' In the following five suits, one common question of jurisdiction is involved in view of the newly enacted law titled "The Banking Companies (Recovery of Loans, Advances, Credits and Finances)
Act, 1997 (hereinafter referred to as the Act, 1997). This question has arisen in view of the different provisions of the Act, 1997. However, before proceeding further,. I would like to discuss separately the facts of the cases which are as follows:--- SUIT NO.475 OF 1993
2. Plaintiff No,2, namely Mrs. Zenat Nasim claims to be the owner of a plot bearing No,D-9, measuring 1438 square yards, situated in Blocks 4 and 5 of Al-Hilal Cooperative Housing Society, K.D.A. Scheme No,7, Karachi. The case of the plaintiffs is that the defendant No ;2, namely, M/s. Zenat Brothers, which is a private limited company, obtained loan from defendant No,1 namely United Bank Limited and against that several documents of properties were executed as collateral.
One such property was the property mentioned hereinabove; that in the month of April, 1992, the plaintiffs came to know, for the first time from defendant No,3, that the property of plaintiff No,2 has also been lying by way of security with the Bank and that a Memorandum of submission of Title Deeds has also been executed. It is further alleged that defendant No,3, namely, Atiquddin who is brother-in-law of plaintiff No,1 and real brother of plaintiff No,2 and defendant No,4 namely Tariquddin who is father-in-law of plaintiff No,1 have jointly played fraud with the plaintiffs and illegally, unauthorisedly and maliciously got the suit property mortgaged with the defendant Bank.
In such circumstances, plaintiffs have filed this suit for declaration and perpetual injunction seeking cancellation of general power of attorney, executed by the plaintiff No,2 in favour of defendant No,1, alongwith the following declarations:--- "(a) For cancellation of the General Power of Attorney, dated 21st October, 1976 presented for Registration vide Serial No,5742 purported to have been executed by the plaintiff No,2 in favour of defendant No,1 as well as the Memorandum confirming deposit of Title-Deeds, dated 26th November, 1978 same being null, void and inoperative and not binding upon the plaintiff No,2 and the same be delivered up.
(b) For declaration that mortgage/charge on the Property No,D-9, Block 4-5, measuring 1438 sq.
Yards situated at Al-Hilal Housing Society, K.D.A. Scheme No,7, Karachi is illegal, void, inoperative and of no legal effect and that the defendant No,1 is not entitled to sell, dispose of, encumber and/or otherwise proceed against the said property of the plaintiff No,1 and the defendant No,1 may be directed to return the original documents of title to the plaintiff No,1.
(c)
(d) .
(e) ..
3. It was argued by Mr. Saleem Thepdawala that since plaintiffs are neither borrower nor customer of the bank, the subject-matter of this suit does not fall within the purview of Act XV of 1997. On the other hand, it is argued by Mr. Sadruddin Huda and S. Jamil Ahmed that by virtue of section 7(4) of Act XV of 1997 even a question that a plaintiff has not obtained any loan or that he is not liable to pay any loan or that any loan was obtained by playing fraud falls within the jurisdiction of the Banking Court. They have maintained that the suit be transferred to the concerned Banking Court.
SUIT NO.356 OF 1995
4. In this case, 4 plaintiffs who claim to be minors in the year 1983 when one Memorandum of Deposit of Title Deed was executed. They have filed this suit for declaration that the said Memorandum of Deposit of Title Deed in respect of immovable Property bearing No,33, C.P. Berar Cooperative Housing Society Limited, Blocks 7 and 8, Karachi does not create any equitable mortgage or charge upon the plaintiffs. In addition, they have also prayed for permanent injunction. The case of the plaintiffs is that they are co-owners of the suit property alongwith some other eight (8) brothers and sisters. A cash credit-cumoverdraft facility to the extent of Rs,10 million was obtained against the equitable mortgage of suit property with N.B.P. In the year 1983 when it is alleged that the plaintiffs were minors. It was argued by Mr. Iqbal Kazi that admittedly at the time of execution of the said deed creating equitable mortgage, the .Present plaintiffs were minors and, therefore, such contract has no legal sanctity. It was also argued that the plaintiffs neither fall within the definition of 'borrower' or 'customer' nor within 'mortgagor' or ' surety' and that the question of jurisdiction in a banking matter will only arise when there is legal and valid contract between the parties. According to Mr. Kazi it is a contract, written or implied which creates relationship of banker on the one hand and that of customer, borrower on the other hand. He has referred to the following case-law:---
(i) Gadigeppa Bhimappa Meti v. Balangowda Bhimangowda (AIR 1931 Bombay 561);
(ii) Nawab Sadiq Ali Khan v. Jai Kishori and others (AIR 1928 Privy Council 152);
(iii) The Chairman, District Screening Committee, Lahore v. Sharif Ahmad Hashmi (PLD 1976 SC 258);
(iv) Govind Ram v. Piran Ditta and others (AIR 1935 Lahore 561);
(v) S. Subramania Ayyar v. Al. Ar. Rm. Aruna Chalam Chettiar (AIR 1933 Madras 95); and
(vi) Mst. Izzat v. Allah Ditta (PLD 1981 SC 165).
5. Mr. S. Aminuzzaman, appearing for defendant Bank and Mr. Arif Khilji, appearing for the Intervenors namely Javed Ghaffar, Managing Partner of Messrs. Metro Garment Industries, Karachi, have pleaded that this Court has no jurisdiction in view of section 9 of the Act, 1997 and that the plaintiffs fall within the definition of a borrower. Mr. Arif Khilji has also invited my attention to para. 8 of the plaint, wherein the plaintiffs have admitted that in the year 1983 they were minors and they affixed their signatures on the said Memorandum of Deposit of Title Deed without knowing or understanding its contents .Which they duly repudiated, which fact they have also stated in the application seeking leave to defend and appear in the Suit No,77 of 1990 filed before the Banking Court in the year 1990. Plaintiffs have prayed for the following reliefs:---
(a) For declaration that the said Memorandum of Deposit of Title Deeds, dated 1983 in respect of Property bearing No,33 (35/18) measuring 968 square yards situated in Blocks Nos.7 and 8 C.P.
Berar Cooperative Housing Society. Ltd., within the area of Karachi Cooperative Housing Societies Union Ltd., Karachi does not create any equitable mortgage or charge on their shares in the property to any liability muchless to the liability of rupees ten million with interest at 14 per cent. Per annum with quarterly rest realisation and costs and that the same is void, ab initio, cannot be sued upon, has no existence in the eyes of law, entails no liability and is absolutely null as far as the interests of the plaintiffs are concerned.
(b) For permanent injunction against the Defendant from in any way enforcing the said Memorandum of Deposit of Title Deeds, dated 1983 in respect of the shares of plaintiffs in the said Property bearing No,33 (35/18) measuring 968 square yards situated in Blocks Nos.7 and 8, C.P.
Berar Cooperative Housing Society Ltd., in the area of Karachi Cooperative Housing Societies Union Ltd., Karachi, Karachi East and/or in any way adversely affecting the undivided share of plaintiffs therein.
(c).
SUIT NO.421 OF 1995
6. In this case, plaintiffs have claimed that they are not liable to repay any amount of finances or loans extended to the defendants Nos.4 to 6 as the change of management offered by the plaintiffs was not accepted by the Defendant No,7, namely, Habib Bank Limited and, therefore, the plaintiffs do not fall within the definition of 'borrower' or ''customer'. In view of this background, the plaintiffs have filed this suit for declaration that the Letter of Guarantee executed by them and filed with the proposal for change of management be declared null and void and that the same shall not be used against the plaintiffs as the same is void. On the other hand, Mr. A.R. Akhtar, learned counsel for Habib Bank Ltd. Has disputed this fact and stated that the change of management was approved by the bank and it was for this reason that the plaintiffs were permitted to operate bank account. He has referred to Annexure 'C' filed with the plaint which shows that on the request of the plaintiffs the running finance limit was approved. Mr. A.R. Akhtar has also referred to section 7(4) and (6) of the Act, 1997 and contended that the question as to the existence or nonexistence of a loan of finance exclusively falls within the jurisdiction of the Banking Court. According to the learned counsel, in the instant case, the question whether the running finances was enhanced at the request of plaintiffs or not falls within the jurisdiction of Banking Court. Mr. Rizwan Ahmed Siddiqui, Advocate for defendants Nos.2 and 4 to 6 has supported the contentions of Mr. A.R. Akhtar and has referred to paras. 3 and 7 of the plaint in order to show that the jurisdiction of this Court is ousted.
The plaintiffs have prayed for the following reliefs:--- "(a) Decree be passed declaring that the letter of guarantee was signed blank and was to be used subsequent to the approval of the proposal for change of management.
(b) Decree be passed declaring that proposal for change of management not having been approved by the defendant No,7 the letter of guarantee filed in support thereof whether blank or otherwise cannot be used against the plaintiffs.
(c) Decree be passed declaring that letter of guarantee sought to be enforced against the plaintiff is null and void and the same be delivered up and cancelled.
(d) Decree be passed for permanent injunction restraining defendant No,7 from enforcing the letter of guarantee as against the plaintiff whether blank or otherwise.
(e)
SUIT NO.1084 OF 1997
7. Plaintiff is a duly incorporated company under the Companies Ordinance, 1984. The case of the plaintiff is that on 27-6-1993, defendant No,1, namely Investment Corporation of Pakistan (I.C.P.) sanctioned financial assistance up to Rs,17,060 Million by way of LMM Financing in participation with UBL and ABL for the purposes of establishing a new solvent extraction plant, at Maoza Ranjay Khan, Tehsil Sadiqabad, District Rahim Yar Khan; that after recommendation of NESPAK, a sum of Rs,5.555 million and 4.208 million respectively were advanced for supply of locally manufactured machinery by the ICP and ABL but when it was the time of UBL to disburse the third instalment of Rs,3,731,221 the said bank failed to comply legal and contractual obligations, that the plaintiff approached the Board of Directors of ICP, to intervene in this matter but their attempts also failed as the UBL declined to perform its legal and contractual obligations. In these circumstances, plaintiff has filed a suit for declaration, damages and specific performance of the contract. According to Mr. S. Amjad Hussain, this suit is outside the scope of Act XV of 1997, while Mr. Anwar Mehmood, Advocate for defendants Nos.1 and 3 and Mr. Arif Hussain Khilji, Advocate for defendant No,2, have contended that this case falls within the jurisdiction of the Banking Court. Learned Amicus Curiae, Mr. Mansoorul Arfin, has also argued that the subject-matter falls within the jurisdiction of the banking Court. Reliance was placed on the case of Kamran Industry (Pvt.) Ltd. v. Industrial Development Bank of Pakistan and others (1994 SCMR 1970). The plaintiff has prayed for the following reliefs which reveals the exact nature of this suit:---
(i) A decree be passed against Defendants Nos.1 to 3 for Specific Performance of the LMM Financing Agreement, dated 4-5-1994 for the purpose of releasing a sum of Rs,5.120 million by defendant No,2, Rs,1.270 million by defendant No,1 and Rs,0.907 million by defendant No,3.
(ii) (a) A decree for damages against defendants Nos.1 to 3 in the sum of Rs,20,000 million invested by the plaintiff;
(b) Rs,20.00 million due to missing of crushing seasons for 1995-96 and 1996-97. Total damages Rs,40.00 million with 18% interest from the date of suit till realization.
(iii) An injunction to be issued against the defendants Nos.1 to 3 directing them to release the funds to the plaintiff on the basis of LMM Financing Agreement, illegally withheld.
(iv) An injunction be issued restraining the defendants from withdrawing any amount and also charging interest/mark-up from the Escro Account.
(v) Ad interim injunction be issued against the defendants in terms of prayer (iii) and (iv) above.
(vi) ..
SUIT NO.1090 OF 1997
8. In this case, the plaintiff is a duly incorporated company as per provision of the Companies Act, 1913 (now repealed by the Companies Ordinance, 1984). It is averred in the plaint that the plaintiff is in the business of producing, manufacturing as well as export and import of pharmaceutical goods and that it has an old business relationship with the defendant Bank; that in the year 1993 the plaintiff obtained running finances facility (0.D. Facilities) of Rs,5 millions and other finance facility against Trust Receipt (FATR) for Rs,7 millions; that between the years 1991 to 1994, the plaintiff imported several consignments for manufacturing of its pharmaceutical product, one of which comprises of Citric Acid which was detained by the Customs Authorities in the year 1994; that the plaintiff filed a Constitutional Petition against such detention, that in the alleged circumstances, the defendant Bank refused to open letters of credit. In reply, the defendants have not filed any counter-affidavit or any written statement; instead, they have filed an application under Order VII, Rule 11, C.P.C. (CMA-6397) for rejection of plaint on the ground that the suit is barred under section 9 of the Act, 1997. The plaintiff has prayed for the following reliefs in the above suit:- "(a) Declaration that the plaintiffs are entitled to demand and collect their Category passbook from the defendant Bank to enable the plaintiffs to import their raw materials for continuing their manufacturing and production of pharmaceutical products.
(b) Declaration that the act of the defendant Bank to withhold and retain the category passbook of the plaintiffs in the present case was illegal, arbitrary, mala fide and without lawful authority rendering the defendant Bank for ensuing costs, consequences and damages sustained by the plaintiffs.
(c) Injunction restraining the defendant Bank from interpolating, manipulating and making incorrect entries debiting the running finance and F.A.T.R. Accounts of the plaintiffs with incorrect entries of principal and mark-up elements.
(d) Mandatory injunction directing the defendant Bank to rectify and adjust the erroneous entries and interpolations relating to incorrect debits of principal and mark-up, in the subject accounts of the plaintiffs with defendant Bank.
(e) Order the defendant Bank to render true and correct up to date accounts of the plaintiffs relating to the subject bank accounts of the Plaintiffs with the defendant Bank in accordance with law.
(f) Grant mandatory injunction to the Plaintiffs directing the defendant Bank to return to the plaintiffs their Category Pass Book to enable them (plaintiffs) to import raw materials for manufacturing of their pharmaceutical products.
(g) In alternate and without prejudice grant damages to the plaintiffs in the sum of Rs,seventy two million (Rs,72 million) and/or any other sum as may be found and payable by the defendant Bank to the plaintiffs in the events and circumstances of the present case.
(h) .
(i) "
9. I have heard Messrs Iqbal Kazi, A. Aziz Khan, Habibullah Samo, Amjad Hussain, Nazar Hussain Dhoon and Salim Thepdawala who all have strenuously argued that their cases fall outside the scope of the Banking Companies Act, 1997 and that these cases being ordinary civil suits are covered by section 9 of the Code of Civil Procedure, 1908. On the other hand, Messrs A.R. Akhtar, Sadruddin Huda, Syed Jamil Ahmed, Arif Hussain Khilji, Syed Aminuzzaman and Zubair Qureshi are of the contrary view. According to the counsel for defendants all these suits are covered by section
(1) and that the jurisdiction of this Court is ousted by section 7(4) of the Act, 1997. Learned Amicus Curiae, Mr. Mansoorul Arfin is also of the same view who submitted that in all these cases the plaintiffs, either directly or impliedly, have called in question existence or otherwise of the loan or finances which can only be considered by the Banking Court. He has referred to the case Kamran Industries (supra). Before proceeding further, it would be advantageous to examine the relevant provisions of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, which read as follows:--- "7. Powers of Banking Courts.--- (1) Subject to the provisions of this Act, a Banking Court shall---
(a) in the exercise of its civil jurisdiction have all the powers vested in a Civil Court under the Code of Civil Procedure, 1908 (Act V of 1908); (b)
' Provided that ..................................................................
(2) A Banking Court shall in all matters with respect to which procedure has not been provided for in this Act, follow the procedure laid down in the Code of Civil Procedure, 1908 (Act V of 1908).
(3) .
(4) Subject to subsection (5), no Court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under this Act, including a decision as to the existence or otherwise of a loan or finance and the execution of a decree passed by a Banking Court....
9. Procedure of Banking Courts.--- (1) Where a borrower or a customer or a banking company commits a default in fulfilling any obligation with regard to any loan or finance the banking company or, as the case may be, the borrower or customer, may institute a suit in the Banking Court by presenting a plaint duly supported by a statement of account which shall be verified on oath in the case of a banking company by the Branch Manager or such other officer as the Board of Directors of a banking company may authorize in this behalf. Copies of the plaint shall also be filed along therewith in sufficient numbers so that there is one copy for each defendant and one extra copy.
(2) The provisions of section 10 of the Code of Civil Procedure, 1908, shall have no application for and in relation to suits filed hereunder...."
10. It will be seen that the objects and reasons for enacting the Banking Companies Act, 1997 as stated by the Minister of Finance (Mr. Sartaj Aziz) was to provide a single forum to the Banks for the recovery of their loans as the previous system provides two forums which created problems for the litigants. It is further disclosed in the ' Statement of Objects and Reasons' that the Act, 1997 aimed to consolidate both the Laws to provide single forum to the Banks as well as remedies to the customers who were required to go before the ordinary Courts which creates multifarious proceedings. It was further disclosed in the said statement that the Act, 1997 would provide remedy to the customer to approach the same Court which can be approached by a Bank. Prior to the Act, 1997 there were two laws for the purpose of recovery of bank loans and other allied disputes, namely, Banking Companies (Recovery of Loans) Ordinance, 1979 (hereinafter referred to as the Ordinance, 1979) and the Banking Tribunals Ordinance, 1984 (hereinafter referred to as the Ordinance, 1984) which were repealed through the Act, 1997. In so far as Ordinance, 1979 is concerned, it was held by the Courts that the defendants where it was Banking Company or even an individual like borrower was entitled to file a counterclaim and that a suit was also held maintainable by an individual including non-banking company against the scheduled Banks provided it fulfils the requirements of the Ordinance, 1979. (If any reference is needed, see General Investment Ltd. v. Dubai Bank Ltd. (1982 CLC 2252), Shamim Siddiqui v. Government of Pakistan and others (1985 MLD 951), Messrs National Motors Ltd. v. Muslim Commercial Bank Ltd. (1982 CLC 236), Haji Nabiullah and another v. Habib Bank Ltd. And others (PLD 1990 Peshawar 17) and Munir Ahmad Siddiqui and another v. Feroze Ahmed Siddiqui and others (1990 MLD 1776).
11. By virtue of subsection (6) to section 7 of the Act, 1997 all such suits which were pending in the Special Banking Courts or Banking Tribunal arising out of the Banking Companies Ordinance, 1979 or arising out of the Ordinance, 1984 stood transferred to the newly-established Banking Court.
Therefore, all suits filed by borrowers or customers against the Banks or the counter-cases filed by such persons now stand transferred to the Banking Court. Nowhere it is suggested in the Act, 1997 that such suits shall not be triable by the newly-established Banking Court. It is further provided in subsection (7) that the Banking Court shall proceed from the stage which had reached immediately prior to the transfer of such cases and shall not be bound to recall and rehear any witness. In such circumstances, this new Act has been enacted with a view to cover the procedure for recovery of loans and finances by the Bank and at the same time had given an opportunity to the customers or borrowers to seek redress of their grievance through the Banking Courts if it touches the question of Loan or Finance.
12. A close scrutiny of the above two provisions of the Banking Companies Act, 1997 namely sections 7(4) and 9(1) would reveal that a borrower or a customer or a Banking Company will be entitled to file a suit when any of them commits a default in fulfilling any obligation with regard to any loan or finance. The first requirement is that the parties should be either a borrower or a customer or a banking company which have been defined in section 2 of the Act, 1997. According to subsection (c) of section 2 a borrower means a person who has obtained a loan under a system based on interest from a banking company and includes a surety or an indemnifier. This definition is same as of Ordinance, 1979 except to the extent that the loan must be based on the system of interest. (For detailed discussion on the term 'borrower', see United Bank Ltd. v. Adamjee Insurance Co. Ltd. (1988 CLC 1660). The 'customer' has been defined in subsection (d) to section 2 which means a person who has obtained finance under a system which is not based on interest from a banking company or is the real beneficiary of such finance including a surety or indemnifier. 'Again, this definition is the same as of 'customer' in the Ordinance, 1984, except that the finance should not be based on system of interest. Subsection (a) to section 2 also defines the Banking Company and the names of such Banking Companies have been disclosed in the Schedule to the Act, 1997.
13. The second condition precedent for bringing a suit within the scope of Banking Court is that such suit must arise from a commission of default in fulfilling any obligation touching the business of loan or finance. This suggests that if the transaction is outside the scope of the loan or finance even then commission of any default in fulfilment of obligation will not bring a suit within the jurisdiction of a Banking Court. However, a question whether there exists any agreement to grant loan or finance will definitely fall within the jurisdiction of Banking Court. Therefore, where a suit is filed by a customer or a borrower claiming that amount received by them was not as a result of loan or finance it will fall within the jurisdiction of a Banking Court. Similarly, a suit for specific performance filed by a customer or borrower against the Banking Company seeking fulfilment of its obligation in respect of loan or finance will also fall within the jurisdiction of the Banking Court. In the case of Munir Ahmad Siddiqui and another v. Feroze Ahmad Siddiqui and 2 others (1990 MLD 1776), it was held by this Court in a matter arising out of Ordinance, 1979, that "the jurisdiction of a Civil Court has not only been excluded in respect of a suit filed by a Bank against a borroyver or by borrower against a Bank, but it has also been excluded with regard to a decision as to the existence or otherwise of a loan". However, in another case National & Grindlays Bank Ltd. v. N.P.
Miranda and 2 others (1984 CLC 2106), it was held, inter alia, by this Court that the suit filed by the plaintiff Bank under provisions of Ordinance, 1979, seeking recovery of amount from its two employees for compensation on account of money fraudulently withdrawn by them was not competent before Special Court. The Execution Application filed before this Court was held to be competent and its transfer to Special Court was declined.
14. Reverting to the cases, in Suit No,475 of 1993, it is admitted that defendant No,3 was attorney of the plaintiffs and that a memorandum of deposit of title deed was also executed in favour of Bank.
It is pertinent to note that this Memorandum was executed in the year 1978 and all the title documents of the property in suit were also delivered to the Bank which remained with them till filing of the suit (for nearly 15 years) and are still with them. The question whether the Memorandum of Deposit of Title Deeds was the result of any fraud or misrepresentation and that this document creates any obligation on the plaintiffs for repayment of loan is to be decided by the Banking Court. The jurisdiction of this Court is ousted by virtue of section 7(4) of the Act, 1997.
15. In one of the matter arising out of the Banking Companies (Recovery of Loans) Ordinance, 1979, it was held, inter alia, by this Court in the case of M/s. Shafiq Hand (Pvt.) Ltd., Karachi v. Bank of Credit and Commerce International (Overseas) Ltd., Karachi (PLD 1993 Karachi 107) that a cross- suit or a set-off is entitled to be maintained before the Banking Tribunal on the ground that the jurisdiction to entertain a set-off or counterclaim arises from the jurisdiction to entertain the main suit. It was further held that if a suit lies in the ordinary jurisdiction or in the special jurisdiction a set-off can fall in line. (See also Banque Indosuez v. Banking Tribunal for Sindh and Balochistan and others 1994 CLC 2272). I may also point out here that in the Banking Tribunals Ordinance, 1984 there was an identical provision as of section 4(7) of the Act, 1997 which was subsection (3) to section 5 of the Ordinance, 1984 which was also considered by the Hon'ble Supreme Court in the case of Kamran Industry (Pvt.) Ltd. v. Industrial Development Bank of Pakistan and others (1994 SCMR 1970).
' In that case, the petitioner obtained loan from respondent No,1 and against that executed certain documents and also furnished bank guarantee. Since the petitioner failed to repay the loan within time, the respondent No,1 filed recovery proceedings before the Banking Tribunal at Multan. The petitioner also filed a suit for declaration to the effect that the loan agreement was illegal, ultra vires and that it was result of undue influence. It was further prayed by the petitioner that the bank guarantee be declared to be of no legal effect. However, the plaint in the suit filed by the petitioner before Civil Court was rejected as respondent No,1 filed an application under Order VII, Rule 11, C.P.C.
The appeal and revision filed by the petitioners against rejection of plaint were also dismissed. The civil petition seeking leave to appeal filed by the petitioner before the Hon'ble Supreme Court was dismissed on the ground that the plaint was rightly rejected, while observing that the learned Single Judge was not justified in rejecting the plaint on the ground of want of cause of action but it should have been dismissed on the ground of jurisdiction. It was held that the jurisdiction of the Civil Court is excluded in respect of the subject-matter of the suit. For further discussion on the point of jurisdiction of the Special Courts and Banking Tribunals, see M/s. Grain System (Pvt.) Ltd.
And others v. Agricultural Development Bank (1993 SCMR 1996), M/s. M.M. Traders and others v.
Muslim Commercial Bank and others (1994 MLD 1186), Algemens Bank, Nederland N.V. v. Fort Super Pakistan Ltd. And others (1988 MLD 1058) and M/s. United Bank Ltd. v. Rehana Raza (PLD 1983 Karachi 467). In the last cited case, it was held by a learned Single Judge of this Court, Salim Akhtar, J. (as his lordship then was) that where a special law has been enacted for specific subject-matter and where special Court has been established to try such matters excluding the jurisdiction of all other Courts, the provision of such special law shall prevail over the general law.
16. Now, turning to the arguments of Mr. Iqbal Kazi, suffice to say that section 11 of the Contract Act, 1872, permits every person to enter into contract who has attained the age of majority according to law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. The first qualification of such person, thus, is that he should be major/adult. In Pakistan, such person should have attained the age of majority as provided in the majority Act.
1875. Any contract entered into by a minor is treated as an act void ab initio. In the case Sharif Ahmed Hashmi (supra), it was held, inter alia, by a Full Bench of Hon'ble Supreme Court that the law forbids the enforcement of an act or transaction entered into by an agreement by a minor even if the minor were to ratify it after attaining majority. It was held by the Privy Council in the case of Nawab Sadique Ali Khan (supra) that the execution by the minor of the mortgage deed was a nullity according to Indian Law and incapable of founding a plea of estoppel. In Gadigeppa Bhimappa Meti (AIR 1931 Bombay 561), it was held by a Full Bench of Bombay High Court while interpreting section 11 of the Contract Act that where an infant represents fraudulently or otherwise that he is of age of majority and thereby induces another to enter into a contract with him, then, in an action founded on the contract, the infant is not estopped from setting up infancy. (For further reference, see Kolipakam Penchelu Varadappa Rao (AIR 1933 Madras 94). Coming to the case of Gondram (supra) which is a decision given by a Full Bench of Lahore High Court, one may find comprehensive discussion on the provisions of sections 10, 11 and 25 of the Contract Act. After reference to several case-law, it was held that the contract under ,reference before the Court was a nullity and unenforceable at law since the same was entered into by a minor. It was further held that in the circumstances of the case, no question arises of ratification of such contract after attaining the age of majority. This view was followed by a learned Single Judge of Dacca High Court in the case Syed Alauddin Ahmed v. MD. Mustafa (PLD 1971 Dacca 286).
17. In the present circumstances of this case, the burden is upon the plaintiffs to show that they were minors at the time when the contract under reference was executed. But, at the same time, the question whether this agreement which creates the liabilities upon the executor, has resulted in creation of any liability will again fall within the jurisdiction of a Banking Court. In other words, plaintiffs are pleading that there does not exist any legal, valid and binding agreement between them and the Banking Company for repayment of loan. To give such decision on existence or otherwise of the borrower's liabilities, the jurisdiction lies with the Banking Court. In view of the prohibition contained in subsection (4) to section 7 of the Banking Companies Act, 1997, the question whether the deed, agreement or contract through which a loan or finance was extended is lawful or otherwise is to be decided by the Banking Court as established by the Act, 1997. In the instant suit, for the sake of arguments, if it is accepted that the agreement to create loan or finance was void, it will clear the plaintiffs of the liabilities which will amount to preempting the jurisdiction of the Banking Court. I am of the considered view that the decision as to the existence or otherwise of a loan or finance includes the question of considering voidness or voidability of an agreement to grant loan or finance which, in the instant suit, is the subject-matter. Therefore, this suit is liable to be transferred to the concerned Banking Court.
18. In Suit No,421 of 1995, it is claimed by the plaintiffs that they are not liable to repay the amount of loan on behalf of the Company as the defendant Sank did not accept the change of Directors of the Company concerned. Athough this fact is disputed by the defendant Bank but I would not like to take any observation on this controversy as it may cause prejudice to any of the arty; suffice it to say that this dispute involves determination of the question whether a loan was created or not which is within the exclusive domain of the making Court. It is more so, since the plaintiffs are seeking declaration in pact of the Letter of Guarantee to the extent that it may be declared to be operative and of no effect as it was signed blank at the relevant time. It is only section 17 of the Act, 1997 which has laid down that all the relevant which are to be obtained by the Bank from borrower or customer should be completely filled and signed. Therefore, this question whether the letter of Guarantee was obtained blank at the relevant time and whether it could be used for the purpose of creating liability falls within the jurisdiction of the Banking Court. A common Court of civil jurisdiction has no jurisdiction.
19. In Suit No,1084 of 1997, the main relief plaintiff is seeking is for the specific performance of the financing agreement, dated 4-5L-1994. As discussed earlier, it is an obligation of the Bank arising out of a finance agreement which the plaintiff is seeking to enforce through this suit on the ground that the Bank has committed default in its fulfillment. This act, as alleged in the plaint is fully covered by section 9(1) of the Act, 1997. The plaintiff is also seeking prohibitory injunction as well as mandatory injunction which are both consequential reliefs. Since the Banking Court is competent to grant main relief, such as declaration an! Cancellation of a document, it can also grant all consequential reliefs. It would not be proper to hold that for the reliefs (iii), (iv) and (v) as prayed in the plaint of Suit No,1084 of 1997, this Court has jurisdiction. It is pertinent to observe that by virtue of section 7(1) and (2) of the Act. 1997, the provisions of Code of Civil Procedure, 1908, are made applicable to the Banking Courts. There is no prohibition or bar on the newly-established Banking Court to invoke provisions of C.P.C. Which are not contrary to the provisions of the Act, 1997 and which may advance the cause of justice, equity and good conscience. Thus, Suit No,1084 of 1997 is also liable for transfer to the concerned Banking Court.
20. In Suits Nos.1084 of 1997 and 1090 of 1997, the plaintiffs have claimed monetary compensation against Banks as damages, in addition to other reliefs. The legal meaning of the word "damages" is that it is pecuniary compensation, which is determined by the Court according to circumstances of each case, payable by one person to another for the injury, loss, or damage caused by one to the other by breach of legal duty, normally by breach of contract or commission of tort. (See the Oxford Companion to Law by David M. Walker, Clarendon Press, 1980, Oxford, U.K.). There is a marked distinction between damages arising out of a contract and a tort. Even the test by which the amount of damages is to be ascertained in contract and in tort may differ as it is to be judged in the circumstances of each case. However, the intention with which a contract was broken may not be material but in tort the intention of wrongdoer is considered to be fair in assessing the quantum of damages. Likewise, in cases arising out of breach of contract the evidence of malicious motive may be held not to be relevant but it is admissible in the case of tort. A fine distinction has been drawn in the book 'The Law of Torts' (by Ratanlal and Dhiraj Lal, edited by Justice (Retd.) G.P. Singh, 23rd Edition, Wadhwa & Co., New Delhi, India) in the following manner:--- ...A contract is founded upon consent: a tort is inflicted against or without consent. A contract necessitates private between the parties: in tort no privity is needed. A tort must also be distinguished from a pure breach of contract. First, a tort is a violation of right in rem, i,e,, of a right vested in some determinate person, either personally or as a member of the community, and available against the world at large: whereas a breach of contract is an infringement of a right in personam, i,e,, of a right available only against some determinate person or body, and in which the community at large has no concern. The distinction between the two lies in the nature of the duty that is violated. In case of a tort the duty is one imposed by the law and is owed to the community at large. In the case of a contract, the duty is fixed by the will and consent of the parties, and it is owed to a definite person or persons...."
21. In Suit No,1090 of 1997, the plaintiff is seeking damages to the tune of Rupees Seventy-two Million (Rs,72 million) in alternate and without prejudice to main reliefs which are for the declaration and rendition of accounts. According to the contents of plaint, the reason for alleged suffering of monetary loss by the plaintiff was due to refusal of Bank to open letter of credit. In such circumstances, damages arose when there is an obligation on one party to do some act and its breach by the same party within a given period. A plaintiff who is seeking specific performance of a contract may also ask for compensation for its breach, either in addition to, or as substitution for, such performance. It is provided in section 19 of the Specific Relief Act, 1877. (If any guidance is needed, please see Abdul Karim v. Muhammad Shafi and another (1973 SCMR 225).
22. While discussing provisions of the Act, 1997, one should not lose sight of the fact the at one of the purpose of enacting the Banking Companies Act, 1997 after repealing of enactments was, inter alia to provide speedy measures for recovery of outstanding loans and finances of the Banking Companies. The definition of Banking Companies was also extend in the new enactment. (See Pakistan Fisheries Ltd., Karachi and others v. United Bank Ltd. (PLD 1993 SC 109 at 128). Recently, in the case of Qayyum Nawaz Khan and another v. The Regional, Agricultural Development Bank of Pakistan, Dera Ismail Khan and 4 others (PLD 1997 Peshawar 72), the question of a suit filed for damages against a Banking Company was considered by a Division Bench of Peshawar High Court. It was held, inter alia, that a Civil Court has no jurisdiction to entertain a suit with regard to damages which is an offshoot of the main suit for declaration. It is settled law that once the Legislature has made any special law for a particular purpose prescribing a forum or a Tribunal for decision of any dispute the Courts should not encourage deviation from such recourse. As a result of the above discussion, I am inclined to hold that a Banking Court as established under section 2(b) of the Act, 1997, is competent to hear and adjudicate cases of the, inter alia, following nature:- --
(a) All suits filed by the Banking Companies against borrower or customer for recovery of Loan or Finance, either based on interest for mark-up as defined in the Act, 1997.
(b) All suits or claims filed by a borrower or customer against the Banking Company claiming any adjustment, set off or setting up a counterclaim either through an independent suit or in a suit filed by a Banking Company.
(c) Suits for accounts arising out of a Loan or Finance as defined in the Act, 1997.
(d) Suits for specific performance seeking enforcement of an agreement or contract to pay or repay any Loan or Finance or to perform any obligation arising out of such agreement.
(e) All the suits for declaration as to legality, validity or otherwise of a document which creates Loan or Finance as defined in the Act, 1997.
(f) All the suits for cancellation of any instrument through which any liability to pay or to repay a Loan or Finance may arise.
(g) All the suits for prohibitory injunction which may restrain any of the parties namely, Banking Companies, borrower or customer from performing their obligations and duties arising out of such business pertaining to Loan or Finance. In the like manner, all suits in the nature of mandatory injunction.
(h) All the suits for damages (excluding tort cases) arising out of the breach of contract executed in respect of Loan or Finance between the Banking Company on the one hand and the borrower or customer on the other.
23. In all the above cases, the suits which are valued at Rupees 30 million or below shall be transferred to the concerned Banking Courts while those suits whose valuation is above Rupees 30 million, shall remain in this Court but shall be placed before the Judge duly nominated by the Hon'ble Chief Justice of this Court as provided under section 5 of the Act, 1997.