MUHAMMAD SAJID MEHMOOD SETHI, J.- This is a suit under section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("the Ordinance, 2001"), for the recovery of Rs.620,900,897.39 (Rupees Six Hundred Twenty Million Nine Hundred Thousand Eight Hundred Ninety Seven and Thirty Nine Paisas) from defendants on account of different finance facilities extended to the defendant-Company and default on its part in fulfillment of its payment obligations.
2. Essential facts, necessary for the disposal of the instant suit, are that defendant-Company periodically availed certain finance facilities from the plaintiff-Bank, which were sanctioned, renewed, enhanced and disbursed to the defendants by the plaintiff-Bank after execution of all the relevant documents and the defendant-Company was permitted to utilize the finance facilities sanctioned on 10.04.2019. It is averred in the plaint that four (04) LCs, in the sum of Rs.294,177,194.70/-, were retired through availing of finance facility namely Finance Against Trust Receipt ("FATR"), however, the defendants failed to repay the entire amounts as per the terms and conditions mentioned therein. It is further averred in the plaint that the defendants also availed/utilized and enjoyed Local Bill Discounting/Working Capital Loan ("WCL") finance facility in the sum of Rs.244,000,000/- which is still outstanding against them. As per plaint, the defendants only repaid / adjusted Rs.60,700,000/- against WCL and Rs.25,00,000/- against FATR. The remaining liability against defendants jointly and severally has been claimed as Rs.620,900,897.39 including mark-up as on 30.11.2021, break-up whereof is as under:- FINANCE AGAINST TRUST RECEIPT (FATR); Principal availed: Rs.294,177,194.70/- Principal outstanding: Rs.291,677,194.70/- Markup outstanding: Rs.90,762,299.98/- LOCAL BILL DISCOUNTING/WORKING CAPITAL LOAN (WCL); Principal availed: Rs.244,000,000/- Principal outstanding: Rs.183,300,000/- Markup outstanding: Rs.55,161,402.71/- Total Principal Outstanding: Rs.474,977,194.70/- Total Mark-Up Outstanding: Rs.145,923,702.69/- Grand Total: Rs.620,900,897.39/-
3. The defendants were summoned through summons in Form No.4 in Appendix 'B' of the Code of Civil Procedure, 1908, as required under Section 9(5) of the Ordinance, 2001 as well as through publication of proclamation in the newspapers and they appeared through their counsel and filed PLA No.8341 of 2022 by raising therein certain factual grounds and prayed for grant of unconditional leave to defend the suit.
4. Perusal of record shows that vide Credit Facilities-Offer Letter dated 10.04.2019, four finance facilities, namely, Sight Letter of Credit, Finance Against Imported Merchandise, Finance Against Trust Receipt (FATR) and Local Bill Discounting (LBD) / Working Capital Loan (WCL) were offered by the plaintiff-Bank. The offer was accepted by the defendant-Company and accordingly, it executed an Agreement for Financing on Mark-Up dated 10.04.2019, Promissory Note dated 10.04.2019, Trust Receipt dated 10.04.2019, Revolving Continuing Indemnity dated 10.04.2019 and Letter of Arrangements for Bills Purchase Limit dated 10.04.2019. The defendant-Company mortgaged lands measuring 100 Kanal & 186 Kanal 1 Marla & 68 Sqft by executing Deeds of Mortgage dated 26.03.2019 & 28.03.2019, respectively. Detailed description of the properties has been given in the said deeds. The defendant-Company also executed Memorandums of Deposit of Title Deeds dated 28.11.2018 & 14.03.2019. Charge Mortgage for Rs.600,000,000/- & Rs.1,500,000,000/- were also duly registered with the Securities and Exchange Commission of Pakistan. The defendants No.2 to 4 also executed personal guarantees dated 10.04.2019. According to learned counsel for plaintiff-Bank, the defendants have satisfied the two finance facilities, namely, Sight Letter of Credit and Finance Against Imported Merchandise, however made default in the repayment of FATR & WCL finance facilities.
5. Record reflects that under FATR facility, four Letters of Credit were retired: LC#0468LCS001919 of Rs.41,397,584.80 on 19.06.2019, LC#0468LCS001619 of Rs.83,179,180.70 on 20.06.2019, LC#0468LCS001819 of Rs.84,286,000/- on 05.07.2019 and LC#0468LCS001719 of Rs.85,314,429.20 on 07.08.2019, Total Rs.294,177,194.70, as evident from the Statement of Account and Financing Statement of defendant-Company. It is also evident from the Financing Statement that the defendant-Company repaid an amount of Rs.25,00,000/- on 07.08.2019, against principal amount disbursed on 19.06.2019, thus, the total outstanding principal amount comes to Rs.291,677,194.70. The plaintiff-Bank has calculated the due mark-up as Rs.90,762,299.98, therefore, the total aggregate of due amount under FATR facility is Rs.382,439,494.68.
6. Regarding WCL finance facility, plaintiff-Bank disbursed Rs.62,000,000/- on 03.07.2019 (withdrawn through three cheques dated 04.07.2019), Rs.25,000,000/-, Rs.12,000,000/- & Rs.25,000,000/- on 04.07.2019 (withdrawn through RTGS dated 04.07.2019), Rs.20,000,000/-, Rs.20,000,000/-, Rs.20,000,000/- & Rs.20,000,000/- on 05.07.2019 (withdrawn through four cheques dated 05.07.2019), Rs.20,000,000/- on 08.07.2019 (withdrawn through RTGS dated 08.07.2019) and Rs.20,000,000/- on 25.07.2019 (got transferred in the account of one Muhammad Shahbaz on 26.07.2019), total Rs.244,000,000/-. The afore-noted entries are duly reflecting in the Statement of Account and Financing Statement of defendant-Company. These documents further reflect that the defendant-Company repaid Rs.60,700,000.00, against disbursement of Rs.62,000,000/- only.
The plaintiff-Bank calculated the mark-up as Rs.55,816,952.42 and adjusted Rs.655,549.71 in this regard. Thus, the total outstanding liability against WCL finance facility comes to Rs.238,461,402.71.
7. Learned counsel for the defendants has raised the following main objections / submissions:-
(i) that the suit has been instituted by incompetent person, thus, it is not maintainable.
(ii) that the Statement of Account, attached with the plaint, is not duly verified as required under the provisions of the Bankers Books Evidence Act, 1981.
(iii) that the defendants have not availed the alleged FATR and WCL finance facilities, besides disbursement of Rs.41 Million under FATR facility.
(iv) that entries of the Statement of Account are not corroborating the alleged claim of mark-up in respect of FATR and LBD/WCL facilities.
(v) that claim of FATR facility is not supported by necessary documents particularly 'Trust Receipts".
(vi) that the Letters of Credit (LCs) mentioned in Para 8(iii) of plaint are different and not the ones which the plaintiff-Bank allegedly claimed to have been retired.
(vii) that the defendants are not liable to make payment of the suit amount as the alleged documents showing liability of the defendants have been engineered by the plaintiff-Bank.
(viii) that the amounts mentioned under the head of interest cannot be a part of the claim of plaintiff-Bank as this term is alien to the alleged finance agreements and so-called finance facilities.
8. The above objections are addressed as follows:-
(i) As per Section 9(1) of the Ordinance, 2001, when a customer or financial institution defaults on any finance obligation, the aggrieved party may institute a suit in the Banking Court by presenting a plaint verified on oath. In the case of a financial institution, this verification may be executed by the Branch Manager or another officer duly authorized by power of attorney. The record demonstrates that the plaintiff-Bank had nominated and appointed Sheharyar Tiwana, Senior Manager Corporate Structuring-Special Assets Management Group, and Syed Majid Ali Bukhari, Unit Head-Legal Support North & South-Special Assets Management Group, as Attorneys to conduct, carry on, and represent the bank in all forms of litigation. The present suit was instituted through the aforementioned Sheharyar Tiwana, with the Power of Attorney available in the file, confirming that this suit has been properly initiated through a competent person. Reliance in this regard could be placed upon cases reported as First Dawood Investment Bank Ltd. v. Bank Islami Pakistan Ltd. (2019 SCMR 1925), The Bank of Punjab through Branch / Chief Manager v.
Messrs Khan Unique Developers Pvt. Ltd. through Chief Executive Officer and 9 others (2016 CLD 29 Lahore), Ehsan-Ul-Haq v. MCB Bank Limited through Manager (2016 CLD 1874 Lahore), Allied Bank Limited through Principal Officers v. Messrs S.G. Polypropylene Pvt. Limited through Directors/Chief Executive and 5 others (2018 CLD 199), Mian Ashiq Hussain and others v. Faysal Bank and others (2019 CLD 152), Messrs Bahawalpur Cotton Company v. United Bank Limited (2021 CLD 434), The Bank of Khyber through Branch Manager v. Messrs Kashmir Sugar Mills Limited through Chief Executive and others (2021 CLD 1220). (ii) The Hon'ble Supreme Court and High Courts have consistently held that the Statement of Account provided by the bank, which bears the proper stamps and initials of the authorized bank official, besides carrying a note "Certified and verified on Oath that all the entries contained in the statement of account are true copies of the entries contained in ordinary books of the bank maintained and prepared in ordinary course of business and the said books are still in the custody of the bank. These entries have been certified after verification from the original ledger/ bills of the banker", satisfies the legal requirements stipulated under section 2(8) of the Bankers' Books Evidence Act, 1891. The Statement of Account submitted by the plaintiff bank in this suit carries such an endorsement/certification; therefore, the Statement of Account is duly certified in terms of afore- referred provisions of law. On the other hand, the defendants have not attached any counterstatement to controvert said Statement of Account. Consequently, their mere unsubstantiated allegations, unsupported by legal authority or documentary evidence, have no legal merit or foundation. Reliance in this regard may safely be placed on cases reported as Muhammad Saleem Khan vs. MCB Bank Limited (2020 SCMR 984), Habib Bank Limited through Authorized Attorney v. Haidri Homes through Partners and 3 others (2012 CLD 2016 Lahore), Messrs Habib Metropolitan Bank Limited v. Messrs Faizan Ali and Company (Pvt.) Ltd. through Chief Executive Officer and others (2017 CLD 1583), First Dawood Investment Bank Limited v. New Allied Electronics (PVT.) Limited and another (2018 CLD 250 Sindh), Trust Investment Bank Limited v. The Bank of Punjab (2021 CLD 1430 Lahore) and MCB Bank Limited through Authorized Officer v. Messrs City Steel UAE Mills (Pvt.) Ltd. through Chief Executive and others (2024 CLD 387 Lahore).
(iii) In their leave application, the defendants disputed the availing of FATR and WCL finance facilities, except disbursement of Rs.41 Million under FATR facility. However, this stance lacks supporting documentary evidence. They have also contested the demanded markup under the aforementioned facilities but have failed to identify even a single entry demonstrating how the mark-up was inconsistent with the Statement of Account. This approach contradicts the established legal principle outlined in National Bank of Pakistan v. Chenab Limited and others (2017 CLD 1539 Lahore) wherein it was held that where a defendant challenges the disbursement claim made by the plaintiff bank, he must rely on his account statement to highlight the inaccuracies and fallacies of the claim, rather than putting up just a simpliciter denial. Reference can also be made to Messrs Colony Textile Mills Limited and another v. First Punjab Modaraba (2021 CLD 1212 Lahore). Even otherwise, the defendant-Company, in its financial statement for the year 2019, submitted with SECP, shown an amount of Rs.400 Million as outstanding against the defendant-Company. It is a well-established legal principle that a defendant cannot contest an amount that has been duly acknowledged in the financial statement and audited accounts. In case cited as Habib Bank Limited v. Orient Rice Mills Ltd. and others (2004 CLD 1289 Lahore), this Court held that audited financial statement of the defendant-Company is very strong corroborative evidence against it. It is worth mentioning that during course of arguments the learned counsel for plaintiff-Bank has also tendered the Financial Statement of defendant- Company for the year 2023, wherein Rs.474,977,195/- has been shown as under litigation finances.
Nevertheless, since said document was not a part of the plaint, hence it is not considered.
(iv) The documents annexed with the plaint negate this contention of the learned counsel of the defendant-Company. The Statement of Account and the Financing Statement duly reflect the details of due mark-up as well as adjusted mark-up. It is well-settled principle of law that mark-up is to be paid by the customer on the availed finances as per the agreement executed between the parties. Reliance in this regard may safely be placed on case reported as First Women Bank Limited through Attorneys v. Messrs Bita Textile Mills (Pvt.) Ltd. through Directors and 6 others (2018 CLD 913 Sindh) and Messrs U.I.G (Pvt.) Ltd. through Director and 6 others v. Bank Al-Falah Ltd. (2015 CLD 452 Sindh).
(v) This contention of the defendant-Company also gets belied by the Trust Receipt dated 10.04.2019, which unequivocally establish that FATR facility was availed by the defendant- Company. Indubitably, in terms of Articles 102 and 103 of Qanun-e-Shahadat Order, 1984, if, there is a conflict between oral evidence and documentary evidence, then documentary evidence available on record, is to prevail over the oral evidence. Reliance in this regard can be placed upon Tassaduq Hussain Shah and others v. Allah Ditta Shah and others (2023 SCMR 1635), Muhammad Akbar and others v. Province Of Punjab through DOR, Lodhran and others (2022 SCMR 1532), Azeem Khan and another v. Mujahid Khan and others (2016 SCMR 274) and Sher Muhammad v. Muhammad Khalid (2004 SCMR 826).
(vi) No supporting material was submitted by the learned counsel for the defendant-Company to substantiate this claim. It is axiomatic that the Court cannot grant relief based merely on unsubstantiated assertions. It is a fundamental principle of evidence that parties seeking judicial remedy must provide adequate documentation or testimony to validate their contentions. In the absence of any supporting material, the Court has no alternative but to reject such unfounded assertions as being devoid of merit.
(vii) The defendants No. 2 to 4, being Directors of the defendant-Company, furnished personal guarantees in favor of the plaintiff-Bank. Said defendants have failed to produce any documentation demonstrating that the personal guarantees were fake, fabricated, or bore forged signatures. Consequently, their mere vague denials are insufficient to absolve them of their liability.
It is a well-established principle of law that even when a contract becomes unenforceable against the principal debtor, the guarantor remains bound by the surety he had executed, unless there exists a specific covenant to the contrary and a surety/guarantor cannot be permitted to repudiate the original finance facility. Furthermore, jurisprudence has consistently recognized that a bank guarantee constitutes an autonomous contract that imposes an absolute obligation to fulfill its terms. Payment under such a guarantee becomes due upon the occurrence of the specified contingency that renders the guarantee enforceable. Reliance is placed upon Messrs Huffaz Seamlen Pipe Industries Ltd. and 2 others (2002 SCMR 1419), Sahara Trading International (Pvt.) Ltd. and others v. Bank Alfalah Ltd. (PLD 2004 SC 925), Messrs State Engineering Corporation Ltd. v. National Development Finance Corporation and others (2006 SCMR 619), Bolan Bank Limited through Attorneys v. Baig Textile Mills (Pvt.) Ltd. through Chief Executive and 6 others (2002 CLD 557 Lahore) and Standard Chartered Bank (Pakistan) Ltd. through Authorized Attorney v. Needle Point (Pvt.) Ltd. through Chief Executive and others (2016 CLD 2066 Lahore), Adamjee Polycraft Limited and 3 others vs National Investment Trust Limited (2017 CLD 380 Sindh) and Mian Furqan Idrees and others v. JS Bank Limited and others (2022 CLD 1395 Lahore).
Once again it is observed that unsubstantiated allegations by the defendant-Company regarding the non-execution of financial documents lack documentary evidence. The defendants have not specifically denied executing the Mortgage Deeds, Memorandum of Deposit of Title Deeds, or other security documents. Furthermore, they have not explicitly denied that the amount claimed by the plaintiff-Bank was credited to the principal debtor's account. The defendants have also failed to challenge these documents before any legal forum. Therefore, their evasive denial of executing the financial documents does not entitle them to leave to defend the suit. Conversely, the plaintiff- Bank's claim is supported by numerous documents present on the record, as discussed above, which cannot be discarded without compelling documentary evidence in rebuttal.
(viii) In the Statement of Account, certain outstanding amounts have been claimed under the title of interest, however learned counsel for the plaintiff-Bank during arguments clarified that this was merely a technical error, and the amounts should be construed as mark-up. We find this clarification sufficient and do not consider it a valid ground for dismissal of the plaintiff-Bank's claim. A similar issue arose in C.O.S No.4287 of 2022 titled Faysal Bank Limited v. M/s Hira Terry Mills Ltd. & others, wherein this Court, through its judgment dated 14.03.2024, held that such an error was not fatal to the plaintiff-Bank's case.
9. The defendants have failed to comply with the requirements of Sections 10(4) and 10(5) of the Ordinance, 2001. Under these provisions, they were obligated to provide a clear and specific response to the Bank's Statement of Account, in their application for leave to defend, besides providing details of their own accounts along with the specific amounts they dispute. However, the necessary documents, as mandated under Section 10(5) of the Ordinance, 2001, were not annexed with the leave application. This failure to plead the requisite details attracts the consequences prescribed under Sections 10(1) and 10(6) of the Ordinance, 2001, warranting the rejection of the application for leave to defend and the passing of judgment and decree in favour of the plaintiff- Bank under Sections 10(1) and 10(11) of the Ordinance, 2001. Reliance in this regard is placed on the cases reported as Apollo Textile Mills Ltd. And others v. Soneri Bank Ltd." (PLD 2012 SC 268), Habib Metropolitan Bank Limited through Attorney v. Century 21 Textile and Sportswear (Pvt.) Limited and 3 others (2014 CLD 729 Sindh), Silkbank Limited through Authorized Persons v. Messrs AZM Chemical Company through Proprietor and 5 others (2014 CLD 1526 Sindh) and Al-Madina Aluminium Work and others v. Habib Metropolitan Bank (2020 CLD 892).
10. In view of the above, the defendants have failed to raise any factual defence that would necessitate the recording of evidence. Accordingly, the defendants' application for leave to appear and defend the suit is hereby dismissed. Since, application for leave to defend filed by defendants is dismissed, therefore, all the four miscellaneous applications i.e. C.M Nos.1 to 4 of 2025, filed by defendants, are also dismissed being not maintainable. It is well-settled that, prior to the grant of leave to defend, a defendant cannot seek adjudication of any rights of defence as the law expressly prohibits consideration of a defendant's defence before leave is granted, and prescribes a specific procedure under which any defence--whether raising legal or factual controversy--may only be entertained after leave to defend has been granted. Therefore, any ancillary application filed prior to the grant of such leave is legally untenable. Reliance is placed on the cases reported as Messrs Waheed Corporation through Proprietor and another v. Allied Bank of Pakistan through Manager (2003 CLD 245) and Sheikh Muhammad Usman v. Judge Banking Court No.1, Lahore (2015 CLD 257 Lahore), wherein it has been held that a defendant could not file any ancillary or interlocutory application unless such defendant was allowed by the Court to defend the suit.
11. The upshot of above discussion is that suit of the plaintiff-Bank is decreed in its favour and against defendants, jointly and severally, in the sum of Rs.620,900,897.39 together with costs and cost of funds as contemplated by section 3 of the Ordinance, 2001 and will be recoverable by sale of mortgaged, pledged and hypothecated properties. Decree sheet be prepared accordingly.
12. The decree is now converted into execution proceedings under section 19 of the Ordinance, 2001.
The decree holder will submit Fard Taleeqa / list of mortgaged, pledged and hypothecated properties of the judgment debtors within a period of thirty days. Execution petition shall be fixed for hearing on 28.05.2025.