On 30-9-1997 and again on 9-10-1997, a legal objection on the point of jurisdiction was raised by Mr. Maqbool Baqar, Advocate, for the plaintiff that after promulgation of the Act XV of 1997 namely Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. This Court has no jurisdiction and that the case should have been transferred to the concerned Banking Court as established under the said Act.
2. In order to determine the question of jurisdiction, it would be relevant to consider the facts of the case, particularly as stated in the plaint. It is the case of the plaintiff that he is a Director of Messrs Boots Co. (Pakistan) Limited, and a member of Stock Exchange, Karachi; that in February, 1986 the plaintiff, at his request, was granted two credit facilities in the sum of Rs,10 million each, extended into two accounts maintained by the plaintiff with defendant No,1 (hereinafter called as "the Bank") in the name of (i) Habib Ahmed and (ii) Habib and Habib International; that said credit facilities were granted to the plaintiff under express terms and conditions in the Bank's two letters both dated 18-2-1986; that the plaintiff thereupon executed two agreements relating to pledge of securities (the shares in question), demand promissory note in the sum of Rs,12 million, personal guarantees and agreements for financing on mark-up basis all on the same date i,e, 18-2-1986. As apparent from the documents referred to above, the plaintiff was extended the said credit facilities initially for a period of three months i,e, until 20-5-1986 by which time the credit facilities had to be repaid subject to the Bank's right to review the position at that time. It is further, averred in that letter, dated 22-2-1986 that the plaintiff expressly undertook to fully compensate the Bank should the same suffer any loss due to adverse fluctuation in the market price of the shares and to fully honour any commitment made by the Bank in that respect; that the said undertaking/indamnity was given by the plaintiff when a request was made by him to the Bank to accept the pledge of shares in equal proportions in two accounts; that on 6-3-1986 the Bank wrote a letter to the plaintiff requiring him to place additional shares with a current market value of Rs, 11,042,000 to cover the shortfall as the value of 2,98,600 shares of the company deposited by the plaintiff as security against the said credit facilities had come down in the market; that the Bank wrote letters in August and October, 1986 asking the plaintiff for repayment of the amounts due to it and also making up the deficiency but the plaintiff again failed to make payments or offer additional security; that the Bank finally addressed a letter to the plaintiff in January, 1987 demanding repayment of all the outstanding in both the loan accounts and that the plaintiff was also put on notice that if the outstanding are not repaid, the Bank will be constrained to start selling off the securities pledged by him with the Bank to alienate the above said outstanding.
3. It is further the case of the plaintiff that he wrote a letter, dated 10-3-1986 requesting defendant No,2 namely Knoll Pharmaceuticals Ltd. (Previously Boots & Co.) to pay the dividend warrants for the credit of plaintiff's accounts with the Bank. However, the plaintiff did not pay any amount to the Bank. Consequently, the Bank instructed its stock broker to commence selling the shares pledged with the Bank through Karachi Stock Exchange. As a result thereof, 37,300 shares were sold as alleged in different lots during the period commencing from 10-5-1987 to 17-5-1987. The Bank, however, on 18-5-1987 put the balance of shares to sale. This perturbed the plaintiff who, then, served a legal notice, dated 20-5-1987 on the Bank. A notice was also served on the defendant No,2, requesting that transfer of shales be effected in the Company's Books. As a result of the abovenoted facts the plaintiff filed this suit with the following reliefs:--
(a) Declare that the plaintiff is the owner of 2,98,600 shares in the Boots Company (Pakistan)
Limited appearing against his name in Folio No,218 in the register maintained by the said company.
(b) Grant an injunction restraining the defendant No,2 from effecting any transfers whatsoever of the said shares and/or making payments of dividends to any one other than the plaintiff and/or from issuing right shares to anyone other than the plaintiff to exercise any right, title or interest of any sort including the exercise voting rights for or in relation to the said shares or any of them.
(c) Direct the defendant No,2 to permit the plaintiff to exercise all and whatsoever rights are attached to and in relation to the said shares and to treat the plaintiff as the owner thereof.
(d) Restrain the defendants Nos.3 to 6 from acting directly or indirectly, or through any agent or associate or nominee, or through or in relation to any transferees or purported transferees not to claim or exercise any right or purported right for or in relation to the said shares and prohibit the sale/transfer/alienation/pledge/hypothecation/charging of the said shares.
(e) Grant a decree in the sum of Rs,5 Crores against the defendants jointly and/or severally.
(f) ............................
(g) ..................
4. I have heard Mr. Maqbool Baqar for the plaintiff and Messrs Muhammad Ali Sayeed, A.H. Mirza, Iqbal Bawany and Zahid Burhani, Advocates for the defendants. It was strenuously argued by Mr. Baqar that after promulgation of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, (hereinafter referred to as the Act, 1997), this suit is liable to be transferred to the newly established Banking Court. He had placed reliance on sections 2(b), 5, 7(4), (6) and 941) of the Act, 1997. It was argued on behalf of the defendants that the dispute in the present suit is not that in which it could be said that it relates to default committed, either by a borrower, or a customer or by a Banking Company in fulfilling any of their respective obligations as envisaged in section 9(1) of the Act, 1997. It was further argued that the act of the Bank, in selling the shares of the plaintiff pledged with it as security which were allegedly sold at a price which was less than the claimed market price; is of a tortuous conduct on the part of the Bank in selling the shares which were pledge in respect of two credits facilities and that such act does not form part of contractual obligation of a Banking Companies. Mr. Muhammad Ali Sayeed further argued that such an obligation should be an obligation which has been defined and assumed in clear terms under the contract which govern the granting of the loan and the pledging of shares as security thereof.
Another plea raised against the transfer of this suit to the Banking Court was that defendants 2 to 6 do not fit in the scheme of the Act, 1997 as they are neither borrowers nor creditors nor even customers and that the present Act, 1997 does not cast upon the said defendants any obligation arising out of loan or finance. It was submitted that the Act, 1997 authorises only a borrower or a customer of the Bank to file a suit against the Banking Company which commits default in fulfilling any of its obligations or the Banking Company may, on its part, file a suit against the borrower or customer for the same reason. These defendants having no privity of contract with plaintiff and being under no statutory or contractual obligation do not come under the scheme of the Act, 1997 and cannot be joined as parties to a suit under the said Act. Lastly Mr. Sayeed concluded his submission by saying that one of the defences of the defendants 3 to 6 taken in the suit is that they had transacted the shares without any notice of the alleged dispute between the plaintiff and defendants Nos.1 to 2. Additionally, there is no justifiable reason either in law or in equity as to why the defendants 3 to 6 should be subjected to the procedures of a summary suit under the Act, 1997 and the limited and conditional right of appeal provided by the new Banking Law.
5. Mr. A.H. Mirza and Mr. Iqbal Bawany have also opposed submissions of the learned counsel for the plaintiff by adopting the arguments of Mr. Muhammad Ali Sayeed. Mr. Zahid Burhani, learned counsel for the defendant No,1 submitted that initially this suit was filed in the year 1987 on the original civil side of this Court and that in view of section 7(6) of the Act, 1997 only such matters shall stand transferred to, or be deemed to be transferred to the Banking Court having jurisdiction which were pending either in any Special Court constituted under the Banking Company (Recovery of Loans) Ordinance, 1979 or in any Banking Tribunal under the Banking Tribunals Act, 1984 (1984 Act). It was, thus, argued that the above suit is pending in this Court neither under the Ordinance, 1979 or nor under the Ordinance, 1984 and that this suit was instituted under section 9 of the Civil Procedure Code, 1908, on the original Civil side of this Honourable Court. It was also argued that the defendants were never served with summons/notices in the special form as prescribed under the Ordinance, 1979 or the Ordinance, 1984 but were served with ordinary summons and notices prescribed under the ordinary civil jurisdiction vested under the Civil Procedure Code of 1908.
6. All the parties have referred certain provisions of the Act, 1997 therefore, it will be advantageous to reproduce the same in order to appreciate their respective submissions:-- "Section 7(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.
Section 7(6). All proceedings, including proceedings following the filing of an arbitration award and proceedings for the execution of a decree within the jurisdiction of a Banking Court, pending in any Special Court constituted under the Banking Companies (Recovery of Loans) Ordinance, 1979 (XXV of 1997), Banking Companies (Recovery of Loans, Advances, Credits or Finances) Ordinance, 1997 (XXV of 1997) or any Banking Tribunal under the Banking Tribunals Ordinance, 1984 (LVIII of 1984) or any other Court including a High Court shall stand transferred to or deemed to be transferred to the Banking Court having jurisdiction. On transfer of a proceedings under this subsection, a Banking Court shall require the attendance of the parties through notice issued in accordance with the procedure for service of summons or laid down in subsection (3) of section 9.
Section 7(7). In respect of proceedings transferred to a Banking Court under subsection (6) the Banking Court shall proceed from the stage which the proceedings had reached immediately prior to the transfer and shall not be bound to recall and rehear any witness and may act on the evidence already recorded or produced before the Court or Tribunal from which the proceedings were transferred.
Section 9(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."
7. Recently, in the case Nasimuddin Siddiqui and others v. U.B.L. and others (Suit No,475 of 1993), more or less, identical objections were raised in view of the provisions of newly enacted Banking Companies Act, 1997. After making reference to several reported cases including Kamran Industry (Pvt.) Ltd. v. Industrial Development Bank 1993 SCMR 1996, Pakistan Fisheries Ltd. v. United Bank Ltd.
PLD 1993 SC 109, General Investment Ltd. v. Dubaee Bank Limited 1982 CLC 2252, Shameem Siddiqui v. Government of Pakistan and others 1985 MLD 951, Messrs National Motors Limited v. Muslim Commercial Bank Limited 1982 CLC 236, Hajee Nabiullah and another v. Habib Bank Limited and others PLD 19 PS 17 (sic), and the case of Messrs Shafiq Haneef (Private) Limited, Karachi) v. Bank of Credit and Commerce International Overseas Limited, Karachi PLD 1993 Kar. 107, it was held, inter alia, that in addition to the suits for recovery of loan and finances filed by a Banking Company, the newly established Banking Court is competent to hear and adjudicate cases of the following nature:--
(a) All suits filed by the Banking Companies against borrower or customer for recovery of loan or Finance, either based on interest or 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 counter-claim 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.
8. I have considered arguments of all the learned Advocates. The main relief which the plaintiff has prayed is in respect of his shares belonging to Messrs Boots Company Pakistan Limited which were pledged against the grant of two loans/finances in order to grant declaration that the plaintiff is still owner of these shares which were sold by the defendant No, 1 . It is to be seen as to what were the terms and conditions for the grant of these two finances and what were the obligations of the plaintiff who is a borrower and the contractual obligations of the defendant No,1 who is a Banking Company arising out of such finances. Determination of all these questions eminently falls within the domain of a Banking Court as established under the Act, 1997. The remaining relief for grant of damages. For the purpose of granting a perpetual injunction and even to grant damages in the shape of monetary compensation, the foremost question which is to be decided first is the question of the status of the shares of the plaintiff. The plaintiff would be entitled to the consequential reliefs or for the matter to damages, if he succeeds in obtaining the declaration as prayed for a plaintiff cannot be permitted to bifurcate the claims of declarations and damages.
According to subsection (1)(a) to section 7 of the Act, 1997 a Banking Court shall have all the powers vested in a Civil Court under the Code of Civil Procedure, 1908. Subsection (2) of the section 7 of the Act, 1997 entitles a Banking Court to follow the procedure laid down in the C.P.C. and the Code of Criminal Procedure, 1998, where no such procedure is provided in the Act, 1997. In this view of the matter I do not see any prohibition that a plaintiff may not be entitled to unite in the same suit several cases of action against the same defendant or the same set of defendants as provided in Order 2, Rule (3), C.P.C. There is no bar or prohibition on the Special Court not to entertain or adjudicate any connected issues arising out of the same cause of action.
9. It was also argued by Mr. Muhammad Ali Sayeed that if the suit is transferred to the Banking Court then it will amount to putting defendants Nos.3 to 6 under hardship and rigors of summary proceedings. He has expressed his apprehension that after transfer of the suit to the Banking Court these defendants will be required to obtain leave to defend from the Banking Court as provided under section 9(4) of the Act, 1997. I am not in agreement with the submissions of Mr. Muhammad Ali Sayeed. The procedure provided in subsection (4) to section 9 is meant for those plaints and suits which are filed subsequent to coming into force of the Act, 1997, which is clear from the language used in subsections (1) and (3) to section 9 of the Act, 1997. However, for the cases which come before a Banking Court shall be governed by subsection (7) to section 7 of the Act, 1997.
According to these provisions, if a suit is transferred to a Banking Court as provided under subsection 7(6), the Banking Court shall proceed from the stage which the proceedings had reached immediately prior to the transfer. It is further provided in section 7(7) that on transfer of the case to the Banking Court. the said Court shall not be bound to recall and rehear any witness and may act on the evidence already recorded or produced before the Court or Tribunal from which the proceedings are transferred. The provisions of sections 7 and 9 are quite different. One prescribes the procedure in the case of a transfer of a suit while the other provides the procedure for filing a suit under the new Act. Therefore, the apprehension expressed on behalf of defendants Nos.3 to 6 that they will be required to obtain leave to defend the above suit after its transfer to a Banking Court is misconceived.
10. Mr. Zahid Burhani has submitted that only those suits are liable to be transferred to a Banking Court which were either pending in the Special Court constituted under the Banking Companies Ordinance, 1979 or under Banking Tribunal Ordinance, 1984 and that the instant suit which was filed under section 9, C.P.C. is not liable to be transferred to a Banking Court. This is not the spirit of subsection (6) to section 7 of the Act, 1997. According to this provision "all proceedings including proceedings following the filing of an arbitration award and for the execution of a decree pending before the Banking Courts or Banking Tribunals including any other Court shall stand transferred. It will be seen that in addition to the earlier three Banking Courts/Tribunals it is also mentioned in section 7(6) that all proceedings pending in any other Court including a High Court has also been used. Subsection (6) to section 7, in my considered view, does not limit transfer of the suits pending in the Banking Courts or Banking Tribunals. The term "all proceedings", if read with the phrase "or any other Court including a High Court", as used in section 7(6), clearly indicates that all such suits which fall within the scope of Act, 1997 are liable to be transferred, irrespective of the fact that such suit was pending in a Court of common jurisdiction. If what Mr. Burhani has suggested is upheld, then it will defeat the aim and object of this new enactment. Therefore, this suit is also liable to be transferred. It was also argued that the defendants Nos.3 to 6 have no privity of contract with either the plaintiff or with the Banking Company, and therefore, by impleading them in the suit, it has lost its character of a Banking suit. None of the Advocates appearing for the defendants were able to sight any law to support this contention. I am unable to subscribe to their views. The relief being sought by the plaintiff against defendants Nos.2 to 6 is mainly for the damages. As held by me in the earlier portion of this order, it will not be permissible to the plaintiff to split its several claims and file two separate suits. The recent trend of the Superior Judiciary in Pakistan is to discourage multiplicity of proceedings. I am of the considered view that the presence of the defendants Nos.2 to 6 is not likely to change nature of the suit or in any manner effect the jurisdiction of Banking Court. The doctrine of sinker is not applicable to the facts of the instant case.
I would not like to dilate upon this doctrine in detail as none of the parties have made any submission on this point. If any guidance is needed, please see Atta Muhammad v. Ahmad Bakhsh and 2 others PLD 1971 Lah. 401, Mehr Allah Ditta and another v. Muhammad Ali and another PLD 1972.
SC 59 and Muhammad Ramzan and 12 others v. The Member (Revenue) Board of Revenue, Punjab, Lahore and 7 others 1994 SCMR 55.
11. As a result of above discussion, this suit stands transferred to the concerned Judge of this Court as appointed by the Honourable Chief Justice of this Court pursuant to section 5 of the Act, 1997.