1. ' Through this application the defendants seek permission to place on record copy of the plaint in Suit No,106 of 1993 and of some proceedings therein which, according to the defendants, are relevant for the present proceedings. The application, with consent of learned counsel for the plaintiff, is granted to the extent that the various documents filed therewith may be referred during hearing subject to all just exceptions.
2. ' This application is preferred under section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, hereinafter referred to as 'Act XV of 1997', seeking leave to defend the proceedings. The application is filed by the defendants Nos.1, 3, 4, 6, to 11 ' The present proceedings have been filed by the plaintiff for recovery of a sum of Rs.1,412, 159, 191. 79 being the amount of dues allegedly outstanding against defendant No,1 as the customer and the remaining defendants as guarantors in relation to nine loans/finances extended by the plaintiff.
3. The first, in the series, is Credit Agreement dated 21-11-1983 for US dollars 8, 154, 000,00 carrying interest at 11% per annum and the amount availed thereunder was to be repaid in 16 instalments commencing from 15-9-1985 and the last instalment was to be paid on 15-3-1993. The next loan was granted under Credit Agreement dated 14-9-1986 in the sum of US dollars 3,00,000. The loan granted under the last mentioned agreement was to carry interest at the rate of 14% per annum and was repayable in 16 instalments commencing from 1-3-1988 and the last instalment had to be paid on 1-9-1995. The repayment schedule in relation to this land was revised twice and under the second revision, the first instalment was due to be paid on 1-7-1993 whereas the last instalment is agreed to be paid on 1-1-2001. For the purpose of present proceedings, both the above referred transactions have been dealt with together by the learned counsel for the parties and I also intend to treat and consider them together. It is pertinent to note that both the parties are, ad idem, that defendant No,1 had availed a total sum of US dollars 7,536,742.06 equivalent to Pak Rs.137,087,597 under the above referred two loans.
4. ' The 3rd facility is based on the guarantee dated 9-6-1985 executed by plaintiff on behalf of defendant No,1 in favour of the Islamic Development Bank (hereinafter referred as I.D.B.) whereby the plaintiff, amongst others, had guaranteed to the I.D.B., due performance of the obligations of defendant No,1 under Lease Purchase Agreement, dated 4th December, 1984 executed between them. The said guarantee was based on counter-guarantee dated 28-5-1985 executed by the defendant No,1 in favour of the plaintiff. According to the plaintiff, the defendant No,1 had availed finance under the guarantee facility to the extent of Islamic Dinars 8,696,680.59 and the outstanding amount due and payable thereunder, as on 30-9-1997, stands at Rs.286,534,001.73.
5. The defendant No,1 according to the plaintiff is also liable to pay a sum of Islamic Dinars 1,668,508.46, equivalent to Rs. 92,787,590.82 as guarantee commission and a further sum of Islamic Dinars 2,244,556.58, equivalent to Rs.124,822,260.43, as liquidated damages. According to the plaintiff, the guarantee facility was re-structured and under the revised terms it is to carry interest at the rate of 21 % per annum. The Islamic Dinar are converted into Pak rupees at the rate of one Islamic Dinar equivalent to Pak Rs.55.6111.
6. ' The 4th facility was granted through Financing agreement dated 28-12-1986 in the sum of Rs.38,206,000. The marked-up price was settled to be paid to the plaintiff in 16 half-yearly instalments commencing from 1st July, 1988 and ending on 1st January, 1996. The re-payment schedule was subsequently revised whereby the 1st instalment become payable on 1st July, 1991 and the last instalment was agreed to be paid on 1st January, 1990. A sum of Rs.109.952,998.75 is claimed as outstanding and payable, as on 30-9-1997, under this facility.
7. ' The next two facilities, referred as the 5th and 6th facilities, were both granted on 21-7-1987.
8. According to the Financing Agreement, the 5th facility was granted for a sum of Rs.15,181,000.; whereas the 6th facility was granted for a sum of Rs.11,405,000. The marked-up price, under the 5th facility was settled at Rs.28,395,000. And under the 6th facility, the marked-up price was settled at Rs.21,332,000.00. The marked-up price under both the last mentioned facilities was agreed to be paid in lump sum by 1-7-1989 but such date was apparently changed to 4-11-1990. According to the plaintiff, the defendant No,1 had made partial re-payments but had defaulted in clearing the liabilities with the result that, as on 30-9-1997, a cumulative sum of Rs.12,645,815.78 is claimed to have remained outstanding and payable under the two accounts.
9. ' The 7th facility was granted under Financing Agreement dated 22-5-1998 to the extent of Rs.15,000,000. The marked-up price, settled at Rs.36,096.000. Was payable in 16 instalments commencing from 1-7-1989 and ending on 1-1-1997. The repayment schedule was, however, revised in the manner that the 1st instalment was to be paid on 1-7-1991 and the last instalment was payable on 1-1-1999. The plaintiff has claimed a sum of Rs.33,213,869.76 as due and outstanding against the defendants under this facility.
10. ' The 8th facility was granted on 7-2-1989 for a sum of Rs.24,313,000. The marked-up price was settled at Rs.36,909,000. Which payable in lump sum on 30-6-1990 and a sum of Rs.137,895. Is claimed as the balance outstanding and payable by the defendants.
11. ' The last financial facility was granted under Financing agreement dated 7-2-1989 to the extent of Rs.33,652,000. The marked-up price payable by the defendant No,1 under the said agreement was settled at Rs.105,072,000. Which was payable in 16 half-yearly instalments commencing from 30-6- 1991 and ending on 31-12-1998. According to the plaintiff, a sum of Rs.100, 420,119.38 is outstanding against the defendants in relation to this facility.
12. ' According to the plaintiff, the defendant No,1 had made partial repayments which have duly been accounted for and adjusted against the respective facility. The claim, according to the plaintiff, is for the balance outstanding amount. It is further the case of the plaintiff that on 5-1-1995 the plaintiff had offered re-scheduling of the liabilities to defendant No,1 which, despite acceptance, have not been adhered. It is pertinent to mention here that the repayment schedules appended to the above referred 4th, 7th and 9th financing facilities, repayable in 16 instalments, admittedly contain figures of substantial rebate in the marked-up price. Thus under the 4th facility while marked-up price was settled at Rs.110,176,000. a rebate of Rs.28,256,000. Was allowed to the defendant No,1 in the event of payment within due date. The total marked-up price, with rebate, was, thus, agreed at Rs.81.920. Under the revised re-payments schedule, however, the amount of rebate was reduced from Rs.28,256,000. To Rs.5,386,000,. Likewise, under the 7th financing facility, the defendant No,1 was requirded to pay a sum of Rs. 17,232,000. Instead of Rs.36,096,000. In the event of payment of instalments within due dates. Similarly, in relation to the 9th financing facility, although marked-up price was settled at Rs.105.,072,000.00, in the event of payment of instalments within due dates, the defendant No,1 was required to pay a sum of Rs.76,570,000.
13. ' Mr. Mansoorul Arfin, Advocate has raised the following contentions:
(a) The proceedings for recovery of dues, under the 1st and 2nd facilities, are patently barred by limitation.
(b) Interest or mark-up could not be charged in relation to the 3rd facility pertaining to I.D.B. Loan.
(c) The statements of accounts are not verified on oath in terms of section 9 of Act XV of 1997 and the plaint, therefore, is liable to be rejected.
(d) The statements of accounts filed by the plaintiff contain unauthorised entries and the prima facie evidenciary value attributed thereto stands displaced.
(e) Proceedings in relation to all the mark-up based facilities were subject-matter of earlier proceedings in Suit No,106 of 1993, hence barred by the principle of res judicata.
14. ' In reply, Mr. Faisal Arab has urged that the various facilities availed by the defendant No,1 had been restructured and rescheduled through mutual agreement on 9-1-1995 with the result that the limitation for filing the proceedings for recovery stood extended; by virtue of section 22 of Act XV of 1997, a fresh cause of action is to be deemed to have arisen for the purpose of limitation on 2nd June, 1997 when the said Act came into force; appropriation of various payments had lawfully been done in terms of agreements between the parties; charges under the heads of Additional Interest, Foreign Exchange Risk Fee, Commitment Charges, Professional Assistance Fee, Loan Administration Fee etc;, were in consonance with the financing agreements between the parties; under Article 75 of the Limitation Act, the plaintiff has lawfully exercised its option upon commission of default in payment of instalments; and, the defendant No,1 had admitted and acknowledged its liability to make payment in accordance with the terms of rescheduling which were accepted by the defendant No,1 on 9-1-1995. Mr. Faisal Arab, in view of the above, has contended that no case for grant of leave is made out by the defendants. In any event, he seeks interim decree under section 11 of Act XV of 1997 to the extent of the liability admitted by the defendants.
15. ' It may be noted that the present proceedings were filed on 28-10-1997. Elaborating his submissions, Mr. Arfin has referred to the Credit Agreements dated 21-11-1983 and 14-9-1986.
16. Reference was also made to the fact that the loan availed by the defendant No,1 under the two Credit Agreements had to be repaid with interest in 16 instalments under the schedules of repayment. The last instalment under Credit Agreement dated 21-11-1983 had to be paid by 15-3- 1993. According to the learned counsel, suit for recovery of money has to be filed within three (3) years from the time when payment is agreed to be made under Article 64 of the Limitation Act. In relation to the money payable in instalments, it is urged, the limitation would start from the date agreed for respective payments by virtue of Article 74 of the Limitation Act. Thus, the claim for recovery of dues under Credit Agreement dated 21-11-1983 for any instalment thereunder is patently barred by limitation. Likewise, under Credit agreement dated 14-9-1986, the first instalment had to be paid on 1-3-1988 and the last instalment had to be paid by 1-9-1995. The 14th instalment had to be paid by 1st September, 1994 and the present proceedings, therefore, were barred by limitation in relation to the amount covered by the first 14 instalments. According to Mr. Arfin, although, the defendant No,1 had not agreed to the revised schedules of repayment, the claim for the amount covered by the first three instalments having become due before 1st July, 1994 was barred by limitation. With reference to the revised schedule of payment, it is further pointed out by Mr. Arfin that the last 7 instalments had not become due for payment on the date of institution of present proceedings and the claim, therefore, to that extent is premature. Reference has also been made to an observation made by me in the order dated 8-1-1998 passed in Suit No,67 of 1987. Muslim Commercial Bank Limited v. Adamjee Industries Ltd. And others, wherein while dilating upon section 22(1) of Act XV of 1997, it was held "if a remedy becomes barred under the Law of Limitation in force, a subsequent change in or repeal of the law will not by itself, in the absence of a very clear language, revive or re-create the remedy". On such basis, it is urged that the limitation, for filing proceedings for recovery, having expired before promulgation of Act, XV of 1997, fresh cause of action cannot be claimed to have accrued to the plaintiff for institution of the present case. The plaintiff's case, in reply is two-fold. It is contended by Mr. Faisal Arab, Advocate that by virtue of Article 75 of the Limitation Act, option is afforded to the plaintiff for waiver of the right to intitiate proceedings immediately upon commission of default in payment of particular instalment or to bring action within three years from the date when last instalment becomes due for payment.
17. According to the learned counsel for plaintiff, the various agreements executed between the parties clearly provide for an option vesting in the plaintiff to recall the entire remaining amount.
18. On such basis it is urged that Article 75 of the Limitation Act applied to the present proceedings.
19. Furthermore, according to Mr.Faisal Arab, the very order passed by me in Suit No, 67 of 1987 referred by the learned counsel for the defendants contains the following observation in relation to the proviso to section 22(2) of Act XV of 1997:- ' "Indeed, by virtue of proviso to subsection (2) of section 22, a clear right has been created affording fresh cause of action for institution of proceeding after promulgation of the Act".
20. ' According to the learned counsel for plaintiff, the said observation does not leave any room for taking a different view and the time for suing defendant No,1, even if found to have already expired, stands extended for a further period of three years with effect from the promulgation of Act XV of 1997. In any event, Mr. Faisal Arab contends, the defendant No,1 had acknowledged its liability to make payment of the dues by accepting the terms of rescheduling on 9-1-1995 and the limitation for the present proceedings would commence from the said date of acknowledgment being 9-1- 1995. ---64. For money payable to the plaintiff for money found to be due from the defendant to the plaintiff on accounts stated between them:(Three years).When the accounts are stated in writing signed by the defendant or his agent duly authorized in this behalf, unless where the debt is, by a simultaneous agreement in writing signed as aforesaid, made payable at a future time; and then when that time arrives.
76. On a promissory note or bond pay- able by instalments:(Three years).The expiration of the first term of payment as to the part then payable; and for the other parts the expiration of the respective terms of payment:
75. On a promissory note or bond pay- able by instalment; whichprovides that if default be made in payment of one or more instalments, the whole shall be due:(Three years).When the default is made, unless where the payee or obligee waives the benefit of the provisions, and then when fresh default is made in respect of which there is no such waiver: ' The three Articles of the Limitation Act, referred by the learned counsel may be reproduced for convenient reference:- ' Amongst other documents of security, the defendant No,1 had admittedly executed Promissory Notes and Personal Guarantee. Both the Credit Agreements in question, contain inter alia, the following term:- "7.01. Notwithstanding anything to the contrary contained in this agreement; the Corporation may, upon happening of any of the event mentioned below and so often as the same may happen, declare that the entire amount drawn by the Borrower against the Credit and all other sums payable by the Borrower hereunder shall be due and payable at once and upon the making of such declaration all such amount and sums shall become due and payable immediately and shall be paid accordingly by the Borrower".
21. ' The repayment had to be made the instalment and the plaintiff Corporation was given option to recall the entire balance amount by making such declaration. Evidently, such situation attracts application of Article 75 of the Limitation Act and the contention of the learned counsel for defendants to contrary does not appeal to reason. The problem, however, does not settle there. The question which still needs to be considered is if the amount remaining outstanding under the Credit Agreement dated 21-11-1983 can lawfully be recovered in this manner by the plaintiff. The last instalment for payment of dues under the said Credit Agreement was to be paid by 15-3-1993 and even under Article 75 of Limitation Act, the present proceedings, having been filed on 28-10- 1997, are beyond the period of limitation. Mr. Faisal Arab has referred to the proviso to Section 22 of Act XV of 1997. The relevant provision, for convenience sake, is reproduced hereunder:- "S.22. (1) Subject to subsection (2), the provisions of the Limitation Act, 1908 (Act IX of 1908), shall not apply to any suit, application or other proceedings filed or transferred to a Banking Court under this Act.
(2) The provisions of the Limitation Act, 1908 (Act IX of 1908), shall apply to all cases instituted or filed in a Banking Court after the coming into force of this Act.
22. ' Provided that in relation to past transactions a fresh cause of action will be deemed to arise, for purposes of limitation only, on the date on which this Act comes into force."
23. ' According to the learned counsel, the intention of the legislature to create fresh cause of action in relation to all the past and closed transactions is quite evident and proceedings for recovery of the otherwise time-barred dues can validly be instituted within 3 years from the promulgation of Act XV of 1997. The learned counsel in this behalf has relied upon the above quoted observation made by me in Suit No,67 of 1987---Muslim Commercial Bank Ltd. v. Adamjee Industries Ltd. And others. At the very outset it may be mentioned that the question which had come up for consideration in the above referred Suit No,67 of 1987 was if section 22 (1) of Act XV of 1997 had the effect of reviving remedies which had been barred by lapse of time. It was found by me that Section 22 (1) of the above referred Act does not contain any provision so retrospective in effect as to revive and make effective a barred right. Such view was expressed on the basis of principle contained in Adnan Afzal v. Capt. Sher Afzal PLD 1969 SC 187, to the effect that when retrospective application of a statute results in disturbance and impairment of vested rights or inflicts such hardship or injustice as could not have been within the contemplation of the law maker, the Statute is not to be construed retrospectively. The effect and interpretation of the proviso to section 22 (2) of Act XV of 1997 had neither been mooted nor discussed in the said order and the observation referred by Mr. Faisal Arab was merely in the nature of obiter dicta which does not have any binding effect. I am supported in this view by judgments in 'Muhammad Ismail Ali Charm v. Pakpor Ceramics Ltd. PLD 1973 Karachi 491 and M/s. Agro Marketing Corporation Ltd. v. Pakistan and others PLD 1982 Lahore
20. Reverting to the language employed in the said proviso, the phrases 'past transaction' and 'fresh cause of action' are important. The word 'past' according to the dictionary meaning stands for bygone, elapsed or ended. It, however, stands short of a closed transaction which would mean a matter having no opening or ventilation. The legislature, quite significantly, had omitted to use the words 'past and closed transactions. A past transaction, therefore, in my view, would merely encompass the situation where finances or loans have completely been disbursed prior to promulgation of the Act. Since extinguishment of remedy by efflux of limitation creates substantive right in favour of other side, the above-referred proviso has to be subjected to strict construction and impairment of substantive rights cannot be allowed unless provided by law in unambiguous terms. Moreover, a proviso has always to be construed in juxtaposition with the main provision and the intention of a proviso, generally speaking, is to prescribe explanation or exception to the main provision. Under section 22(2) of Act XV of 1997, the provisions of the Limitation Act have been made applicable to all the cases instituted or filed in a Banking Court after the coming into force of the said Act. Keeping the background of the Banking law in view, it appears that the provisions of the Limitation Act were inapplicable to the proceeding for recovery of mark-up based transactions by virtue of section 12 of the Banking Tribunals Ordinance, 1984. However, the law of limitation did apply to the proceedings for recovery of interest-based transactions or loans. In order to bring the law, pertaining to the two kinds of transactions, in conformity with each other, the legislature chose to enact section 22(2) of Act XV of 1997. However, since change of law relating to the mark-up based transactions could have adversely affected the right of the Banking Companies pertaining to mark-up-based transactions, through the above-quoted proviso, it is prescribed that fresh cause of action is to be deemed to have arisen for purpose of limitation only. Apparently, the intention of the legislature was to save the Banking Companies from the hardship which could have been faced by them on account of change in the law. Such position, in my humble view, is not even changed by use of the words 'fresh cause of action' in the proviso. The word 'fresh' according to Chambers 20th Century Dictionary means 'in new condition" not stale, faded or soiled: new'. At this stage, I may also refer to another category of cases mentioned in section 8 of Act XV of 1997, in relation whereto, provision has been made for institution of proceedings notwithstanding anything contained in the Limitation Act. Such provision, tentatively speaking, seeks reopening of 'past and closed transactions' and abridgment of the rights vesting in the borrowers or customers. Thus, where the legislature intends to disturb vested or accrued rights, a clear provision is made in the law. However, the proviso to section 22(2) of Act XV of 1997 does not contain language in the terms similar to the one used or employed in Section 8 of the very enactment. Nothing had prevented the legislature from clearly excluding the effect of Limitation Act retroactively in relation to all the transactions where remedy to sue had extinguished. The omission to include all the past and closed transactions in the abovereferred section 8 and the use of different phraseology in section 22(2) of Act XV of 1997 has to be given due weightage and clearly indicates that the barred rights have not been revived. Moreover, in case all the 'past and closed transaction' were intended to be reopened by virtue of the abovereferred proviso, no justification seems to have existed for making provision of the nature contained in section 8 of Act XV of 1997 which in the event of the interpretation canvassed by Mr. Faisal Arab being accepted, would be rendered otiose. In such event, suit for recovery of written off loans could, as well be filed by virtue of the abovereferred proviso to section 22(2) of Act XV of 1997. In my view, therefore, the only reasonable and justifiable effect of the proviso is that extended period of limitation has been provided in relation to the 'paste transactions, distinct from the 'closed' transactions involving barred or extinguished remedies. The result, therefore, is two-fold. In regard to all the mark-up-based transactions disbursed prior to enforcement of Act XV of 1997, three years period of limitation has been prescribed from the enactment of the Act and in relation to the interest based transactions which were enforceable and the period of limitation, on the date of promulgation of Act XV of 1997, was still alive, an extended and additional period of limitation has been prescribed.
24. ' In the present case, however, an important development had taken place on 9-1-1995 when the defendant No,1 had signed each and every page of the letter, dated 5th January, 1995 received by it from the plaintiff in token of acceptance of terms contained therein. Although Mr. Arfin has tried to explain that the said documents is signed merely by the Receipt and Despatch Clerk of the defendant No,1 in token of its receipt, and therefore, no sanctity could be ascribed thereto, such contention can hardly be accepted. It is difficult to believe that receipt of a letter consisting of 4 pages would be acknowledged by signing and affixing company seal on each and every page.
25. Secondly, the plaintiff, having specifically sought return of duplicate of the letter as a token of acceptance of the terms and conditions mentioned therein, can validly invoke doctrine of indoor management to contend that the terms and conditions of rescheduling/restructuring of loans mentioned in the letter, dated 5th January, 1995 had been accepted by the defendant No,1. The plaintiff had apparently acted upon such acceptance and refrained from filing proceedings at that stage for recovery of the dues claimed under the two Credit Agreements, referred herein as the first and second facility. Quite significantly. On 4th September, 1997, the defendant No,I had written letter to the plaintiff in the following terms:- "Restructuring and Rescheduling of NDFC Loans.
26. ' We sincerely thank for your kind favour of giving us an opportunity to call on you to explain our view point on the working of our plant and the difficulties confronted to us in making payments of your dues. The restructuring and rescheduling arrangements so kindly granted by NDFC to facilitate repayment of your dues as contained in your letter No,PGCD/AS/L-015/95, dated 5-1-1995 could not be implemented due to factors beyond our control as described in the following paragraphs. The said package was also not otherwise helpful in improving the AWCL Balance Sheet on the basis of which it could obtain working capital necessary to increase production. We submit below various factors confronted by us in running our project economically due to change in Government monetary policies during the last two years ' Yours faithfully, For ANWAR ZAIB WHITE CEMENT LTD." (emphasis supplied)
27. ' It appears that the defendant No,1 after having accepted the rescheduling / restructuring had found it difficult to implement its terms and had not executed the documents required to be furnished thereunder. Consequently, through letter, dated 2nd October, 1997, the plaintiff had informed the defendant No,1 to treat the rescheduling package of no legal consequence and all the outstanding liabilities were required to be discharged forthwith. Obyiously, the abovereferred letter, dated 2nd October, 1997 applied prospectively and the defendant No,1 having accepted the terms of rescheduling and restructuring cannot plead bar of limitation which was not available to it on 9-1-1995. Such conduct amounts to approbation and reprobation which cannot be permitted for defeating rights of the plaintiff, if any, by resort to technicalities. Moreover, the contention of the learned counsel for plaintiff that acceptance of the terms and conditions of rescheduling and restructuring on 9-1-1995 by the defendant No,1 amounts to acknowledgment of liabilities visualized by section 19 of the Limitation Act is not without force and cannot be ignored. The reference made to section 25 of the Contract Act by Mr. Arfin and the contention that the acknowledgment dated 9-1-1995, in any event, was of a date beyond by limitation, and therefore, ought to be shown to have been for some consideration, I am afraid, is not tenable. On 9-1-1995, in view of the opinion expressed by me hereinabove, the liabilities under any of the facilities particularly the two Credit Agreements (first and second facilities) were not barred by limitation by virtue of Article 75 of the Limitation Act. The reference to the case of Abdul Karim Jaffarani v. United Bank Ltd. And 2 others 1984 SCMR 568 made by Mr. Arfin, in the circumstances, is, therefore, misplaced. In the cited proceedings, the debt in question, was admittedly barred by limitation and it was found that the question if a party had promised to pay such debt was a serious issue warranting grant of leave. In the present case, however, the plaintiff's claim does not appear to be barred by limitation and, therefore, the defendants are not entitled to grant of leave on this ground.
28. ' Reverting to the second contention of the learned counsel for the plaintiff, it may be noted that the defendant No,1 under a Lease Purchase Agreement, dated 4th December, 1984 executed with I.D.B.
29. Had undertaken to make payment of Islamic Dinars 12,240,000,00 by way of rental for the various equipment and machinery procured by it. The amount of rental had to be paid in instalments. In order to ensure timely and regular payment of the amount of rental, the plaintiff at the request of defendant No,1 had executed guarantee dated 9-6-1985 in favour of I.D.B.. Both the parties are ad idem that the plaintiff has made payment of rental to the I.D.B. In terms of the guarantee on behalf of the defendant No,1. In order to secure reimbursement to the plaintiff, a counter-guarantee dated 28th May, 1985 was executed by the defendant No,1 in favour of the plaintiff. The plaintiff claims to have paid money equivalent to Rs.381,889,498.99 on behalf of defendant No,1 in pursuance of the I.D.B. Guarantee dated 9-6-1985. According to the plaintiff, it has received a sum of Rs.221,379,367.63 from the defendant No,1 towards this account and after adjustment of the last mentioned figure, a balance sum of Rs.160,510,131.36 is claimed as the principal outstanding and due against the defendant No,l. Besides such amount, as already noted, a sum of Rs.92,787,590.82 is claimed as guarantee commission; a sum of Rs.125,647,835.37 is claimed as interest worked at the rate of 21% per ahnum; a sum of Rs.376,035 is claimed as the Central Excise Duty paid on behalf of the defendant No,1; and, a sum of Rs. 124,822,260.43 is claimed as liquidated damages. The claim for guarantee commission is sought to be justified on the basis of clause VI (a) of the counter guarantee, dated 28th May, 1985. Under the said clause, guarantee commission equal to 1.6% was specifically undertaken to be paid by the defendant No,1. The learned counsel for the defendants has, however, contended that the claim for interest and the liquidated damages is not warranted under any of the agreements/arrangement between the parties. Mr. Faisal Arab, however, has referred to clause (4) of the counter guarantee whereby the defendant No,1 had undertaken and bound itself to immediately pay on demand to the plaintiff, the amount paid by it to the I.D.B.
30. Without questioning correctness of the figure together with liquidated damages and all other costs, charges and expenses as were determined by the plaintiff. As regards claim for interest, the plaintiff has relied upon clause (10) of the terms of rescheduling and restructuring contained in the letter dated 5-1-1995 which is to the following effect:- "10. The outstanding principal amount of Islamic Dinar of 3.973 million as on December 1, 1994 alongwith lease rental against the future payment of I.D.B. Lease line be converted into NDFC loan at interest rate of 21% per annum payable in 10 years starting from September 1, 1996. However, the exact amount payable by AWCL will be determined in Pak Rupee equivalent converted on the date of payment to I.D.B.. NDFC will make payment to I.D.B. As and when due and the same will be considered as outstanding amount against the newly converted loan. NDFC will continue to charge the guarantee commission as per agreement. The security of the loan will be first charge on the assets of AWCL ranking pari passu with other loans."
31. ' According to the learned counsel for plaintiff the terms of rescheduling, including the abovequoted terms, were accepted by the defendant No, land such position was also incorporated in the Directors' Report based on audited accounts of defendant No,1-company for the year ended on 30th June, 1997 with the following notes:-- "5.2.This represents amount paid by NDFC to Islamic Development Bank against lease instalments of loans as envisaged in the restructuring package. The loan and interest at the rate of 21% per annum is payable in 10 years strating from September 1, 1996."
32. ' As to claim for liquidated damages. Except for a general term contained in the counter guarantee, nothing is mentioned about its rate and the plaintiff, without specifying any details of the loss suffered by it, if any, has charged liquidated damages at a flat-rate of 21%. The charging of liquidated damages, as above, through application of rule of thumb cannot be permitted and is opposed to section 73 of the Contract Act. However, the amount of liquidated damages is separately identifiable and in the event of being disallowed, can be excluded from the amount of claim. Such objection cannot be termed as a serious and bona fide dispute entitling the defendants to grant of leave. Reverting to the contention about unauthorised claim for interest, the guarantee dated 9-6-1985 or the counter guarantee dated 28-5-1985 do not authorize the plaintiff to charge any such amount. The contention of Mr. Faisal Arab that the interest could be charged on account of the term entitling his client to recover all costs, charges and expenses incurred by it, does not appear to be sound and tenable. The plaintiff had opted to charge guarantee commission on the amount availed by the defendant No,1; and the claim for interest, in the circumstances, does not appear to be justified. Moreover, the amount of guarantee, although payable in foreign currency, had to be converted into pak Rupee and can be recovered in the local currency. For all intents and purposes, the facility is a local currency transaction and charging interest thereon is violative of BCD Circular No,13, dated 20th June, 1984 issued by the State Bank of Pakistan. Needless to observe that the various circulars issued by the State Bank of Pakistan containing instructions to the banks have statutory force and cannot be ignored. Such position could not be changed even through mutual agreement as is asserted by the plaintiff on the basis of terms of rescheduling contained in the letter, dated 5th January, 1995. In any event, the offer of rescheduling was treated by the plaintiff itself as of no legal consequence and such position was admittedly communicated by it through letter dated 2-10-1997. The plaintiff having itself taken the above position cannot deviate therefrom. The amount of interest claimed by the plaintiff, again, is clearly identifiable and can be segregated from the claim amount and, therefore, cannot be considered a serious and bona fide dispute justifying grant of leave.
33. ' The next ground urged by Mr. Mansoorul Arfin is based on section 9 of Act XV of 1997. It is contended that a banking company is obliged to file statement of account verified on oath by the concerned Branch Manager or an authorised officer alongwith the plaint and non-compliance with such requirements necessarily entails the penalty of rejection of plaint. The relevant provision, requiring submission of statement of account at the time of institution of suit, is contained in section 9(1) of Act XV of 1997, which reads as follows:- "S.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 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."
34. ' It appears from a perusal of the said provision that a statement of account is required to be filed by the banking company at the time of institution of proceedings before a Banking Court. It, however, needs to be seen if the requirement is absolute or is merely directory in nature. The test for determination of a provision being mandatory has been subject-matter of discussion in a number of cases. The primary test for deciding such question, is generally to see if any penalty is prescribed by law for non-compliance with the provision in question. In my view, the answer to the question is not that simple. Various factors have to be considered and kept in view to determine if a provision is mandatory, or, directory in nature. Some of the matters requiring consideration to decide the above issue are enumerated by a Division Bench of this Court in the case of Muhammad Matin v. Mrs. Dino Manekji Chinoy and others PLD 1983 Karachi 387 in the following words:- " The question in regard to a provision being mandatory, or, directory is not capable of an easy answer. The answer has to depend on several questions in regard to the correct interpretation of the statute itself, the objects which the statute wants to fulfil, the consequence which follows the non-compliance, of the rule, the prejudice and quantum thereof that it causes to the other party by non-compliance, the penalty which the statue prescribes in the matter of non-compliance and the nature of the provision, whether it is for the benefit of the entire populace, or, is in the limited sense of the parties being concerned only in a particular cause. All these questions need to be considered, while determining the nature of the provision."
35. ' The above judgment was further assailed before the Supreme Court of Pakistan and was upheld in the case of Mrs. Dino Manekji Chinoy and others v. Muhammad Matin PLD 1983 SC 693. In the above cited proceedings, the question before the Court was if non-compliance with the requirements of prior notice stipulated under Order 43, Rule 3, C.P.C. Would entail the penalty of dismissal of appeal. Although the law did not prescribe any penalty for noncompliance with the said requirement, it was found that the said rule was beneficial in effect, and therefore, its compliance in letter and spirit should be ensured. For the purpose of giving full effect to the said provision, the officers responsible for, inter alia, receiving and scrutinizing appeals preferred against the interlocutory orders, were required not to entertain the appeal without proof of due compliance with the requirement of Order 43, Rule 3, C.P.C. However, since the said proceedings had already been entertained, it was found that the same could not be dismissed to non-suit a party and substantial compliance with provisions of Order 43, Rule 3, C.P.C., had been made. The following observations made by the Hon'ble Judges of Supreme Court in this behalf can be reproduced with advantage:- ' In the instant case, we observe that the learned Division Bench had issued a pre-admission notice to Advocate of the respondents (the petitioner herein ) and their Advocate Mr. Akhtar Mahmood was present on pre-admission notice. Thus, he could contest the admission of the appeal and seek its dismissal in limine. No grievance, furthermore, was made by him to the effect that any document to which reference was being made during the hearing of the appeal had not been supplied to him or that he was otherwise taken by surprise. Thus, in this case, all the objects for which rule 3 was inserted in Order XLIII of the C.P.C. Were satisfied in substance. Since the proper place of procedure is to help and not to thwart the obtaining of justice and procedural laws, as pointed out by Mr. Sharifuddin Pirzada, should be utilised as 'stepping stones' rather than we might add, as stumbling blocks; the rights, of a party in this case to have his appeal heard, cannot be allowed to be defeated for failure to comply with the form where the substance has, in fact, been complied with.
36. See Imtiaz Ahmad v. Ghulam Ali and others (PLD 1963 SC 382 and Manager, J & K State Property in Pakistan v. Khuda Yar (PLD 1975 SC 678)."
37. ' Applying the above rule and logic, I find that the requirements of filing the statement of account must necessarily be followed. I say so, notwithstanding the fact that no penalty is prescribed by the provisions of Act XV of 1997 for non-compliance with the requirement of filing statement of account. Even otherwise, in view of the special and summary procedure provided for deciding matters instituted under the said Act, every material which supports proper and equitable adjudication must be placed before the Court and supplied to the other side. A statement of account affords opportunity to the defendant to know exactly what is credited to and debited from his account. A defendant, required to apply for leave to defend within 21 days from service of summons, is entitled to receive complete details of the case set out against him. The requirement of disclosing the material produced against a party is inalienably included in the right of hearing and is, therefore, to be considered imbedded in every statute being part of principles of natural justice. The provision contained in section 9(1) of Act XV of 1997 is, thus, beneficial and must be given full effect. However, applying the principle laid down in the case of Mrs. Dino Manekji Chinoy and others (supra), in my view, the rule of substantial compliance requires that in the proceedings already filed by banking companies under the provisions of Act XV of 1997 and in which statement of account has not been filed, notices may be sent by the office requiring the respective plaintiff (s) to file statement of account forthwith. The office is directed not to entertain any plaint filed under the provisions of Act XV of 1997, in future, if the same is not accompanied by a statement of account. In the present case, however, the plaintiff had filed statements of accounts pertaining to the various facilities alongwith the plaint. The objection taken by the learned counsel for the contesting defendants that the contents of such statements have not been verified on oath by the Branch Manager or an authorised officer. A careful reading of section 9(1) of Act XV of 1997 shows that the requirement of verification on oath pertains to the plaint alone which is to be supported by a statement of account. The use of the words, 'which shall be' are clearly relatable to the plaint and the contents thereof are required to be verified on oath, in the case of a banking company, by the concerned Branch Manager or such other officer as the Board of Directors of a banking company may authorise in this behalf. Though inartistically worded, in case the contents of statement of account were intended to be verified on oath, as above, it would not have been necessary to use the words 'which shall be' preceding the phrase 'verified on oath' . Such intention is further manifested by the next sentence which requires filing of sufficient number of copies of the plaint at the time of institution. It may be noted that verification on oath of the contents of plaint is not an unknown phenomenon and even in regard to ordinary civil proceedings, pleadings are required to be verified on oath by virtue of Order VI, Rule 15, C.P.C. The logic and necessity for making specific provision for verification of contents of the plaint seems to have arisen in order to authorise that Branch Manager (s) to institute proceedings and to verify the contents of the plaint. Such provision has helped the Banking Companies over-come the technical difficulty and the resultant delay in compliance with the rule of prudence contained in Order XXIX, C.P.C. As interpreted in the case of M/s. Muhammad Siddiq Muhammad Umar and others v. The Australasia Bank Ltd. -PLD 1966 SC 684, Khan Iftikhar Hussain Khan of Mamdot v. M/s. Ghulam Nabi Corporation Ltd. PLD 1971 SC 550, M/s. Standard Hotels (Private ) Ltd. v. M/s. Riocentre and others 1994 CLC 2413, Board of Control For Cricket in Pakistan v. Karachi Development Authority 1997 CLC 795, Abdul Rahim and 2 others v. M/s. United Bank Ltd. Of Pakistan PLD 1997 Karachi 62 and Sirajuddin Paracha and 12 others v. Mehboob Elahi and 3 others PLD 1997 Karachi 276. It may be noted that before promulgation of Act XV of 1997, proceedings on behalf of a banking company could be instituted by a person lawfully authorised for such purpose. Such rule has evidently undergone change and a Branch Manager of a banking company, too, is now authorised by virtue of section 9(1) of Act XV of 1997, to institute proceedings and to verify on oath the contents of the plaint. Such right having been conferred by law, no further resolution or power of attorney is needed by the Branch Manager for initiating the proceedings.
38. Statement of account, is required to be filed merely to facilitate the defendants knowing details of the claim and carries evidentiary value to support the contents of the plaint. For being ascribed the evidenciary value, as above, a statement of account is required to be certified under the Banker's Books of Evidence Act, 1891 and the contents of a certified statement of account are entitled to be received as prima facie evidence of the existence of relevant entries recorded in the Banker's Books. The certificate required to be appended under the Banker's Books of Evidence Act, 1891 merely provides sanctity to the contents of certified documents to the above extent. However, the contents of a certified document can be disproved by the adversary and Mr. Arfin has rightly referred, in this behalf, to the case of The Australasia Bank Ltd. v. M/s. H.S. Mahmood Hassan Akber and 2 others PLD 1983 Karachi 431 and I am in respectful agreement with the rule laid down therein to the effect that if prima facie value of the certified statement of account is displaced, the banking company is obliged to prove the accounts otherwise. However, non-verification on oath or failure to file certified copy of statement of account with the plaint, in my view, does not render the suit liable to dismissal summarily, hence, the contention of Mr. Mansoorul Arfin in this behalf is repelled.
39. It is pertinent to mention that even in cases of failure to verify contents of plaint under Order VI, Rule 15, C.P.C., the Courts have consistently taken liberal view by holding the omission as mere irregularity. Moreover, the plaintiff has subsequently filed certified Statements of Account in the present case.
40. ' As to the next contention, it is urged by the learned counsel for the contesting defendants that the plaintiff has played-up with the figures by acting contrary to the appropriation notified to it from time to time. Reference, in support of such submission, is made to the correspondence filed as Annexure "G-1" et seq alongwith the leave application. It is pointed out by the learned counsel, that the Payments enclosed with Annexures "G-9" to "G-11", in all amounting to Rs.14 million, were wrongly appropriated and the plaintiff was intimated to apply the same towards partial discharge of the parincipal foreign currency loan granted under the Credit Agreements dated 21-11-1983 and 14-9- 1986. According to the learned counsel, by virtue of section 59 of the Contract Act, the plaintiff was obliged to apply the payments as per the appropriation and in case it wanted to appropriate payments otherwise than as directed by the defendant No,1, the latter ought to have been informed. It has been pointed out from the various statements of accounts that the above referred three payments were instead applied by the plaintiff towards discharge of the 8th financial facility.
41. In the present case, pertinently, the method of appropriation had been agreed upon between the parties and was so provided in the various agreements. In relation to the interest based facilities, the following term was settled between the parties which is so incorporated in the Credit Agreement (s):- "(n) notwithstanding any request or direction of the Borrower accompanying or in respect of any payment made the Corporation (NDFC) shall be entitled to appropriate such payment first towards over due interest, additional interest, and other charges in that order and then towards principal."
42. ' Likewise, in relation to the mark-up based transactions, the parties had agreed upon the following term for appropriation:- "(n) Notwithstanding any request or direction of the Customer accompanying or in respect of any payment made, the Corporation (NDFC) shall be entitled to appropriate such payment first towards costs, fees, expenses and other charges in that order and then towards the Marked-up Price."
43. ' While it is true that section 59 of the Contract Act makes it obligatory upon the creditor to apply payment made by the debtor strictly in accordance with the intimation received from the debtor and the particular debt is required to be discharged accordingly. However, the said provision does not forbid the parties from entering into an agreement prescribing the method of appropriation at the outset. In the event of such agreement, one of the parties cannot alter the appropriation in which both had originally concurred. In the present case, as observed earlier, the method of appropriation had been settled between the parties and the few letters referred by the learned counsel for the defendants were nothing but an attempt to change the mutually settled mode for appropriation. The principle contained in section 59 of the Contract Act cannot be limited in its application to the creditor alone. A debtor, too, in my view, is bound by the settled mode of appropriation and cannot unilaterally seek alteration thereof. I am Mindful of the language used in the above referred provision of the Contract Act which refers to the intimation at the time of making payment to the creditor. With the expanded and frequent financing transactions taking place between the banking companies and their customers, the rule of reasonable interpretation justifies the parties being enabled under section 59 of the Contract Act to mutually devise the method of appropriation at the very outset. In such eventuality, even the rule of equity, requires the parties to abide the agreement. The alternate assertion made by Mr. Arfin on the basis of section 61 of the Contract Act, requiring the plaintiff to apply the payments towards discharge of debts in order of time, also, does not appear to be justifies since the plaintiff had applied the payments in accordance with the abovequoted terms for appropriation agreed between the parties. In any event, ample material has been placed on record to indicate that the defendant No,1 had been intimated about application of various payments from time to time and was kept informed of the balance outstanding in relation to the various transactions. It is urged by Mr. Arfin that the payment enclosed with the letter, copy whereof is filed as Annexure "G-4" with the leave application, has not been adjusted. It is pertinent to note that alongwith the leave application a statement showing the repayments made by the defendant No,1 has been filed as Annexure 'B'. According to such document a sum of Rs.253,894,428 is claimed to have been repaid to plaintiff by the defendant No,1 on various dates between 7th March, 1983 and 7th July, 1997. The amount claimed to have been repaid, as above, includes a sum of Rs.56,374,428 which is acknowledged to have been adjusted by the plaintiff through grant of subsequent finances. Thus the defendant No,1, according to its own showing, had actually repaid a sum of Rs.197,520,000 to the plaintiff in relation to the various financial facilities except the I.D.B. Guarantee i.e, the 3rd finance. The learned counsel for the plaintiff, while refuting the assertions made by the learned counsel for defendants has asserted and shown from the various statements that each and every payment made by the defendant No,1 has duly been adjusted. Indeed, in para. 16.4 of the affidavit in the rejoinder, the plaintiff has acknowledged that the defendant No,1 had actually repaid a sum of Rs.255,477,423 instead of Rs.253,893,428 claimed by it. During arguments, Mr. Arfin, has, however, made varying claims about the amount repaid by the defendant No,1 by including therein a sum of Rs.221,379,367.63 shown to have been credited to the account of defendant No,1 in relation to the I.D.B. Guarantee loan. The plaintiff, it may be mentioned, has separately dealt with I.D.B. Guarantee loan and such statement of account has been filed as Annexure "C-2" with the plaint. Under such statement, a sum of Rs.381,889,498.99 is shown to have been debited to the account of the defendant No,1 against which, credit has been given to the extent of Rs.22I,379,367.63 and the balance principal amount outstanding against defendant No,1 has been claimed as Rs.160,510,131.63. The defendants have not pointed out any error or unauthorised entry in the figures mentioned under the debit, credit and balance colums contained in the statement of account pertaining to the I.D.B. Guarantee loan. As regards the amount of interest/mark-up, additional interest and the Central Excise Duty, I have already made observations about the amounts which can lawfully be claimed by the plaintiff. Mr. Arfin has pointed out that the various statements of accounts reveal that mark-up/interest has been charged from the very inception of the grant of finance/loans. The actual disbursement, however, was made late. On such basis, it is contended that mark-up or interest could not be charged for the period prior to actual disbursement of the facilities. It is urged that the commitment fee, in any event, could not be levied. The learned counsel for the plaintiff has explained that upon sanction of any facility, the plaintiff had to keep the required funds available but the actual disbursement was dependent upon the requirements of the defendant No,1. The plaintiff, during the interregnum, could not divert the funds elsewhere or disburse them to any other person. The mark-up or interest on the amount kept available for disbursement to the defendant No,1, therefore, had to be charged in accordance with the terms of the agreement (s). It is further contended that the entire grant being industrialization oriented, a nominal amount is charged as commitment fee in order to ensure early utilization of the funds for being applied towards the project in question. It is pointed out that commitment fee has been claimed in relation to the 1st and the 7th facilities to the extent of Rs.71,970.42 and Rs.253,588.88 respectively. The levy of commitment fee appears to be a sort of penalty imposed for non-utilization of the funds and would, therefore, tentatively, seem to be violative of the principle contained in section 73 of the Contract Act. The penalty or damages can be claimed only by way of compensation of the loss sustained by a contracting party. Admittedly, it is nobody's case that on account of delay in seeking disbursement of the amount of finance/loans, any loss was caused to the plaintiff who otherwise, had become entitled to mark- up/interest as per the terms of agreements(s). Although payment of commitment fee seems to have been agreed between the parties, its imposition does not appear to be justified and lawful.
44. The plaintiff at the time of grant of finances was placed in a position of advantage and, therefore, any term found unreasonable or illogical cannot be enforced. The amount of commitment fee claimed by the plaintiff is identifiable and can conveniently be segregated from the claim amount, and therefore, does not pose a serious question for trial envisaged by section 10 of the Act XV of 1997.
45. ' Reverting to the contentions of the learned counsel for defendants, it has been urged that loan administration fee in the sum of Rs.4,686,126.03 has been charged by the plaintiff without any corresponding obligation under the various agreements. The learned counsel for the plaintiff has, however, explained that the various fees and charges including the Professional Assistance Fee.
46. Legal Documentation Fee, Project Monitoring Fee etc. Have jointly been classified as loan administration fee in the statements of accounts. Such charges were specifically agreed to be paid by the defendant No,1 and are part of the amount acknowledged and undertaken from time to time by the defendant No,1 to be paid. The learned counsel has referred to clause 2.03(f) of the Agreement dated 14-9-1986 whereby the plaintiff has specifically been authorised to charge Loan Administration Fee at the rate of 0.25% per annum. Significantly, identical clause is not incorporated in any other agreement. The authority to charge Commitment Fee, Professional Assistance Fee, Legal documentation Fee, Project Monitoring Fee etc. Is separately mentioned in all the agreements. The omission to provide for Loan Administration Fee in the other agreements appears to be conscious and is to be given effect. The plaintiff cannot claim Loan Administration Fee in relation to any of the transactions except the 2nd facility under Credit Agreement dated 14- 9-1986. The amounts can, however, be calculated at this stage and do not justify grant of leave.
47. ' It has further been contended that in relation to the 4th, 7th and 9th facilities, the parties had agreed to payment of mark-up at a lower' rate and in the event of repayment within due dates, the marked-up price had to be paid as had actually been settled. In order to keep the pressure for repayment of marked-up price on the agreed, dates, a substantial amount was added to the marked-up price by way of penalty in the event of non-payment within time. Indeed, the plaintiff, according to its own case had the authority to recall the entire amount of loans/finances in the event of default in payment of any instalment. The plaintiff, therefore, could have instituted proceedings immediately upon any default in payment of instalments for recovery of the marked- up price actually settled between the parties. It is pointed out by the learned counsel for defendants that in relation to the 4th finance a sum of Rs.28,256,000 was added to the marked-up price by way of penalty; in relation to the 7th facility, a sum of Rs.18,864,000 was added by way of penalty to the marked-up price; and, in relation the 9th facility, a sum of Rs.28,502,000 was added as the amount of penalty for non-payment of the marked-up price by the scheduled dates. Under the Islamic System of banking in the event of grant of finance a reasonable amount of profit, called mark-up can be agreed between the parties but imposition of any penalty upon the borrower, who is a needy person, is not permissible. The command to the creditor is either to forgive or to grant time. In no case, a borrower can be burdened with additional liability in the form of penalty or liquidated damages. Even otherwise, imposition of penalty or damages at a fixed rate is opposed to the provision contained in section 73 of the Contract Act. For claiming penalty or damages, a party is required to plead and prove actual loss or damages. I am supported in this view by the case of HBL v. M/s. Farooq Compost Fertilizer Corporation and 4 others 1993 MLD 1571. In the circumstances, the principal amount, being the marked-up price agreed under the 4th, 7th and 9th facilities, according to me, was settled between the parties as Rs.81.920 million, Rs.17.232 million and Rs.76.570 million respectively. Such finding, again, does not require any evidence warranting grant of leave in the matter. The learned counsel for the plaintiff has further urged that the plaintiff had charged mark-up over mark-up and included such amount in the statement of account. While elaborating the submissions, the learned counsel has referred to a statement filed as Annexure "F" with the leave application wherein actual amount disbursed to the defendant No,1 and the dates thereof have been mentioned. It is asserted that the 5th, 7th and 8th finances were partially disbursed to the defendant No,1 and were partially utilized unilaterally towards adjustment of the liabilities of the defendant No,l. In regard to the 9th facility, it is asserted that the entire amount was adjusted by the plaintiff and nothing was actually disbursed. The plaintiff having failed to disburse the finances, as above, and having charged mark-up thereon has, thus, levied mark-up upon mark-up. The said assertion of the learned counsel for the defendants is controverted by Mr. Faisal Arab, Advocate who has pointed out that the adjustments were made at the request of the defendant No,1 and their concurrence. The statement of account showing repayments made by the defendant No,1, filed as Annexure "B" with the leave application, it is pointed out, includes a sum of Rs.56,374,428 having been adjusted by the plaintiff. The defendant No,1 having itself claimed advantage of the said adjustments made between 30th November, 1986 to 17th July, 1986 cannot turn round and plead otherwise. The stand taken by the learned counsel for plaintiff appears to be justified and various averments contained in the affidavit filed by the defendants do substantiate the stand taken by him. The defendant No,1 evidently has failed to object to the adjustment of their liabilities from the amounts sanctioned subsequently and have rather claimed benefit of the adjustment. The defendant cannot be allowed to blow hot and cold in such manner.
48. ' It is contended by the learned counsel for defendants that the plaintiff had earlier filed Suit No,106 of 1993 before the Banking Tribunal, Sindh at Karachi for recovery of amount claimed under the mark-up based facilities which have been referred in the present proceedings as the 4th to 9th financial facilities. According to the learned counsel, an application under Order XXIII, Rule 1, C.P.C., was jointly filed in the said proceedings during September, 1993 with the following terms:- It is submitted on behalf of the parties abovenamed as under;
(1) That the defendant has agreed to make partial repayments to the plaintiff at the rate of Rs.5 million per month against the suit amount. Repayments at the said rate shall be made upto 30-6- 1994.
(2) That the defendant will make a fresh proposal to the plaintiff on terms which are acceptable to the plaintiff in its discretion for repayment of the balance dues at an enhanced rate prior to 30th June, 1994. It will be open to the plaintiff to either accept or reject the said proposal. In the event of the plaintiff rejecting the said proposal it will be open to the plaintiff to take such action for recovery of its dues including the filing of a fresh suit as may be deemed appropriate by it.
(3) That the consideration of the abovementioned promises and representations made by the Defendant the Plaintiff has agreed to withdraw the present suit without prejudice to its rights to file a fresh suit in the event of any breach of the above mentioned stipulations and without prejudice to its rights as contained in the earlier agreements/documents executed between the parties which shall remain in full force and effect. It is clarified that save and except for what has been stated herein there is no other oral agreement or understanding between the parties and any further agreement will only be executed in a written document signed and executed by both parties.
(4) It is, therefore, prayed that this Honourable Court may be pleased to allow the plaintiff permission to withdraw the present suit with leave to file a fresh suit. Sd/- Sd/- Advocate for the plaintiff. Plaintiff.
49. Sd/- Sd/- Advocate for the the defendant. Defendant.
50. Karachi Dated- 9-1993."
51. The above application came-up in Court on 19-9-1993 and judgment (order) in the following terms was passed:- "29-9-1993 JUDGMENT Mr. Maqbool Baler for National Development Bank Corporation. Mr. Abdul Majeed for Defendants 1 to 9.
52. Application under Order 23, Rule 1, 151, C.P.C. Terms admitted. Signatures admitted by learned advocates. Compromise recorded. Decree in terms of Compromise.
53. (Sd.)
54. (HYDAYAT HUSSAIN) PRESIDING OFFICER/CHAIRMAN BANKING TRIBUNAL NO,II KARACHI."
55. ' It is contended by Mr. Arfin that on account of the suit having been decreed in terms of the compromise, the same has to be complied and the plaintiff cannot sue on the original cause of action, if any. Reliance in this behalf is placed on the case of Haji Abdul Rashid Sowdagar v. S.M.
56. Lalita Roy and others PLD 1959 SC (Pak.) 287. This objection raised on behalf of the defendants also does not pose any question for trial through evidence. The plaint in Suit No, 106 of 1993 shows that the plaintiff had filed such proceedings for recovery of amount allegedly due in relation to the 5th, 6th and 8th facilities only. The suit filed before the Banking Tribunal, in any event, had by consent been withdrawn with permission to fii, a fresh suit. Mere use of the word 'Decree' instead of 'order' does not change the substance, indeed. Admittedly the withdrawal of proceedings was allowed under Order XXIII Rule 1, C.P.C. Which does not admit of passing a decree. A decree by compromise is instead postulated under Order XXIII Rule 3, C.P.C. Evidently, neither an application for decree under Order XXIII Rule 3, C.P.C. Was filed nor was any decree passed thereunder. The use of incorrect phraseology, inadvertently, by the Court cannot be made a ground for non-suiting the plaintiff. The plaintiff having been granted permission to file fresh proceedings while withdrawing the above suit No,106/1993, cannot be entrapped in technicalities of procedure.
57. In the Circumstances, the defendants have failed to raise any serious and bona fide dispute warranting grant of leave to them. The application preferred under Section 10 of Act XV of 1997 being C.M.A. No,8360 of 1997, in the circumstances, is dismissed.
2. C.M.A. No,7618 of 1997: ' In view of dismissal of the application listed at serial No,3 and for the reason stated in the order thereon, the ad interim order dated 10-11-1997 is confirmed and this application is disposed of, accordingly.
58. As a result of dismissal of the application for grant of leave, the contents of the plaint are to be deemed to have been admitted in terms of section 9(4) of Act XV of 1997. In view of certain discrepancies found in the plaintiff's claim which are noted hereinabove, in the interest of justice, I have taken-up examination of the claim on the basis of the material on record.
59. ' As regards the two Credit Agreements dated 21-11-1983 and 14-9-1986, the loan was granted to the defendant No,1 under three (3) lines of credit. The 1st, referred as ADB-564 is in the sum of US$ 6,062,294.25; the next, referred as ADB-678, is for US$ 1,378,388.39; and, the 3rd, referred as ADB-878, is for US$ 96,059.42. Apparently, the financing against ADB-564 and ADB-678 was made under the terms of Credit Agreement dated 21-11-1983 whereas financing against ADB-878 appears to have been extended under the Credit Agreement dated 14-9-1986. It is pertinent to record here that the defendants despite raising the question about non-verification/non-certificaiton of the statement of Account, have not challenged the correctness of the figures shown in the various statements and have rather relied upon the entries therein to establish repayments made by the defendant No,1. Taking up the finance granted under the line of credit, ADB-564, upon adjustment of the various repayments, a sum of Rs.111,850,088.52 is claimed as the principal amount outstanding against the defendant No,1; upon such amount, a sum of Rs.108,778,844.67 is claimed as interest; US$ 6221.04, equivalent to Pak Rs.253,588.88, is claimed as commitment fee; Rs.118,925,090.82 and US$ 16,486.30 equivalent to Pak Rs.672,032.70, is claimed as additional interest; a sum of Rs.2,018,653.31 is claimed as loan administration fee; and, Rs.480,660 is claimed as the Central Excise Duty. The Total amount, claimed as outstanding, is shown to be Rs.342,978,952.90. By deleting the amount of instalments which had not fallen due on 1-9-1997, a sum of Rs.298,777,065.58 has separately been shown. Likewise, in relation to the credit line ADB-678, upon adjustment of the amount repaid by defendant No,1, a sum of Rs.22,804,I85 is claimed as the principal outstanding amount; a sum of Rs.20,482,459.97 is claimed as interest, Rs.24,270,694.52 and US$ 303.23, equivalent to Rs.12,360.59, is claimed as additional interest, a sum of Rs.432,329.39 is claimed as loan administration fee whereas Central Excise Duty in the sum of Rs.99,332 has been claimed. The total claim is stated as Rs.68,101,361.20. Upon deletion of the amount of instalments which have become due upon recall of the loan, a total sum of Rs.61,495,469.50 is separately shown as due against the defendant No,l. Similarly, under ADB-878 facility, covered by agreement dated 14-9-1986, the principal outstanding amount is shown as Rs.2,433,324; interest on the said principal amount is worked out to Rs.1,806,472; Loan Administration Fee in the sum of Rs.32,258.48; Additional Interest. In the sum of Rs.920,012.75; and Central Excise Duty in the sum of Rs.123,387 have been claimed. The total claim under this facility is Rs.5,204,454.75. A reduced sum of Rs.3,729,561.84 is shown as due under a separate column by deletion of the amount of instalment which had not fallen due before recall of the facility.
60. ' In relation to the facilities granted against ADB-564 and ADB-678, I have already found that the agreement dated 21-11-1983 did not provide for charging Loan Administration Fee and the claim for such charge being unwarranted, is disallowed. The plaintiff is entitled to the principal amount claimed as outstanding. Under the above-referred Credit Agreement dated 21-11-1983, the plaintiff could charge 11% interest per annum besides 3% foreign exchange risk fee. The amount under the two heads, cumulatively worked at the rate of 14% per annum, being the agreed rate, is allowed.
61. The claim for recovery of Central Excise Duty, paid on behalf of the defendant No,1 having remained uncontroverted, is also granted. The Commitment Fee amounting to Rs.253,588.88 cannot be granted for the reasons stated in the discussion of leave application. Likewise, the plaintiff's claim is accepted to the extent of principal amount outstanding under ADB-878 with interest at the rate of 14% per annum and the' Central Excise Duty. The claim for Loan Administration Fee pertaining to ADB-878 is also allowed since the parties had agreed for such payment. Coming to the claim for Additional Interest, under that two Credit Agreement, such charge could be levied under clause 2.03(b) at the rate of 6% per annum above the bank rate. The above referred clause which is identically incorporated in the two Credit Agreements is as follows:-- "2.03(b). Additional interest in Pakistan Rupees at the rate of 6% per annum above the State Bank of Pakistan rate of interest ('the Bank Rate') computed on daily basis using a 360 days factor for the period of default on all amounts due to the Corporation by way of principal, interest, or costs, charges and expenses which remain unpaid beyond the due date which shall be paid at the same time and in the same manner as interest."
62. ' Evidently the Agreements stipulate imposition of Additional Interest in the nature of penalty. Quite often it is referred in the loan agreements as penal interest. The law pertaining to imposition of penalty liquidated damages is now well settled and is clearly laid down in the case of HBL v. Farooq Compost Fertilizer Corporation and 4 others 1993 MLD 1571. I may also refer here to five judgments which are relevant to the issue. Such judgments are reported as National Bank of Pakistan v. M/s. Ch. Ilamdin & Co. And others PLD 1985 Lahore 117, United Bank Limited v. Nishat Chemical Industries Limited and others NLR 1986 civil 580, United Bank Limited v. Kurnool Muhammad Muneer 1991 CLC 1758, Allied Bank of Pakistan v. Masood Ahmed Khan 1994 MLD 1557 and United Bank Limited v. M/s. Sartaj Industries PLD 1990 Lahore 99. In all the said judgments it is held that penal interest cannot be charged if the parties have not specifically agreed for such payment. In the last mentioned case, penal interest was awarded at the agreed rate. The position, in my view, has undergone change with introduction of Islamic System of Banking and abovereferred Division Bench judgment in the case of HBL v. Farooq Compost Fertilizer Corporation (supra). The Additional interest, in the present case, as already observed, was intended to be levied by way of penalty upon default in making repayment on due dates. The imposition of penalty, in my humble' view, is opposed to the provision contained in section 73 of the Contract Act and in the absence of any pleading about any loss having been suffered by the plaintiff, cannot be awarded being too remote. In the present case, another factor which needs to be noted is that the penalty, referred as additional interest in the two Credit agreements, is too exorbitant rather unconscionable. In a way, it is even uncertain since the bank rate referred in the above quoted clause of the Credit agreements always keeps varying. In the circumstances, I am not inclined to enforce the clause which in my view is void for being uncertain and voidable for being unconscionable, hence, against the public policy. The claim for additional interest in relation to the three lines of credit covered by the two Credit Agreements, in the circumstances, is disallowed.
63. ' Coming to the 3rd facility i.e, I.D.B. Guarantee, the principal balance amount, upon adjustment of the money received from the defendant No,1, is shown as Rs.160,510,131.36. The defendant No,1 has not been able to controvert the various figures shown in the debit, credit and the balance amount columns. The plaintiff's claim in relation this facility is, therefore, sustained to the extent of Rs.160,510,131.36 besides the amount of Rs.376,035 climed as Central Excise Duty. However, the claim for interest/mark-up being not warranted under the Guarantee or the Courter Guarantee is disallowed. The claim for interest on the basis of rescheduling, too, cannot be allowed being contrary to the Islamic System of Banking and the law. I have already discussed such aspect while dealing with the application of the defendants for leave to defend. The plaintiff, however, can.
64. Rightly claim the amount of Guarantee Commission amounting to Islamic Dinars 1,668,508.46 equivalent to Rs.92,787,590.82. Again, the claim for liquidated damages, in relation to the I.D.B.
65. Guarantee facility, is disallowed for the reasons stated while discussing the plaintiff's claim for grant of additional interest under the 1st and 2nd facilities.
66. ' Taking-up the claim under the 4th, 7th and 9th facilities, I have already observed that the marked- up price settled between the parties under such facilities was Rs.81.920 million, Rs.17.232 million and Rs.76.570 million respectively. The plaintiff is entitled to claim recovery of outstanding amount on the basis of the above marked-up price. The claim for Loan Administration Fee and the Commitment Fee is disallowed for the reasons already stated by me hereinabove. However, the plaintiff's claim for Central Excise Duty in the sum of Rs.377,514 is sustained. Let the plaintiff file a consolidated revised statement of account as per the findings contained hereinabove within 3 weeks from today with advance copy to the learned counsel for other side.
67. ' The defendants Nos.2 and 5 are stated to have expired prior to the filing of the suit and such fact has remained uncontroverted. The plaintiff has failed to take any steps for impleading the legal heirs of the said defendants and therefore, the plaintiff's suit against the defendants Nos.2 and 5 in dismissed. The defendants Nos.3, 4 and 6 to 11 have been sued as guarantor/mortgagors. The question of their liability as guarantors/mortgagorg for the defendant No,1 has not been disputed before me and has normally to be considered coextensive with that of the defendant No,
1. Put up for further order on 20-8-1998.