' This is a suit for recovery of Rs,916,890,184.43 filed by Messrs United Bank Ltd. a Banking Company, against Messrs Redco Textiles Limited, a Company incorporated under the Companies Ordinance, 1984 and 7 others who have been sued as guarantors.
2. According to the facts stated in the plaint, at the request of the defendants, the plaintiff sanctioned the following financial facilities on markup basis.
(i) Usance Letter of Credit under supplier's credit scheme for the import of machinery in the amount of Rs,312,290 million on 8-8-1991.
(ii) N.I.D.F.-I in the amount of Rs,38,523 million dated 2-6-1992,
(iii) N.I.D.F.JI in the amount of Rs,22,532 dated 17-7-1992,
(iv) N.I.D.F. III in the amount of Rs,12,700, dated 11th September, 1992.
' It has been averred that the repayment of these financial facilities were secured inter alia by hypothecation and floating charge on the movable assets of the Company by execution of Demand Promissory Notes, personal guarantees of defendants Nos.2 to 8, in addition to various other documents which have been listed in paragraph 6 of the plaint. It is further averred in the plaint that the defendants did not clear their liabilities in accordance with the agreements between the parties, with the result that certain amounts fell over due. Consequently, the liabilities of the defendants were restructured by creating a fresh N.I.D.F. IV in the sum of Rs,145,133 million vide sanction advice, dated 17-8-1994. The defendants also created mortgage/charge over the immovable property belonging to the Company for the aforesaid amount of Rs,145,133 million on 4- 9-1994 and further executed letter of hypothecation of movable assets including stocks of cotton in bales, under process, yarn and other finished raw materials alongwith spare parts and machinery on 31-8-1994.
4. According to the plaint, the defendants were further provided, working capital Cash Finance Facility in the sum of Rs,60 million which was sanctioned vide Sanction Advice dated 29-12-1994 which was later on enhanced at the request of defendant No,1 to Rs,70 Million on 27-12-1995. The defendants again failed to perform their obligations by repaying the amounts due and on their request the plaintiff once again restructured and rescheduled these liabilities by opening N.I.D.F. V in the sum of Rs,139 M. Vide Sanction Advice dated 6-12-1995. At the same time, the. Working capital Cash Finance was also renewed. This repayment of the restructured loan was secured by the defendants by executing various documents mentioned in paragraph 10 of the plaint. According to the plaintiff, the defendants have miserably failed to discharge their liabilities under the various financial facilities and a sum of Rs,916,890:184.43 have become payable .By the defendants. It as in these circumstances that the present suit has been instituted.
5. On having been served with summons in the prescribed form, the defendants applied for leave to appear and defend the suit by filing P.L.A. No,182-8/98 in which it was claimed that the charge of interest by the plaintiff against the defendants was against shares. It was objected that the agreement executed between the parties was not admissible in evidence due to being unstamped and not having been witnessed in accordance with the provisions of Qanun-e-Shahadat Order. It was also claimed that the suit had been filed prematurely inasmuch as no amount had become due in terms of various documents filed by the plaintiff itself. It was further claimed that the plaintiff has maliciously and for extraneous consideration and political reasons stopped the credit line of the defendants which has resulted colossal loss to the defendant-Company. It is also mentioned that the plaintiff was Charging mark-up on mark-up.
' As regards the documents filed alongwith the plaint it was submitted by the defendants that the plaintiff had obtained signatures on various blank documents which have been filled in by the plaintiff later on contrary to the agreement between the parties. Interestingly, however, it is to be noted that in the application for leave to appear and defend the suit, there was no denial by the defendants that the financial facilities in question were granted to them and that they had utilised these finance. The plaintiff filed a reply to the application for leave.
7. However, the plaintiff also moved an application (Civil Miscellaneous 56-B of 1999) for placing further documents on record. That application was contented by the plaintiff but was allowed by this Court on 11-10-1999. At the same time, the defendants were permitted to submit additional grounds in support of the application for leave to appear and defend in view of the fact that further documents had been filed by plaintiff after the application for grant of leave was moved.
Consequently, the defendants submitted additional grounds vide application (Civil Miscellaneous 571-B of 1999) on 18-10-1999 alongwith certain documents. It may be mentioned that the plaintiff has also placed on record further documents alongwith the reply to the application for additional grounds.
8. Another fact which is worth-mentioning is that on 21-10-1999, an application (Civil Miscellaneous No,605-B of 1999) under section 151, C.P.C. Was filed wherein the defendants indicated their desire to have the matter settled on the footing of the arrangement/compromise already arrived at between the parties. In reply to the said application, the plaintiff took up the position that the defendants have failed to act in accordance with the agreement arrived at between the parties on 8-8-1999 and instead had been contesting the suit on merits and, therefore, the plaintiff was no longer bound by the aforesaid agreement.
9. Arguments of the learned counsel for the parties have been heard.
10. Mr. Sulman Aslam Butt, learned counsel for the defendants, in the first instance, submitted that the suit be decided on the basis of the compromise arrived at between the parties on 8-8-1998.
11. Mr. Sulman Akram Raja, Advocate, on the other hand pointed out that the agreement was conditional and its enforcibility was dependent upon performance of certain obligations by the defendants which they failed to do and instead disowned the agreement which stood repudiated as envisaged by section 39 of the Contract Act, 1876. A reference to the agreement arrived at between the pantries, a copy of which has been placed on record by the plaintiff alongwith the application for additional 'documents, shows that the defendants had accepted their liability for repayment of the amount due under various heads of account. According to this agreement, repayment was to be made in instalments. The defendants were to furnish further securities in the form of equitable mortgage and by executing other documents. It was specifically mentioned in the said memorandum that restructuring and rescheduling shall be formalised by an agreement in a Court of law to be signed by the borrower and the Bank by obtaining consent decree which shall be a condition precedent for restructuring and rescheduling of the outstanding loan. Under the said agreement the decedents had also to make certain payments within a specified period.
However, the defendants initially did not accept this agreement and when the suit was filed they instead of asking for consent decree in terms of the memorandum contested the same on merits by filing an application for leave to appear and defend in which they did not plead that there had been any agreement for rescheduling of the liabilities. The agreement was contingent upon performance of certain obligations by the defendants which they failed to do. It is also to be noticed that the defendants in their reply to the application for production of additional documents did not admit the aforesaid agreement and instead stated that the plaintiff in put to strict proof of the same. In their application for raising additional grounds for leave to appear and defend the suit, they claimed that, additional documents filed by the plaintiff have been forged and fabricated and prepared with mala fide intent. It was specifically mentioned in sub-para. (e) of para. 1 that the acceptance of memorandum of understand ding dated 13-8-1998 is specifically denied and the plaintiff is put to strict proof of the same and nothing contained in any reply or application by the defendants should be construed as an admission of the additional ' documents.
12. Not only that but the defendants had filed a constitutional petition (Writ Petition No,1002 of 1999) in which question of interim relief came up for consideration before this Court on 5-10-1999 when it was observed that the plaintiff had produced an agreement acknowledging the loan and that the learned counsel 'for the petitioner does not deny the agreement. Later on, an application (Civil Miscellaneous 1151 of 1999) was filed by the defendants in which it was stated that the learned counsel for the petitioner (defendants in the present suit) had never acknowledged the alleged agreement of September, 1998 but in fact had specifically denied the existence of the agreement in its reply and various applications submitted by the respondent-Bank in the suit.
13. From the above, it is quite obvious that at no stage the defendants had acknowledged the existence of any agreement or sought enforcement thereof. On the other hand, the defendants have gone to the extent of denying the agreement which clearly shows that they were not willing to abide by the same. It was during the course of arguments that a somersault was taken by the defendants and they moved an application (Civil Miscellaneous 605-B of 1999) for decision of the suit in terms of the aforesaid compromise. As has been rightly pointed out by Mr. Sulman Akram Raja, that on account of refusal of the defendants to abide by the terms of the agreement, the agreement stood repudiated in terms of section 39 of the Contract Act, 1876.
14. The learned counsel for the defendants referred to Order XII(6), C.P.C. And cited- certain judgments to show that when the parties are not at issue the suit should be decreed on the basis of admission. This provision has no application to the present case, as admittedly the defendants themselves had refused to admit the existence of any agreement and had dubbed the same to be fictitious and fake. This repudiation was accepted by the plaintiff as provided by section 39 of the Contract Act and as such it cannot be held that there is subsisting agreement between the parties to reschedule/restructure the debt.
15. The next plea raised by the learned counsel for the defendants was that the defendants were, in any case, not in default and the suit was premature inasmuch as the agreement provided that the defendants would be notified about the dates on which instalments fell due but it failed to do so and as such there was no default on the part of the defendants and, therefore, no suit could be filed.
16. This argument of the learned counsel is again without any force. It is evident on the record that the parties well-understood that the liability was to be cleared by payment of instalment on the due dates. In this connection, it is idle on the part of the defendants to argue that they have never been in default of the payment, for many reasons, first of which is that it was on account of the failure of the defendants to pay the amount due under the original agreements for finance; that their liability was restructured/ rescheduled by opening Accounts Nos.N.I.D.F. IV and N.I.D.F. V. More importantly, however, the defendants themselves have alongwith Civil Miscellaneous 158-B of 1999 filed a report of the Chartered Accountant appointed by them viz., A.F. Farguson & Company, at pages. 68, 71 and 73 or which the amounts which fell due on specific dated have been particularized. It, therefore, does not lie in the mouth of the defendants to claim that though they have received the amounts in question, they were not liable to repay the same as the due dates have not been fixed.
17. The other objection raised by the learned counsel for the defendants is that the suit had not been filed by a duly authorised and competent person on behalf of the plaintiff. According to section 11 of the Banks (Nationalisation) Act, 1974, it is the Board of Directors which can authorise the filing of the suit and appoint attorney, as the case may be. In this behalf the learned counsel has relied upon Abdul Rahim and others v. Messrs United Bank Ltd. Of Pakistan PLD 1997 Kar.
62. He emphasised that in the present case it was not the Board of Director but the Executive Board which had authorised the filing of the suit and appointed attorney.
18. This argument, to say the least, is wholly without any legal foundation and proceeds under misconception. The Banks (Nationalisations) Act, 1974 originally provided setting-up of Executive Board and it was only by an amendment made by the Banks (Nationalisation) Amendment) Act, XVIII of 1974, that the concept of Executive Board was done away which was replaced by the Board of Directors. This amendment was made much after the execution of power of attorney. At the time when the power of attorney was executed it was the Executive Board which could authorise and appoint attorney. A reference to the power of attorney would show that the attorney has been authorised to commence, prosecute and defend all actions or proceedings, whether civil, criminal or revenue and to engage counsel on behalf of the plaintiff-bank.
19. Coming now to the question that the signatures of the defendants were obtained on blank forms and that the said documents have not been executed in accordance with the Qanun-e- Shahadat Order 1984, it is necessary to refer to section 17 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, which reads as under:-- "17. Banking documents.--- (1) No bank shall obtain the signatures of a borrower or customer on banking documents which contain land in respect of important particulars including the date, the amount or the period of time in question.
(2) All banking agreements executed by or on behalf of a bank and a borrower or customer shall be duly attested in the manner laid down in Article 17 of the Qanun-e-Shahadat Order, 1984.
(3) Nothing contained in subsections (1) and (2) shall invalidate any documents executed prior to the coming into force of this Act.
(4) ..
20. In view of subsection (3) of the aforesaid section, the documents , even if obtained blank and not attested in the manner laid down in Article 17 of the Qanun-e-Shahadat Order, 1984 are not invalid, if those documents were executed prior to coming into force of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. In the present case the documents were admittedly executed much prior to the enforcement of the Act and cannot be said to be invalid on account of the fact that signature was obtained on blank forms and that the documents have not been attested in the manner provided,by the Qanun-e-Shahadat Order, 1984.
21. It is convenient to dispose of at this stage another argument raised by the learned counsel for the defendants in which he pointed out that though some documents were shown to have been executed in 1996, the date of repayment is mentioned as 1994.
' This plea is based on misreading of the documents. What appears to have happened is that the printed slash merged with the figure 1996 which on first impression look like 1994 though in fact the date given in 30-6-1996. The document was executed on 2-6-1996 and provides for repayment w,e,f, 30-6-1996 and there appears to be no illegality in this respect.
22. It may also be mentioned that there are three sets of documents and guarantees executed by the defendants. While the learned counsel for the defendants has raised an objection in respect of the documents executed in 1996,. No objection has been raised by him in respect of the documents executed on 15-9-1994 and 31-12-1995.
23. The learned counsel also submitted that the defendants have suffered huge loss and damaged on account of the acts and conduct of the plaintiff-Bank by not issuing No Objection Certificate to enable the defendants to borrow money from other Banks.
24. As has been rightly pointed out by the learned counsel for the plaintiff, there was no obligation on the, bank to issue any such certificate under any rule or law. Be that as it may, this issue is not relevant for the purposes of decision of this suit and would be adjudicated upon in the suit filed by the defendants against the plaintiff.
25. Towards the end, it is also to be mentioned that the arguments of the learned counsel for the defendants were in a way self-contradictory inasmuch s, on the one hand, he wanted to enforce the agreement dated 13-8-1998, but at the same time the agreement was that no amount was due and payable by the defendants. These contradictory pleas could not have been set up. If any authority is needed, reference may be made to Budho and others v. Ghulam Shah PLD 1963 SC 553, Amin Yousuf Nizami v. Rashid Rayon Mills Karachi PLD 1971 Kar. 505 and Alaud Din v. Farkhanda Akhtar PLD 1953 Lah.
131.
26. The learned counsel for the defendants submitted that in view of the facts and the law applicable, the defendants have disclosed triable issues and as such they are entitled to the grant of leave to defend. It is true that in suits filed under Order 37 of the Code of Civil Procedure, it has been held by the superior Courts including Supreme Court of Pakistan that if a triable issue is disclosed, unconditional leave to appear and defend should be granted but if the defendants disclose vague or indefinite pleas, leave should be granted subject to certain conditions. This principle has no applicability to the suits filed under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, Section 10 of which provides that the Court shall grant leave to defend the suit only if a serious and bona fide dispute is raised thereby. It follows from the above that the dispute raised by them is neither serious nor bona fide. The mala fides of the defendants are apparent on the face of the record inasmuch as on the one hand they are relying upon the agreement dated 13-8-1998 and, on the other hand, they are disputing their liability to pay the suit amount. It is also to be noticed that nowhere either in the original application for leave to appear and defend or the subsequent applications, has the fact that the defendants have received different amounts on different dates under the agreements for finance, been denied or disputed. The only plea raised in this respect was that the amount had not yet fell due which stands negated from the report of A. F. Ferguson & Company, the Chartered Accountant of the defendants themselves, who have given due dates for payment and have also mentioned the fact that the defendants were in default.
27. In view of what has been stated above, the application for leave to appear and defend the suit is dismissed.
28. As the defendants have failed to obtain leave to appear and defend, the averments made in the plaint are deemed to be correct as provided by section 9(4) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. In view of the stand taken up by the learned counsel for the defendants that the plaintiff was charging mark-up on mark-up and compound basis, the plaintiff was called upon to submit a chart showing the liability of the defendants in each account separately, worked out without capitalizing and compounding mark- up. Pursuant thereto, the learned counsel for the plaintiff has placed on record a chart, according to which after giving due adjustments for the payments made by the defendants, the total claim recoverable comes to Rs,114.837 Crores. However, in the plaint the amount due is mentioned as Rs,916,890,184/43. The suit is decreed to that extent with costs. The defendants shall also pay mark- up on the decretal amount from the date of filing of the suit till the recovery in terms of section 13 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. However, the claim for liquidated damages is disallowed.