner of the disputed sukuk certificates. Hence the august Supreme Court of Pakistan concluded that the suit was lawful and all claimants should be joined and made party to the interpleader suit. Hence for the purposes of Issues Nos.6, 12 and 14-B the decision of the august Supreme Court of Pakistan prevailed that the interpleader suit is maintainable.
65. The question that arises is whether the alternative prayers of the Appellants can be granted in the interpleader suit. Although we have concluded that no case of fraud or forgery was made out, meaning that the Appellants are entitled to payment of ijara on their sukuk certificates. The issues pertaining to the scope of an interpleader has to be considered as it was part of the Impugned Judgment and was argued at great length before us. Furthermore it is significant to give finality to the dispute related to the transfer of 72 sukuk certificates. As has already been stated, the Appellants essentially each claim to be the owners of sukuk certificates either presently or at some point in time and therefore state that if the appeals are decided against them, they should be compensated by Wapda and the Sukuk Company in the form of ijara payments due and the principal amount paid for the sukuk certificates. Learned counsel for the Appellants argued that the Impugned Judgment found NFC to be the true and lawful owner of the disputed sukuk certificates yet failed to address the claims of the Appellants. They argue that the Appellants are entitled to be compensated for the amounts they have paid towards the purchase of the sukuk certificates and for the rentals they have been deprived of as they had no knowledge of the fraud played with reference to the sukuk certificates.
66. Historically an interpleader suit has been as equitable proceeding to determine adverse claims to the same debt or property. The concept of the interpleader suit is that rival claimants litigate against each other with reference to their conflicting claims over the same debt or property. The person facing the compelling claims will eventually discharge its liability towards the lawful claimant. The issue before the Court is whether the discharge of liability includes any other liability which arises out of allegations of negligence, breach of trust or fiduciary duties or on account of further liability, related to the capacity or duties of the person facing the claims. So to put it succinctly the issue is whether the Appellants can have their claim of compensation and damages against Wapda and Sukuk Company decided in the interpleader suit. In support of their contentions Respondents Nos.1 and 2 have relied upon Halsbury Laws of England, Vol.47 (2014)/2, para.89 which narrates as under: Subject to certain restrictions as to the nature of the claims made against the person desiring to interplead, the former Court of Chancery extended the remedy of interpleader to all cases to which in conscience it ought to extend, namely where a person not interested was exposed to conflicting claims, whether an action or suit had been begun by any claimant or only a claim made. Thus it applied to cases where two or more persons severally claimed delivery of the same property, payment of the same debt or rendering of the same duty, under different titles or in separate interests, from another person, and the latter did not know to which of the claimants he ought to deliver the property, pay the debt or render the duty.
Respondents Nos.1 and 2 have also relied upon the Law of Interpleader as Administered by the English, American, Canadian and. Australian. Courts (RJ MacLennan, 1901 pub. Carswell: Interpleader defined Interpleader is a legal proceeding devised to enable a person of whom the same debt, duty or thing, is claimed adversely by two or more parties, to compel them to litigate the right or title between themselves, and thereby to relieve him from the suits which have been or otherwise might be brought against him.
The object in interpleader.- The supreme object' of an interpleader proceeding is to protect a person when he stands in the situation of a stakeholder not knowing to whom to pay the money or to deliver the property, so that he shall not bevexed by contending claimants, whose contention is not in reality with him but with each other, when a recovery against him by one party will not be a protection against the claim of the other.
Principles of interpleader in equity.-The essential principles of interpleader in equity, may be summarized in a paragraph as follows: The jurisdiction of courts of equity to grant relief by interpleader is properly applied to cases where two or more persons, in some manner of privity, severally claim the same debt, duty or property, under different titles or in separate interests, from another person, who not claiming any title or interest therein himself, and not having incurred any independent liability to either of the claimants, and not knowing to which of them he ought of right to render the debt or duty claimed, or to deliver the property in his custody, and being unwilling to take the risk of deciding between the claimants, is either molested by an action or actions brought against him, or fears that he may suffer injury from the conflicting claims of the parties.
Consequently they argue that the scope of an interpleader suit is set out in Section 88, C.P.C. for obtaining a decision as to the person to whom the payment or delivery shall be made. Similarly, Order XXXV Rule 4(2), C.P.C. states that in an interpleader suit, the Court may adjudicate the title to the thing claimed. Hence they argue that the scope of an interpleader suit, as set out in Section 88 and Order XXXV, C.P.C. is clearly limited to determining which claimant is entitled to the thing claimed (in this case being the disputed sukuk certificates and the final encashment value) and the payments due (the Ijara rentals). They argue that there is no provision in the C.P.C. for expanding the scope of an interpleader suit to include damages, compensation or the claims of the Appellants. Respondents Nos.l and 2 have relied on the following judgments in support of their claim National Insurance Co. Ltd. v Antony T George and others (Ker HC 1989) which held as under: The only two purposes of an interpleader suit as S. 88 C.P.C. indicates are (1) Obtaining a decision as to the person to whom the payment or delivery shall be made and (2) Obtaining indemnity for the plaintiff. The purpose is not settlement of any disputed issues as between plaintiff and defendants or any of them though in some cases an ordinary trial with all the parties may become necessary as Order XXXV, Rule 4(2) and (3) indicate."
Jagdish Chandra and others v. Krishiza Mohan Aggrawal and others (All HC 2020) which held as under: To interplead means to litigate with each other to settle a point concerning a third party. Section 88 of the C.P.C. enacts that two or more persons claiming adversely to one another, the same debt, sum of money or other property, movable or immovable property from a person who does not claim any interest therein except the charges and costs incurred by him and is ready to pay or deliver the same to the rightful claimant may file an interpleader suit.
The object of the aforesaid is to get claims of rival defendants adjudicated. It is the process where the plaintiff calls upon the rival claimants to appear before the Court and get their respective claims decided. The decision of the Court in an interpleader suit afforJs indemnity to the plaintiff on the payment of money or delivery of property to the person whose claim has been upheld by the Court.
Respondents Nos.1 and 2 also relied on extracts [pp.11 RJ, MacLennan (1901) which opined as under: Same thing must be claimed.- The same thing, debt, or duty, must be claimed by both or all of the parties against whom the relief is demanded. When the subject in dispute has a bodily existence, no difficulty can arise on the ground of identity; but where the subject is a chose in action, which has no bodily existence, it becomes necessary to determine what constitutes identity. Where the claims made are of different amounts, they can never be identical, but where they are the same in amount, that circumstance goes far to determine their identity. The amount may not be sufficient of itself, for the amount may be the same, and the debts different. The claims must refer 'to the same subject matter, and not to collateral demands arising out of the right immediately in dispute interpleader was never intended to apply to different claims, merely because they originate out of one transaction; so interpleader was refused to a person who had had a house built for himself, and admitted a sum due, when the architect sued for the contract, price, the contractor employed by the architect and who had been dismissed claimed the price of his contract or damages for dismissal, while claims were also made by an assignee of the contractor, and by artisans. It has been decided in Mississippi, that it does not matter, that the claims are upon an open account for the value of the property, so long as each claimant claims the same amount. When one person claims the subject matter or its proceeds, from the applicant for relief, and a second claims unliquidated damages for conversion, or for breach of warranty, or for negligence in selling, or for not accepting a bill of exchange for the price, interpleader will not lie, be-cause the parties do not claim the same thing, the claim of the person seeking damages is against the applicant personally and not against the fund or property in his hands. Nor will interpleader lie, when both claimants claim damages against the person seeking to interplead.
[pp. 81 RJ, MacLennan (1901)] Evidence restricted to subject in dispute.-The evidence must, be limited to the property which was the subject of the interpleader. The contest proceeds between the claimants to the specific property involved, and as to that property alone. To permit outside issues, and matters affecting the claimants, but not connected with the subject of the action, would confound the action and lead to confusion.
[pp.281 RJ, MacLennan (1901)]
67. The Appellants have relied on American Jurisprudence, Second Edition, Volume 45 to show the shift in understanding interpleader suits and their scope such that the strict requirements of interpleader are no longer relevant, that is to say that a court can permit interpleader action even where the rival claimants assert the stakeholders liability, so long as there is a connection to the stakeholders capacity and the debt. Hence if the proceedings create a genuine issue of fact as to the liability of the claimants other than to title of the debt or property, the stakeholder seeking interpleader can be made liable in the interpleader suit. They have relied upon several cases of different jurisdiction to substantiate their point on the extent to which relief can be given in an interpleader suit. Reliance was placed on Dakota Livestock Company and. Farmers Union Marketing and Processing Association v. Gary Keim et. al (552 F.2d 1302 (1977), a decision rendered by the United States Court of Appeals, Eighth Circuit to urge the point that the party seeking compensation from a stakeholder in an interpleader action if not seeking to be paid out of the particular fund which was in dispute, the interpleader suit will not preclude the court from determining the claim of the parties. The court found that the claimants' assertion against the stakeholder was an independent liability with a nexus to the basic dispute, hence it can be decided in the interpleader suit. In this case the Dakota Livestock Company and Farmers Union Marketing and Processing Association appealed before the United States Court of Appeals, Eighth Circuit against the decision of the District Court dismissing their interpleader action against various creditors. The Appellate Court held that the rights of the claimants can be protected adequately within the framework of the interpleader action as provided under the statute.
In Odell Dick v. The First International Bank of Birmingham, a National Banking Association (334 So 2d 922 (1976) the Court of Civil Appeals of Alabama held that: independent liability can be looked into in an interpleader suit after settlement of the claimants' dispute to avoid multiple litigation where a genuine issue of fact is created as to the liability of the stakeholder. In this case the Bank filed an interpleader suit against certain depositors. One of the depositors alleged that the Bank was in breach of its duty to depositors, being an independent liability from the Banks claims, as the claimant Odell Dick. claimed the entire amount plus compensation. The court maintained the interpleader suit and remanded the unit for a proper determination in the suit by the trial court.
In Hebel v. Ebersole (543, F.2d 14 (1976) the court held that: independent stakeholder liability is asserted, however, need not vitiate a suit in interpleader as long as the necessary adversity between the interpleader parties exists in some fashion.
In Syed Shamshul Haque v. Sitram Singh (AIR 1978 Patna 151), the court in a case where money was due from harvested crops that the trial court had to try the suit in the ordinary manner and decide all relevant questions substantially in issue between the parties. The Court concluded that: the findings of this interpleader suit are to operate as res judicata. It is difficult to hold that it is open to the civil court, where such suits are filed to decide only the question of possession and to exercise a power similar to the power conferred on a Magistrate under the C.P.C. while disposing of a property which has been used for commission of an offence. In our view it was incumbent upon the trial court to decide the suit in an ordinary manner recording findings of the issues.
In Raja Bhagwali Baksh Singh v. The Civil Judge (AIR 1961 All. 559) the high court held that: under sub-rule (3) of Rule 4 of Order XXXV, which applies to interpleader suits, there is clear direction that once the suit has proceeded on trial, it shall be tried like any other suit in the ordinary manner. Order VI of the Code is applicable to suits and there is no reason why it should not be applicable to a suit which had its beginning as an interpleader suit.
If the pleadings placed by the several claimants to the property, the subject matter of the interpleader suit, should claim that there is some further property which is part of the estate but has somehow or the other being omitted from it and should also be brought within the suit, there is no reason why it cannot be done so. Neither Section 88, C.P.C. nor Order XXXV has required to the contrary. On the other hand, the later has enjoyed that the suit shall proceed in the ordinary manner.
68. In terms of the cases cited, it is clear that the person filing the suit being the stakeholder should be neutral so far as the rival claims to the debt or property are concerned for which the parties have been interpleaded. However claims that are incidental to the title dispute must be addressed because if they are not decided in the interpleader suit, one consequence of the decision in the interpleader suit is that it will discharge the stakeholder of all liabilities towards the debt or property and the decision will operate as res judicata against all claims. This is detriment to the rights of the claimants. It also means that multiple cases can be filed with reference to allegations of negligence, breach of fiduciary duty and capacity which may lead to decisions in various claims which are inconsistent with one another. Furthermore the stakeholder cannot use the interpleader suit to protect itself from any liability, meaning that a valid interpleader action cannot be a shield for the stakeholder from counter claims, where the stakeholder is not free from blame with reference to the disputed claimants.
69. In this context while reading Section 88 of the C.P.C., the words "for the purposes of obtaining a decision" means that an interpleader suit shall be filed where a person fears multiple claims for the same debt or money or property so as to ensure that ownership or title is decided in one suit, where all parties are interpleaded. So the person filing the suit has some obligation to discharge with reference to the debt, money or property and needs to know whom to discharge it against.
This being the primary purpose of the suit will not restrict a decision on liabilities that are related to the title dispute. There is nothing in Section 88, C.P.C. which prevents a decision on claims against the person filing the suit which are related to its obligation to pay the debt, money or property.
Section 88, C.P.C. does not create special jurisdiction in which the interpleader suit is to be heard, it merely sets out the procedure to be followed in such cases. The true origin of this jurisdiction is in equity, where the plaintiff comes to court claiming no interest in the debt, money or property, against several claimants so as to rid itself of the controversy in one suit. Interpleader relief is discretionary subject to the plaintiff meeting the basic conditions that is it has no interest in the debt, money or property, has not colluded with any claimant and is willing to make the payment or transfer. Therefore it is a power that the court has while deciding cases of this nature. Accordingly there is no bar in Section 88 of the C.P.C. with respect to consequential relief sought by the claimants, nor do the words "for the purposes of obtaining a decision" in Section 88, C.P.C. limit the jurisdiction of the court to decide connected issues. In fact it is vital to determine interrelated issues, because otherwise they continue to perpetuate the adversity between the parties being relevant to the title issue. We have examined the cases cited by the Respondents and find that the cases relied upon by the Respondents do not limit the extent to which relief can be granted in an interpleader suit by the Court. The cases relied upon set out the requirements to file an interpleader suit and the procedure to be adopted, but do not limit the jurisdiction to grant relief. In fact the literature suggests that the decision of the Court in an interplealer suit shall indemnify the plaintiff on the payment of money or delivery of property against claimants and that if other suits are filed they must be stayed. This goes to the point that if the claimants claims are not decided in the interpleader suit, they will be adversely affected and even if the plaintiff claims it does not seek indemnification the decision will operate as res judicata between the parties.
70. We are persuaded by various judgments from other jurisdiction, which show the liberal approach to interpreting interpleader suits so as to ensure that the entire controversy is decided upon in the suit to avoid multiple litigation on the question of the extent to which relief can be given. In Johnston v. Sunwest Bank of Grant County (116 N. M. 422, 863 P.2d 1043 (1993) the court held that a stakeholder cannot be granted immunity from liability of damages that are related to the reasons for interpleading the parties. The court found that the purpose of interpleader is to avoid multiple litigation, and to protect disinterested stakeholders against conflicting claims to property or a fraud. It allows a party against whom two or more persons are making a claim to bring an action joining as defendants all such claimants for the purpose of adjudicating whether he is liable to anyone. The Court further held that interpleader is remedial in nature, and interpleader statutes are to be liberally construed. The Court further held that Further, while interpleader relieves a petitioner from any necessity to litigate ownership of a fraud, it does not relieve the petitioner from defending itself from negligence allegations, even if the same funds are involved. The Supreme Court of the United States in Republic of the Philippines, et al., v. Jerry S. Pimentel, Temporary Administrator of the Estate of Mariano J. Pimentel, Deceased, et al. (128 S.Ct.2180 (2008) held that the purpose of the interpleader device is to allow "a party who fears being exposed to the vexation of defending multiple claims to a limited fund or property that is under his control a procedure to settle the controversy and satisfy his obligation in a single proceedings". Accordingly, the interpleader allows a stakeholder who "admits it is liable to one of the claimants, but fears the prospect of multiple liability to file suit, deposit the property with the court, and withdraw from the proceedings." Metro Life Ins. Co. v. Price, 501 F.3d '271, 275 (3d Cir.
2007). The result is that the competing claimants are left to litigate between themselves" while the stakeholder is discharged from any further liability with respect to the subject of the dispute. The court further held that the typical interpleader action proceeds in two distinct stages. During the first stage, the court determines whether the interpleader complaint was properly brought and whether to discharge the stakeholder from further liability to the claimants. During the second stage, the court determines the respective rights of the claimants to the interpkaded funds. The court further held that under the old interpleader practice, if a claimant alleged that the stakeholder was independently liable to him or her, the stakeholder would lose its right to bring the interpleader action. The modern approach, however, is that, where a claimant brings an independent counterclaim against the stakeholder, the stakeholder is kept in the litigation to defend against the counterclaim, rather than being dismissed after depositing the disputed funds with the court. In Travelers Ins. Co. v. Montoya (566 P.2d 105 (1977), the Court of Appeals of New Mexico held that a counter claim should be considered in an interpleader suit, especially since the stakeholder had filed the suit. In the same way in Christina Louise ROBERTSON, Executrix of the Estate of Marian Winski v. La LINDA, INC. and John Z. Winski (548 So.2d 1308 (1989), the Supreme Court of Mississippi has also allowed a counter claim to be adjudicated upon in an interpleader suit as it arose out of the same transaction which is subject matter of the interpleader suit.
71. After hearing the parties and examining the case law, we find that the scope of an interpleader suit must be liberally construed while the person filing the suit must be neutral to the outcome of the suit, that is to whom the debt or property is to be transferred. So for clarity the person filing the interpleader suit should have no claim in the debt or property. That does not mean that the claimants' contention with reference to the role of the stakeholder, the person filing the suit, should not be considered or any liability of the stakeholder not be considered if it is directly linked to the transaction of the debt or property. The typical interpleader is an innocent stakeholder, who is subject to competing claims, however where the claims of the defendants are inextricably interrelated it has to be adjudged in the same suit. The relevant ingredient to file the interpleader suit is that the plaintiff/stakeholder be neutral to or disinterested in the payment of the debt or property. However if the plaintiff/stakeholder has incurred a liability against the claimant(s), which has nexus to its obligations and capacity, then such claims should be finally decided in the interpleader suit. The trial court cannot discharge the plaintiff/stakeholder from further liability in order to sustain the interpleader suit as this would give an undue advantage to the plaintiff filing the suit, where there is potential for claims for damages. No doubt there are conflicting claims for the same debt or property, however the plaintiff cannot escape the outcome of its liability simply by electing to file an interpleader suit. Hence the interpleader suit will not discharge the plaintiff from allegations of negligence, fraud or on fiduciary duty which go to the duties and obligations and capacity of the plaintiff and gives rise to a counter claim of damages and loss.
72. We are also of the opinion that Order XXXV, Rules 3 and 4 of the C.P.C. sets out the procedure to be followed where there is potential of a counter claim. Order XXXV, Rule 3, C.P.C. provides that where any defendant in the interpleader suit is suing the plaintiff in respect of the subject matter in the interpleader suit that suit of the defendants shall be stayed and his cost in The stayed suit may be provided for in the, interpleader suit, meaning that the interpleader suit shall proceed and the defendants suit has to stop. As the rules provide that the suit of the defendants be stayed and the defendants can claim its costs in the interpleader suit, it means that the defendants can raise their claim in the interpleader suit as to be able to recover its costs. So long as the defendants claim emanates out of the same debt, money or property over which ownership is in dispute and is related to the capacity or ooligations of the plaintiff in the interpleader suit, including allegations of negligence and breach of duty, there is no reason why it cannot be taken up in the interpleader suit. Consequently, where the interpleader suit relieves the plaintiff from defending itself against rival claims it does not relieve the plaintiff from defending itself from allegations of negligence or breach of duty with reference to the debt, money or property in question. Furthermore given that a fundamental purpose of the interpleader suit is to avoid multiple litigation and cost, interpleader suits must cover the entirety of the disputes to avoid all possible exposure to litigation on the same debt, money or property.
73. Therefore, we find that an interpleader suit is decided in two stages, the first where the court determines the issue of ownership or title and the second to decide on any consequential or incidental relief with respect to the rights of the claimants. In this case, based on the facts, we find that this is necessary because Respondents Nos.1 and 2 opted to bring the interpleader suit against the Appellants opting to have its case decided in one case, against all claimants. Hence Respondents Nos.1 and 2 cannot hide behind this suit to avoid any independent liability arising out of negligence, breach of duty and capacity issues, basically all relating to the manner in which the sukuk certificates and its transfer was handled by Respondents Nos.1 and 2 in the first instance. So Respondents Nos.1 and 2 cannot use the interpleader suit to shield itself and to protect itself from valid counter claims, which counter claims would have been adjudged but for the interpleader suit.
Hence we are of the opinion that the relief claimed by the Appellants should have been decided in the interpleader suit.
74. In this context, the Impugned Judgment has decided Issue No.4 on vicarious liability of Wapda and the Sukuk Company based on its findings on Issue No.14-C. The said issue relates to breach of trust and-failure of Respondents Nos.1 and 2 to discharge their obligations. The Impugned Judgment finds that Wapda and the Sukuk Company are victims of the fraud and they acted in good faith especially with reference to Ex.P24 when they acted on NFC's instructions. It also finds that Wapda and the Sukuk Company were diligent and gave the required duty of care, hence were not negligent. At the very outset, we note that these findings run contrary to the findings in Issue No.14 on fraud where the Impugned Judgment finds that a case of fraud is made out based on Ex.D1-32, which finds certain employees of Wapda and the Sukuk Company to be liable for fraud and criminal breach of trust under the PPC. On the one hand the Impugned Judgment has relied totally on Ex.D1-32, the judgment of the Special Judge (Central) Lahore whereas in Issues Nos.14 and 14-C, the Impugned Judgment finds that Wapda and the Sukuk Company to be a victim of fraud. These findings on the face of it are contradictory.
75. Issue No.4 is that If forgery or fraud took place, the plaintiffs are vicariously liable to the holders or Sukuk Certificate for such forgery or fraud committed by their employees, and the plaintiffs are- liable to their negligence, for an amount equivalent to the value the Sukuk and the Ijara thereon?
This issue is with reference to the vicarious liability of Respondents Nos.1 and 2, in the event of fraud, forgery or negligence. Issue No.14-C is Whether the plaintiffs have committed serious breach of the trust and contract and have failed to discharge their obligations, duties and responsibilities and are thus not entitled to obtain indemnity for themselves? This issue is with respect to the breach of trust and contractual obligations of Respondents Nos.1 and 2 and whether they are entitled to indemnity under Section 88, C.P.C. The Impugned Judgment finds that there is no evidence of negligence or breach of trust or failure to perform as per the obligations of Respondents Nos.1 and
2. This is the same argument made by Counsel for Respondents Nos.1 and 2. Although Respondents Nos.1 and 2 do not seek indemnity under Section 88, C.P.C., the issue of breach of trust and contractual obligations is relevant to the dispute between the parties. Respondents Nos.1 and 2 instituted the interpleader suit on 12.12.2009. In the plaint they claim that fraud came to their knowledge on 25.4.2009 (Ex.P34) when NFC wrote to them informing them that they had not sold 72 sukuk certificates to SES. Respondents Nos.1 and 2 formed a fact finding committee (Ex.D1-10) which inquired into the matter and concluded in its report (Ex.D1-11) that Wapda Bonds Cell did not comply with the requirements set out in clause 10 of the Agency Agreement (Ex.P15). Further that the special security marker provided by the Pakistan Security Printing Corporation vide letter dated 3.5.2006 for verification of the sukuk certificates was not used when verifying the 72 sukuk certificates for transfer to SES. They also found issues with the authorization of Hammad Rasool as Company Secretary (Ex.P32) and with his letter of 22.4.2009 (Ex.D2-20). These findings by the fact finding committee (Ex.D1-11) are sufficient to establish a case of breach of contractual obligations and negligence by Wapda Bonds Cell. Furthermore the judgment by the Special Judge Central Lahore (Ex.D1-32) also finds that Wapda Bonds Cell and employees of the Sukuk Company were negligent of their duties. Hence findings of criminal breach of trust were made against some of the employees of Wapda Bonds Cell. Again this document also testifies to the negligence and breach of contractual obligations by Respondents Nos.1 and 2.
76. We have also gone through the transaction documents being the Agency Agreement (Ex.P15) and the Declaration of Trust (Ex.P16). As per the Agency Agreement (Ex.P15) Wapda Bonds Cell was the Registrar and Transfer Agent with respect to the sukuk certificates as well as the Replacement Agent. The duties and obligations of the Registrar and Transfer Agent are provided for in clauses 9 and 10 of the Agency Agreement. Amongst the duties of the Registrar, - we note that clause 9 requires the Registrar to maintain proper records of the details of all documents and certificates received by itself or any other Transfer Agent, to register all transfers and to prepare the list of certificates holders. Under clause 10, the Transfer Agent is responsible for the transfer of the certificates in accordance with the terms and conditions prescribed in the Agency Agreement (Ex.P15). As per clause 19.5, the Agent is obligated to perform such duties as is set out in the Agreement and the certificates which essentially means the duties related to the transfer of the sukuk certificates and the registration of title holders. The manner in which the register and transfer of certificates is to be delivered is provided for in the schedule to the Agency Agreement (Ex.P15). In the same way the Declaration of Trust (Ex.P16) renders the Sukuk Company liable for performance in accordance with the terms and conditions and obligations set out in the transaction documents and further requires in terms of clause 10 that they have the duty of care towards their investors and are liable with respect to the negligence, default, breach of duty or breach of trust. In his evidence PW-1 acknowledges the obligations and duties under the transaction documents particularly the Agency Agreement (Ex.P15) and the Declaration of Trust (Ex.P16) which includes the process of scrutiny and verification at the time of transfer and registration of the sukuk certificates in the Register of Certificate Holders. With reference to these duties and obligations he admits in his evidence that investigation against the employees of Wapda Bonds Cell which is responsible for the security and scrutiny of the sukuk certificates: He also admits to the fact that he also saw 72 sukuk certificates in the verification process to affect the transfer from SES to AIMC and consequently he initialed Ex. P32 (letter from the Sukuk Company to the CDC requesting the use of global terminal facilities). He admits in his evidence that all necessary steps were taken for the transfer of the sukuk certificates from NFC to SES and from SES to AIMC. As per his evidence, Respondents Nos.1 and 2 followed the procedure and were not negligent in their duties. At the same time he admits that he along with another were terminated from service by Respondents Nos.1 and 2 on account of their negligence in the verification of the sukuk certificates and their transfers but he stated that subsequently they were reinstated by the Federal Service Tribunal.
77. Therefore, from the evidence of PW-1 the obligations and duties set out in the transaction documents especially the Agency Agreement (Ex.P15) and the Declaration of Trust (Ex.P16) were complied with and followed by Respondents Nos.1 and 2. However, this evidence is contradicted by the .Wapda's own fact finding committee's report (Ex.D1-11) which clearly states that the employees of Wapda Bonds Cell were negligent in their duties with respect to the transfer and verification of the sukuk certificates.
78. Another document of relevance is the 'Special Audit Report (Ex.D2-10) which also sets out a case of negligence against Respondents Nos.1 and 2. This report finds that Respondents Nos.1 and 2 did not exercise proper verification of the sukuk certificates nor did they confirm from the transferors and transferees of the sukuk certificate's transfers. It finds that regulations for transfer of the sukuk certificates by the Wapda Bonds Cell were made on 9.5.2009 (Ex. D2-9) after transfer to SES and AIMC were effected. Consequently senior management of Respondents Nos.1 and 2 should have set out internal checks to prevent fraud. Further that the transfer should have been on the CDC and not physically. Also that there was no application of security checks by Respondents Nos.1 and 2 as required by the Pakistan Security Printing Corporation (Private) Limited to check the genuineness of the certificates. That they did not use the, required security marker, which means that it was easier to make fake certificates. The Audit Report details the areas where Respondents Nos.1 and 2 were negligent and failed to take necessary 'Steps, including an internal audit of the sukuk certificates.
PW-1 admits to these facts and states that the public accounts committee unilaterally concluded that Wapda Bonds Cell should improve its internal controls to avoid fraud. In this regard, the Special Audit Report finds that the Sukuk Company failed to function as an efficient company which caused reputational damage to Wapda. In the context, the Auditor's Report as at June 30, 2015, dated 18.9.2015 (Ex.D2-4) finds Respondents Nos.1 and 2 should bear the loss of Rs.180,000,000/-. Hence a clear case of negligence and breach of duty is made out against Respondents Nos.1 and 2, that its employees were involved not only in the negligence but also failure to ensure performance of its contractual duties.
Consequently we find that the stated Respondents failed to take appropriate steps to prevent fraud and were negligent as they failed to ensure the required safety and security mechanisms for transfer of the sukuk certificates. This is evident from the fact that they devised the required SOPs for the verification process on 9.5.2009 whereas they began the process of sale and transfer of the sukuk certificates in 2006.
79. In this regard, we find that Respondents Nos.1 and 2 have tried to shield themselves from any liability with reference to their negligence by filing the interpleader suit, and thereafter clairhing that the only issue which needs determination in the interpleader suit is as to whom payment of ijara should be made, that is to decide who is the owner of the disputed sukuks. While we have held that they failed to make out a case of fraud, a case of negligence and breach of duties is evident from the evidence. Therefore, Respondents Nos.1 and 2's contention that there is no cogent evidence of the negligence and breach of duty by its employees is without basis, as their own documents testify to the negligence.
Consequently, Respondents Nos.1 and 2 are liable for the negligence which resulted in the duplication of 72 sukuk certificates. They tailed to provide the investors with the required contractual duty of care and trust which is evident from their own fact finding report, special audit report and audit report. Hence they are liable to pay NFC the price of the 72 sukuk certificates that it claims it did not sell and by way of compensation it cannot recover the ijara payments made to NFC. Consequently we find that Respondents Nos.1 and 2 cannot seek, to recover ijara payments from NFC on account of its own negligence and payments by NFC received will suffice as compensation for NFC. This is especially so as NFC has not claimed any specific loss or damage from Respondents Nos.1 and 2 and the compensation in the form of retaining the ijara payments is to compensate for the negligence caused by Respondents Nos.1 and 2.
79. In view of the aforesaid, all these appeals are allowed and the impugned judgment and decree dated 14.4.2017 passed by the Civil Judge 1st Class, Lahore is set aside.