' National Bank of Pakistan with its registered office at Karachi and a Branch at Ghalla Mandi, Haroonabad, District Bahawalnagar, has instituted this suit against the defendants for recovery of Rs, 12,53,493.82 together with future interest at the rate of 14 % per annum from 1-7-1982 till realization of the amount by sale of mortgaged property and in case the sale-proceeds are insufficient to satisfy the decree then to apply for a decree for recovery of the balance otherwise.
Costs of the suit have also been prayed for.
2. It has been asserted in the plaint that on the request of the defendants they were afforded a loan facility up to rupees ten lakhs against security of pledge of goods (cotton, cotton bales and Kapas). The defendants are stated to have executed a demand promissory-note dated 3-11-1980 for the sum of rupees ten lakhs, Form C (general) i,e, the agreement for cash credit on security of pledge of goods dated 3-11-1980, pledge letter dated 3-11-1980 and daily stock position memorandum dated 3-11-1980 for securing the loan to be advanced to them. A partnership letter dated 3-11-1980 was also delivered by the defendants to the plaintiff.
3. It has further been averred in the plaint that subsequently the defendants asked for increase of the limit of loan up to rupees fifteen lakhs and in consequence executed demand promissory-note dated 13-11-1980 in the sum of rupees fifteen lakhs and Form C the general agreement for cash credit on security of pledge of goods.
4. The defendants, according to the plaint, availed of the loan facility, account regarding which was operated upon by defendant No,
2. It has been asserted that a sum of Rs, 12,53,493.82 stood due to the plaintiff from the defendants as on 30-6-1983 which they have failed to pay despite repeated requests and therefore the plaintiff has been obliged to file the present suit.
5. The defendants were served with summons in Form 4 of Appendix B of C. P. C. In the ordinary course on 24-3-1984 and also through publication of summons in the daily "Nawa-e-Waqt" dated 14-3-1984. They applied on 1-4-1984 for leave to appear and defend the suit through an application (C. M. 1674/C-84) which has been supported by an affidavit of defendant No, 2
6. The above application has been resisted by the plaintiff who has also raised the plea that it has been filed beyond the period of limitation.
7. The learned counsel for the defendants raised the following contentions in support of the application for leave to defend :
(i) That the statement of accounts filed by the plaintiff is not correct ;
(ii) that the goods of the value of Rs, 17,55,900 pledged with the plaintiff by the defendants have been misappropriated by the plaintiff-Bank when these were in the custody of the plaintiff ;
(iii) that the amount of Rs, 1,10,947.92 claimed as penal interest is not payable by the defendants ; the defendants having never agreed to pay the same ;
(iv) that insurance charges debited in the statement of account from time to time w,e,f, 25-2-1981 till 8-6-1983 could not be claimed as no insurance cover was procured during that period ; the pledged goods having been sold latest by 23-2-1981 ;
(v) that the sum of Rs, 8,064.88 claimed as monthly salaries for the staff employed could also not be charged by the plaintiff ;
(vi) that the plaintiff-Bank has not produced the receipts of the insurance companies for the alleged payment of the premiums ; and
(vii) that the property of about rupees twelve lakhs having been mortgaged by the defendants with the plaintiff unconditional leave to defend the suit be granted.
8. On the other hand, the learned counsel for plaintiff contended first, that the application for leave to defend having been made on 1-4-1984 when service through proclamation had been made on 14-3-1984 the application is beyond the period of limitation ; ' secondly, that the availing of the loan facility has not been denied by the defendants and the execution of none of the documents annexed with the plaint has also been denied which, inter alia, include the confirmation of balance as at 31-12-1980, 31-12-1981 and 27-1-1982 as also the schedule of re-payment submitted by the defendants themselves on 21-10-1982. The learned counsel in the same context urged that the defendants having admitted the amount of rupees ten lakhs as payable by them for which they also gave a schedule of repayment can no longer bona fide claim a defence of the suit ; ' thirdly, that the question of misappropriation of pledged goods by the plaintiff does not arise in that the pledged goods were partly taken delivery by the defendants against payment whilst the remaining which had been damaged due to rain were also delivered to the defendants without payment and in acknowledgment of the receipt of the goods the defendants had themselves signed on the reverse of the delivery notes originals whereof have been placed on record ; ' fourthly, that the loan amount as claimed in the suit stands admitted also by the fact that when re-payment was not made the defendants created a mortgage of land measuring about 200 Kanals on 21-8-1982 which mortgage has been admitted in para. 13 of the application itself.
' The learned counsel for the plaintiff also clarified that although in the application of the defendants for leave to defend they have referred to the mortgage of 200 Kanals of land as also of a house of one of the defendants but the plaintiff-Bank is claiming mortgage of the land only as the house was mortgaged against another loan and cannot thus be the subject of the present suit ; ' fifthly, that it has been alleged today that the goods were sold to other persons but affidavit of no other person to whom the goods had been allegedly sold by the Bank has been filed nor any complaint was ever made to any Bank authority regarding the misappropriation of goods by the Bank officials. Continuing his arguments in the above connection the learned counsel also submitted that what to say of taking legal proceedings for recovery of the pledged goods no letter or notice even was ever given by the defendants to the plaintiff-Bank for either the alleged misappropriation of the pledged goods or for that matter for recovery of the amount of Rs, 17,55,900 claimed to be the sale price of the pledged goods ; ' sixthly, that all insurance premiums have been paid by cheques and not by debit entries which cheques numbering 31, originals whereof have been placed on record, were all issued by the defendants directly drawn in favour of the various insurance companies and that the receipts of insurance premium issued by the various companies for the period in question have also been already placed on record ; ' seventhly, that the staff salaries have been rightly debited to the account of defendants in the light of letter dated 12-11-1980 signed by the defendants and addressed to the plaintiff authorizing the latter to charge any amounts in connection with the loan to the account of the defendants which would inter alia include the salaries of the staff posted at the premises of the defendants to keep a watch on the pledged goods. It was urged that these charges which were debited w,e,f, 30- 11-1980 to 29-11-1982 have all along been accepted as correct charges by the defendants and they cannot therefore be allowed at this stage to object to the same ; and ' lastly, that neither the receipt of consideration loan amount claimed in the suit being in dispute nor there being any plausible defence disclosed by the defendants their application for leave to defend is liable to be rejected.
' The learned counsel for the plaintiff, however, admitted that the charge of penal interest in the statement of accounts is not in accordance with any specific agreed term of loan agreement but has been claimed on the basis of the Dank practice.
9. Having given consideration to the controversy involved I am of the view that the defendants have not been able to make out a case for grant of leave to defend the suit.
10. It has been correctly pointed out by the learned counsel for the plaintiff that the loan amount stands proved as due from the defendants to the plaintiff and that the execution of all the documents which have been annexed with the plaint or placed on record otherwise has not been denied by the defendants. The defendants have admitted the availing of the loan facility but have only baldly disputed the correctness of the statement of accounts. In the light of the documents filed by the plaintiff which have in no manner been controverted by any documentary evidence or even by denial of execution of the said documents by the defendants or of the affixation of signatures thereon, the bare assertion of incorrectness of the statement of accounts can in no way be given any weight or made the basis for granting leave to defend the suit.
11. It may be pertinently observed here that in the face of confirmation of balances admittedly signed by the defendants confirming the outstanding loan as on 31-12-1980, 31-12-1981 and 27-9- 1982 and more particularly on account of the schedule of re-payment given by the defendants vide their letter dated 21-10-1982 the signatures whereon have today also been admitted by defendant No, 2 before me and in token of his admission he has made an endorsement on the letter that the signatures thereon are in his hand there is no basis available at all for holding that the statement of accounts submitted by the plaintiff is in any manner discrepant. In fact the defendants stand precluded from agitating something contrary to their written admission of outstanding liability of loan.
12. There is otherwise also a presumption of correctness attached of course rebuttable to statement of accounts certified under the Bankers Books Evidence Act, 1891 which presumption has in no manner been rebutted by the defendants.
13. Yet another factor which squarely establishes the outstanding loan against the defendants is the fact that as on 27-9-1982 the defendants confirmed a balance outstanding of Rs, 10,30,974.86 almost which figure has been reaffirmed in the re-payment schedule submitted by the defendants to the plaintiff and not only that just before 27-9-1982 viz. On 21-8-1982 the defendants created a mortgage of immovable property in, favour of the plaintiff to secure the loan. Had the amount not been actually due from the defendants to the plaintiff they could have at least refused to create the mortgage.
14. As regards the allegations that the pledged goods had been misappropriated by the Bank/its officials or for that matter any loss has been caused to the defendants as claimed in para. 6 of the application, I suffice by observing that the learned counsel for the plaintiff has rightly contended that had there been any such occasion the defendants would have protested against it in some manner or the other. This is also the established position that the defendants never ever complained to higher Bank officials/authorities in this regard nor did they ever write to the Bank or served a notice alleging the above nor for that matter they have taken any legal proceedings so far for redress of the grievance now being made. The above position coupled with the fact of the defendants having from time to time confirmed balances without any objection and having submitted a re-payment schedule as also having created a mortgage of immovable property leaves no room for doubt that the amount claimed by the plaintiff-Bank from the defendants is payable by the latter except the amount of penal interest amounting to Rs, 1,10,947.92 an entry regarding which has been made at the end of the statement of accounts and about which it is the admitted position that it was not ever agreed that the defendants shall be liable to pay the same.
15. Adverting now to the other contentions raised on behalf of the defendants for seeking leave to defend the suit, it may be observed that these contentions, with the exception of the one regarding penal interest, are also illusory and a figment. In the face of the documents placed on record such as cheques issued by the defendants themselves to insurance companies and the receipts of premium there can hardly be any justification to assert that the premium amounts have been incorrectly debited. The same ,position would obtain as regards the entries pertaining to salaries of employees posted at the Factory premises to look after the pledged goods.
16. It may also be of benefit to state here that the very fact that the learned counsel for the defendants today requested that the plaintiff be asked to produce insurance receipts which are already on record shows the hollowness of the contentions in this behalf.
17. The only other contention of the learned counsel for the defendants which is left to be dealt with is the ground urged that the loan having been secured by a mortgage unconditional leave to defend the suit should be granted I am afraid the mere fact that a loan has been secured by a mortgage cannot be made a basis aliunde for grant of leave to defend c a suit brought under Order XXVII of C. P. C. Read with provisions of the Banking Companies (Recovery of Loans)
Ordinance, 1979. It may be observed that a contrary view would amount to deflecting the intention of the Legislature as it would defeat the purpose underlying section 7 of the aforementioned Ordinance, which makes suits based on all kinds of mortgages triable under Order XXVII of C. P. C.
The existence of a mortgage as a security for repayment of a loan may be a relevant factor in a suit under the Banking Companies (Recovery of Loans) Ordinance; 1979 when the Court on consideration of the attendant circumstances of a case has reached the conclusion that a case for grant of leave to defend the suit has been made out by the defendant and the next question as to imposition of any terms for such grant falls for determination.
18. The consideration of Demand Promissory Note having been established and there being no manner of doubt regarding the availing of loan and the outstanding amount and also no plausible defence having been disclosed by the defendants there is no occasion to grant leave to defend the suit and thus the question of grant of unconditional leave as a matter of course on account of the existence of a mortgage would not arise at all.
19. In view of the foregoing discussion I find that there is no merit in the application of the defendants for leave to defend and consequently reject the same.
20. The application for leave to defend having been dismissed the plaintiff-Bank is entitled to the decree prayed for except for the penal interest amounting to Rs, 1,10,947.92. Needless to mention that this penal interest cannot be allowed to the plaintiff-Bank as it is the admitted position that this interest was never agreed to by the defendants.
21. It may also be observed that mere practice of the plaintiff Bank to charge penal interest in cases of default in liquidation of loans within a particular period would not afford a lawful basis for allowing the same as1 such interest can only be claimed if it is agreed to between the parties( through an express contract.
22. Resultantly a decree for the recovery of Rs, 11,42,545.90 by sale of the mortgaged property is passed in favour of the plaintiff-Bank and against the defendants with costs and future interest at the rate of fourteen per cent. Per annum with quarterly rests chargeable from the date of institution of the suit till realization of the total amount.
23. The defendants are allowed three months' time to pay decretal amount failing which the mortgaged property shall be sold in execution for satisfaction of the decree. In case the sale- proceeds of the mortgaged property are found to be insufficient to satisfy the above decree the plaintiff-Bank may apply for a decree for recovery of the balance otherwise.
24. The claim of the plaintiff-Bank as regards future insurance charges and other expenses incurred during the pendency of the suit as claimed in para. (c) of the relief is not allowed for the reason that the plaintiff has neither claimed any specific sum in this regard nor has it produced any documents in support of such a claim.