C.M. No.1/2024 and MAIN CASE This application is filed under Order VII Rule 11 of the Code of Civil Procedure, 1908 ("CPC") on behalf of applicant/ defendant No.1, seeking rejection/return of the plaint in hand for lack of jurisdiction of this Court.
2. Learned counsel for the applicant/defendant No.1 i.e. Zarai Taraqiati Bank Limited (ZTBL -- hereinafter referred to as "defendant-Bank") submits that in order to secure the loan facility extended to defendant No.7 i.e. M/s Kohi Noor Edible Oil ("borrower Company"), the plaintiff executed a Mortgage Deed as well as registered General Power of Attorney ("GPA") on 27.08.1989 in favour of the defendant-Bank. Learned counsel submits that upon default in repayment by borrower Company, the defendant-Bank instituted COS No.10/2002, titled "ZTBL Vs. M/s Kohinoor Edible Oil Ltd. & 10 others", however, the plaintiff was not impleaded as a defendant therein.
Submits that the said Suit culminated into a decree dated 21.04.2014; pursuant thereto, the mortgaged property ("property") belonging to the plaintiff was included in Fard Taliqa in Execution Application No.28-B of 2014, however, the plaintiff filed CM No.218-B of 2016 in the aforenoted Execution Application, seeking exclusion of the mortgaged property from the Fard Taliqa on the ground that she was neither a party in the Suit nor any decree was passed against her. Submits that eventually, the Executing Court allowed the aforesaid application on 08.12.2016 and ordered deletion of the mortgaged property from the Fard Taliqa, while allowing the defendant-Bank to file a separate Suit against the plaintiff, if so advised. Further submits that subsequently, the defendant-Bank acting under the authority of GPA executed a registered Sale Deed dated 05.04.2021, whereby the mortgaged property was auctioned and sold to defendants No.2 to 4 (the purchasers). Submits that the Sale was effected not on the basis of Mortgage Deed or in execution of the decree, but solely in the capacity of an attorney under the GPA, executed by the plaintiff in favour of the defendant-Bank, therefore, the plaintiff does not fall within the definition of a "customer" as defined under Section 2(c) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 ("Ordinance"). Furthermore, the obligations arising under the GPA also do not fall within the ambit of "obligation" as defined under Section 2(e) of the Ordinance, hence, the institution of the instant Suit under Section 9 of the Ordinance is legally untenable, as a pre- condition thereto is the existence of a 'default' by a 'customer' or a 'financial institution' in relation to an "obligation" with respect to the finance. Reliance is placed on "Al-Raheem Rice Mills Vs. Bank Alfalah Limited and others" (2018 CLD 1351), "Ishfaq Ahmed and 5 others Vs. Habib Bank Limited and another" (2017 CLD 1639), "AMTEX Limited through Director Vs. Bank Islami Pakistan Ltd. and 8 others" (2016 CLD 2007), "Sh. Altan Azmat Vs. Habib Bank Limited through Chief Manager and another" (2014 CLD 1636) and "Mian Mehmood Ahmad Vs. Hong Kong and Shanghai Banking Corporation Ltd. through Manager and 6 others" (2010 CLD 293). Learned counsel for defendant No.2 also reiterated the above submissions.
3. Learned counsel for the plaintiff, on the other hand, submits that in view of the amendment in the law i.e. insertion of Rule 11-A under Order VII of the CPC, a separate application under Order VII Rule 11 of CPC is not maintainable. He submits that the plaintiff being the mortgagor of the subject property, the GPA cannot be construed in isolation but must be read conjunctively with the Mortgage Deed; hence, not only the plaintiff qualifies as a "customer" within the meaning of applicable statute but there is also a default in discharge of the financial obligations. Further submits that the GPA was intended to be invoked solely upon the occurrence of a default by the plaintiff, and as such, it operates as a form of guarantee and consequently falls within the ambit of term "obligation". Reliance is placed on "Bankers Equity Limited through Official Liquidator Vs. Bank Al-Falah Limited and others" (2022 CLD 1478).
4. Arguments heard. The moot question requires determination is that, whether in the light of peculiar facts and circumstances of the present case, the Suit under Section 9 of the Ordinance is maintainable before this Court, or the plaintiff should approach the Court of plenary jurisdiction. In this context, for convenience Section 9(1) of the Ordinance is reproduced below: "(1) Where a customer or a financial institution commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise."
(emphasis supplied)
Plain reading of the above quoted provision manifests that a suit may be instituted under the Ordinance where a 'customer' or 'financial institution' defaults in fulfilment of any obligation in relation to any finance. In order to maintain Suit under Section 9 ibid, the essential elements that must be established are: (i) the existence of a 'customer', (ii) a 'financial institution', and (iii) a 'default' in the discharge of an obligation with regard to any finance. In the present case, admittedly, the subject property was mortgaged with the defendant-Bank by the plaintiff as security for the finance facility availed by the borrower Company, accordingly, the plaintiff qualifies as a 'customer' and the defendant-Bank as a 'financial institution' within the meaning of the applicable law. However, the plaintiff in the capacity of a mortgagor was neither impleaded as a defendant in COS No.10 of 2002 (instituted by the defendant-Bank) nor any decree was passed against her in the said Suit. Further, the property was not auctioned in execution of the decree, nor was it sold as mortgaged property under Section 15 of the Ordinance; instead, the property was alienated by the defendant-Bank, as attorney of the plaintiff, in favour of defendants No.2 to 4 merely on the basis of the GPA.
5. The real test is that, whether the sale of the property by the defendant-Bank effectuated on the basis of GPA constitutes a 'default' in discharge of the obligation with regard to the finance. It is pertinent to note that the term "obligation" is defined in Section 2(e) of the Ordinance. For ease of reference, the provision of Section 2(e) ibid is reproduced hereunder: "e) "obligation" includes:-
(i) any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and
(ii) any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise; and
(iii) all duties imposed on the customer under this Ordinance; and"
The plain reading of definition of "obligation" shows that clause (i) of Section 2(e) of the Ordinance is not relevant to the matter in hand and only the clause (ii) of Section 2(e) ibid is applicable in the present case. In terms of aforesaid sub-clause (ii) although a mortgage deed falls in the definition of "obligation", however, a GPA does not specifically constitute an obligation within the meaning of Section 2(e) of the Ordinance. No doubt, the term "include" in Section 2(e) ibid signifies that the definition is not exhaustive but the obligation imposed by the provision of Section 2(e) pertains specifically to representations, warranties, and covenants made by the customer and not by the financial institutions, as rightly held by this Court in the case of Amtex Ltd. supra. Further, it is also admitted fact on the record that the subject property was included in Fard Taliqa in Execution Application, filed in pursuance of the decree dated 21.04.2014, however, the Executing Court on the objection raised by the plaintiff, via CM No.218-B/2016, excluded the mortgaged property from the Fard Taliqa on 08.12.2016, on the ground that no decree had been passed against the plaintiff.
6. The plaintiff's next contention that the GPA ought to be construed as a "guarantee" or as an integral part of the Mortgage Deed, is also misconceived and without legal basis. The perusal of General Power of Attorney shows that it is an independent legal instrument, authorizing the defendant-Bank to dispose of the property mentioned therein, and it neither forms part of nor is contingent upon the existence or terms of mortgage deed. Further, the plaintiff in this Suit has challenged the Sale Deed executed on the basis of the GPA, and has not alleged any default in performance of obligations under the Mortgage Deed. The mere fact that the plaintiff had mortgaged the property as well does not, by itself, confer upon the plaintiff the right to institute Suit U/S 9 of the Ordinance, particularly in circumstances where the Mortgage Deed was neither invoked nor any proceedings were initiated against the plaintiff in the capacity of a mortgagor. In the forgoing circumstances, this Court cannot proceed with the instant Suit for declaration, cancellation of auction proceedings and Sale Deed in the banking jurisdiction. In this regard, reliance is also placed on following case law, where for not fulfilling the preconditions of Section 9 of the Ordinance, the Suits were not entertained. "Al-Baraka Bank (Pakistan) Limited Vs. Enshaa Holdings Ltd. and another" (2019 CLD 1350), "Gulistan Textile Mills Ltd. and another Vs. Soneri Bank Ltd. and another" (2018 CLD 203), "Messrs Summit Bank Limited through Manager Vs. Messrs Qasim and Co. through Muhammad Alam and another" (2015 CLD 1377), "Sh. Altan Azamat Vs. Habib Bank Limited through Chief Manager and another" (2014 CLD 1636), "Haji Dad Muhammad Vs. Muslim Commercial Bank Limited" (2011 CLD 785) and "Procter and Gamble Pakistan (Pvt.) Ltd., Karachi Vs. Bank Al-Falah Limited, Karachi and 2 others" (2007 CLD 1532).
7. The judicial precedents cited by the defendant-Bank also support his above contentions, whereas, the case law relied upon by the plaintiff side is distinguishable on facts and is not applicable to the present case. Further, the plaintiff's plea that a separate application under Order VII Rule 11 of CPC for rejection/return of the plaint is not maintainable, has also no legs to stand because the issue of jurisdiction was already raised by the defendant-Bank in the PLA and on 28.11.2023 Issue No.1 was specifically framed on maintainability of the Suit, hence, this Court is competent to examine the question of maintainability/ jurisdiction.
8. For what has been discussed above, the instant Suit is not maintainable before this Court under Section 9 of the Ordinance. Consequently, the plaint is returned in terms of Order VII Rule 10 of the CPC. Office is directed to do the needful.