' The appellants have impugned the judgment and decree of the learned Special Court, Banking Companies (Recovery of Loans), N.-W.F.P., Peshawar dated 13-4-1988 vide which the appellant- defendants were refused leave to appear and defend the suit, with the result that the plaintiff- respondent Bank was granted decree as prayed for, with costs.
2. M/s. Allied Bank of Pakistan Limited through its Manager brought a suit against the appellant- defendants under the Banking Companies (Recovery of Loans) Ordinance, 1979 for the recovery of Rs,11,58,420.69 alongwith 14% compound interest plus 2% penal interest till final recovery of the amount.
3. Vide Letter No, CO/405/MKM dated 9-7-1975, the appellants were allowed loan of Rs,5,00,000 overdraft of Rs,1,00,000 and cash credit facility of Rs,2,50,000 against registered mortgage of machinery, land and property, by pothication of stock of chemicals and finished goods, and pledge of timber. Thereafter the appellants-defendants applied for the grant of advance/fixed loan limit to the tune of Rs,8,00,000 (Eight Lacs) which was sanctioned on 18-3-1979 subject to the security for the said loan by the defendants in the following terms:-
(a) Registered Mortgage of property worth Rs,8,50,000 the Match factory, under the name and style of, Haji All Khan and Company situate at Garri Habibullah, Tehsil and District Mansehra;
(b) Pledge of shares of M/s. Khyber Textile Mills Limited and Sindh Alklis Limited, worth Rs, Two Lacs Seventy thousand (2,70,000) alongwith transfer deeds duly verified.
(c) Hypothecation of stock of raw material and finished goods of fire Matches, including stocks in process in various departments of the Factory, raw material including chemicals, cardboards, woods, slint sheets, stored in the match factory building and stocks of finished goods stored in Match Factory building, worth Rs,15,00,000 at the relevant time.
' In view of the abovementioned sanction of the appellant/defendants executed mortgage deed No,542/1 on 19-11-1977 in favour of the plaintiffs and in addition to the above security hypothecated stock of raw materials and finished goods of fire matches, including stock in process in various departments of the factory the value of which was Rs,15,00,000. The appellants-defendants also pledged the shares of Khyber Textile Mills Limited and Sindh Alkalis Limited in favour of the plaintiffs-respondents in order to secure the repayment of the loans. Beside these securities, the appellants 1 to 4 had also executed Letter of Guarantee for Rs,8,00,000 (Eight Lacs) each on 14-11- 1985 for repayment of the liabilities of the bank. The appellants-defendants company availed and utilized the above loan but no efforts were made towards the adjustment of their loan liabilities, the repayment of Rs,40,000 per mensem as per terms of the sanction advice was not made in spite of the repeated notices and reminders. In November 1985 the appellants were asked to adjust the outstanding liability of Rs,11,58,420.69 against which a Promissory Note dated 13-11-1985 was executed in favour of the bank confirming the outstanding balance. The appellants-defendants in spite of several reminders and notices failed to repay the outstanding amount. Consequently the bank under the circumstances filed a suit for the recovery of Rs,11,58,420.69 alongwith the compound and penal interest until realization of the total amount. The appellants appeared before the Special Court and applied for leave to defend the suit on the grounds inter alia that the personal Guarantee has become time-barred, the suit is based on fictitious documents, incorrect statement of account containing unauthorised entries, that the defendants have repaid the entire loan amount and the plaintiff cannot claim any amount in excess. However, the learned Special Court refused to grant leave to defend the suit and decreed the suit in favour of plaintiff- respondent with costs.
4. The contention of the learned counsel for the appellants is that they have been making re- payment against the debts and that unauthorised charges like penal interest, taxi charges, telephone charges etc. Have been made from the appellants which are against the terms of agreement entered between them. He submitted a statement of accounts, according to which a sum of Rs,4,21,742 from the principal amount, a sum of Rs,2,36,220 from the interest and a sum of Rs,20,883 as insurance premium, the total of which comes to Rs,6,78,745 is admitted to be outstanding against the appellants. He further argued that interest being against the injunctions of Islam is void and cannot be granted.
5. The learned counsel for respondent contended that the Bank documents are genuine and no unauthorised or fake entries had been made therein. He further contended that the presumption of truth is attached to the bank documents under the Bankers' Books Evidence Act. He submitted that the appellants have been avoiding the re-payment of outstanding liabilities against them on one or the other pretext. He also produced the statement of penal interest for a period from 4-1-1983 to 30-3-1983 and 1-7-1983 to 30-9-1983 amounting to Rs,28,688 and the statement of charges amounting to Rs,3,739.50. He contended that these charges have been made in accordance with the Bank Rules and Regulations and the agreement entered between the parties. He submitted that the appellants/defendants have been confirming the balance from time to time and are bound to honour their promissory note dated 13-11-1985 whereby they confirmed and admitted the liability of Rs,11,58,420.69.
6. We have heard the learned counsel for the parties and have gone through the record of the case.
7. Section 6 (1) (a) of Banking Companies (Recovery of Loans) Ordinance, 1979, confers civil jurisdiction on the Special Courts in respect of claims filed by the Banking Companies against the borrowers or by the borrowers against the Banking Companies in respect of, or arising out of a loan, all the powers vested in a Civil Court under C.P.C. Section 7 of the Ordinance provides the procedure of the Special Court that suits before the Special Courts shall come up for regular hearing as expeditious as possible and except in extraordinary circumstances and on grounds to be recorded the Special Court shall not allow adjournments and the Special Courts in all suits including suits based on mortgages of all kinds on statement of accounts for recovery of money paid to or top the order of the department follow the summary procedure provided for in Order XXXVII of C.P.C.
8. Order XXXVII of C.P.C. Provides summary procedure for disposal of suits on negotiable instruments like bills of exchange, undies or promissory notes. After the institution of the suit under Order XXXVII, the defendant shall not appear or defend the suit unless he obtains leave from the Court as provi&d under sub-rule (2) of Rule 2 of the aforesaid Order. It may be noted that in case of default of his obtaining such leave or failing to appear within the period provided for filing an application for leave to defend, the allegations in the plaint shall be deemed to be admitted, and the plaintiff shall be entitled to a decree. Rule 3 of the said order empowers the Court to grant leave to appear and defend the suit upon affidavits of the defendant which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application. The Court may grant leaye to defend unconditionally or subject to such terms as to payment into Court, giving security, framing and recording issues or otherwise as the Court thinks fit. From the aforesaid provisions, it follows that the grant of leave to appear and defend is not a matter of routine or matter of right. The defendants has to disclose a plausible defence and where there is no substantial question of law or facts needing trial and the defence set up is vague or shame, leave can be refused and the suit decreed. The appellants could not set up a plausible defence, therefore the learned Special Court was justified to refuse leave to appear and defend the suit.
9. The aforementioned provisions of both the laws are meant to have expeditious and summary disposal of suits arising out of loans of the banks. The very purpose of legislating the Banking Companies (Recovery of Loans) Ordinance, 1979, seems to ensure expeditious recovery of bank loans by providing summary procedure and inclusion of suits based on mortgages of all kinds would further indicate the intention to recover the loans quickly and promptly. In recovery of loan cases based on statements of account maintained by the banks to which presumption of correctness is attached under the Bankers' Books Evidence Act, 1891 the defendant seeking to appear and defend the suit must disclose a plausible defence or show that there are substantial questions of facts and law which need to be tried otherwise leave has to be refused, and decree shall follow in the suit.
10. The perusal of the application for leave to defend the suit filed by the appellants/defendants show no disclosure of any plausible defence or suggest any triable issues, but only vague and routine type objections have been taken. The availing of the loan facility against the registered Mortgage deed, pledge of shares, Hypothecation of stock, Letter of Guarantee and execution of Promissory Note in favour of the bank have not been denied. Regarding the statement of accounts it has been said that it was incorrect and contained unauthorised entries but no such entry was pinpointed. We do not find that any cogent and plausible or even prima facie defence was put forward which could warrant the leave to appear and defend the suit. The learned Special Court after having taken into considerations the grounds of application for leave to defend the suit, rejected the same and observed that in view of the documentary evidence filed by the plaintiff/respondent bank the appellant/defendant was unable to make out a case for the grant of leave to defend the suit.
11. The contention of the learned counsel for the appellants that the bank could not charge the penal interest, has some force, as there is no clause or provision in any of the documents providing for the imposition of penal interest in case of default. This position was also conceded to by the learned counsel for the bank, hence the bank in absence of any such agreement cannot charge the penal interest and any entry of debit in this regard in the accounts of appellants is declared to be without lawful authority and of no legal effect. As far as other charges are concerned the Bank is authorised under the Mortgage Deed Hypothecation Deed and other documents to recover the principal amount with interest thereon at 4% above the bank rate with monthly/quarterly rests and all charges, costs, expenses and commission which may be sustained or incurred by the bank or which may occur due to the bank in connection therewith. Although the bank as per aforesaid deeds was within its competence to charge other charges yet in view of the appellants' financial sickness, it may be observed that if possible may consider to waive the same.
12. The last contention of the learned counsel for the appellants was that interest being against the injunctions of Islam and the Constitution of Islamic Republic of Pakistan, the bank cannot charge any interest and no decree can be passed for the same. In this regard reference is made to Full Bench judgment reported in PLD 1987 Karachi 296, and PLD 1987 Karachi 612 wherein it has been held that in spite of the provisions of Article 2-A of the Constitution, in view of Article 270-A the provision of Banking Companies (Recovery of Loans) Ordinance, 1979 are protected and the claim of interest made under the Ordinance though un-Islamic can be granted. In view of these observations, the contention of the learned counsel needs no further consideration. As far as the pronouncement of the Federal Shariat Court reported as PLD 1992 FSC 1 on the subject is concerned, an appeal has been filed against the same and is pending adjudication before the Honourable Appellate Bench of Supreme Court of Pakistan.
13. The appellants having admitted the loan, as well as aforesaid documents are liable to make repayment of loan. The perusal of the record shows that the appellants company failed to honour their commitment of repayment of even monthly instalments. They have been, however, making certain repayments according to their conveniences and choice. There are numerous letters placed on file whereby the appellants have been time and again asked to make the repayment of the loan according to the terms and conditions but no serious efforts were ever made for the repayment of the outstanding amount. The learned Special Court has observed that in view of the documentary evidence the appellants could not make out a case for the grant of leave to defend the suit and all the documents have been acknowledged by it in favour of the Bank. The appeal under subsection (2) of section 12 of the Ordinance against the judgment and decree of the Special Court only lies on the following grounds:- "(a) The decision being contrary to law or to some usage having the force of law, or
(b) the decision having failed to determine a material issue of law or usage having the force of law, or a substantial error apparent in the procedure provided by or under this Ordinance, which may possibly have produced error in the decision on merits."
' Since the learned counsel for the appellants has not been able to point out any illegality or any substantial error apparant in the procedure provided by the Ordinance, therefore, we do not find any substance in the appeal and would dismiss it with costs with the observations as made above that the banking company cannot charge the penal interest when there is no agreement to that effect; in the circumstances given above the bank, if possible may consider to waive miscellaneous charges charged from the appellants.