JUDGMENT DR. GHOUS MUHAMMAD, J.- In the present set of first appeals as mentioned in the title since common questions of law and fact have been raised we propose to dispose of the same through a consolidated judgment.
2. The present set of first appeals have been instituted by the appellants under section 9 of the Banking Tribunals Ordinance. 1984 (hereafter: "the 1984 Ordinance"), being aggrieved by the judgment and decrees, all dated 3.8.1995, passed by the Presiding Officer (Mr. Khadim Hussain Junejo), Banking Tribunal Hyderabad in Suit Nos. 356/1994. 357/1994, 398 1994. 4021994. 353/1994.
339/1994.373/1994. 380/1994. 394/1994. 368'1994. 377/1994, 369/1994, 401/1994. 363/1994, 340/1994.
344/1994. 348/1994. 391/1994, 351/1994. 378/1994, 337/1994. 381/1994. 396/1994, 370/1994, 327/1994, 328/1994. 364/1994. 349/1994. 329/1994. 355/1994, 384/1994. 352/1994. 395/1994. 376/1994 and /1994, while decreeing the suits of the respondent-Bank.
3. Lt has been alleged by the learned counsel for the appellants that in response to the suits instituted by the respondents in the Banking Tribunal under the 1984 Ordinance, the appellants had filed written statements with a view to defend the same. The learned Presiding Officer of the Banking Tribunal Hyderabad while deReeing the suits had observed that "neither of the parties appeared to be interested in recording evidence." We have further seen from the record that the learned Presiding ' I icer had decreed the suits without framing any issues, recording am evidence and meeting any of the objections raised by the appellants.
4. We have heard the learned counsel for both sides and perused the pleadings before us as well as before the Banking Tribunal. From the said pleadings as well as from the arguments advanced by the respective sides we feel that in the present set of appeals the following points would warrant adjudication and finding on our part:-
(i) whether it was essential to deposit the decretal amount before filing the appeals in question;
(ii) whether the Banking Tribunal could decree a suit for customer'-- failure to furnish a bank guarantee or deposit an amount u/S. 6(6) and second proviso thereto of the1981 Ordinance; iii) whether the Banking Tribunal was under an obligation to frame issues and record evidence. In other words what ought to have been the procedure followed by the Banking I Tribunal while deciding the suits before it;
(iv) whether the respondent-bank in this case was claiming any amount which constituted interest and whether the said amount relateable to interest/riba was recoverable under the 16
(v) whether the documents relied upon by the respondent were in order and if the same were disputed whether the same had been executed in consonance with the provisions of law;
(vi) whether the Banking Tribunal was at all under an obligation to decree the amount as desired by the respondent bank or whether it had to determine the correct amount after necessary adjustments while taking into account set offs and counter claims of the appellants i! Any;
(vii) whether the suits in question were filed in a premature manner as here had been talks of rescheduling of the payments and compromise;
(viii) whether under the agreements of finance the provisions of the 1984 Ordinance ought not to have been invoked since the arrangements of finance were nothing but mere contracts of services in view where of the suits ought to have been filed by the respondent-bank under normal law and not under the special law as envisaged in the 1984 Ordinance;
(ix) whether the person filing the suits had to do so under an express authority backed by a resolution from the bank.
5. We intend to deal with and dispose of these issues in turn. b. The first issue can be disposed of by scrutinizing the question as to whether the first proviso to section 9(1) of the 1984 Ordinance is mandatory or directory in nature. In case the pre-condition of depositing the decretal or cither amount, as specified in the said first proviso to section 9(1). Is found to be mandatory requirement, default thereof would result in dismissal of the appeals.
However, in ease we come to the Conclusion that the said precondition of deposit of the decretal amount is only directory in nature, the first appeals under S. 9 would still be maintainable despite failure of deposit of the same. As the matter revokes round the import of S. 9 of the 1984 Ordinance we feel that it shall be both pertinent and convenient to reproduce the same:- 9.(1) Any person aggrieved by an order of the Hanking Tribunal passed under subsection (4) or S.B section (5) of section 6 or a decree or sentence passed under this Ordinance may. Within thirty days of such order. Decree or sentence, prefer an appeal to the High Court Provided that no appeal filed by the defendant against a decree shall, be entertained unless the defendant has deposited with the Banking Tribunal the amount claimed in the suit under subsection (6) of section 6 or the decretal amount: Provided further that, where the claim of the Banking Company is based on the default of the defendant in payment of agreed installments the deposit shall be to the extent of the amount of instalments in default.
(2) An appeal under subsection (1) shall be heard by a Bench of not less than two Judges."
7, The first proviso to the said section 9 stipulates that no appeal filed by the appellants against a decree shall be entertained unless the appellants first deposit the decretal amount or the amount u/S. 6(6) of the 1984 Ordinance with the Banking Tribunal.
8. While interpreting the first proviso to section 9(1) of the 1984 Ordinance we would first highlight that an analogous matter in respect of the Sales Tax Act, 1990 came before a Single Bench of the Lahore High Court in M/s. Maple Leaf Cement Factory v. The Collector of Central Excise and Sales Tax (Apples) Lahore and 2 others (1993 M.L.O 1645 = PTCL 1993 CL 656). Under the Sales Tax Act.
1990. Section 45 provides for filing of appeals while section 45(3) thereof requires the appellants to deposit both the tax demanded and tax: penalty levied, if any, before filing the appeal. The actual words of the said section 45 (3) are as follows:- "S. 45(3): Any person desirous of appealing under subsect ion (I) against any decision or order relating to any tax demanded or any penalty levied under the Act shall, before filing the appeal, deposit the tax demanded or the penalty levied or both tax and penalty."
Malik Muhammad Qayyum J. While writing for the Court in Maple Leaf, and reiving upon a number of references including case law and books on interpretation of statutes, from both the Pakistani, and foreign jurisdictions, in a well-reasoned judgment came to the Conclusion that the provisions of section 45(3) were not mandatory in nature because the said provisions were silent in respect of the consequences flowing out of non-compliance thereof. The learned Judge in his judgment in para 17 has. However, compared the said section 45(3) of the Sales Tax Act. 1990 with the comparable provisions of the Banking Companies (Recoveries of Loans) Ordinance, 1979 and the 1984 Ordinance and expressed the view that since in the latter the consequences for default or non-compliance of deposit have been categorically stated, the said analogous provisions in the Banking Companies (Recovery of Loans) Ordinance, 1979 and the 1984 Ordinance, were mandatory in nature. In this respect it would be pertinent to reproduce the relevant findings:- "17. As already observed, the consequences of non- deposit have not been provided by section 45(3) of the Sales Tax Act. 1990 by the Legislature itself. This omission is not without significance especially when this provision is compared with similar provision existing in many other statutes, like the Banking Companies (Recovery of Loans) Ordinance, 1979 and the Banking Tribunals Ordinance. 1984, which emphatically provided that no appeal shall be entertained or admitted to hearing unless the amount found due has been deposited." (See 1994 MLD 1654).
9. With due respect we are unable to subscribe to the obiter expressed in Maple Leaf (as above) in relation to the comparable provisions of the Banking Companies (Recovery of Loans) Ordinance.
1979 and the 1984 Ordinance. We do not think that just because the first Proviso to section 9(1) of the 1984 Ordinance expresses a consequence that an appeal shall not be entertained unless the defendant first deposits the decretal or other amount would not make the said first proviso mandatory in nature, lt is now well-settled that mere use of the word "shall" will not make a particular provision mandatory in nature. In fact the two words "shall" and "may" have been judiciously recognized to be interchangeable. If there is any authority needed lor the proposition it is the case of Muhammad Saleh v The Chief Settlement Commissioner. Lahore (PLD 1972 SC 326), wherein the Supreme Court has been pleased to observe as follows:- "It is now well-settled that the words "may and "shall" in Legal phraseology are inter-changeable depending on the context in which they are used, and are not to be interpreted with the rigidity which is attributed to them in ordinary prudence."
No doubt the general rule is that where a provision in a statute is vouched in negative language, while providing for consequences in case of default of conditions and preconditions specified therein, the provisions is to be taken to be mandatory in nature. However, this is only a general rule which is not without exceptions. In fact our Supreme Court has conclusively settled the matter in Jamshed Ahmed Khan and 2 others v. The SDM/Assistant Commissioner. Garden S.B-Division Karachi and others (PLD 1987 SC 213) and Dr. Slier Afghan v. Aamar Hayat Khan (1987 SCMR 1987), that no universal rule can be laid down to determine as to whether a provision is directory or mandatory in nature. The Supreme Court, in the two cases referred, has categorically Held that every enactment has to be construed on its own merit in light of the general object intended to be secured, the subject-matter and the importance of the provisions which are to be interpreted.
Such also appears to be the settled law in the English and Indian jurisdictions as is borne out from Liverpool Borough Bank v. Turner (1861) 30 ii Ch. 379 (at page 380) and H.M Rishbud v. State of Delhi (AIR 1955 SC 196). We feel that the correct approach while construing any provision of an enactment is to evaluate the entire scheme of the enactment, the nature of the provision in question and to ascertain the true intention of the Parliament before coming to the Conclusion as to whether a particular provision is directory or mandatory in nature.
10. Section 9 of the 1984 Ordinance provides for an appeal. The primary objective of the Legislature in legislating such a provision is to provide a right of appeal to the persons aggrieved so as to allow them forum of remedy. Dismissal of appeals on mere ground of failure to deposit any amounts specified has been deprecated by the Supreme Court as far back as M/s. Eastern Rice Syndicate v.
C.B.R. (PLD 1959 SC 364). Subsequently the case ot Maudood-ur-Rehman v. C.B.R. (PLD 1975 Karachi 51) lends further support to this proposition. Also in case we hold that the condition of depositing the decretal amount under the first proviso to section 9 of the 1984 Ordinance is mandatory in nature, the said provision would be ope*n to a prospective Constitutional challenge on grounds that a provision providing for a right of appeal is a basic natural right in an Islamic polity while any attempt to take the same away or make it restrictive, nugatory or illusory would be void and the Courts shall be empowered to strike down the offending part of that provision (See CIT r. M/s. Siemen (PLD 1991 SC 368), Pakistan v. The general Public (PLD 1989 SC 6) and Maple Leaf (Supra), paras 19 and 20). In this respect we have also been able to lay our hands on Sindh High Court Bar Association Karachi r. Islamic Republic of Pakistan (PLD 1991 Karachi 178) and Dr. Mehmoodul- Rehman Faisal Secretary,' Ministry of Justice and Parliamentary Affairs (PLD 1992 FSC 195). Wherein it has been categorically decided that in an Islamic polity there is no concept of a Court fee while in the earlier case i.e. Sindh Highh Conn Bar Association a Division Bench of this Court interpreting the Constitutional mandate contained in Articles 2-A and 227 of the 1073 Constitution has been pleased to strike down an increase in the Court-fee. While analysing these two judgments it is quite apparent that any Court fee is viewed As a hindrance in and negation of a person's right of appeal which is his basic right in an Islamic polity. If Court fee can be seen As a burden to and negation of a person's right of appeal there can be no cavil with the proposition that a mandatory condition to deposit a decretal or other amount before filing an appeal would also be a clear negation of a person's right of appeal. As we have already observed aforesaid that such a view would leave room for a Constitutional challenge and justify striking down that part of the first proviso to the said section 9(1) of the 1984 Ordinance which provides for such a precondition of deposit. It is the duty of the Court to afford an interpretation which would save the law rather than destroy the same. In this respect we would cite the decision ot Multiline Associates v. Ardeshir Cowasjee (PLD 1995 SC 423).
Wherein Sajjad Ali Shah. CJ, while sitting in a Full Bench has been pleased to observe "35. Cardinal principle of interpretation of Statutes is that a law should be interpreted in such a manner that it should be saved rather than destroyed. The Courts should lean in favour of upholding constitutionality of legislation and it is, therefore, incumbent upon the Court to be extremely reluctant to strike down laws as unconstitutional. This power should be exercised only when absolute Ly necessary, for injudicious exercise of this power might result in grave and serious consequences, In support of the proposition reference can be made to the case of Province of East Pakistan v. Sirajul Haq Patwari (PLD 1966 SC 854)".
In order to save the first proviso to section (1) of the 1984 Ordinance from being a subject-matter of Constitutional challenge and striking down the same we ought to give an-interpretation that the same is directory and not mandatory in nature. In this manner we would save rather than destroy the law.
11. In case we were to hold that the precondition of depositing the decretal or other amount as contained in section 9 of the 1984 Ordinance was mandatory in nature, it would additionally open the path for litigants to challenge decrees of the Banking Tribunal in Constitutional petitions as there are authorities for the proposition that in case filing of an appeal is subject to the condition of depositing an amount, the appeal is not an efficacious and adequate remedy in view whereof a direct Constitutional petition under Article 199 would lie. (See Eastern Rice Syndicate v. C.B.R. (PLD 1959 SC 364). And M/s. Usmania Glass Sheet Factory r Assistant Collector of Customs (PLD 1968 Dacca 276) and Nagina Silk Mills v Income Tax Officer (PLD 1963 SC 322 at 3127 (D)). In the context of the 1984 Ordinance, we have been able to lay our hands on M/s. Majeed Enterprises v. U.B.L. (NLR 1994 Civil 533= 1994 CLC 2292) where it has been clarified that due to the condition of deposit stated in the 1984 Ordinance, the right of appeal is illusory and not in the nature of an adequate remedy in view whereof the appellants could file a Constitutional petition. However, in two other recent decisions the Courts have taken the view that notwithstanding the precondition of deposit a Constitutional petition shall not be maintainable to impugn an order/decree of the Hanking Tribunal. These decisions are M/s. Tank Steel and Re-Rolling Mills (Pvt) Ltd. v. Federation of Pakistan (PLD 1996 SC 77) and Khurshid Alam v. U.B.L. (PLD 1995 Karachi 409). These two decisions are clearly in dissonance with the settled proposition of law that where the filing of an appeal is subject to the condition of deposit, an aggrieved person may invoke the Constitutional jurisdiction since the appeal in such an event could not be viewed to be an efficacious or adequate remedy. Assuming for the sake of argument we were to hold that the precondition to deposit the decretal amount u/S. 9 of the 1984 Ordinance was a mandatory requirement before an appeal thereunder could be entertained the position would be that the first appeal u/S. 9 would not be entertained in case of default of the condition of deposit while a Constitutional petition would also not be maintainable in view of the decisions in M/s. Tank Steel and Re- Rolling Mills Pvt. Ltd. And Khurshid Alam (cited above). In other words, if a person who is unable to arrange cash to meet the deposit while admittedly the decree passed by the Banking Tribunal is fundamentally perverse (as is in this case), the aggrieved person would be left without a remedy. Such cannot be the intention of the legislature while such a predicament would be opposed to all cannons of law, justice and equity.
The Courts are under an obligation to place such construction on statutes which will be beneficial to the widest extent and which would make the legislation operate fairly, justly, equitably and not unreasonably while, the Legislature presumes on enactment to operate in manner which would be just, reasonable, equitable and fair (see Mst. Zainab v. Kamal Khan (PLD 1990 SC 1051) and Kamran Industries v. Collector-of Customs (PLD 1996 Karachi 68 at page 101). An interpretation that the first proviso the section 9(1) of the 1984 Ordinance making the requirement to first deposit the decretal amount before instituting appeal is only directory in nature would allow the aggrieved person a chance to avail an appellate remedy in case he is unable lo deposit the decretal amount. Such an interpretation would also restrain us from respectfully disagreeing with M/s. Tank Steel and Re- rolling Mills {Pvt) Ltd. And Khursheed Alam cited above (enunciating the proposition that despite the precondition of deposit a writ would not lie) and in indulging ourselves to scrutinize as to whether the said two decisions are per incurium. Our proposed interpretation would also avoid a floodgate on the Constitutional jurisdiction impugning the decrees passed by the Banking Tribunals on the score that the aggrieved persons can well avail the appellate remedy without meeting the mandatory requirement- of depositing the decretal or other amount. In this context we would like to underscore that in M/s. Majeed Enterprises (cited above) it was additionally observed that the first Re-rolling Mills Ltd. And Khurseed Alam Alam that first option was closed to the petitioners-appellants without availing of the second option. In Majeed Enterprises had the learned Judges been aware of such closure of the fist option they would not have entered into the verdict of interpreting the first proviso to section 9 as mandatory in nature. In Majeed Enterprises the observation that section 9 was mandatory was subject to availability of a writ petition as substitute remedy. In view of this we do not think that M/s. Majeed Enterprises poses any hinderance before us to hold that the pre-condition of deposit u/S. 9 is a directory condition. This is more so because of the fact that in the case of M/s. Tank Steel am1 Re-rolling Mills Pvt. Ltd. The Supreme Court has approved an Appellate Court's power and jurisdiction to resolve factual, Legal as well as Constitutional controversies. The consequence of our proposed interpretation that the condition of deposit is not ambulatory in nature would essential have the same result in the case the appellants were to file a Constitutional petition as per the directions in M/s. Majeed Enterprises.
In this manner the spirit of the statement of law and observations by the learned Judges in Majeed Enterprises remains intact. We may also point out that in Sirajuddin etc. r. Habib Bank Ltd. (NLR 1994 AC 686) the Peshawar High Court has taken the view that the use of the word, "shall" in the proviso to section 9(1) of the 1984 Ordinance suggests its operation to ho mandatory. There is no further discussion in the said judgment in this context. We have already cited the decision of M.Saleh) (PLD 1972 SC 326) for the point that mere use of the word, shall" does not make an enactment mandatory, while lm incl the -Supreme Court in Jamshed Ahmad Khan and Dr. Sher Allium cited above has clarified that there can be no universal rule for interpreting an enactment to be mandatory in nature. With utmost respect these aspects of the decisions of the Supreme' Court have not been considered in Sirajuddin. In view whereof the same loses its binding or persuasive force on the plane of stare deecisis.
12. Before parting with this particular issue we would also like to underscore another very significant aspect and which touches upon the limits of Judicial power i.e. Whether the Courts ought to follow the law stricto senso no matter how unjust and inequitable consequences may ensure or whether the Court can afford an interpretation by reading in and reading down provisions in a statute to avoid inequity. It is essential to view this controversy in the light of facts before us as, on one hand it has been argued that this Court can only apply the provisions of first proviso to section 9(1) of 1984 Ordinance in the strictest literal sense by not entertaining the first appeals if the decretal amount is not deposited, while on the other hand it has been contended that the Courts as guardians of the Constitution have the power to supply construction to provisions which if taken in the strictest sense are patently unjust. The controversy is far from simple and is in no way confined to our jurisdiction alone. As far back as in the 19th Century such a question came before the Courts in the United States wherein it was thought that the Courts ought to strictly follow the law irrespective of the consequences. In this respect the prime authority is Osborne r. Bank of United States, 9 Wheaton 738 (1824). 866 where it was observed:- "Judicial power, as contradistinguished from the power of the laws, has no existence. Courts are mere instruments of the law, and can will nothing. When they are said to exercise a discretion, it is a mere Legal discretion, a discretion to be exercised in discerning the course prescribed by law; and when that is discerned, it is the duty of the Court to follow it. Judicial power is never exercised for the purpose of giving effect to the will of the Judge, always for the purpose of giving effect to the will of the Legislature; or, in other words, to the will of the law.
In striking contrast Hamilton, J., had been noted not only to call upon the judges to declare statutes unconstitutional whenever they contravened the Constitutional but also ordained them to "mitigate the severity" and "confine the operation" of "unjust and partial (though not unconstitutional) laws." According to the learned Judge, Judicial "firmness" in turning back the "spirit of injustice" is "calculated to have more influence upon the character of our government, than but few may be aware of." And "whatever will tend to fortify that temper in the Courts" should be prized by considerate men of every description (Federalist. No. 78 page 528) (See Agresto J., "the Supreme Court and Constitutional Democracy" 1984, Ferozesons page 113).
13. In the English jurisdiction also as far back as 1610 in Dr. Bonham's case (1610) 77 ER 652 Coke, CJ.
Had observed that laws which were opposed to common sense and equity or were unjust otherwise were- void. Subsequently in England, however, the Courts in a number of decisions had Held that in England Judicial power was subservient to the doctrine of parliamentary sovereignty and the role of the Judge was to apply the dictates of law. Pickin i. British Railway Board (1974 AC 765) is an obvious illustration where the House of Lords took the view that the local or private Act of Parliament was binding and the Courts had to apply them as they were and could not disregard an Act of Parliament. Another very interesting illustration in this regard is the case of R v. Jordan (1963) Crime IR 124 where a person was convicted for uttering racist remarks. The conviction was found under a statute which prohibited raciest slurs. The Court while hearing the case rejected the plea that such statute was unconstitutional being violative of the fundamental right of the persons right of freedom of expression on grounds that due to the operation of the doctrine of parliamentary sovereignty the Courts had to apply the law as it was.
14. In Pakistan we operate under a written Constitution which prescribes a trichotomy of powers between the three organs of the state whereby the legislature has to legislate the law. The executive to implement the same while the judiciary to perform the task of interpretation. (See State v. Ziaur Rehman (PLD 1973 SC 79), Government of Baluchistan Azizullah Memo I (PLD 1993 SC 341). Government oj Sindh v. Sharaf Faridi (PLD 1994 SC 105), The State v. The Editor Daily Muslim (PLD 1995 Lahore 147, and the interpretation offered to Article 175(3) of the 1973 Constitution therein). The Courts in Pakistan Undisputedly have the power to strike down laws in case the same offend provisions of the Constitution. Also without dispute the Courts under our Constitutional set- up have been made the guardians of the Constitution and accordingly custodians of the Legal system. In Pakistan the doctrine of parliamentary sovereignty which is rigorously prescribed in England has a very limited scope, since instead of the Parliament in Pakistan, it is the Constitution which is supreme. By way of deduction since the judiciary is the final interpreter and guardian of the Constitution it is the Judicial organ which acquires a predominance over the other three organs of the State. By way of further deduction it can also be safely said that it is the judiciary which is Supreme in Pakistan as opposed to the Parliament. Accordingly, Judicial power in Pakistan has a different connotation while no doubt it is subject to limits, however, these limits are those which are prescribed by the Constitution itself and not ordinary law. The Preamble to the 1973 Constitution guarantees social, economic and political justice to meet the egalitarian expectations of the populace. Like provisions are also contained in the objectives Resolution which forms a substantive part of the Constitution in view of promulgation of Article 2-A. Article 3 of the 1973 Constitution mandates the state to ensure elimination of all forms of exploitation while Article 4 prescribes the due process clause guaranteeing that every person is to be treated in accordance with law. Article 37(d) directs the state to ensure inexpensive and expeditious justice while other provisions of Article 37 are geared to promote justice and eradicate social evils. A provision of law which would make filing of an appeal conditional upon furnishing a deposit is ipso facto unjust inequitable and hampers a person's right of appeal and militates against Articles 2-A, 3, 4 and 37 of the Constitution. The Courts or other adjudicating authorities including Appellate Tribunals and forums in order to perform their Judicial or quasi Judicial functions in consonance with the Constitution, in particular Articles 2-A, 3, 4 and 37 must read in or read down provisions conferring rights of appeal by affording such provisions an equitable construction. In our country after the decisions of Mst. Zainab) and Kamran Industries (referred above) there can be little dispute that the Courts while adjudicating causes must presume that the parliament can never intend a law to operate in an oppressive, unjust and unreasonable manner. The powers of reading in and reading down provisions have also been recognized, In Lt. Cal, Nawabzada Muhammad Ameer Khan v. The Controller Estate Duties and others (PLD 1962 SC 335). a Full Bench of the Supreme Court has accepted the Judicial power to modify the language and terms of statutes while citing with approval the following excerpt from Maxwell's Interpretation of Statutes, page 229. 1953 Edition, as follows:- "where the language of the statute in its meaning and grammatical construction leads to a manifest contradiction of the apparent purpose of the enactment. Or io sonic inconvenience or absurdity, hardship or injustice, presumably mn intended, a construction be put upon ii which modifies die meaning of the words and even the structure of the sentences;:."
(See p. 143 of the judgment)
(underlined by us)
The underlined pari of the above quotation amply reveals that even where there is some patent inconvenience, absurdity hardship or injustice embodied in the operation of a statute and presumably such hardship is not intended. Courts can supply construction by way of modification.
In Mst. Zainab and Kamran industries it has already been Held that such inconvenience, hardship etc. Can never there intended by the Legislature and this is to he presumed by the Courts.
Accordingly, a law which may cause inconvenience or hardship must be read down by the Courts to make it operate in a just manner since such is the intention of the Parliament. The decision of Lt. Col. Nawabzada Muhammad Amir Khan had been subsequently approved by another Full Bench of the Supreme Court comprising six Hon'ble Judges in Muhammad Ismail I The State (PLD 1969 SC 241), while the Court's power to read in and read down statutory provisions have also been accepted in another case (bearing the same name as the earlier one) i.e. I.I. ('<>1. Nawabzada Muhammad Amir Khan v. Controller of Estate Duties and others (PLD 1962 SC 335). In the Indian jurisdiction also a Court's power to read in and read down provisions is well-settled. (See A Sanyasi Rao and others i. Government ol Andhra Pradesh (19X0) 178 ITR 31. Sat Pal and Co. v. Excise and Taxation Commissioner am1 others. (1990) 185 ITR 375 and Shri Venkateswara Timber Depot i. Union of India and others (1991) 189 ITR page 741. In India this power has been exercised to save statutes and bring them in line with the provisions of the Constitution. Our proposed interpretation to the first proviso to section 9(1) of the 1984 Ordinance by way of reading in and reading down its terms would not only save the statute but would also bring it in consonance with Articles 2-A. 3, 4 and 37 of the 1973 Constitution. While dilating upon this issue we are also cognizant of another principle of law that an interpretation should be offered to statutes which would advance the remedy and not negate the same while a provision which is to confer the right of appeal is to be construed liberally, being an enabling provision providing a forum of remedy to a proposed appellant. (See M/s. Crescent Textile Mills i. Commissioner Workman's Compensation (PLJ 1979 Karachi 253). Malik Aftab Ashan v. Mian Alta/ Ahmed (1991 CLC Note 327) and Muhammad Ali v. Muhammad Amir. CPU) 1995 Lahore 124) for the proposition that an interpretation is to be offered which is to advance the remedy and prevent mischief). Accordingly, the right of appeal cannot be whittled down.
15. For the detailed reasons as aforesaid we hold from multifarious facets that the first proviso to section 9(1) of the 1984 Ordinance is only directory in nature and the first appeals to the High Court are entertainable in the absence of deposit of the decretal or other amount specified therein while such appeals ought not to be dismissed only on the sole ground of default of such deposit.
16. The second issue which we undertake to tackle is whether the Banking Tribunal could decree a suit for a customer's failure to furnish a bank guarantee or deposit of an amount u/S. 6(6) and the second proviso thereto of the 1984 Ordinance. Although the judgments impugned against do not touch or discuss the said section 6(6). However, it has been contended by the learned counsel for the respondent bank that in case we were to allow the appeals of the appellants by way of a remand we ought to direct the Banking Tribunal to order the appellants to furnish security in terms of the said section 6(6). Before adverting to this issue we feel it pertinent to reproduce the provisions of the said section 6(6):- "Section 6(6)
All suits filed in the Banking Tribunal shall be disposed of within ninety days of the filing of the plaint and. In case the proceedings Sick.......................................................................................
Banking Tribunal continue beyond a further period of 120 days the defendant can be required to deposit with the Banking Tribunal the amount in cash claimed in the suit and on failing to make such a deposit within 15 days, the Banking Tribunal shall pass a decree in favour of the bank as prayed for in the suit.
17. The learned counsel for the appellants contended that the requirements to submit a bank guarantee or cash deposit under/S. 6(6) where the suits are pending are against Articles 23. 24 and 25 of the Constitution. There is some weight in the argument since it is quite possible that the delay in deposit of the suit by the Banking Tribunal may occasion due to no fault of the customers but on account of the conduct of the Tribunal itself or the counsel for the Banks eg. Where the Tribunal finds no time to dispose of the suit within the stipulated time or where the bank's counsel seeks time. The delay may well occasion due to default of the customers, however, the possibility of the former could also not be over looked. In case the delay beyond the stipulated period was not attributable to the customer, it would be very unreasonable and unjust to penalize the customers.
Therefore, a direction by the Banking Tribunal to furnish a bank guarantee or a cash deposit before finalization of the cause would amount to emburdening a part) before the actual outcome of the cause. Prima faice, this predicament would militate against Articles 23. 24 and 25 of the Constitution, however, in Tank Steel and Re-rolling Mills (Pvt.) Limited (cited supra) the Hon'ble Supreme Court has given a finding that the said section 6(6) is not repugnantly to Articles 23, 24 and 25 of the Constitution. Such view has also been taken in Zarat International v. Banking Tribunal (1995 MLD 1546). We may respectfully point out that the Hon'ble Supreme Court in coming to this Conclusion has not assigned any reason (see para 11 of the judgment) except expression of its agreement with the FINDINGS of the Division Bench of the High Court in this regard. As a Court functioning subordinate to the Supreme Court and operating under the Constitution we feel that we are bound by this finding under Article 189 of the Constitution. Hence we reject the contention of the learned counsel for the appellants that the provision of the said section 6(6) are ultra vires Articles 23,
24. And 25 of the Constitution. We, however, feel that such a provision i.e. Condition to furnish security u/S. 6(6), prima facie offends Articles 3. 4 and 37 of the Constitution. Law favours a Judicial forum to act in consonance with the dictates of justice and equity where a cause is decided expeditiously but no doubt after giving full and ample opportunity to all sides. Law not only dissuades pre-judging and pre-determining causes but also emphatically discourages burdening and hampering of litigants before the outcome and finalization of causes. The concept of furnishing a security during pendency of litigation is not new.
Order 38 of the C P C. Is one such illustration where the Civil Court is empowered to direct a litigant to furnish security or pass an order of attachment before judgment. However, this power is to be exercised sparingly and as matter of last resort where the Court is satisfied that the person against whom such an order is sought may abscond, there is likelihood of that person transferring away his funds outside the jurisdiction of the Court or where a person is likely to thwart a prospective decree.
However, no such requirements have been spelt out as prerequisites to the exercise of powers u/S. 6(6) where the only excuse to order furnishing of security is delay of disposal beyond the stipulated time, In case delay is not attributable to the defendant-customer an exercise of such power under section 6(6) could also mean that the Tribunal or the counsel for the Bank would be making the customer a scape-goat for their own follies. This would clearly violate the provisions of Articles 3, 4 and 37 of the Constitution while also militating against the settled principle that an act of Court shall prejudice no one. We are not inclined to strike down the provisions under discussion as it is also settled law (see Multiline cited above that the Courts should first make an effort to save statutes and the power to strike down should be employed As a matter of last resort. We feel that we can reconcile the offending portions of section 6(6) by holding that the requirement to furnish security is only directory and not mandatory in nature Accordingly, in case the customer is unable to furnish the security as stipulated therein, the Banking Tribunal shall not decree the suit in favour of the Bank only for that reason. Our reasons for holding the provisions of section 6(6) to be only directly in nature are the same as are so in relation to the first proviso to section 9 (see above).
Additionally, the Banking Tribunal has the power to decide the cases expeditiously and within time.
Mere delay in the disposal of the cases should not be the only reason for burdening the litigants. It is the duty of the Legislature to legislate such laws which are not oppressive, unjust and one-sided, where the Legislature provides for a forum entrusted with the task to adjudicate matters, the rules of adjudication (High1 not only to be reasonable and just but they ought also to he seen to be such.
Accordingly, where the Legislature provides lor a Court or a Tribunal to take cognizance of matters, such Court or Tribunal would also have the power to grant interim relief and any rule or law framed by the legislature which w ould have the propensity to negate that power would also he prima facie avoidable eg. Where the legislature provides that in case a cause is not decided within a stipulated time the Court/Tribunal shall not have the power to pass an interim order or the interim order passed would cease to exist. Such a provision would not only by unreasonable and oppressive but would also seriously question the Judicial power vested in judiciary. In case a Court is called upon to interpret such a provision it ought to give a finding that such provision making interim orders to cease before finalisation of causes is only directory in nature and not mandatory.
The Conclusion would then be that despite such a provision the interim order would continue till either the case is finally disposed of or some other intervening event may ensue to warrant vacation-of the interim order by the Court. To allow interim orders to cease merely by lapse of time automatically would be patently unjust unreasonably and violative Of Articles 3, 4 and 37 of the Constitution. In such cases the better approach would be for the Courts to read in and read down such provisions for a beneficial interpretation ensuring a just Conclusion. (See discussion above in the context of section 9(1)). Before parting with this issue we would like to observe that the legislature should also avoid making laws which are oppressive, unreasonable, inequitable and one-sided as such laws would run the risk of being shuck down in case the Courts are unable to save them buy supplying construction.
I8 The next issue to which we would address our minds is whether the Banking Tribunal is under any obligation to frame issues and record evidence and as to what ought to be the procedure followed bv the Tribunal when deciding suits before it. Section 5(1 Ma) of the 1984 Ordinance makes it clear that the Banking Tribunal while exercising Civil jurisdiction shall have the powers as are vested in a Civil Court under the CPC.
Furthermore, section 5( 1)(d) of the 1984 Ordinance clarifies that in all matters with respect to which the procedure has not been provided for in 1984 Ordinance, the Banking Tribunal shall follow the procedure as laid down in the CPC. Also section 5(2) confirms that the Banking Tribunal is a Judicial forum which has to exercise Judicial powers in accordance with law. A bare reading of these provisions underscores and amply crystallizes that the Banking Tribunal has to exercise powers in a judicious manner. Also where a particular procedure is provided for in the 1984 Ordinance the Banking Tribunal has to follow the same, however, where such procedure is lacking the Banking Tribunal has to follow the procedure as laid down in the CPC. Once a suit is filed and the claim therein is denied by the other side the only manner in which a Civil Court can proceed adjudication is to first frame issues: In this respect Order 14 of the CPC is relevant which provides for framing of issues where material propositions of fact and law are affirmed by one party and denied by the other (also see Abdul Khaliq qureshi v. Saeed H. Shah and 5 others (PLJ 1979 Lahore 466). Subsequently, once the issues are framed the parties may have to lead oral or documentary evidence, as the case may he (see Order 10 of ('PC) and the Court may have to examine witnesses and record evidence to decide the issues before it. Since the 1984 Ordinance does not specify the manner or procedure to deal with claims which are in dispute, by virtue of section 5(1 )(d) the procedure contained in the CPC becomes applicable to suits tiled in the Banking Tribunal, The Banking Tribunal is these suits issue in failed to either frame issues or record evidence in..Absence whereof it can hardly be said that it ascertained the real controversy between the parties and disposed of the same in accordance with law. It is the duty of any Court or Tribunal to frame issues which either arise out of the pleadings or form the evidence which is led. The Courts while framing issues ought to be liberal and should also As a matter of course allow additional issues, which can also be done at appellate stage where the request for framing of additional issues is made which would decide a point of law or fact capable of altering the result of the cause in which case an issue would then become both necessary and proper. In view of the failure of the Banking Tribunal in these suits to frame issues and to allow the parties to lead evidence thereon we hold that the impugned judgments/decrees are defective and are Liable to be set aside with the direction to the Banking Tribunal to frame proper issues, allow the parties to lead evidence thereon and they decide the matter in accordance with law. In the context of appeals before us it was the respondent bank who as plaintiff had to bring evidence first and in failure thereof it was hardly the appellants who could be blamed. The appellants had disputed the claim of the respondent- bank in view whereof it was necessary to frame issues and allow evidence. At first we were willing to set aside the impugned judgments/decrees without any direction of remand, however, from the record it appears that the respondent-bank was also not allowed reasonable opportunity to lead evidence. It is needless to mention that in ease proper opportunity was provided to the respondent-bank which the plaintiff in the respective suits the proper course would have been to dismiss the suits or in appeal to set aside the impugned judgments/decrees without a further direction of remand.
19. The next issue that we shall tackle is whether the respondent bank in this case was claiming an amount which constituted interest/riba and whether the said amount reliable to interest/riba was recoverable under the 1984 Ordinance. We intend to answer this question only by way of laying down the general principles with directions to the Banking Tribunal to apply these principles to the facts in issue.
20. The learned counsel appearing for the appellants has stated that the finance in issue were nothing but interest based in view whereof the interest part of the finance cannot be recovered as the element of interest constitutes be and has been declared un- islamic by the Federal Shariat Court in the case of Mahmood-ur- Rehman Faisal i. Secretary Ministry of Law (PLD 1992 FSC 1). The leamed counsel for the appellants has further placed reliance upon the decisions ol Irshad H. Khan T. Parveen Aijaz (PLD 1987 Karachi 466). Habib Bank r. Muhammad Hussain (PLD 1987 Karachi 612 > and Aijaz Haroon v Inam Durrani (PLD 1989 Karachi 304) to support his contention that any interest chargeable by the banks would be un-islamic, unenforceable and hence cannot be recovered. On the other hand, the learned counsel for the respondent had placed reliance upon the decision of Habib Bank Limited v Ms.Waheed Textile Mills Limited (PLD 1989 Karachi 31\ for the proposition that the High Court could not annul legislation on the touch-stone of Article 2-A and that interest was recoverable in addition to the principal amount by the banks. Without going into the controversy as to whether the claim of interest is illegal and not recoverable we can decide the issue as to whether Banking Tribunal has the power to order its recovery in a suit filed before it by a bank.
21. The preamble to the 1984 Ordinance makes it very clear that the machinery contained in the 1984 Ordinance is not intended for recovers' of finances which are based upon interest. In this respect we would like to reproduce first part of the said preamble which reads as follows:- "Preamble: Whereas it is expedient to provide a machinery for recovery of finance provided by banking companies under a system of financing which is not based on interest."
Section 2(e) of the 1984 Ordinance also defines the term "finance". Clarifying that such definition shall not include facilities based upon interest. In this respect we would also like to reproduce the definition of the term "finance" as contained in the said section 2(e) which reads as under:- "Finance includes an accommodation or facility under a system which is not based on interest but provided on the basis of participation in profit and loss, mark-up or mark-down in price hire purchase, lease rent-sharing, licensing, charge of fee of any kind, purchase or sale of any property, including commodities, patents, designs, trade marks and copyrights, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate. Musharika certificate, modaraba certificate, term finance certificate-or any other mode other than an accommodation or facility based on interest and also includes guarantees, indemnities and any other obligations whether fund based or non-fund based, and any accommodation or facility the seal beneficiary whereof is a person other than the person to whom or in whose name it was provided; and"
There is no cavil with the proposition that a finance which is based upon interest is not recoverable through the machinery provided under the 1684 Ordinance. Such interpretation is amply borne out from the clear terms of the Statute (i.e. The 1984 Ordinance) as would also be apparent from M/s. Capital Farms r. K.D.F.C. (PLD 1996 Lahore 99 at p. 119) J. The learned counsel for the respondent- bank has stated that such objection could not now be raised by the appellants as like objection had not been taken at the original stage and also that while availing the facility of loan the appellants were well aware of the amount of interest, if any. Which was attached to the facility. As regards the first objection we fell that the same is not tenable as the qualification of a particular forum to take cognizance of a particular cause would be a jurisdictional point which can be taken at any stage. To say that the Banking Tribunal has no authority to take cognizance of suits with interest based finance amounts to challenging the very jurisdiction which can be permitted to be raised at the appellate stage. In respect of the second objection that at the time of accepting the banking facility the appellants were fully aware of the interest based finance and now should be estopped from raising such a defence, we would like to cite the ease of M/s. Tank Sled am1 Re- rolling Mills Limited (cited above) where the Hon'ble Supreme Court has observed in the following terms:- "Nonetheless. The petitioners are apparently estopped by their own conduct to question the vires of section 6(6) dm! As while taking the loan from the Corporation they conveniently ignored the rigours of the first Ordinance but when the Corporation sought the recovery of the loan they got mindful of its effect of violation of the Injunction of Islam and Sunnah, "(see PLD) 1996 SC 84 at para 10)".
The above observation of the Supreme Court has to be read in the context of striking down the elements of interest in a finance facility on grounds ol Article 2-A as such discussion has preceded the observations cited above. We may also added that the above observation of the lHon'ble Supreme Court-cannot be extended to support the plea that even where the finance is interest based the Banking Tribunal under the 1984 Ordinance would still be authorized to lake cognizance of the matter on grounds that such facility was agreed upon by the customer, such an interpretation would be against the clear terms of the 1984 Ordinance which categorically precludes interest-based finances from the ambit of the Banking Tribunal and in case a suit in relation to such finance is filed with the Banking Tribunal the same would fail for reasons that the latter would have no jurisdiction under law to entertain such claims. The proper course in that case would be to seek transfer of such suits to the proper forum of permitted by law otherwise. The question then arises an to when a particular finance ought to be construed as non-interest based and when it ought to be seen as otherwise. The learned counsel for the respondent-bank that in all the documents of finance the term interest has not been used and instead the term mark-up has been eomployed. We fell that just by substitution of nomenclature the essential attributes of a particular finance cannot undergo, a change. The Banking Tribunal has to essentially scrutinize the substance of the finance. It is only where in substance a claim pertains to a non-interest based finance that the Banking Tribunal should accept its jurisdiction over the matter. "Interest" is synonymous with the term "riba" which has ben defined by the federal Shariat Court in Dr. Mahmood-ur-Rehman Faisal (cited supra) as the excess over and above the sum lent in transactions where deferred transfer of a commodity or money is involved which is prohibited in Islam, lt has also been stated that such prohibition covers not only loans and debts but also credit, barter, deterred exchange of currency, demonetization delayed payment of remuneration after devaluation or revaluation, indemnity and change in the unit of currency at the time of redemption of loan (See had note(p)). The decision of the Federal Shariat Court i.e. Dr. Mahmood ur-Rehman faisal (cited above) is already a subject- matter of appeal before the Shariat Appellate Bench of the Supreme Court in view whereof the said decision shall not be deemed to take effect till disposal of the appeal according to the proviso to Article 203-D(2) of the Constitution. This, however, can be no justification to bring a claim on interest based finance before the Banking Tribunal under the 1984 Ordinance. The Banking Tribunal which entertaining such causes must first determine the nature of finance, eg. Under a Morabaha mode of financing i.e. Were a bank purchases a commodity on behalf of a contracting party and sells the same in turn to the customer at a cost plus arrangement, there must be such an actual transaction which must exist and the entire attempt must not be to conjure up a sham transaction where such a cost plus arrangement is only on paper and no actual goods are purchased, repurchased or sold. In case w here the arrangement is only on paper the finance could hardly be visualized as free from interest in which case the Banking Tribunal would have no jurisdiction. Another obvious illustration is where under a musharika arrangement (where the idea is essentially a profit and loss sharing arrangement) a predetermined percentage of profit and loss is fixed. This would completely negate the concept of masharika and point to an arrangement being based upon interest. Once again the Banking Tribunal would have no jurisdiction. Many other like illustrations could be cited.
22. The Banking Tribunal should accordingly look into the documents and other evidence partaining to finance and then determine in light of the above and other goodiness as to whether the finance in issue in these suits are based on interest or whether they are non-interest based. It is only in the case of the latter that it should take cognizance.
23. Nextly, we shall deal with the objection as to whether the documents of finance executed by the respondent-bank are in order and in case there is any illegality in respect thereof, whether the same could annul the contracts of finance.
24. The parent objections taken by the learned counsel for the appellants in this regard are that the documents have been obtained by the respondent-bank in blank forms while the same have not been properly witnessed. Also the entire transaction is very unfair. The counsel for the respondent on the other hand has contended that the appellants have entered into the contracts of finance of their own free will and the Court has no power or authority to question the fairness or unfairness of contractual transactions. Furthermore, there ws absolute Ly no scope to question the documents themselves. The learned counsel for the respondent has denied that any signatures were obtained on blank forms and has submitted that even if the same were the position such was the practice of all banks and no exception could be taken in respect thereof. We would not go into the controversy of whether any documents in blank forms were in fact obtained. We would leave this factual matter for the Banking Tribunal to ascertain after sifting the evidence. However, we would make an attempt to once again lay down the principles of law which ought to govern the contentions raised by the appellants.
25. The classical theory in the law of contract is only aimed at procedural fairness. In other words, such theory propagates the idea of freedom of bargaining power, while only laying down rules of procedure which would ensure that the process of negotiations and Conclusion of the bargain are fair. The classical theory is not concerned with the substantive fairness or justice in the outcome of the contract. In modern times, however, the classical theory has been subject to debate, criticism and erosion and the Courts have been seen to even strike down or amend contractual terms on grounds that they lead to consequences which are extremely unfair, unjust and unreasonable. In Han r. O'Cornor (1985) AC 1000 at p. 1017-1018 the distinction between procedural and substantive fairness has been made by the Privy Council. When talking about substantive fairness in the outcome of a contract the fundamental idea is to remedy a grossly excessive or deficient price agreed upon, terming it to be unfair. (See Atiya P.S. "An Introduction to the Law of Contract." 1995.
Oxford, Clarendon Press, 5th Ed, p. 285 to 303). The reasons for agreeing at the unfair price may be due to many factors, some of which can be: where the parties have lacked information of the commodity or market; parties have not really read or understood the terms of the contract or where they have lacked the opportunity to be familiarized with the terms eg. Where the notice of the terms are not adequate. An illustration ol the latter is the case of Interfo Picture Library Ltd. v.
Stiletto Visual Programmes Ltd. (1989) QB 433, in which case the plaintiffs supplied some transparencies on hire to the defendants, together with a note setting out their terms. These terms included a "holding charge" which was about ten times the charge made by the similar agencies.
The defendants were Held by the Court of appeal not bound by these terms because the same had not been sufficiently brought to their attention. The Court in taking this approach had been swa yed by the fact that the price of the holding charge was exorbitant. In case the price was reasonable the Court may not have interfered in the contract. The case of Interfo is. Accordingly, an authority for the proposition that the Courts are concerned with substantial justice even in contractual eases so as to ensure that the end result of a contract is fair. The Courts in modern limes have been more willing to question the fairness of a contractual consequences than they had been in the past and in doing so the Courts have resorted to the doctrines of "unconscionable bargains", "inequality or unconscionability of bargaining power" or "economic duress." Where one of the parlies to a contract is in a position to dominate the will of the other and the contract is apparently unconscionable, that is, unfair, the law presumes that consent must have been obtained by undue influence. The burden in such a situation is then shifted on the stronger party to prove that he did nothing to over bear the the other. An obvious illustration in this regard would be the case of Wajid Khan r. Raja Ewaz Ali Khan (1891) 18 1A 144, where an old and illiterate woman, incapable of business, conferred on her confidential Managing Agent, without any valuable consideration, an important pecuniary benefit under the guise of a trust. Their lordships of the Privy Council were pleased to observe that "all the facts of the case go to show that there was active undue influence. The onus is on the grantee to show conclusively that the transaction is honest, bona fide, well understood, the subject of independent advice and free undue influence." Other illustrations in this regard are Rennee Anna Purni r. Swaminatha (1910) 34 Mad. 7 where the presumption of undue influence was raised when a poor Hindu widow, having no means for maintenance, borrowed, in order be establish a right to maintenance, a sum of money at 100% rate of interest; Chunni Kam v. Rup Singh (1889) 11 all 57 where ' person, without having the means of subsistence) in order to prefer an appeal against judgment, borrowed Rs. 3,400/- on a bond promising to pay Rs. 25.000/- within a year from recovery of the possession of an estate. The presumption of unconscionableness was raised; Kiri pa Ram r. Samiuddin Ahmed Khan (1903) 25 all 284 where a youth of 18 years of age, spent-thrift and drunkard borrowed Rs. 900/- on a bond bearing compound interest at 2% per mensen with monthly rests, the Court said that "the- instrument itself bears upon its face the impress of unconscionable dealing, the rate of interest charged being so exorbitant"; Balkrishnadas v. Madanlal (1960) 29 all 303 where a person of an age of some 28 years, the son of a wealthy man, but of profiligate habits and greatly in need of money, his father having refused to supply him, executed a bond to secure a sum of Rs. 500/- with 37 A interest with six- monthly rests, the bond further providing that the sum would be repayable within three years and even if it was repaid the interest would run for three years. In all these illustrations the Court gave relief by scaling down the rate of interest to what appeared to be reasonable in the circumstances. In Philip Lukka v. Franciscan Assn (AIR 1987 Ker. 204) a gift in favour of a religious organisation by a person weak in mind and suffering from ill health was Held to be one which carried the apparent impress of undue influence. In Bhimbhai v. Yshwantrao (1900) 25 Bom. 126 a farmer, unable to pay back a loan, executed a sale deed in favour of the creditor of his property three times the value of the sum due, the Court granted relief by setting aside the sale and allowing the former to pay the lender within a fixed period. On the principle of inequality of bargaining power between parties which can give rise to an economic duress the prima illustration is the decision of the Court ot appeal in Lloyd Bank v. Bundy (1975) ' QB 326. In this case a contractor borrowed a sum of money from a Bank. He could not pay back the same in time. The Banker pressed for payment or for security. He suggested that his father might mortgage the family's only residential house. The Bank Officer visited the father and obtained his signatures on ready-made papers. The contractor still could not pay and the Banker sought to enforce the mortgage which might have meant throwing out of the family from its only residence. The contractor relied upon the unfair character of the mortgage. The Court of the mortgage, while Lord Denning MR locating the principle of inequality of bargaining power observed as under:- "English law gives relief to one who, without independent advice, enters into a contract upon terms which are very unfair, or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influence or pressure brought to bear on him by or for the benefit of the other."
In another case i.e. Universal Tankships Inc. v. International Transport Workers Federation (1982) 2 WLR 803 HL the House of Lords allowed a Shipping Company to recover back from the Workers Federation 80.000 US Dollars which were paid under an agreement and which agreement the Shipping Company had to execute because the workers did not permit the ship to leave without signatures, lt was Held that the act of the workers amounted to economic duress upon the shop owners. The conduct was so catastrophic as to amount to coercion of ship owner's will which vitiated their consent to those agreements and payments made by them. The Bombay High Court in Dai-ichi Karkaria P. Ltd.v. Oil & Natural Gas Commission (AIR 1992 Bom. 309) followed the decision of the House of Lords in Universal Tankships to invoke the principle of economic duress. In Dai-ichi the Court Held that where a supplier of raw materials to the ONGC, which was an import substitution, gave a Bank guarantee to the ONGC which was to be enforced only when the customs duty paid by the supplier was refunded to him and he was asked to drop this condition and make the guarantee absolute with the stipulation that the said condition would be orally observed, it amounted to economic duress and fraud. The concept of economic duress was not to be confused with the existence of commercial pressure which in some degree always exists in any commercial transaction. In this respect it would be pertinent to cite a decision of the Privy Council reported in Pas On v. Lao Yiu Long (1908) AC 614 PC. In this case Lord Ziplock while underscoring the rationale behind the law of economic duress was pleased to observe that where the apparent consent of the party aggrieved is induced by pressure exercised upon him by the other party which the law does not regard as legitimate the resultant consent will be treated as revokable unless approbated expressly or by implication after the illegitimate pressure has ceased to operate on the mind. While distinguishing between economic duress from mere commercial pressure his Lordship was of the view that the latter itself did not amount to economic duress. The Privy Council further identified two essential ingredients necessary to constitute economic duress i.e., (i) pressure amounting to compulsion of the will of the victim; and (ii) the illegitimacy of the pressure exerted. In other words, the victim of the duress must have no other choice. In another case on the subject i.e., ' Atlas Express-Ltd. v. Ka/co (1989) 1 all ER 641 QBD Commercial Court, a national road carrier backed out of the contract already entered into and compelled the other side to renegotiate the terms of the contract. The defendants were heavily dependant on the retail chain's contract and were unable at the time to find an alternative carrier. They agreed to the new terms but alter on refused to pay at the new rate. The Court observed: "Where a party a contract was forced by the other party to renegotiate the terms of the contract to his disadvantage and had no alternative but to accept the new terms offered, his apparent consent to the new terms was vitiated by economic duress."
The Court in Alias Express relied upon Lord Denning's dictum in D A C Builders Lid. v. Rees ( 1965) 3 all ER 837, 841:- "No person can insist on a settlement procured by intimidation."
It has been contended by some that the doctrines of unconscionability of bargaining power and economic duress would only apply in cases where the aggrieved party had no opportunity to seek independent advice or was illiterate/ignorant or extremely poor, In other words, the procedural aspects before finalisation of the contract had to be looked at and not the ultimate or substantive fairness. This may not be now a correct statement of law. In this respect we would refer to'
Cresswe ll w Pouer (1978) 1 WLR 325n and Backhouse r. Backhouse (1978) 1 WLR 243. Each case concerned a wife who was a joint owner of a matrimonial home, subject to a mortgage. In both cases, the marriages had broken down, the wives had left the home', and had been persuaded (though with no overt signs of pressure or undue influence to sign agreements surrendering their interests in the matrimonial home in return for an indemnity against liabilities on the mortgage. The indemnity was, almost valueless since it was of no importance so long as the house was worth more than the mortgage, and in those days of rapidly rising house prices this was nearly always the case, the situation may well have changed in more recent years. Of course, it could not be said that the indemnity was no consideration since there could be very remote contingencies which would have given it some value. Nevertheless,, in the first case the contract was set aside, and in the second the judge would have done the same if it had been necessary for the decision. In the first, it was Held that in modern times, a person could be treated as 'poor' if he or she was a member of the ' lower income group'; and he could be treated as ignorant' if he was 'less highly educated1. In the second case, the same principle was treated as applicable even though the wife was not destitute for she was, if not poor certainly not wealthy', and she was also not 'ignorant' but 'and intelligent woman.' It is difficult to see what ground is left for saying that these contracts ought to be set aside except the bare fact that they were grossly unfair because one person gave up a lot. And received very little in return. (See Atiyah referred above at p.291).
26. From the above it appears that the Courts not only have the power to look into the procedural fairness obtaining before the finalisation of contracts but also have the power to look into the question as to whether the outcome of the contracts by themselves are fair. In other words, the Courts have the power to ensure substantive fairness of contracts as well.
27. Most of the decisions cited and discussed above are from the English Jurisdiction where the law of contract has developed at common law and in equity. The question is how would the principles of unconscionability and economic duress to be extended by the Courts in Pakistan where the law of contract is statutorily codified in the Contract Act, 1872. We feel that this querry is not insurmountable. Section 10 of the Contract Act. Inter alia, prescribes the elements of free consent as an essential ingredient for a valid contract. Thereafter section 14 of the Contract Act defines the word "free consent" to include, inter alia. Consent not caused bv undue influence. Section 16 of the Contract Act in turn provides a definition of the term "undue influence." which we reproduce as under: - "16.-(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parlies is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another-
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this subsection shall affect the provisions of section 111 of the Evidence Act, 1872.
Illustrations
(a) A having advanced money to his son, B, during his minority, upon B's coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age,, is induced, by B's influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. B employs undue influence.
(c) A being in debt to B, the moneylender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.
(d) A. Applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by the undue influence."
A bare reading of section 16, in particular, section 16(3) would reveal that the equitable of doctrines of unconscionability, inequality of bargaining power, economic duress and like principles to ensure substantive fairness in the outcome of a contract can well be invoked by the Courts in Pakistan, as instances and illustrations of the wider concept of undue influence.
28. The facts in question are that the appellants claim that the respondent-batik had secured from them signatures in ready made blank from which of course, the respondent denies. We have already observed that the Banking Tribunal when deciding the suits afresh after the instant remand order should decide this factual controversy. We, however propose to decide as to whether obtaining of such signatures in blank ready made forms would by itself cause any illegality to the contract of finance on grounds of unconscionability, inequality of bargaining power and economic duress. The relationship between a banker and its customer is fiduciary in nature. It may well be that the bank may have a set practice of obtaining signatures from customers on blank forms. If the said practice is triggered off in order to facilitate making and completion of documents it may be said that there is nothing wrong in obtaining such signatures on blank forms or documents. And if such is the case. It would be essential for the Bank to establish that once signatures on blank forms/documents had been obtained the customers were thereafter specifically notified what was thereafter filed in the blank forms and no objection was taken by the customer in that regard. On the other hand, if the intention of the Bank was to secure the signatures in blank loans/documents with a view to subsequently entrap the customer or the Bank having obtained signatures did not subsequently intimate to the customer as to what was filled in the said documents, the said documents would then be tainted with illegality on grounds of unconscionability, inequality of bargaining of power as well as economic duress. In the case of Lloxdes Bank v. Bundy (cited above) the signatures were obtained from the customer on a ready made form which was not blank, while in the case of interfo (cited above) the fact that the terms of the contract were not adequately brought to the notice of the other side were found to be fatal.
Accordingly, where documents or forms are obtained in blank with no subsequently notice, as to what was contained therein, there would be a better reason to hold such documents as unenforceable.
29. In this context we are also mindful of the provisions of Article 17 of the Kanoon-e-Shahadat which we reproduce as under:- "17. Caompetence and number of witnesses. -(1) The competence of a person to testify, and the number of witnesses required in any case be determined in accordance with the Injunctions of Islam as laid down in the Holy Quran and Sunnah.
(2) unless otherwise provided in any law relating to the enforcement of Hdood or any other special law-
(a) in matters pertaining to financial or future obligations, if reduced to writing, the instrument shall be attested by two men, or one man and two women, so that one may remind the other, if necessary, and evidence shall be led accordingly; and /'. (b) in all oilier matters, the Court may accept, or act on, the testimony of one man or one woman, or such other evidence as the circumstances of the case may warrant."
SUB-Article (2)(a) ol Article 17 of the Kanoon-e-Shahadat clearly prescribes that when documents pertain to finance which if reduced in writing must be attested by two men, or one man and two women. This of course is relevant where the very making of the document is in dispute. Where signatures are obtained in blank forms/documents mere attestation by the number of witnesses thereon in terms of Article I7(2)(a) would not save the document from being declared unenforceable on grounds of unconscionability, inequality of bargaining of power as well as economic duress.
30. The next point which warrants adjudication on our part is whether the Banking Tribunal is at all under any obligation to decree the amount as desired by the respondent-bank or whether it had to determine the correct amount after necessary adjustments while taking into account set offs and counter claims.
31. It is now quite well-settled that under the 1984 Ordinance it is only the Banks which can bring a claim, while private persons, being customers, cannot bring an action against a bank before a Banking Tribunal under the 1984 Ordinance. The position was different under the Banking Companies (Recovery of Loans) Ordinance. 1979 where both the bank and the borrower could institute suits before a Banking Court. If there is any authority needed for the proposition it is the case of Muhammad Shalt ct Co. v. National Hank & others, (PLD 1995 Lah. 360). This proposition, however would only stand good for counter-claims and cross suits and cannot be extended to mere set offs. Where the claim of the customer is in the nature of a set off the Banking Tribunal under the 1984 Ordinance ought to adjust the same before finalizing the decree of the Bank. This distinction between set offs vis-a-vis counter claims and cross suits in the context of the 1984 Ordinance has been taken note of in Shafiq Hani/ (Pvt.) Ltd. v. Bcc I (overseas) Ltd ( PLD 1993 Karachi 107). In case the claim of the customer is in the nature of a cross suit or a counter claim, the same should be instituted in the forum having jurisdiction over the matter and not before the Banking Tribunal. In such cases the better course would be for the Banking Tribunal to not enforce the decree in the suit filled by the Bank before it. Till the outcome of the other suit(s) by the customer in the other forums.
32. The next issue that we shall like to touch upon is whether the suits in question were filed in a premature manner as there had been talks of rescheduling of payments and compromise. There are no documents which point out to negotiations and compromise. We do not thus fell it necessary to answer this issue which will only serve as an academic exercise.
33. The next point raised is whether under the agreements of finance in issue the provisions of the 1984 Ordinance ought not to have been invoked since the arrangements of finance were nothing but mere contracts of service in view whereof the suits ought to have been filed by the respondent-bank under normal law and not under the special law embodied in the 1984 Ordinance. In this respect, the learned counsel for the appellants has placed reliance Upon Habib Bank Limited v. Monopoly Control Authority (1986 C.L.C 2489) wherein a Division Bench of this Court while interpreting the provisions of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970, has been pleased to observe that the word "service" means and includes banking and insurance. On a closer scrutiny of this decision we are of the view that this definition of "service" can only be extended to the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 as S. 2(1 )(j) thereof statutorily defines "service" to, inter alia, include banking and insurance. Such definition cannot have a general application and has to be necessarily restricted only for the purpose of the particular enactment. It would not be out of place here to remind ourselves Ot the decision in President v. Mst. Benazir Bhutto (PLD 1991 Kar. 164) wherein it has been Held that it is unsafe to compare the language used in one statute with that employed in another even though the subject covered by the two may involve similarities. Such comparison otherwise may also not be conclusive on the point agitated. On principle and As a matter of general rule we do not feel that an agreement for finance between a bank and its customer would be a contract concerning service. It is only when the bank specifically undertakes to render any service, for example, to process cheques, to look after a portfolio or finances of its customer or to process other documents pertaining to import to export that it can be considered to render a service. The amount of services renderable by a bank is not relatable to the principal or outstanding amount of the loan, finance or interest. In other words, there is no nexus whatsoever between the wrath of services that are to be rendered by a bank and the value or extent of a finance. It is quite possible for a bank to render considerable amount of services to a customer without extending any financial facility and vice-versa. The concept of rendering of services by the bank has got nothing to do with extension of a financial facility to a customer. We would further illustrate this point by distinguishing between finance based on interests where the customer receives a loan or an advance carrying interest and where the contract of finance is mark up based and structured on an Islamic mode of finance:-
(i) in the first type of finance, i.e. Where money is given on loan or advance carrying interest, the contract cannot by itself by termed as that relateable to services. Separating some actual services, as indicated above (i.e. Concerning processing of cheques, looking after portfolios etc.) may be rendered by the Bank. We would cite in support New York Slate Association of Life Underwriters r.
Superintendent of Ins., N.Y.S. 2d 172, 176, 37 A.D 2d 304 (quoted in WORDS AND PHRASES, Permanent Edition. Volume 38A. 1993 Cumulative Annual Pocket Part. Page 305) where it was Held that the relationship between a bank and its depositor was not one such tis to create a service within statute prescribing stile of life insurance as an inducement to, or interdependent with purchase by public of any goods. Securities, commodities services or subscriptions to periodicals; Farmers and Merchants State Bank oj Krum i. Ferguson, Tex. Civ. App., (605 S.W. 2d 320. 324 (quoted in WORDS AND PHRASES supra at pages 305 and 306) where it was Held that it was only the regular, routine process honouring cheques which constituted services; first Nat. Bank of Mercedes v. 1A Sara Grain Co. Tex App. 13 Distr, 646 S.W. 2d. 246, 252 (WORDS AND PHRASES supra at page 306) where the same approach as in Farmers and Merchants State Bank of Krum was taken; and Bank One, Texas, N.A. v. Taylor. C.1. 5(Tex). 970 f. 2d. 16, 28 (quoted in WORDS AND PHRASES Permanent Edition. Volume 5 1993 Cumulative Annual Pocket Part, page 39) wherein it was Held that a depositor is a consumer of banking services within the purview of Deceptive Trade Practices Consumer Protection Act only where the depositors pay service fee and the bank in return agrees to process, the cheques of the depositor. These decisions would amply reveal that mere lending of money or advancement of loan with or without interest does not constitute rendering of services. It is only where the hank renders services covering processing of cheques or looking after portfolios or finances of its customers which is specifically agreed to or processing of other documents, that services can be taken to be rendered by the bank. As already stated such must be the clear agreement;
(ii) where the type of finance is mark up based and structured on an Islamic mode of finance there is all the more reason to hold that the bank does not render any services merely by providing such a finance or facility. Iii the Islamic mode of finance which is based upon a Musharika i.e. Profit and loss sharing arrangement, equity participation, or Morabaha i.e. Cost plus arrangement to purchase or sell commodities, or Modaraba die essential idea is to enter into or participate in an entrepreneurial type of arrangement. This arrangement can be in the shape of a partnership or a profit or loss sharing formula. Mere providing such a finance which would result in the said entrepreneurial or partnership relationship between the bank and the customer can hardly qualify to constitute a contract where services are received or rendered. Here also the banks can specifically agree with the customer to provide actual services pertaining to processing of cheques etc. Already highlighted above.
34. We accordingly reject the contention of the learned counsel for the appellants that the respondent-bank by providing the financial facilities was rendering services and as such the Banking Tribunal had no jurisdiction to entertain the matter.
35. The final issue to which we shall address our minds is whether the persons filing the suits had to do so under an express authority backed by a resolution from the Banking Company i.e. The respondent. In order to resolve this issue we shall refer to the following decisions of the superior Courts:-
(a) Muhammad Siddiq Muhammad Umar v. Australasia Bank (PLD 1966 SC 684) (hereafter: "Muhammad Siddiq")',
(h) Khan Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Ltd. (PLD 1971 SC 550)
(hereafter: "Iflikhar Mamdot"):
(c) Habib Bank Limited v. Green Garments Manufacturers, (PLD 1978 Kar. 1027) (hereafter: "(Green Garments")',
(d) Punjab Livestock Dairy & Poultry' Board v. Sh. Muhammad Younus (PLJ 1980 Lah. 84 = 1980 CLC 1932) (hereafter: "Punjab Livestock")',
(e) Khayam Films r. Bank of Bahawlpur (1982 CLC 1275) (hereafter: "Khayam Films")',
(t) Pakistan v. Pak Chrome Leather Company Ltd. (PLD 1983 Lah. 326) (hereafter: "Pak Chrome")',
(g) Abdul Salam Qureshi v. Judge Special Court of Banking for Sindh ( PLD 1984 Kar. 462)
(hereafter: "Salam Qureshi")
(h) Du me: Boric t. International Forwarders Ltd. (NLR 1983 UC 184 (hereafter: "Dumez Borie")',
(i) Abuhakar Saleh Mayet v. Abbot Laboratories, (1987 CLC 367 (hereafter: "Seleh Mayat")',
(j) Master Sons r. Ebrahim Enterprises (1988 CLC 1381) (hereafter: "Master Sons");
(k) Paper Exchange v. Qadria Board Mills Ltd. (1989 MLD 2968) (hereafter: "Paper Exchange")',
(1) Emirates Bank lnt'l Ltd. v. Super Drive-in Ltd. (1990 MLD 538) (hereafter: "Emirates Bank")',
(m) Govt. Of Pakistan v. Premier Sugar Mills Ltd. (PLD 1991 Lah. 381) (hereafter: "Premier Sugar Mills");
(n) Banque indosue: v. Jet Travels Ltd. (1991 CLC 446) (hereafter: "Banque Indosuez")
(o) Millat Tractors Ltd. v. Ch. Tawakul ullah (NLR 1991 AC 432 (hereafter: "Millat Tractors")',
(p) Duncan Stratton & Co. v. N.S. Construction Co. (1992 CLC 1128) (hereafter: "Duncan Stratton")',
(q) Central Bank of India v. Tajuddin Ahdur Rauf (1992 SCMR 846) (hereafter: "Central Bank of india ");
(r) IDBP V. Sh. Impex, (1994 CLC 2334) (hereafter: "Sh. Impex,")
(s) Standard Hotels (Pvt) Ltd. v. Rio Centre (1994 CLC 2413 (hereafter: "Standard Hotels'.)',
36. In Muhammad Siddiq the Supreme Court of Pakistan had to consider the objection levelled by the appellants therein that the suit filed by the plaintiff-bank was incompetent on the ground that it had been signed by a person who was unauthorized and that there was no separate resolution from the board of directors conferring such authority on him. The Supreme Court in that case took the view that the objection regarding competence to institute the suit could only be decided after reference to the Articles of Association of the company from where it had to be seen as to whether the directors were competent to delegate such powers to the person instituting the suit. It was also Held in that case that all that was necessary was to see whether the directors had the competence to delegate such powers and not whether in fact they had delegated such powers or approved the giving of power of attorney to that person to present the plaint. In other words, it was not necessary to call the Managing Director to confirm the actual delegation and even production of the resolution of the Board of Directors was dispensable. The Supreme Court in that case recognized a distinction between authorization in terms Of 0. 29 R.1 of the CPC which only dealt with signing or verifying the plaint and the competence of a person to institute a suit on behalf of a company which could only be done if that person was duly authorized in that behalf and occupied one or other of the offices mentioned in 0.29 R.1 Very significantly, the Supreme Court also observed that it was essential to meet such an objection since a person dealing with a company was hound to see whether the power of attorney was in accordance with the articles and mere affixation of a common seal of the company on such power was not sufficient by itself. In the next case of iftikhar Mamdot the Supreme Court appears to have modified its decision in Muhammad Siddiq (Muhammad Siddiq was not referred to in Iftikhar Mamdot) by holding that a suit on behalf of a company even if instituted by a Director was incompetent till the person instituting the suit was so authorized by a resolution passed by the board of directors with due notice to all the directors in a meeting in that regard. In the third case of Green Garments a learned Single Judge of this Court attempted to reconcile the two decisions of the Supreme Court i.e. Muhammad Siddiq and Iftikhar Mamdot by distinguishing Iftikhar Mamdot on grounds that in the said case on power of attorney was executed by the Company in favour of the person instituting the suit whereas such was the case in Muhammad Siddiq. This distinction in Green Garments would leave us with the principle that where a suit is filed on behalf of a company a resolution from the board of directors is dispensable in case a power of attorney is executed by the company in favour of a person instituting the suit. However, in case no such power of attorney is executed, production of a resolution authorizing institution of suit becomes indispensable. We cannot subscribe to this distinction for reasons mentioned in para 37(v) hereinafter. In Green Garments persons signing the plaint on behalf of the plaintiff-bank were attorneys holding powers of attorney executed by two Directors of the Bank and the said directors were authorized by the memorandum of association to appoint attorneys. It was thus Held that the suit was properly instituted. In the forth case i.e. Punjab Livestock a learned Single Judge of the Lahore High Court took the view that signing-verifying the plaint was not the same thing as the competence to institute the suit. The matter concerning signing/verifying the a plaint was to be governed by 0.29 R.
1. Whereas institution of a suit or Legal proceedings could only be done so by the party in person or by his recognized agent or pleader as required u/S. 3, R. 1 of the CPC. In this case an application for setting aside an ev parte decree was filed on behalf of a Board constituted under an Act of Parliament. The application did not bear signatures of any person authorized by the Board except that of an advocate in whose favour no power of attorney was executed by any duly authorized person on behalf of the Board. The application was Held to be a nullity in the eyes of law which was found to be incurable even hv a subsequent ratification. In the fifth case i.e. Khayam Films a Single Bench of this Court took the view that the fact that the person did or did not have the authority and competence to institute Legal action could only be challenged by the principal against the agent and not by an outsider. The Court was further of the view that where the principal continued to recognize the authority of the agent to institute the suit the same would amount to ratification and the suit would be taken to have been validly instituted, In the next case of Pak. Chrome the objection that the plaint had not been signed by a person having authority to do so was not raised in evidence at trial stage. The objection was repelled for such reason. In the next case of Salam Qureshi a division bench of this Court Held that the question as to whether a suit was instituted by properly constituted attorney was different from whether the plaint Was signed-verified by one of the persons mentioned in 0.29 R. 1 of the CPC. The Court was further of the view that where the plaint was signed and verified by a person claiming to be the Principal Officer and attorney of a bank and that claim was not denied, the plaint would be taken to be properly signed in terms of 0.29 R. 1 of the CPC. In Dumez Borie a learned Single Judge of this Court also recognized the distinction between verifying/signing and the competence to institute a suit. In this case it was observed that 0.29 R. 1 dealt only with subscription and verification of pleadings in suits by and against corporations and that this rule merely authorized persons mentioned therein to sign and verify pleadings on behalf of a Corporation. The rule did not authorize such persons to institute suits on behalf of Corporations. It was further Held that even a constituted attorney had to have an express authority from the board of directors of a company to institute a suit. It was observed that the reason for the rule appeared to be that in case of companies the initiative to institute an action at law had to proceed from the company or the authority under the articles in whom the management of the company vested.
The Court was further of the view that where the authority to institute the suit was challenged it was necessary for the plaintiff to produce in evidence the articles of association. The Court finally approved and applied the decision of the Supreme Court in Iftikhar Mamdot by holding that even a principal officer of a company had to have an express authority through a resolution passed by the board of directors for instituting a suit. In the next case of Saleh Mayet the person signing/verifying the plaint was the Manager and Principal Officer of the company. He was only verbally authorized by the directors to contest the suit. There was no general power of attorney in his favour and the power of attorney produced did not indicate that he was specifically authorized to institute the suit against the defendants in issue. In these circumstances it was Held that the suit filed was a nullity in the eyes of law since it was instituted by a person having no authority to file the same and thus the plaint was non-existent for all intents and purposes. It was further observed that a company had to a act in consonance with the articles and it was the provisions of the articles which determined as to which person had the power to institute Legal proceedings. Accordingly, a power of attorney authorizing a person to institute Legal proceedings, if executed on behalf of Company, had to satisfy the requisites contained in the Articles. In Saleh Mayer the leamed Single Judge approved the dicta in Punjab Livestock while also recognizing the distinction between the Authority to institute the suit and the competency to verify/sign pleadings. In Master Sans a learned Single Judge of this Court had been pleased to observe that where the objection regarding competence to institute the suit was neither taken in the written statement nor raised in any pleadings and no question to that effect asked by the witnesses in the witness-box such objection could not be entertained at a subsequent stage especially where the defendant neither prayed for framing of an additional issue nor applied for permission to lead additional evidence in that regard In Paper EM han^e to an objection that the suit was not filed by a competent person, the Managing Director produced a resolution which authorized him to institute the suit. It was Held by a learned Single Judge of the Lahore High Court that such document was sufficient to establish the credentials in relation to the competence of the Managing Director to institute the suit. In ext case i.e. Emmies Hank it was Held that where a suit was filed by a Banking Company it was not necessary to produce a resolution of the company nor summon the Managing Director. All that had to be seen was Whether the person instituting the suit was duly authorized in that behalf by the company and occupied one or the other offices mentioned in 0.29 R.
1. In the next case of Premier Sittar Mills a Division Bench of the Lahore High Court came to the Conclusion that it was well-settled that when a company instituted a suit, it had to establish that the suit had been instituted competently and unauthorisedly on its behalf. The rigour of this principle was no extensive that even a person incharge of the affairs of the company unless specifically authorized in that regard could not be considered competent to initiate proceedings on behalf of a corporate entity. The Court in this regard, while relying upon Iftikhar Mamdot, Held that till such time the person instituting the suit was authorized by a resolution passed by the Board of directors, the suit would be incompetent. It is pertinent to note that the Court in this case scrutinized the articles to determine as to whether the person filing the suit had the authority to do so. In Banque Indosuez the defendants objected that the plaint was signed by a person having no authority to do so and without a resolution from the Board of Directors. Also no power of attorney was given. On verification, power of attorney was found to be in the name of one person while the plaint had been signed by two persons. Plaintiffs counsel, however, submitted that due to over sight he could not file the power of attorney of the other signatory of the plaint and presented the same in Court. It was Held that once the powers of attorney were found to be in order it was not necessary to have produced the resolution of the plaintiff-bank at the time of filing of the suit. The Court in this case placed reliance upon NBP v.
Muhammad Ashraf Malik (PLD 1987 Lah. 17) wherein it was Held that a suit filed by National Hank through a person holding power of attorney authorising him to institute/defend any action/proceedings relating to the affairs of the principal was under a proper authority. In Millat Tractors a learned Single Judge of the Lahore High Court came to the Conclusion that in the absence of evidence indicating that Directors of a Company were competent to authorize a person to institute a suit and the fact that a valid resolution was passed to give such person the authority to institute the suit, the suit was Held to have been filed incompetently. In this case the Court differed with the dicta in Khayam Films that only the principal could challenge the authority of the agent in this regard and also turned down the request to lead additional evidence to establish authority to institute the suit, in the interest of justice, on the ground that ample opportunity had been so given at trial stage- The Court in this case also recognized the distinction between verifying/signing the plaint u/O. 29 R.1 and the authority/competence to institute the suit.
In the next case i.e. Duncan Stratton a learned Single Judge of this Court while citing Master Sons with approval took the view that since no specific issue had been fraud no parties had led evidence in relation to the point as to whether the suit had been instituted by competent/authorized person and also because the articles had not been produced, there would be no adjudication on this point and the suit could not be dismissed so. In Centra; Bank of india a Division Bench of the Supreme Court while relying upon Muhammad Siddiq was pleased to observe that once it was proved that the power of attorney had been executed and the relevant articles under which the Directors could delegate their respective powers to institute and prosecute suits on their behalf were also proved it was not necessary to prove the resolution by which the directors had resolved to grant such a power to the attorney. In Sh. Impex a learned Single Judge of the Lahore High Court took the view that an SVP (Law) duly authorized by resolution to institute a suit instituted a petition for winding up. This was found to be in order. The Court also found itself in agreement with Khayam Films to the effect that such objections could only be made by the principal against his agent. In the last case i.e. Standard Hotels a Single Bench of this Court was pleased to reject a plaint u/O. 7 R. 11 CPC on grounds that the suit had been instituted incompetently. After perusing the articles the Court came to the Conclusion that the same did not confer any authority to a director to institute the suit. Also the plaint and affidavits did not disclose existence of any resolution of the Board of Directors, rather the same pointed to nonexistence thereof. The Court in Standard Hotels also distinguished between signing/verifying pleadings and instituting the same.
37. From the analysis of the above decisions the following principles can be extracted
(i) O. 29 R. 1 CPC only deals with signature and verification of pleadings by the persons mentioned therein. The said rule is completely irrelevant to gauge a person's competence or authority to institute a suit on behalf of a company;
(ii) for a suit to be valid it had to be shown that firstly, it was verified and signed by the proper person in terms of 0.29 R. 1 CPC and Secondly, it was instituted by a competent person having the power and authority to do so;.
(iii) in case there is default in compliance of 0.29 R. 1 the same is not a fatal defect and can be cured even after the suit has been instituted (see all india Reporter Limited v. Ram Chandar Dhondo Datar (AIR 1961 Bom. 292);
(iv) however, in case there is any defect in institution of the suit i.e. It is instituted unauthorisedly and incompetently the said defect remains incurable even by a subsequent ratification (See Punjab Livestock and Saleh Ma\et. Referred supra);
(v) there appears to be some inconsistency as to how competence/authority of a person to institute a suit has to be determined. In Muhammad Siddiq a Full Bench of- the Supreme Court clearly stated that it is the articles of the company which have to be seen to assess as to whether a person filing the suit was properly authorized, while the requirement to produce a resolution of the Board of Directors could be dispensed with.
In Iftikhar Mamdot, the earlier case of Muhammad Siddiq was not referred therein, a Full Bench of the Supreme Court took the view that in case a resolution from the Board of Directors is not passed and proved after a duly convened meeting, a suit filed even by a Director- in-Incharge is to be taken as an incompetently instituted suit. In the subsequent case of Central Bank of India the learned Judges of a Division Bench of the Supreme Court followed Muhammad Siddiq, however, no reference was made to Iftikhar Mamdot. In Central Bank of india it was emphatically stated that there was no requirement of law to prove resolution passed by the Board of Directors, In Green Garments a learned Single Judge of this Court made an attempt to reconcile Muhammad Siddiq and Iftikhar Mamdot by holding that in case a suit is filed in consequence of a power of attorney no resolution of Board of Directors is required. With due respect we cannot subscribe to this distinction or reconciliation as the same is not borne out from the principles of law extracted in the two decisions of the Supreme Court (referred supra). We would reconcile the two decisions of the Supreme Court on another plane, lt is settled that the business and affairs of a company are to be conducted strictly in consonance with the articles of association subject of courts to the operative laws. The business and affairs of a company include the power, competence and authority to institute Legal action (See. H.M. Ebrahim Salt v. South India Industries imI. (AIR 1938 Mad. 962). By deduction, the factum of competence and authority to institute Legal proceedings would also have to be determined strictly in consonance with the Articles of the Company. Such interpretation would also being consonance with Muhammad Siddiq and Central Bank of India wherein it has been categorically stated that where the competence to institute Legal action is challenged reference has to be necessarily invited to the articles. Where Articles of the company confer power on a particular person or director to institute Legal action and that person or director institutes the suit there can be no additional requirement of a resolution of the Board of Directors for the simple reason that such power is to be exercisable by a real person. However, where the power to institute the suit is conferred upon an artificial person or body eg. The Board of Directors or a Committee (as in Premier Sugar Milts supra) the requirement to produce and prove the resolution passed by that artificial person or body cannot be dispensed with since such a person can only take a decision As a body through a resolution passed in a duly convened meeting and not otherwise. The above principles would also become applicable in the case of delegation or subdelegation of powers i.e. In case the delegator is a real person (when articles confer the powers to institute Legal action on a real person) all that would be required would be to scrutinize the articles and then the power of attorney to see whether it has been properly executed and confers the power so claimed. There would lx- no requirement to produce or prove the resolution from the Board of Directors in this regard. If on the other hand, the delegator is an artificial person/body (when the articles confer the power to institute Legal action on eg. The Board of Directors or some committee) the resolution passed by that artificial person/body i.e. The Board/Committee shall become indispensable.
However, there would be no requirements to produce or prove a separate power of attorney, In this backdrop we would venture to reconcile Muhammad Siddiq, Iftikhar Mamdot and Central bank of india by presuming that in Muhammad Siddiq and Central Bank of India the Articles conferred the power to institute or defend Legal proceedings to a real person i.e. a Director. Thus the requirement to produce or prove a resolution from the Board of Directors was* dispensed with. However, in Iftikhar Mamdot the articles conferred the power to institute or defend Legal proceedings upon an artificial person/body i.e. That Board of Directors in view whereof the requirement to produce and prove the resolution thereof authorising institution of the suit was found to be indispensable;
(vi) it is not only the principal who can challenge the agent's power and competence to institute/defend Legal action. Khayam Films in this regard cannot be considered as good law any more since in Muhammad Siddiq the Supreme Court has taken the view that a person dealing with a company must know, that any action by the company is in consonance with the articles; vii) objection regarding competence to institute/defend Legal action can only be entertained where such a plea is taken in the pleadings or where request is made to frame additional issues on any evidence or additional evidence is led in respect thereof, or where the Court suo motu raises an objection in this regard;
(viii) a plaint can he rejected on grounds of incompetence to institute the same;
38. The learned Banking Tribunal accordingly when deciding the entire case afresh must call for the articles of the respondent and decide this issue in terms of the guidelines mentioned above.
39. In result we allow all the appeals and remand the matter back to the Banking Tribunal to decide all or other issues in the suits and the suits expeditiously within three months from date of receipt of this judgment in terms of the guidelines appearing herein above.
40. There shall be no orders as to costs.