The plaintiff has filed this suit against the defendants (hereinafter to be referred as the Mills) for the recovery of Rs,35, 76, 64, 262.68 by way of sale of mortgaged property, project assets, hypothecated and pledged goods and through sale or transfer of Mills shares, under the Banking Companies (Recovery of Loans, Advances, Credits, and Finances) Act, 1997.
2. The brief facts are that the plaintiff is'a Banking Company incorporated under the Companies Act, 1913 having its head office at Adamjee House I.I. Chundrigar Road, Karachi and one of its branch at Abpara Market, Islamabad. Its Chief Manager Malik Muhammad Khan being conversant with the facts of the case was authorised to file this suit.
3. Defendant No,1 is a Limited Company incorporated under the Companies Ordinance, 1984, whereas the Defendant No,1 is its Chief Executive and the remaining defendants are its Directors respectively.
4. Defendant No,1 through its Directors installed a Textile Spinning Unit at Chakwal and the plaintiff Bank granted the following financial facilities to the Mills:--
(a) Deferred payment letter of credit under suppliers credit schemeRs,136.919 MLN
(b) Long term TFCS Rs, 8.174 MLN
(c) LMM Loan Rs, 8.000 MLN Letter of the sanction (Annexure-A) was issued on 28-8-1991. The repayment of the aforesaid amount was secured through:-- (I)Equitable Mortgage through Deposit of Titles of Factory, including the land and the infrastructure of property.
(II)Pledge of Stock and Building Material.
(III)Hypothecation of Stock, Building Material and Machinery.
(IV)Personal Guarantees of Directors.
(v) Creation of First Charge on fixed assets of the plant.
(VI) Deposit of shareholding in form of share certificates alongwith duly verified blank transfer deeds.
5. In addition to the aforementioned securities, the defendants Nos.2 to 8 being the Directors of the Mills executed finance agreement such as D.P. Notes and other relevant Bank documents. Copies of the charge and security documents are attached with the plaint as Annexure-B to M. The plaintiff provided further finance facilities to the Mills upon their request conveyed through letter dated 28-11-1991 which were sanctioned subject to the terms and conditions contained in letter dated 22-2-1992. The extended finance facilities were as follows:-- (a)Bridge finance to the extent of Rs,52.293 MLN by way of D/F.
(b)Issuance of Bank Guarantee amounting to Rs,12.284 MLN in favour of M/s HBL for import of diesel generators under US Aid loan.
(c)Revision in project cost and financial plan after opening of L/C.
(d)Under writing commitment for the proposed public issue of company's shares to the extent of Rs,55.293 MLN.
The amounts covered under the facilities aforementioned were disbursed to defendant No,1 and some additional securities were also taken from the Mills for the repayment of loan floated to it.
Those additional securities were as under:--
(a) Additional 1st charge on the immovbale/movable assets/property including Book debts of the company by way of Equitable Mortgage.
(b) Hypothecation of stocks/building material.
(c) perosnal Guarantee of Directors (Annexures 0 to W).
6. The defendant No,1 expressed its inability to repay the finance facilities availed by it and requested for rescheduling of the loans availed by it. The plaintiff conceded to the request of defendant No,1 and permitted rescheduling of finance facilities through a relief package specially designed for the advantage of defendant No,1 vide letter dated 29-1-1996 (Annexure-SS). The break-up of the rescheduling was as follows:--
(A) Demand Finance I(D/FI) of Rs,208.312 MLN for adjustment of total overdue as on 31-12-1995 (including D/F Bridge loan, Supplement Credit, D/F LT-TF.c and LMM. Details of which are as follows:- -
(I) Demand Finance (D/F) Bridge loanRs,5,25,126,49
(II) Demand Finance (D/C) Forced FinanceRs,10,238,7610
(III) Demand Finance (L.T.T.Fc) 3 instalmentsRs,9,99,000
(IV) Overdue instalment of LMM. Rs,21,95,000
(V) Mark-up recoverable from Demand Finances (D/F's) upto 21-12-1995.Rs,44,63,5614
(VI) Mark-up in Cash Finance (C/F)Rs,21,75,982
(VII) Mark-up in LMM Rs,23,26,523 (B)Demand Finance II(D/F II) of Rs,30.000 MLN for adjustment of instalments, including mark-up thereon of suppliers credit D/F L.T.T.FC and LMM due from 1-1-1996 to 30-6-1996.
(C)The remaining instalments of D/F (IT-TFc), suppliers credit and LMM due after 30-6-1996 will be paid by the defendant No,1 as per original schedule as and when due. The relief package was duly acknowledged by defendant No,1 vide its letter dated 1-2-1996 (Annexure-TT). Defendant No,1 in addition to the rescheudled finances mentioned above applied for fresh finances in terms of Bank Guarantee from the plaintiff bank, which was approved by the plaintiff subject to terms and conditions of the sanction approval dated 20-3-1996 (Annexure-WW) amounting to Rs,4.143 MLN and Rs,0.275 MLN respectively.
7. Defendant No,1 failed to honour the relief package by defaulting in the payment of instalments in time as agreed upon between the parties.
8. The break-up of the alleged recoveries to be effected from the defendants was as follows:--
(I) Demand Finance (D/F) L.T.T.Fc (26- 5-1993) Disbursed Rs,5.324Rs,3,65,9000
(II) Demand Finance I(D/F) rescheduled on (30-1-1996)Rs,207,232,378.02
(III) Demand Finance II(D/F II) rescheduled on (30-1-1996)Rs, 19,812,341.37
(IV) LMM (15-3-1992) Rs,4,304,940
(V) Demand Finance (D/F) Forced Finance (21-10-1996)Rs,124,21,642.29
(VI) Demand Finance (D/F) Forced Finance (28-12-1996)Rs,1,880,836 (VII)SCLC (10-11-1991) Rs,683,95,000 (VIII)Bank Guarantee (13-3-1996) Rs,208,980
(IV) Bank Guarantee (13-3-1996) Rs,3,150,900
9. The defendants made a petition to appear and defend the suit wherein loan facilities were admitted, but the suit amount was denied on the ground that the Mills had suffered heavy loss in business due to bad cotton crops which were almost destroyed by the pests; that the amount in question was not due till 2001; that the plaint was not properly instituted as it was signed and verified by Malik Muhammad Khan, who was not competent person to bring the suit; that the security documents annexed with the plaint were inchoate; forged, not properly stamped and as such could not be pressed into service against the defendants; that the guarantee documents were not witnessed as mandated by law, hence no cause of action had accrued on the basis of such documents as those were never legally executed nor duly proved which in any event stand novated; that the plaintiff ought to be put to strict proof of consideration as well as execution of the finance documents. Likewise execution of documents 0 to W was denied and it was alleged that their execution and consideration was to be proved by the plaintiff to get any benefit in the suit; that there was a genuine dispute between the parties regarding the outstanding amount. The disbursed amount was allegedly based on miscalculation and misinterpretation of the obligations of the parties; that in terms of agreement between the plaintiff and defendant No,1, shares Of the value of Rs,55.256 million were under-written by the plaintiff, but after obtaining those documents, no action was undertaken which resulted in loss to the plaintiff; that the plaintiff defaulted in honouring its financial commitment on time. The indifferent attitude of the plaintiff resulted in the recurring loss to the defendant No,1 e.g. cash finance was provided in February, 1995 although the same was to be provided during its season from October to December each year; that loss was suffered by the defendant No,1 when the plaintiff failed to float under-written shares to public in spite of repeated requests by defendant No,1 for which the plaintiff was responsible out and out.
Likewise the parties were allegedly in genuine dispute regarding the amount due for which the evidence is required as to when the amounts were actually given and out of those amounts what repayments were made. It was alleged that since the accounts were not correctly prepared or maintained by the plaintiff, therefore, the suit amount was not recoverable as prayed. The recovery of the loan before its due date was allegedly against the liberal industrial policy. It was also against the incentives to be provided to the Industrialists particularly those like defendant No,1, who had brought foreign capital to invest in Pakistan. However, due to the wrong dealing of the plaintiff with the defendant, the business instead of flourshing has suffered irreversible losses. In the end it was contended that this Court had no jurisdiction because the suit was filed under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Ordinance, 1997 (XXV of 1997), which had a life of 4 months in view of Article 89 of the Constitution of Islamic Republic of Pakistan, 1973. Since it was not a permanent statute therefore, it had no legal value and the proceedings under this Ordinance were illegal. It was further contended that similar law contained in Banking Tribunals Ordinance, 1984 was struck down by the High Court and since the present law was no better than the aforesaid Ordinance, therefore, it was ultra vires of the Constitution.
10. I have heard the learned counsel for the parties at length on the points raised above. First of all, I would like to take up the objection regarding the maintainability of the suit and the jurisdiction of this Court to deal with the matter. Coming to the first objection, it may be pointed out that the suit was instituted through Malik Muhammad' Khan, Chief Manager, who is duly authorised attorney of the Bank and is also authorised to file the suit in hand vide power of attorney No, 0005519 (photo copy placed on record), favouring Malik Muhammad Khan. Paragraph No,7 of the aforesaid power of attorney enables Malik Muhammad Khan to commence, prosecute and defend all actions, suits or legal proceedings whether Civil or Criminal in the Courts. Likewise he is authorised to appear before such Courts in view of provisions contained in paragraph No,11. It is, thus, obvious that the suit was correctly commenced and instituted by the aforesaid Malik Muhammad Khan, who is duly authorised attorney and agent of the plaintiff bank.
11. Likewise the point of jurisdiction is also without any substance because Article 89 of the Constitution empowers the President, except when the National Assembly is in session, if satisfied, that circumstances exist which render it necessary to take immediate action to make and promulgate Ordinance as the circumstances may require. This Ordinance was promulgated by the President of Pakistan as he was satisfied that circumstances exist which rendered it necessary to take immediate action to promulgate the said Ordinance. The 'circumstance' referred in Article 89 is a prerogative of the head of State and cannot be allegedly questioned until and unless there are grounds for are justifiability, which is none in this case. Even otherwise, the Ordinance before completing its life was replaced by the Banking Companies (Recovery of Loans, Advances, Credits and Advances) Act, 1997 and as such stood repealed in view of section 28 of the aforesaid Act. The aforesaid Act came into being during the life time of the Ordinance, therefore, the rights created under the repealed Ordinance would remain in subsistence under the abovereferred Act. Banking Court is defined in section 2(b) of the Act, which includes this Court, for the suits where the amount exceeds thirty million rupees. Hence, this Court has been validly constituted under the aforesaid Act and the Ordinance referred to above, and has jurisdiction to try such cases. The objection in respect of jurisdiction is therefore, overruled.
12. Now coming to the merits of the case, the provisions contained in section 10 of the Act show that the Banking Court shall give leave to defend the suit, if a serious and bona fide dispute is raised thereby. In the instant case the defendants have admitted finance facilities as referred to above, but has challenged the execution of the documents vouching for the repayment of such finances.
It would be clear from the petitioner for leave to appear and defend the suit that the finance facilities were admitted but the liability was denied on the ground that there was a loss to the Mills and also there was rescheduling of the finances, which required that some of the finances were to be paid back in 2001 and as such those were not recoverable and the suit to that extent was allegedly premature. However, ratio of such advances/loans was not made clear either in the plaint or in the petition for leave to appear and defend the suit. Likewise the statement of accounts placed on record by the plaintiff shows that finance facilities as pointed out in the plaint were extended and the amount was disbursed but the genuineness and correctness of the aforesaid statement has been disputed by the defendants on the ground that those were not prepared correctly according to the accounts allegedly maintained by the parties. Similarly lapse of the plaintiff in floating the shares to the value of Rs,55.26 millions was pointed out by the defendants, which too allegedly brought considerable loss to the Mills for which a set off was required in the shape of damages etc. However, I have come across a letter dated 28-3-1997 written by defendant, No,1, which has been placed on record at P/58 showing that the defendant had admitted total outstanding loan to the tune of Rs,192.464 millions. In that very letter which was addressed by the defendants they were ready to clear those amounts with mark-up in instalments, but according to the plaintiff, this commitment was also not honoured. Likewise defendant No,1 in the same letter had contended that they had already paid over Rs,30 million as mark-up, which allegedly cleared the total mark-up due on the principal. The defendant No,1 also claimed that the Mills was set up with investment of three million dollars brought from abroad, but not a single penny was earned as profit due to adverse circumstances. Likewise another letter was produced by the plaintiff during the arguments, which too is dated 3-9-1997 whereby the defendants had offered to pay Rs,150 million towards full and final settlement of the entire outstanding liability. In view of the above letters of defendant No,1, it would be clear that the liability for the total outstanding amount is admitted to the extent of Rs,192.464 million. Therefore, there are grounds to believe that genuine dispute and controversy exist between the parties for which the defendants should be allowed to appear and defend the suit. Since they have denied the validity of the security documents, therefore, to save the financial interest of the bank, it would be necessary that leave to appear and defend should be subject to some tangible security. It is accordingly directed that the defendants are granted leave to appear and defend the suit provided they furnish Bank Guarantee in the sum of Rs,192.464 million till 18-12-1997 failing which the leave shall be liable to be recalled or re-considered.
13. To come up on 21-12-1997, for further proceedings. In the meanwhile the parties shall admit and deny the documents placed on record and shall clarify as to what finances were actually sanctioned and paid to defendants by the Bank and likewise to what extent those finances were repaid by the loanees i,e, the defendants. The plaintiff shall also bring on record verified statement of accounts showing receipt of finance by the defendants and repayment made, if any, by the Mills, showing the total amount actually outstanding against the defendants. The statement abovementioned shall be offered to the defendants for their admission and denial item wise. It shall also be made clear as to what principal amount alongwith mark-up is actually due till date, apart from the amount for which Bank Guarantee has been demanded from the defendants. It may also be made clear by the plaintiff, whether the amount so due is liable to be paid immediately or at some deferred date i,e, in 2001 AD as alleged by the defendants. The Bank Guarantee, if deposited by the defendants shall be encashable on the final order passed by this Court.