MUNIR A.SHEIKH, J.- In this Constitutional petition the petitioner seeks issuance of a direction in the nature of mandamus to the following effect:- "respondent No.1 be directed to extend credit facilities and in that to disburse the remaining Foreign Currency Loan of Rs.80.883 million excluding the amount already released and further directed respondent No.1 to release the importation costs of the machinery already imported under the First (1).C. And lying at the Karachi Port out of the amount allocated under the Head of the Local Currency Loan."
2. The facts giving rise to this Constitutional petition shortly stated are that on the request of Begum Shaheen Munawar one of the Directors of the petitioner's Company financial assistance for setting-up a Solvent Oil Extraction-cum refining Plant at Chak Hyderabad Tehsil Mian Channu District Khanewal, sanction was accorded by the respondent-Bank for providing financial assistance of Rs. 122.733 Million in the form of loan for setting up a Solvent Oil Extraction- cum refining plant at Chak Hyderabad, Mian Channu District Khanewal on interest basis against the total project cost of Rs.176.498 Million which was conveyed through letter dated 27.11.1990. It appears from this letter that prior to that there were negotiations going on in writing for sanction of the said loan and the final approval was conveyed through this letter. This loan was further divided into two parts i.e. Foreign currency loan and Local currency loan. The Foreign currency loan was for Rs.80.883 Million which was meant for imported machinery including 10% contingencies and the remaining loan was local currency loan for local machinery including contingencies, construction of Muskogee seed house, partial importation costs, erection and installation charges. Break up of the total project cost as given in this sanction letter was as under:- A. Fixed Cost: (1).C. (Rs. Million) F.C. Total.
Land 25 acres and development 4.000 - 4.000 Building and Civil Works 11.000 - 11.000 Muskogee Seed House 10.000 - 10.000 Plant and Machinery 17.000 73.530 90.530 Importation cost 24.265 24265 Erection & installation 4.500 - 4.500 Furniture & fixtures 0.500 - 0.500 Vehicles 1.500 - 1,500 Pre-operational expenses 4.500 - 4.500 Contingencies (10%. Of imported mach. & 5% of local machinery 0.850 7.353 8.203 Total Fixed Cost: 78.115 80.883 158.998 B. Nct Initial Working Capital 17.500 - 17.50 TOTAL PROJECT COST: 95.615 80.883 176.498 Under the Head Financial Plan it was provided that Sponsors' Equity would be Rs.44.915 Million and General Public Equity would be Rs.8.850 Million and the Equity ratio was to be 70 : 30.
3. Para 7 of this letter provides Disbursement Schedule. Since the argument of the learned counsel for the respondents as also of the petitioner mostly centered around the interpretation of this clause in relation to its true import and meaning which led to the controversy which has brought the petitioner before this Court, therefore, the same is reproduced below in extensor for facility of ready reference:- "7. Disbursement Schedule: After execution of legal documents and investment of your equity towards construction of building worth Rs.11.000 Million, the utilization of which shall be checked through the concerned PCO to be appointed by the Project Monitoring Department, ADBP, HO, Islamabad, on the recommendations of Regional Manager, ADBP, Multan and after ensuring that the balance of Rs.53.765 Million out of your equity is held by you in an acceptable form of assets to be available for investment as and when needed, loan of Rs.10,000 Million for the construction of building shall be released in appropriate instalment on item rate basis through National Tendering.
Loan for locally fabricated machinery shall be released in appropriate, instalment through National Tendering as per contract between you and suppliers and in accordance with the Bank's standing instructions.
Loan for machinery to be imported worth Rs.80.883 Million shall be released under ADB Agro Industries Credit Line No.810- Pak(SF)/811-Pak against irrecoverable letter of credit to be established by you at ADBP, Model Branch, Lahore, To understand the procurement procedure of International competitive bidding, please contact Deputy Director (Procurement) of this Department at your earliest.
Loan for partial importation, cost, worth Rs.9.500 Million and erection and installation charges worth Rs.4.500 Million shall be reimbursed to you on submission of relevant utilization vouchers.
In case your equity is not invested at the time of opening of Letter of Credit, you will furnish tangible security acceptable to the Bank to cover 30% landed cost of machinery to be imported as an interim arrangement. In any case 10% security as required above will also be mortgaged with the Bank before you are allowed to establish L/C."
4. It has also been pointed out that excepting loan of an amount of Rs.80.883 meant for import of machinery the entire part of the loan was local currency the break up of which has been reproduced above, it included Importation cost of Rs.24.265 Million out of which as per disbursement clause as reproduced above an amount of Rs.9,500 Million only was to be shared by the Bank and remaining was to be paid by the petitioner, it may be mentioned here that whatever amount was to lie spent according to the sanction letter by the respondent under different Heads like building and Civil Works, Erection and Installation, Prc-operational expenses and Importation Cost the same as admitted by the learned counsel for the respondent was to form part of amount of equity which the sponsors were required to invest or the total equity provided in the sanctioning letter. It may be mentioned here that the amount of equity was subsequently as admitted by the learned counsel for the respondent reduced from the amount given in the sanction letter as such the sponsors equity was only to the extent of Rs.26.1 Million and to the same extent was the amount of General ( public equity. The fact that the loan as against Importation cost was Rs.24.265 Million the major portion of which i.e. More than Rs. One crore as admitted by the learned counsel for the respondent was to be paid as custom duty etc. On the arrival of the machinery imported from the Foreign country, therefore, this aspect of the case gains importance when in the later part of judgment it would be discussed as to at what stage the investment of sponsor's Equity was to be ma$3 and could possibly made as much was argued in this respect. It is significant that in the disbursement schedule an express promise was made that in case of non investment of equity at the time of opening of Letter of Credit the petitioner was required to furnish tangible security acceptable to the Bank to cover 30% landed I cost of the machinery to be imported as an interim arrangement. It was also required that in any case 10% security as required above would also be mortgaged with the Bank before the petitioner was allowed to establish (1).C. Since opening of j Letter of Credit was an act which was relatable to the disbursement of that part of loan which was termed as Foreign currency loan, therefore, this part of the j disbursement schedule is relatable to disbursement of the said part of the loan. It was admitted by the learned counsel for the respondent that subsequently as a matter of policy the requirement to provide 10% security as mentioned in this clause was waived off by the Bank, therefore, the said clause is no longer part of the sanction.
5. The first Letter of Credit was opened on the request of the petitioner by the respondent on 12.11.91 for import of machinery worth Rs.1,27,000,00/-. Since at that stage no investment as regards sponsor's equity in full had been made, therefore, the Bank as an interim arrangement under the said Disbursement clause got the land owned by Shahzad Khakwani, one of the Directors of the petitioner Company, mortgaged in favour of the Bank for an amount of Rs.35,00,000/- as such, a charge to the extent of the said amount was created in favour of the Bank which was admittedly 30% of the landed cost of the machinery to be imported. The disbursement to the extent of the said amount for import of machinery out of Foreign currency loan was made and machinery imported.
6. In December 1991 the petitioner requested the Bank to open Second Letter of Credit to import machinery worth Rs.3,36,000,00/-. Since 30% of the landed cost of this part of the machinery was Rs.1,09,000,00/- therefore, the Bank required the petitioner's Company to provide tangible security as interim arrangement till the amount of sponsors equity was invested, therefore, land measuring 225 acres belonging to Begum Shaheen Munawar was mortgaged for the said amount in favour of the Bank. According to the petitioner inspite of that and repeated requests made in that behalf by the petitioner Company the Bank pul of the matter of disbursement of the second instalment of Foreign currency loan. Ultimately on 30.1.1992 the respondent Bank intimated the petitioner that according to the revised instructions issued by the Head Office the petitioner was required to deposit 15% i.e. Rs.33.680 Million of the equity (if the same had not been invested on the project) in the business deposit account to be opened in a branch of the Bank, it was also intimated that the petitioner should also deposit accrued commitment charges as advised by the Head Office vide letter dated 7.11.1991. This gave rise to the present controversy which was in the first instance brought before the Wafaqi Mohtasib by the petitioner through a complaint in' which Wafaqi Mohtasib after considering the material placed before him held that the said demand by the Bank was not justified and it was directed to release the Foreign Currency Loan and open the (1).C.
Against the decision/direction (1) the Wafaqi Mohtasib the respondent-Bank filed representation before the President which was also rejected. A review application/application for seeking clarification made by the Bank before the Wafaqi Mohtasib was also rejected. Prior to thai . >n 19.1.1993 the petitioner provided documents with regard to revised proforma and revised agreement with the Foreign party to import the machinery and had requested the Bank to open Letter of Credit. After the dismissal of application for review the Bank intimated the petitioner that the requirement of deposit of the above mentioned amount in cash had been waived but inspite of that Letter of Credit was not opened i.e the Foreign currency loan disbursement was declined, therefore, the petitioner has filed this writ petition for issuance of a direction in the form of writ of Mandamus.
7. Before proceeding with the merits of the case it is necessary to dispose of a preliminary objection raised by the learned counsel for the respondent, it was argued by him with full vehemence at his command that the rights claimed by the petitioner arise from a contract and according to firmly settled law obligations arising from contract cannot be enforced through Constitutional Petition under Article 199 of the Constitution. In support of this contention he referred to a number of reported judgments and I need not dilate upon the same as there can possibly be no cavil with the said principle. Learned counsel in support of his argument referred to different paragraphs of the writ petition as also the written statement filed by the petitioner in another Writ Petition No.4466/93 filed by the Bank to challenge the legality of the order passed by the Wafaqi Mohtasib in this case to demonstrate that it was the case of the petitioner itself that there was an agreement between the parties, as such, this is a case of enforcement of contractual obligations, therefore, the writ petition should be dismissed on this ground only and there was no need to enter upon the merits of the case as the remedy of the petitioner was to file suit for damages or if the law permits to file suit for damages or if the law permits to file suit for specific performance of the agreement.
8. This contention engaged my serious consideration. On the other hand learned counsel for the petitioner argued that it was not a case of enforcement of contractual obligations as the petitioner wants a direction to the Bank to abide by its promise of advancing financial assistance in the form of loan as sanctioned, therefore, it was a case which is not hit by the mischief of the rule of enforcement of contractual obligations in Constitutional jurisdiction. He relied upon judgments reported as The Gujarat State Financial Corporation Vs. M/s Lotus Hotels Pvt Ltd (AIR 1983 S.C. 848), Pakistan through Secretary, Ministry of Commerce and 2 others Vs. Salah-ud-Din and 3 others (PLD 1991 S.C. 546) and Federation of Pakistan and others Vs. Ch. Muhammad Aslam and others (1986 SCMR page 916).
9. The argument raised by the learned counsel for the respondent though appears to be ingenious but after considering the reported judgments and subjecting the same to rigorous test and close scrutiny the same is found to be not tenable for reasons to follow.
10. The respondent-Bank has been created under the Agricultural Development Bank Ordinance, 1961 which has been declared a corporate body, therefore, it is a juristic person. According to preamble and Section 16 of the Ordinance the main function of the Bank was to provide financial assistance in the form of loan to agriculturalist obviously from the reassures placed at the disposal of the Bank by the State. It is actually the function of the State which the State is performing through the Bank, therefore, there can be hardly any doubt and the learned counsel for the respondent did not question the correctness of the same that the Bank being a statutory body was a person performing functions in connection with the affairs of the Federation. The financial assistance as regards Foreign currency loan was to be given from the resources provided to the Federation of Pakistan by Asian Development Bank which was placed at the disposal of the Bank for providing financial assistance to different agriculturists, it is implicit in the Ordinance itself that the Bank was bound in the matter of grant of financial assistance by the provisions of the Ordinance and the rules framed under the said Ordinance. Among others Rule 11 of the Rules framed under the Ordinance provides as to in what manner, against what kinds of securities such financial assistance loan was to be given by the Bank. If the provisions of the Ordinance are read with the rules framed thereunder I feel no hesitation in holding that in the matter of grant of financial assistance the Bank has got no freedom in the settlement of terms and conditions on which the same was to be given and was bound to follow the same. One of the ingredients of a contractual obligations arising therefrom and the relationship of the two parties under a contract is that both the parties must have freedom of settlement of terms and conditions of the contract, to settle the consideration, the right to revoke the same in certain circumstances, which necessary ingredients arc not available in this ease. The Bank as already observed was performing the functions of the State and the resources of the State placed at the disposal of the Bank were to be utilized for granting financial assistance to various persons therefore, the sanction accorded by the Bank in hand for providing financial assistance to the petitioner in this case is an administrative act of the State performed in accordance with the provisions of the Ordinance and the Rules as such was a promise held out to the petitioner to avail of the said Financial assistance from the State resources on the terms given therein, therefore, was not a contract simplicity and the rule of promissory estoppel as laid down in the reported judgments relied upon by the learned counsel for the petitioner as referred above is fully applicable. It does not make any difference that the State gave that promise in the form of a notification as was done in the judgments of the Supreme Court referred to above or the same was given to an individual in accordance with the provisions of the law and the rules. In the case of 'AIR 1983 S.C. 848' (supra) The Gujarat State Financial Corporation which was a similar corporate body, in performance of its statutory duty entered into an agreement to advance loan to a company for project of setting up a 4-Star Hotel. One of the conditions subject to which the said financial assistance was promised to be advanced was that the rate of interest would be 12 per cent p.a. If re-finance is available from Industrial Development Bank of India (IDB1) at 9% p.a otherwise it would be 13% p.a. The Industrial Development Bank of India declined to re-finance as a consequence of which the Corporation declined to abide by its promise and advance loan, obviously, on the ground that one of the conditions had not been fulfilled. The matter was brought before the High Court is Constitutional jurisdiction. An objection was raised that since the petition had been filed for enforcement of obligations arising from a contract, therefore, the writ petition was not maintainable. This argument was repelled by the Supreme Court on the ground that the said Corporation was functioning under a Statute. It promised to advance financial assistance in performance of its statutory duty in the form of loan and the advancement of loan already sanctioned was declined on the ground not permissible within the ambit of the condition on which the same was advanced, therefore, it was held that it was a case of promissory estoppel, as such, the Constitutional petition was maintainable. On merits it was held that the failure of IDBI to re-finance had the effect of only enhancement of rate of interest at 13% according to the promise given by the Corporation, therefore, the Corporation could not back out of its obligations arising from the solemn promise. The argument thus fails which is hereby repelled.
11. Learned counsel for the respondent when questioned as to how after having called upon the petitioner to create charge over the land measuring 225 acres owned by one of the Directors of the Company which was complied with as an interim measure which was tangible security in lieu of investment of equity for opening Second (1).C. The respondent-Bank could back out from its promise to disburse the second instalment of Foreign currency loan, argued that the petitioner was required to invest total amount of equity before claiming disbursement of loan as per policy decision of 20.1.1992 conveyed through letter dated 30.1.1992 and in lieu thereof to deposit an amount equal to 15% the total amount of equity therefore, the petitioner could not claim disbursement of loan. He also argued that three of the Directors namely Raja Munawar Ahmad, Kamran Faruq Alamgir and Shahzada Suleman in their personal guarantees furnished (o the Bank in pursuance of the sanction letter made false statements about ownership of the properties mentioned in the said guarantees the Directors of the Company did not deposit their share certificates as required under the terms of the sanction letter with the Bank and having also not got inspected the account books of the Company, as such, the Bank was justified for withholding the disbursement of the Foreign currency loan and opening of Letter of Credit for that purpose.
12. Learned counsel for the petitioner denied that there was any false statement made by these Directors in the personal guarantees furnished by them in regard to ownership of the properties. I have noticed that the petitioner-company was not informed about the alleged false statements made by these Directors of the Company in the personal guarantees and the first letter of Credit was opened without any such objection. This objection has been raised in these proceedings with the argument that Section 24 (c) of the Agricultural Development Bank Ordinance, 1961 is attracted.
Section 24(c) of the said Ordinance which according to the argument was attracted is reproduced below as under:- 24(c) "in the opinion of the Bank false or misleading information on any material particular has been given in the application for the relevant loan, advance or credit or in any other statement or communication made in connection with any loan, advance or credit granted to him;".
It is clear from the bare reading of this clause that it is applicable in case where in the application for grant of loan, a false statement was made which led to the sanction of loan, but for which the loan would not have been sanctioned. Learned counsel relied upon the latter portion of this clause which in my opinion is not to be read disjunctively and even if the said clause is read independently and applied to any statement subsequently made in connection with the loan the same would also not be attracted inasmuch as it was admitted by learned counsel for the respondent when questioned that the directors were not required to create charge over their properties through personal guarantees and irrespective of the fact whet her any properly was mentioned in the said guarantees or not, the personal guarantee itself did not have the effect of creating charge over the personal properties of the Guarantors to make it available as security for the recovery of the loan therefore any statement regarding property made in the personal guarantees has no relevance or direct nexus with the recovery of loan as none of the Properties owned by Directors having been made security, could be proceeded against for reimbursement of loan. The provisions of Section 24 being Penal in nature are to be construed strictly. This is apart from the fact that it has been borne out from the personal guarantees furnished by Directors of Kohi-e-Noor Edible Oils Limited which was accepted by the respondent-bank, no mention of ownership of any properties by the Guarantors was made therefore, the argument has no force and is rejected.
13. Regarding the other matters i.e. Inspection of account books etc. The Company was never intimated or required by the Bank to provide the same. Even in the letter dated 30.1.1992 requiring the petitioner to deposit cash amount equal to 75% of the equity, it does not say that the petitioner failed to comply with the said conditions, therefore, it was rightly argued that these grounds have been raised as a crude attempt on the part of the Bank to justify by all means its illegal act of withholding the opening of Letter of Credit.
14. According to the sanction letter there is nothing as to which part of the equity is to be invested at what stage. This sanction letter though requires investment of equity and from its terms it is clear that the investment of equity could be made from time to time at different stages of disbursement and there was nothing in it that whole of it should be invested before disbursement of the loan. This construction and interpretation of the sanction letter is implicit from its terms.
15. As has already been pointed out the loan has been divided into two parts i.e. Foreign currency loan and Local Currency Loan. One of the major part of equity is the Importation charges of Rs.24.265 million out of which only an amount of Rs. 95,00,(XX)/- was to be shared by the Bank. The major portion of the said expenditure was to be undertaken after the import of machinery because it included the amount to be paid on account of custom duty etc., therefore, it is not possible to accept the argument of the learned counsel for the respondent that whole of equity was required to be invested before the disbursement of any portion of the loan was made. The disbursement schedule also negatives this argument of the learned counsel for the respondent as it provides that after the investment of equity towards construction of building worth Rs.11.000 Million the utilization of which was to be checked, the disbursement of Local currency loan of Rs.10,000 Million for construction of Muskogee building was to be made only if it was ensured that the balance of Rs.53,675 Million out of the petitioner's equity was held in acceptable form of assets to be available for investment as and when needed. It may significantly be noted here that the investment of Rs.11.000 Million for construction of building and disbursement of loan of Rs.10.000 Million for construction of Muskogee house was part of Local currency loan, therefore, this arrangement relates only to release of this part of Local currency loan. The paragraph immediately following this para relates to the release of loan for locally fabricated machinery which is an independent one.
Like wise release of loan for machinery to be imported was dealt with in the paragraph following the above- mentioned two paragraphs which relate to release/disbursement of Foreign Currency loan which is an independent provision in the sanction letter. In the same manner the disbursement of loan for partial importation cost worth Rs.9.500 including erection and installation charges worth Rs. 4.500 Million was to be made subject to submission of relevant utilization vouchers.
16. Learned counsel for respondent attempted to argue that different paragraphs under the Head "Disbursement Schedule" as given in para 7 of the sanction letter are not independent from each other and the act required to be performed in the first paragraph are to be performed first before disbursement could be allowed under the following paragraphs one after the other. If this argument is accepted then it has to be held that before disbursement of Foreign currency loan the petitioner was required to qualify for disbursement of loan for Muskogee building, loan for locally fabricated machinery and loan for Partial importation costs and Installation charges etc., before asking for opening of Letter of Credit for disbursement of Foreign currency loan. In my view the argument is wholly fallacious and cannot be accepted for variety of reasons he foremost being the manner in which it was interpreted and understood by the respondent-bank itself, which is demonstrably clear from its own conduct, which can safely be held to be departmental interpretation by the bank itself of this clause which furnishes strong evidence and guide line for its interpretation. For example the first letter of Credit was admittedly opened on acceptance of tangible security in the form of mortgage of land for an amount of Rs. 35,00,000/- for release of first installment of Foreign currency loan in November, 1991- and the Bank did not ask for fulfilment of conditions as given in the paragraphs, above the paragraph relating to opening of (1).C. This being the departmental construction and interpretation of this portion of sanction letter by the bank regarding disbursement schedule, therefore, the Bank cannot turn around and say that the conditions mentioned in the preceding paragraph should have first been fulfilled as a whole and only then disbursement of Foreign currency loan by opening (1).C. Could be made. Reverting to the question of refusal of the Bank to release/disburse a specific amount claimed by the petitioner on production of utilization vouchers out of the loan for partial importation cost worth Rs.9.500 million, it was argued that those vouchers relate to expenditures which were made by the petitioner regarding importation cost prior to the import of machinery i.e. For getting import licence etc. Which were to be borne by the petitioner from his part of loan for importation cost in excess of Rs.9.500 Million and the Bank was to pay only the importation cost which was to be borne after import of machinery regarding payment of custom duty etc.
17. Learned counsel for the respondent argued that though utilization vouchers were submitted by the petitioner but since those vouchers did not relate to payment of custom duty etc., therefore, payment was not released. I am afraid this interpretation put by untenable and does not find support from the sanction letter itself. From the total loan regarding importation cost, the Bank promised to share the same to the extent of Rs.9.500 Million without any further qualification that the part of importation cost relating to period prior to import of machinery itself for obtaining import licence etc., were to be exclusively borne by the petitioner. In my view the petitioner was justified in claiming disbursement of loan of partial importation costs upto Rs. 9.500 Million from the respondent-Bank relating to any expenditure regarding import of machinery whether they relate to payment of customs duty i.e. After import of machinery or before that till the total amount of Rs.
9.500 Million was exhausted, of course, on production of utilization vouchers.
18. Learned counsel for the respondent faced with this situation argued that it was provided in the sanction letter that before disbursement of loan the petitioner was required to make satisfactory arrangements for financing of working capital and provide evidence in this regard before disbursement of loan. Learned counsel for the petitioner has brought to my notice a document placed on the record by the learned counsel for the respondent regarding disbursement of loan to M/S Kohinoor Edible Oils Limited to whom the loan was given on similar terms and conditions. This document is dated 10.8.1989 and has been marked as Annex: 'A'. Para 6 of this letter regarding making satisfactory arrangement for financing of working capital says that Sponsors would submit letter from Commercial Banks stating therein that they were willing to consider working capital request of the party, the letter placed on record by respondent submitted by Kohinoor Edible Oils Limited in pursuance of this term from Muslim Commercial Bank Limited dated 28.8.1989 marked as Annex: 'B' is to the following effect:- "........ They have approached us requesting for issuance of letter that their Working Capital limit will be considered on commencement of the project by our bank. We may consider their request if they approach strictly according to uniform lending principles and on merits if otherwise considered appropriate/feasible.
This letter is issued on specific request of the clients and may not be taken as letter of intent or letter of commitment in any way".
In the similar and rather more clear terms the petitioner had submitted the letter from a Commercial Bank to the respondent-Bank regarding working capital. This objection cannot be raised now as the same shall be deemed to have been accepted and acted upon as the first Letter of Credit was opened without any objection regarding this aspect of the case and the Disbursement Schedule was made operative. Even otherwise the petitioner cannot be dis- criminated on this account as this much commitment by the Commercial Bank for providing working capital was always treated to be sufficient. During the hearing of the case the petitioner placed on record further commitment from Citibank which has been placed on record as Annex: 'C'
19. Learned counsel for the respondent then argued that it was one of the requirements that none of the Directors of the Company would retire without prior approval/permission of the respondent- Bank and in this case Raja Munawar Ahmad retired as Director without such approval or permission. Learned counsel for the petitioner called my attention to the case of Kohinoor Edible Oils Company where three of the Directors were allowed to be relieved by the respondent-Bank itself. Learned counsel for the respondent when questioned submitted that apart from those Directors being females the main consideration was that the financial position of the remaining Directors was found to be sufficiently sound, therefore, they were relieved from their commitment as Directors of the Company. From this it appears that this clause in the sanction letter could be waived of or dispensed with. Learned counsel for the respondent has not been able to satisfy me as to how this objection can be raised as at no stage this was brought to the notice of the Company that the respondent-Bank had taken exception to this before opening first Letter of Credit and even for opening the second Letter of Credit the only requirement which the petitioner was asked to fulfil was to deposit in cash 15% of the total amount of equity and nothing else. The Bank cannot take exception to this and it was not argued that the remaining Directors of the Company were not of sound financial position, therefore, the petitioner's Company cannot be dis- criminated on that account too.
20. Learned counsel for the respondent then generally argued that since the respondent-Bank is to ensure that the loan is disbursed to a Company which was of a sound financial position, therefore, the anxiety of the Bank is to make arrangements that the amount in cash was available with the Company to reimburse the loan. Learned counsel for the respondent when asked as to the procedure which a Bank generally follows before sanction of loan to a party because this objection primarily relates to a stage prior to issuance of the sanction letter because the Bank was to satisfy itself about the financial position of the applicant or Company before the sanction of the loan, has placed on record a document head as "Concept Clearance Note" which has been marked as Annex: 'D\ This is an exhaustive document and it provides a number of items about which the bank was to satisfy itself as regards financial position of the intended lone before the sanction was accorded for loan. There are no grounds to assume that this procedure was not adopted and completed before sanction of loan to the present petitioner. Learned counsel for respondent has placed on record a copy of original application filed by Begum Shaheen Munawar for sanction of loan in question which has been marked as Annex: 'E', on which a note has been given by the bank as under:- 'DC(PLA) CC Note cleared Please process 21.1.1990".
After having sanctioned the loan obviously after having been satisfied on the Concept Clearance Note, the respondent-Bank cannot turn around now and say that it could withhold the disbursement of loan because the financial position of the petitioner was yet to be re-assessed.
21. Learned counsel for the petitioner during arguments submitted that certain other Companies who were granted loan on similar terms by the respondent-Bank were treated favourably as against the petitioner's Company which is being discriminated in respect of all the above matters pointed out by the learned counsel for the respondent. An order was passed for production of the record of the loan cases of those Companies which was produced relating to Kohinoor Edible Oils Limited, Kashmir Edible Oils Limited and S.S.Oils Limited. Alongwith the record learned counsel for the respondent also moved Civil Misc: application No. 1857/93 in which the details of loans sanctioned in favour of these Companies were given and the relevant documents have been attached therewith. Though independent from the cases of those Companies, my finding are that the respondent-Bank had no justification to withhold disbursement of loan sanctioned in favour of the petitioner, I proceed to examine these cases as the records are available. In the case of Kohinoor Edible Oils Limited the original sanction was accorded on 17.7.1988. The amount of loan was enhanced on 25.5.1989 which was further increased on 14.7.1990 but before that on 30.5.1990 an order was passed for disbursement of loan with a note that the documents of entire loan be arranged as they had not been properly arranged. The disbursement to the tune of Rs.17.000 Million as partial payments for seed house, local machinery and vehicles was ordered to be made. It also shows that on this date project land itself had not yet been evaluated and it was ordered that the same should be evaluated at Rs.25,000.00 per Kanal. Conditions No. 1,2,3 and 9 under Para 7 which was similar to Disbursement Schedule in the sanction letter of the petitioner's company were ordered to be waived off. It may be noted that condition No.1 |n case of Kohinoor Edible Oils Limited related to investment of equity before disbursement. This was done on 21.7.1990. Learned counsel for the respondent has placed on record photostat copy of the letter dated 21.7.1990 which has been marked as Annex: 'F'., which shows that conditions No. 1,2,3 and 9 under Para 7 of the sanction letter were waived as those conditions had already been complied with or sett)ed. The expression 'settled" is a relative term and it appears that the condition relating to investment of equity was either complied with as it is i.e. By investment of money or the same was settled otherwise and in lieu of investment of money another form was accepted. There is also correspondence through various letters dated 25.7.1990, 28.8.1990 and 25.2.1991, regarding issuance of import licence for electrical generators, inquiry confirmation for disbursement of local currency loan etc., which shows that as regards sanction of loan and fulfilment of various conditions, it was a continued process and it was never taken that before opening of (1).C. a particular condition should first be technically complied with. Similar is the case of Kashmir Edible Oils Limited and S.S.Edible Oils Limited. Since the main purpose to summon the record of these Companies was to ascertain as to whether regarding the disbursement of loan in particular, opening of (1).C. Which related to disbursement of Foreign currency loan a different criteria was applied, therefore, that aspect of the case should have been high-lighted by the learned counsel for the respondent in C.M.No.1857/93 which was moved for the purpose of demonstrating before the Court that in respect of these Companies the same principle was followed.
About S.S.Oil Mills Limited it has been stated generally that the "sponsors deposited the entire equity minus verified expenses amounting to Rs.0.640 Million with the A.D.B.P. The Sponsors themselves invested equity against equity of "general public". I have significantly noted that no date was mentioned as to when the equity was invested and Foreign currency loan was disbursed by opening (1).C. A document has been placed on record regarding disbursement of loan of this Company which is dated 14.4.1992 and marked as Annex: 'G\ It shows that the evaluation of equity etc., continued uptil 14.4.1992 and though a date was given regarding- receipt of document as 14.4.1992 but in the part of the document relating to establishment of Foreign LC3 no date was given. Regarding Kashmir Edible Oil Mills Limited it was stated in this application as under:- "The sponsors put in their equity money minus verified expenses in full. They also produced firm commitment in writing from M/S Bank of America who undertook that at the relevant stage, money would be paid by them".
Again no date of opening of (1).C. In this case has also been mentioned in this Para which omission is significant because it was this very point which was crucial for which the record was summoned and the learned counsel for the respondent was to satisfy the Court. Though it was mentioned that the equity was put, in the form of money but the documents attached with this application regarding investment of equity by this Company prima face does not support that. Annex: 'H' shows that the security offered by this Company and accepted by the Bank was in the form of Project Agricultural land. Annex: T of this document which relates to details of equity investment shows that the same was invested in the form of land, building, electrification, importation cost, furniture and pre-operational expenses. A note given on this document on 25.5.1992 shows that the remaining equity of Rs. 7.205 Millions was yet to be invested by the general public. Regarding Kohinoor Edible Oils Mills Limited regarding investment of equity it was stated as under:- "All the equity was invested and all terms and conditions of the sanction letter were complied with.
So far as todate, they have fulfilled their terms and conditions in accordance with the sanction letter. Total equity of Rs. 60.262 Million has been invested and the project went in operation on 11.11.1991."
Again the date of opening of (1).C. Has not been given. The petitioner does not say that he would not invest the equity in full but the only question was that this was continuing process and before the full amount was disbursed he could invest the equity from time to time which appears to be the practice and the procedure.
22. Learned counsel for the respondent wanted further time to place on record further documents regarding date of investment of equity and (1).C. But I am not inclined to grant further opportunity as they should have been placed on record alongwith this application.
It may be noted that after complying with the order of production of the record and making application (C.M.No.1857/93) learned counsel moved an application raising objection that this exercise amounted to holding roving inquiry in Constitutional jurisdiction which was not permissible. I am afraid rule of roving inquiry is not applicable in this case. The record was summoned in order to ascertain as to what was the procedure adopted regarding investment of equity, holding of equity and at what stages which were questions relevant for determination of rights of the parties in this case. This application is hereby dismissed.
23. Learned counsel for the respondent insisted that in any case holding of equity in acceptable form of assets as provided in opening part of disbursement schedule was necessary before opening of (1).C and disbursement of foreign currency loan. I have already held that fulfillment of this condition was relatable to disbursement of local currency loan for construction of Muskogee Saeed House. Learned counsel for the petitioner offered that apart from charge of Rs.(1)
()9,00,000/-which has been created on the land measuring 225 acres, the petitioner is ready to create further charge of an amount of Rs.5 crore (Rs. Five crore only) on the said land by way of mortgage and is also ready to deposit original title deed of Begum Shaheen Munawar of her Bungalow owned by her in Gulberg Lahore which has been constructed over an area of more than 4 Kanals of which market value at present is not in any case less than Rs.1,50,00,000/- (Rupees one crore fifty lac only) which is the real estate for providing total equity in acceptable form. Learned counsel for the respondent requested for time to seek instructions from the Bank and later on to inform the Court. The judgment was reserved on 24.8.1993. Learned counsel for the respondent- Bank on 26.8.1993 informed the Court that the Bank did not accept the offer and stated that nothing less than deposit of Cash amount as envisaged by letter dated 30.1.1992 would be accepted.
24. Coming to the policy letter dated 20.1.1992 which has been made the basis for issuance of letter dated 30.1.1992 impugned in this writ petition it may be mentioned that no departmental instructions, administrative orders or notification could be given retrospective effect adversely affecting rights already accrued and created. In December, 199t for opening second Letter of Credit the respondent bank had already asked the petitioner to create charge of an amount of Rs.
109,00,00,000/- over land measuring 225 acres as tangible security in lieu of investment of equity as interim arrangement which was done as such a right had accrued in favour of the petitioner to get second Letter of Credit opened and the respondent-Bank was bound to fulfil the commitment/promise and to open the Second Letter of Credit and the policy decision dated 20.11992 even if it was to be applied the same could be applied in future when the petitioner would ask for opening third Letter of Credit for disbursement of remaining loan. The other objections noted above raised by the learned counsel for the respondent could also not be raised now on the same ground that the respondent-Bank had accepted tangible security.
25. Learned counsel for the respondent also argued that in view of rule laid down in judgment reported as M/s. Sandal Fibres Limited Vs. Government of Pakistan and 7 others (P.(1).D. 1992 Lah: 400), no writ could be issued.
I am afraid the principle laid down in this judgment is hardly applicable in this case. In this reported case there was no question of disbursement of loan promised by a statutory corporation the opening of (1).C of which was necessary part. It was a case where a person in its individual capacity opened Letter of Credit and the Bank wanted to back out from its commitment and to comply with the terms and conditions in the Letter of Credit and in relation thereto it was held that it was a case of contract simpliciter. In this case the terms and conditions of Letter of Credit itself were sought to be enforced which Letter of Credit itself was not based as noted above on disbursement of loan sanctioned by the public functionary, therefore, the argument is wholly untenable and repelled.
26. During the course of arguments allegations were made against Muhammad Ishaque Senior Director and Muhammad Tasnim, Director Agricultural Development Bank of Pakistan, Islamabad that the petitioner was asked to pay illegal gratification etc., which have been rebutted by affidavits sworn by the said two officers of the Bank which have been placed on the record and there are no reasons not to believe those officers.
27. I have, however, noticed that serious allegations were made against respondent No.3 in the writ petition alleging that he acted malafidely in creating hurdles regarding disbursement of loan as he wanted to benefit some other Company regarding this loan. The comments filed in the writ petition have not been supported with affidavit of respondent No.3 and no specific denial appears to have been made regarding these allegations. With reply to the civil Misc: application an affidavit of another officer of the Bank has been filed. Since respondent No.3 was impleaded in his individual capacity, in view of the allegations of malafides levelled against him, therefore, it was he who should have controverted the same by filing counter-affidavit. He has not filed the same, therefore considering, the manner in which respondent No.3 and the respondent- Bank conducted itself in this case for creating lame excuses to decline disbursement of loan, allegations cannot altogether be ignored and held to be without merits.
28. Learned counsel for the respondent-bank submitted that the petitioner had failed to construct building which should be constructed before the arrival of the machinery because the machinery has to be placed and installed in the said building as such the respondent-Bank was justified in showing its anxiety that the construction of the said building should be raised in the first instance.
Learned counsel for the petitioner has brought to my notice that the said building has to be constructed according to the design and lay-out to be provided by the seller of the machinery.
Documents have been placed on the record from which it is manifest that the sellers of the machinery refused to provide lay-out and design of the machinery before opening Letter of Credit.
Learned counsel for respondent-Bank submitted that as a matter of fact when the tenders are invited from the sellers of the machinery they usually provide with these tenders the lay out and design of the machinery. Nothing has been placed on the record as against the documents produced by the petitioner written by the sellers of the machinery declining to provide design of the machinery before opening Letter of Credit. It was pointed out by learned counsel for the petitioner which fact was not denied that the transaction of purchase of machinery was to be settled by the Bank itself and the petitioner has no say in the matter. He also pointed out that after opening the Letter of Credit a period of about 8/10 months is usually taken for arrival of the machinery during which period the petitioner certainly would construct the building which shall be got inspected by the respondent-Bank before claiming disbursement of loan for Muskogee Seed House. The argument has force therefore, the respondent-Bank has no justification to withhold opening of Letter of Credit on the ground that the building had not been constructed.
29. It may be pointed out that the policy letter dated 30.1.1992 which has been made basis for raising demand through letter dated 30.1.1992 for deposit of cash amount has not been even truly followed as the said policy decision provided that 75% of amount the sponsors equity less equity already invested should be got deposited whereas the Bank has demanded deposit of 75% of total equity both sponsors and that of general public. Documents have been placed on the record from which it is clear that inspite of repeated requests made by the petition the sponsors equity invested by the petitioner was not evaluated for a long time. According to the petitioner it has invested an amount of Rs. About 85 lacs whereas according to learned counsel for respondent- Bank equity worth Rs.60 lacs has been Invested according to the evaluation recently made.
30. Be that as it may, it is clear that the respondent-Bank has throughout been non-cooperative and trying to withhold the loan already promised on one pretext or the other, the anxiety to do so was also manifested by the fact that the respondent No.3 personally went to learned Wafaqi Mohtasib with regard to this matter. According to guide of Ministry of Industry 1991 portion-D the requirement of cash deposit had been dispensed with. According to well settled law which has also been given recognition by Section 10 of Protection of Economic Reform Act, 1992 the financial obligation could not be altered to the disadvantage of the beneficiary therefore the alteration of condition relating to investment of equity, to provide deposit of the amount in cash could not have been made.
31. Learned counsel for the respondent-Bank time and again during the arguments prayed that: through an independent Auditor appointed by the Court the assets of the petitioner's company in the bank be got audited. When questioned he was not able to refer to any clause in the sanction letter under which the same could be claimed and further there is nothing in this sanction letter that a Company was required at all times or at a particular time to keep and maintain in its bank accounts specific amount. This request is also untenable and further establishes lack of bonafides on the part of the respondent-Bank to create excuses to decline disbursement of loan.
32. For the foregoing reasons the writ petition is accepted with costs and the direction in the nature of writ of Mandamus as prayed for is issued.