1. ' The brief facts which are not disputed by the parties in relation to this suit are that plaintiff-Bank granted finance facility of Rs,50 million by Agreement dated 10-1-1996 (Annexure A') to defendants No,1 which is a registered Partnership Firm consisting of defendant No,2 and defendant No,3 as its partners. Under the said Agreement defendant No,1 was required to purchase immediately from the Bank the goods (15 buses in this case) at a price of Rs,77.329 million and pay the purchase price to the plaintiff on or before January, 1999 in 36 equal installments. As security for repayment of the aforesaid amount, defendant No,1 executed a Promissory Note for Rs,77.329 million. It appears that pursuant to the aforesaid facility, defendant No,1 on or after 19-3-1996 executed a Vehicle Lease Agreement which laid down the terms and conditions of the use of the vehicles which were purchased or were to be purchased from the loan granted by the plaintiff-Bank and also the monthly rent payable in respect of the same (Annexure C').
2. ' Clause (6) of the Finance Agreement dated 10-1-1996 provided that "failure on the part of the customer (i,e, defendant No,1) in any installment on its due date will entitle the Bank to demand immediate payment of the entire balance of purchase price remaining due notwithstanding anything to the contrary contained in the said Agreement". Clause (7) further provided that notwithstanding anything contained in the said Agreement, "the Bank will at all times be at liberty and shall have the right to cancel the facility under the Agreement, without assigning any reason.
3. The Bank shall also have the right to demand immediate payment of the Purchase Price at any time without assigning any reason therefor".
4. ' To provide security for repayment of the loan defendants Nos. 2 and 3 who are partners of the firm, on 10-1-1996 executed personal guarantees in favour of the plaintiff in the sum of Rs,50 million plus mark-up. Defendant No,4 also issued a guarantee dated 13-12-1995 in favour of the plaintiff in the sum of Rs,50 million plus mark-up. In addition defendant No,5, to secure repayment of the loan through his attorney Abdul Jabbar deposited the Title Deed of his property being Industrial Site No,WH-12, Sector 16-B, North Karachi Township, Karachi and executed a Memorandum of Deposit of Title Deed through his attorney Abdul Jabbar. Defendant No,5 also executed a personal guarantee in the sum of Rs,50 million plus mark-up in favour of the plaintiff-Bank. To provide further security for repayment of the loan, Haji Zar Ali (defendant No, 6) also executed a personal guarantee in the sum of Rs,77.329 million plus mark-up. Similarly, to secure repayment of the loan Shaukat Ali Khan, Sardar All Khan, Mushtaq All Khan and Asghar Ali Khan, (defendants Nos. 7 to 10), all sons of Haji Zar Ali (defendant No, 6) through their father and attorney deposited Extract of Agriculture Land situated in Village Pabbi, Tehsil and District Nowshehra and at the same time executed a Memorandum of Deposit of Title Deed in respect thereof. A copy of the Power of Attorney given by the four sons to their father has also been filed by the plaintiff.
5. ' Defendant No,1 committed default in payment of the loan installments and did not make any payment in spite of repeated demands and legal notices dated 24-3-1997 and 29-7-1997 sent by the plaintiff to them. Consequently, the plaintiff-Bank filed his suit praying for judgment and decree against all the defendants jointly and severally, inter alia, for recovery of Rs,5,80,29,000 with mark- up at 0.54 paisa per Rupee, One thousand per day from the date of the suit till payment, final mortgage decree in respect of the properties mortgaged by the various defendants and appointment of a Receiver to take over possession of 15 buses leased to defendant No,1 with power to sell the same and hand over their proceeds to the plaintiff.
6. ' Several Interlocutory Applications have been filed by the learned counsel for both the parties who have advanced arguments in support of the applications filed by them and against the applications filed by the Opposing Counsel. After considering of the arguments and law cited by the learned counsel, my conclusions in respect of various applications are as follows:-- 1-C.M.A. No,5469 of 1998: ' This is an application under section 34 of the Arbitration Act, 1940 filed by the defendant praying that the Court should stay the proceedings and refer the matter to arbitration as there is an Arbitration Clause in the Lease Agreement (Annexure "C" to the plaint) which has been executed by the parties. Learned counsel for the defendants has argued that the Agreement for Finance dated 10-1-1996 (Annexure "A" to the plaint) was superseded by the Vehicle Lease Agreement allegedly signed on or after 19-3-1996 which gives in great detail the terms and conditions of the relationship between the parties and that the latter Agreement contains an arbitration clause. He has further argued that even if Annexure "A" is treated to be valid, the latter Agreement i,e, Annexure "C" is also operative and the matter should be referred to Arbitration under section 34 of the Arbitration Act as the defendants have not taken any step in the proceedings and are ready and willing to perform their part of the contract and has relied upon 1990 M LD 2027, 1997 CLC 1250 and 1993 SCM R 866. He has further submitted that the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 ("The Act") recognizes the possibility of arbitration and has relied upon section 3 and section 7 (6) of the said Act. He has also submitted that in a case which is to be decided under summary procedure, if there is an arbitration clause, the matter should be referred to arbitration and has relied upon 1990 MLD 207.
7. ' The learned counsel has also argued that it is not a pure banking transaction but a leasing arrangement which has been brought into the extended definition of finance under section 2(e) of the Act. Consequently there being a genuine dispute in respect of the lease agreement between the parties, the arbitration clause must be enforced.
8. ' The arguments of the learned counsel for the defendants that the dispute between the parties be referred to arbitration in accordance with clause 19.02 of the Vehicle Lease Agreement between the plaintiff-Bank and defendant No,1 is misconceived for the following reasons:--
(i) The plaintiff has filed this suit against ten defendants including Golden Eagle Enterprises (defendant No,1) who is the principal borrower and nine guarantors of the loan who have executed various documents to secure repayment of the loan. The Vehicle Lease Agreement which contains the Arbitration Clause is between the Bank and defendant No,1, the principal borrower only. The remaining parties in these A proceedings are not signatories to the Vehicle Lease Agreement which is one of the documents in support of the Bank's claim. The Bank's claim is, inter alia, based upon the Promissory Note executed by defendant No,1, the guarantees executed by defendants Nos. 2, 3 and 4, Memorandum of Deposit of Title Deeds by defendant No,6 and Acknowledgment of Liability and promise dated 18-8-1997 to pay the same by defendant No,6. The plaintiff's claim, therefore, cannot be referred to arbitration under the aforesaid clause. Counsel's argument that as the guarantors and other various defendants come within the definition of customer and as such they should by implication be treated as parties to the Lease Agreement which they have not signed is beyond reason and cannot be accepted. The judgments cited by the defendants are not applicable to the present circumstances.
(ii) The Banking Court has been established under section 4 of the Act with exclusive jurisdiction to deal with dispute between a Bank and its customers and/or borrowers. The definition of borrower includes a surety or indemnifier. Defendants Nos.2 to 10 are prima facie sureties for repayment of the loan. Section 7(4) clearly states that no Court other than a Banking Court shall have or exercise any jurisdiction with respect of any matter to which the jurisdiction of Banking Court exits. This Court is working as a Special Court under the Act (1981 CLC 516 and section 7(4) of the Act) which has exclusive jurisdiction to deal with disputes between a Bank and its customers/borrowers. It is an established law that where a Special Tribunal has been created to adjudicate specified disputes, such disputes cannot be referred to B arbitration even if there is an Agreement between the parties to that effect. The dispute must be decided by the Special Tribunal created for this purpose (1983 CLC 1592, 1995 CLC 1024 and PLD 1996 SC 77).
(iii) This is not a suit to be decided under Summary Procedure provided in C.P.C. Which according to defendants' counsel can be referred to arbitration (1990 M LD 2027 and 1995 CLC 1024). This is a suit filed under the Act before the Special Tribunal established for deciding special disputes between a Bank and its customers/borrowers. This is one such dispute. The judgment cited by the learned counsel for the defendants is not applicable to the present case.
9. ' In view of the above discussion, this application is dismissed with costs of Rs,5,000 only.
10. C.M.A. No, 5466 of 1998: ' This is an application under Order 1, Rule 10 read with section 151, C.P.C. Praying that the name of defendants Nos.2 and 3 may be struck off from the list of defendants on the ground that these defendants are Benamidar partners of defendant No,1 and that defendants Nos.3 and 4 were the real beneficiary of the finance provided by the plaintiff, as alleged in para.4 of the plaint. On perusal of the plaint it appears that in para.14 of the plaint the plaintiff has asserted that defendants Nos.2 and 3 executed personal guarantees as security for repayment of the loan and have attached photo copies of the same as Annexures "E" to "E/3" with the plaint). This has not been denied by the defendants. Defendants Nos.2 and 3 are, therefore, necessary parties to the suit and their names cannot be struck off from the list of defendants. The application is accordingly dismissed with costs of Rs,5,000 only.
11. C.M.A. No, 5467 of 1998: ' This is an application under Order 1, Rule 10, C.P.C. For striking off the name of the defendant No,6 from the list of defendants on the ground that the Memorandum of Deposit of Title Deed was got signed from the said defendant by misrepresentation and thereafter, by fraud the Revenue Record was produced to support the same. The affidavit in support of the application refers to several letters attached with the affidavit but no document has been attached therewith. Learned counsel for defendants also asserted that as there is not privity contract between the plaintiff and defendant No,6 he cannot be made a party to the proceedings. In the affidavit in support of the application the deponent has not denied the execution of a personal guarantee by defendant No,6.
12. The affidavit in support of the application has not been sworn by Haji Zar Ali, defendant No,6 but by Mohiuddin who is defendant No,2. He has not disclosed the source and basis of his allegations in the affidavit as required by law. Such allegation cannot be considered by the Court. However, assuming this to be true, the allegation of misrepresentation and fraud committed on defendant No,6 is a serious matter which cannot be decided in his absence. He is a necessary party to the proceedings and his name cannot be struck off from the list of defendants. The application is accordingly dismissed with costs of Rs,5,000 only.
13. C.M.A. No, 5468 of 1998: This is an application under section 1, Rule 10, C.P.C. Filed by the counsel for the defendants supported by an affidavit of Mohiuddin, defendant No,2 to strike off the names of defendants Nos.7 to 10 from the list of defendants on the ground that there is no privity of contract between the plaintiff and these defendants as they have not signed or executed any document which may give rise to a case of action against them. It is an admitted position that Haji Zar Ali defendant No,6, as attorney of his four sons namely; defendants Nos. 7 to 10 executed a Memorandum of Deposit of Title Deed in respect of agricultural property situated in Naushera and deposited an Extract of the said property and a copy of the Power of Attorney alongwith the Memorandum. The charge created by these defendants was recorded by the Revenue Authorities is evident from the noting on the Extract of Property of defendants Nos.7 to 10 filed with the plaint. The question whether or not the charge on the agricultural F property has been properly created by the attorney of these defendants and is binding upon them cannot be decided in their absence. They are necessary parties to decide this issue. The application is not maintainable and is accordingly dismissed with costs of Rs,5,000.
14. C.M.A. No,4938 of 1998:M ' Learned counsel does not press this application under section 10, C.P.C. For stay of proceedings which is accordingly dismissed as withdrawn with no order as to costs.
15. C.M.A.No,4702 of 1998: ' This is an application filed by the plaintiff under section 11 of the Banking Act read with Order 12, Rule 6, C.P.C. Asking the Court to pass an Interim Decree against the defendants in the sum of Rs,40 million as admitted by the defendants together with mark-up thereon from the date of the suit till payment. In support of the application the plaintiff has filed a copy of a document dated 21-8-1997 titled "Settlement of Liabilities of M/s. Golden Eagle Enterprises, University Road Branch, Karachi" which are the minutes of a meeting held at the central office of the Bank at Karachi regarding adjustment of the liabilities of the aforesaid firm. The document contains the names of the officers of the plaintiff-Bank, Haji Zar Ali (defendant No,6) and Muhammad Faiz, Manager of Haji Zar Ali who attended the meeting. It is signed by Mr. Zahoor A. Siddiqui EVP of plaintiff and Haji Zar Ali and states that after detailed discussion Haji Zar Ali committed-- "(i) that he will pay Rs,15.50 million, thus, reducing the total liabilities to Rs,30 million before 31-8- 1997;
(ii) that he will repay Rs,2 million against which the Bank will issue NOC for one mortgaged vehicle and
(iii) that he will continue to repay Rs,2 million regularly against which each mortgage vehicle shall be released until all the 15 vehicles, are released latest by 28th February, 1998".
16. ' Plaintiff has also produced a copy of letter dated 26-2-1998 written by Dr. A Basit, Advocate, apparently on behalf of the Golden Eagle Enterprises (defendant No,1) and Mr. Mohy-ud-Din, one of its partners (defendant No,2) reiterating that the client was prepared to adhere to the terms of the settlement reflected in the meeting held on 18-8-1997 with suitable adjustment of the time of payment in view dormancy of his clients transport business. In response to the affidavit in support of the application Mr. Mohy-ud-Din, defendant No,2 filed a very formal counter-affidavit denying the plaintiff's allegation by simple use of the word ' denied'. This is no way to deny a detailed assertion of fact made in an affidavit. If defendant No,2 truly wanted to deny the detailed assertions made in the plaintiff's affidavit he should have clearly stated the facts that he was denying e.g. The meeting with the Bank Officer on 18-8-1998, the agreement reached between the Bank and Haji Zar Ali and his signature on the minutes and the basis of his denial but this was not done. He simply said 'denied'. This is an evasive denial and not acceptable in law. Further, the affidavit also does not conform to requirement of Order 19, Rule 3 (1), C.P.C. And Rule 57 of Sindh Chief Court Rules ('SCCR') and therefore cannot be relied upon as enjoined by Rule 69, SCCR. It appears that the defendant No,2 chose this mode of denial because the assertions made by the plaintiff were true and he did not want to commit perjury. Additionally, in view of Dr. Basit's letter dated 26-2-1998 it would have been very embarrassing for defendant No,2 or any body else to deny Haji Zar Ali's admission of liability and promise to liquided the same by 28-2-1998. It is interesting to note that the defendants through Dr. Basit's letter reduced the admission of liability from Rs,45.50 million to Rs,40 million. The reason for doing so is not available from the record.
17. Consequently, an Interim Decree for this amount can be passed on the basis of this admission alone.
18. ' The plaintiff filed this suit on 3-3-1998 for recovery of Rs,58,029,000 but the Statement of Account filed with the plaintiff shows an outstanding balance of Rs,43,825,348 only as on 28-2-1998. It is not stated as to how the amount of Rs,58,029,000 has been claimed.
19. ' The summonses of this suit were served on the defendants, inter alia, by publication in the Daily 'Nawa-i-Waqe of 27-3-1997 and daily "Dawn" of 28-3-1998. Under section 11 of the Act the defendants were required to file an application for Leave to Defend the Suit within 21 days of service of summons. No application for Leave to Defend has been filed so far. The argument advanced by the learned counsel for the defendants for not doing so is that if the defendants had filed the application under section 11 of the Act, it would have amounted to taking steps in the proceedings and their application under section 34 of the Arbitration Act would have been barred. I am not convinced by this reasoning. In my opinion if the defendants were serious about arbitration the proper procedure to adopt would have been to file both applications simultaneously or first file the application under section 34, Arbitration Act and thereafter, file the application for Leave to Defend but within 21 days of the service of the summons. As no Application of Leave to Defend the suit raising a serious and bona fide dispute as required under section 11 of the Act has been filed, the claim of the plaintiff can be decreed as prayed. But as stated above, there is a discrepancy between the amount claimed and the amount shown due to in the statement of account; it would, therefore, not be just and proper to decree the suit as prayed. However, as the defendants have admitted their liability in their lawyer's letter dated 26-2-1998 to the extent of Rs,40 million, I pass an Interim Decree on admission in the sum of Rs,40 million with mark-up at the rate of 54 paisa per Rs,1,000 per day from the date of suit till the date of payment against all the defendants jointly and severally, The decree for the balance outstanding amount shall be passed after obtaining detailed accounts from the plaintiff. The plaintiff shall also be entitled to costs.
20. C.M.A. No, 3231 of 1998: ' Plaintiff has filed this application under Order 40, Rule 1 read with Order 38, Rule 5, C.P.C. Read with section 16 of the Banking Act, 1997 for appointment of a receiver to take over possession of the charged property i,e, 15 buses leased by the Bank to defendant No,1 and attachment of the immovable property mortgaged by the defendants in favour of the Bank. Though the application refers to several provisions of C.P.C., I think the most appropriate provision to grant relief in suits filed under the Banking Act, 1997 and in the circumstances of this case is section 16 of the Banking Act which grants wider power to the Banking Court than those available under the provisions of C.P.C. The power under section 16 includes, among others, the power, at any stage of the proceedings, to issue any kind of injunction or restraining order in respect of the property charged as security, attach such property or appoint one or more Receivers of such property on such terms and conditions as it may deem fit. The Agreements of Mortgage, Hypothecation and Charges etc. Executed between Banks and their customers often include a provision authorizing the Bank to take possession of the mortgaged or charged property and sell it without intervention of Court in case of default in payment by the mortgagor or charger; however, such an authority to 'take possession by virtue of such agreement has apparently never been exercised by a mortgagee or a Bank in the past. It is also forbidden by Order 34, Rule 14, C.P.C. The prohibition has not been removed and apparently for the first time in the history of Pakistan such an authority has been explicitly given to banks under subsection (2) of section 16 of the Banking Act to enable them to recover their loans expeditiously. In the present case the Bank entered into a Finance Lease Agreement with defendant No,1 whereby 15 buses were on terms and conditions stated in the Vehicle Lease Agreement (Annexure C' to the plaint). Under Article 15 of the said agreement the Bank has the powers, in case of default of payment by defendant No,1, to take possession of the leased vehicles without process of law.
21. ' In the instant case the application for appointment of Receiver was filed alongwith the suit on 3-3- 1998 and by order dated 30-3-1989, this Court restrained the defendants from parting with the possession or creating any third party interest in the buses. On 3-4-1998 Mr. Wafi Khan filed his Vakalatnama and sought time to prepare the case. On 21-4-1998 Mr. Wafi Khan again requested for further time to file his counter-affidavit. At this juncture Mr. Khilji, learned counsel for defendants expressed his apprehension that the buses in question had been disposed of by the defendants and requested that inspection of the buses be allowed whereupon Mr. Wafi Khan requested for time to obtain instructions of his clients and the matter was adjourned to 22-4-1998. On the said date Mr. Wafi Khan stated that his clients had no objection to the inspection of the vehicles by a representative of the plaintiff. However, he added that as the vehicles were playing between Lahore and Peshawar, bringing the buses to Karachi for the purpose of inspection would cause a great deal of inconvenience and accordingly by consent of the parties the defendants were directed to take each vehicle to the Provincial Head Office of plaintiff-Bank in Peshawar during office hours on any working day and cause it to be inspected by Mrs. Nuzhat Sherwani, the Manager of the plaintiff-Bank or any officer duly authorised by her. The buses were accordingly inspected on 16-5- 1998 the plaintiff-Bank submitted a statement wherein, among others, it reported that: "(1) One bus bearing Reg.No:PRR-1840 having Engine No,44027, Chassis No,00443 was not purchased/brought for physical inspection on the alleged pretext that the said bus is in Rawalpindi for repairing purpose.
(2) The Engine of bus bearing Reg.No,2040 having Engine No,44031 has been replaced by another Engine No,FE-6-006420-B without consent/permission of the bank's authority, without even any intimation to the bank.
(3) Comprehensive Insurance as required of all the 15 buses not yet arranged by the party.
(4) All the buses are found plying between Peshawar and Lahore without route permit."
22. ' No denial or objection to this report was filed by the defendants.
23. ' The learned counsel for the defendants has argued that according to the Lease Agreement the buses belong to the plaintiff and, therefore, a Receiver of plaintiff's property cannot be appointed in terms of section 16 of the Act and the provisions of Order 40, Rule 1, C.P.C. To test the validity of this argument it would be advantageous to reproduce section 16 of the Act which as stated above, in the most suitable provisions to deal with matters filed in the Banking Courts. The said section reads as follows: "16. Attachment before judgment and appointment of receivers.---(1) Where the plaint under subsection (1) of section 9 is for recovery of any amount through the sale of any property pledged, mortgaged, hypothecated, assigned or otherwise charged as security for the loan of finance, or for or in relation to a finance lease, the Banking Court may, at any stage of the proceedings--
(a) restrain or injunct the sale, creation or transfer of an interest or charge or lease or disposal or disposition of such property by the borrower or customer; or
(b) attach such property; or
(c) appoint one or more receivers of such property of such terms and conditions as it may deem fit.
(2) In cases where a borrower or customer has obtained property or financing through a finance lease, or has executed an agreement in connection with a mortgage, charge or pledge in terms whereof the banking company is authorised to recover or take over possession of the property without filing a suit it may, at its option:--
(a) directly recover the same if the property is movable; or
(b) file a suit hereunder and the Court may pass an order at any time, after the passing of an interim decree, either authorising the banking company to recover the property directly or with the assistance of the Court."
24. ' It is therefore, apparent that in case of Finance Lease which, is the position in the present case, the Banking Court has the power at any stage of the proceedings to attach the leased property, appoint one or more Receiver of such property or after passing of Interim Decree authorize the Banking Company to recover the property directly or with the assistance of the Court. In this case it is clear from the Report submitted by the plaintiff-Bank that one bus was not produced for inspection, the engine of another bus had been replaced without permission or even without intimation to the Bank which is a violation of the Lease Agreement and also casts doubt on the bona fide of the defendants. Further, all buses were found to be plying between Peshawar and Lahore without any Route Permit which cold result in heavy penalties or restraint order in respect of the buses by the relevant authority until regularization of Route Permits and payment of penalties thereby adversely affecting the interests of the plaintiff-Bank. The apprehension of the plaintiff that the buses may be disposed of by the defendants gains strength from the non-production of one bus and change of engine of the other. The counter-affidavit filed by Mohiuddin defendant No,2 is vague, evasive and does not inspire confidence. In view of this position, as I have already passed in Interim Decree, I hereby appoint the Manager of the plaintiff-Bank as Receiver of the fifteen (15) buses with power to sell them, if necessary, and recover its dues or take such appropriate action in respect of the buses as the Bank may deem fit in the circumstances of the case. It will be open to the Bank to obtain any further clarification or facilitating Order if deemed necessary. The plaintiff shall also be entitled to costs of Rs,5,000 in respect of this application.
25. ' Further proceedings in the suit are adjourned to 31-8-1998.