NAZIM HUSSAIN SIDDIQUI, J.---This judgment will dispose of Civil Petitions Nos.1217, 1218, 1219, 1220, 1221 and 1222 of 2001 involving common questions of facts and law, which are directed against common judgment dated 23-4-2001 of a learned Division Bench, High Court of Sindh, Karachi, whereby Special H.C.As. Nos.295, 295, 299, 300, 301 and 302 of 2000 were dismissed with costs.
2. Briefly stated the relevant facts are that through an agreement the respondents hereinafter individually referred to as "Member" and collectively as "Syndicate", entered into a Term Finance Agreement with the petitioners, whereby they agreed to provide to the petitioners Rs,250 million for purchase of plant and machinery for their associated undertaking "Saadi Cement Limited" for which the petitioners agreed to pay marked-up price in quarterly instalments between 1-11-1995 and 1-8-2000. The respective purchase price by each Member of the Syndicate and the marked up price were as follows:-- Marne of Member Purchase Price (In Rupees) Receivable Price (In Rupees)
Citybank NA 50 Million 87,560,883.00 Million Allied Bank Ltd, 50 Million 87,560,883.00 Million Askari Comm. 50 Million 87,560,883.00 Million Standard Chartered 50 Million 87,560,883.00 Million Habib Bank Ltd. 30 Million 52,536,530.00 Million Soneri Bank Ltd. 20 Million 35,024,353.00 Million
3. As security, the petitioners executed necessary documents including Demand Promissory Notes, Letter of Pledges Supplementary Memorandum of Deposit of Title Deeds etc. To further secure such payments, the National Development Finance Corporation, Bankers Equity Limited, Al-Faisal Bank Limited, Faisal Bank Limited and Crescent Investment Bank Limited furnished Letters of Guarantees in favour of Syndicate Members.
4. The petitioners defaulted in payment of repurchase price. They paid only three instalments on 1- 11-1995, 1-2-1996 and 1-5-1996 and thereafter did not pay any amount. According to learned counsel for the respondents, only 90 lacs were paid by the petitioners.
5. The Syndicate Members filed suit for recovery of the amount against the petitioners and sought, amongst others, reliefs of attachment and sale of movable and immovable properties of the petitioners and injunction seeking to restrain them from creating any third party interest in such properties. The petitioners submitted applications for leave to defend the suits and raised therein several grounds. All these applications were dismissed by learned Single Judge and the suits against the petitioners were decreed.
6. Being aggrieved against judgment and decree passed by learned Single Judge, the petitioners preferred appeals before the Division Bench of High Court, which were dismissed by the judgment, which has been impugned in these petitions.
7. Inter alia; the following grounds were raised before the High Court:--
(i) The appellants were unable to pay the buy-back price for several reasons beyond their control and have themselves incurred heavy losses. As such, they ought to be relieved of their obligation in view of fore-major circumstances. On this ground alone, leave to defend should have been granted and the appellants given an opportunity to lead evidence as to the existence of such circumstances as well as the measures of liability keeping in view the same.
(ii) In any event, there was no default on the part of the appellants in fulfilling its obligations under the Contract.
(iii) That the judgment of the learned Single Judge was self-contradictory to the extent that whereas certain factors were taken into consideration in reducing the quantum of damages awarded to the respondent-banks, but were not considered for granting leave to defend.
(iv) That the Agreement dated 22-7-1995, whereby finance was provided by the Syndicate was not an Agreement of lending money on interest but in the nature of Musharka whereby the Members of the Syndicate were required to share profits and losses sustained by the appellants. Since appellants had sustained losses, the Syndicate Members were not entitled to claim the entire buy- back price.
(v) That, alternatively, the agreement in question, did not meet the requirements of a Murahaba under the Islamic System of Finance inasmuch as there was no real sale of assets of the appellants to be repurchased on a marked up price. In the circumstances, it could only be treated as a sham transaction relating to an interest-bearing loan and was void and unenforceable in view of the law declared by the Hon'ble Supreme Court (Shariat Appellate Bench) in the case of Muhammad Aslam Khaki v. Federation of Pakistan (PLD 2000 SC 225).
(vi) That in any event, the questions, raised, presented serious and bona fide disputes for which leave to defend the suit should have been granted."
8. Learned High Court having taken into consideration all the grounds raised on behalf of the petitioners repelled them and assigned cogent reasons therefor.
9. It is contended on behalf of the petitioners that learned Single Judge and Division Bench of High Court have failed to appreciate the facts in their true perspective and reached wrong conclusion.
Learned counsel also contended that the petitioners failed to pay the instalments due to circumstances, which were beyond their control. He has specifically mentioned that, during the period in question, the customs duty, sales tax etc. Were enhanced and this made impossible to Saadi Cement Limited to go into commercial production. It is also urged that the term default was not properly appreciated by High Court. Learned counsel argued that although a serious bona fide dispute with reference to the facts of the case was raised by the petitioners, but same was not considered according to established judicial norms and in terms of section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and that the pleas were turned down on a ground, which is not sustainable in law. Section 10 of the aforesaid Act and term "event of default", as defined in the agreement dated 20-7-1997 are reproduced below for reference: "10. Leave to defend.---Subject to section 11 the Banking Court shall, upon an application made by a defendant within twenty-one days, give leave to defend the suit, if a serious and bonafide dispute is raised thereby: Provided that where service has been validly effected only through publication in the newspapers the Banking Court may extend the time for filing an application for leave to defend if satisfied that the defendant did not have knowledge thereof." ............................................... ............................................... ...............................................
Each of the following events shall constitute an event of default
(a) default of the customer in paying within five (5) business days of the due date for payment or within any period stipulated herein or within any period stipulated in the demand of Syndicate and/or Agent, of any sum payable under this Agreement."
Expression "serious and bona fide" appearing in section 10 was considered in the case reported as Agrofoster (Pvt.) Ltd. And 2 others v. Judge, Banking Court NO.5, Karachi (PLD 1999 Karachi 398) and the following was observed:- "....The word 'seriousin the Oxford English Dictionary has been defined to mean: important, grave, consequences giving cause for concern, worthy of consideration etc. And the 'bona fide means good faith, freedom from intent to deceive, guarantees of good faith, credentials. Combined effect of these two words is if the dispute, ex facie, appears to he genuine, arising out from good faith and free from mala tide, the Banking Court shall grant leave to defend the suit."
10. If a dispute is "serious" and "bona fide" or not within the meaning of aforesaid section will depend upon the merits of each case and no hard and fast rule can be laid down for its applicability in abstract form.
11. In the instant case non payment of instalments due to alleged increase in customs duty and sales tax was not a valid ground. Close scrutiny of the facts reveals that the petitioners were not absolved from their obligations on the pleas mentioned earlier. Section 56 of the Contract Act is not attracted to these matters. The default was to be looked into in terms of the agreement and not with reference to the case reported as Ghulam Muhammad Lundkhor v. Safdar Ali (PLD 1967 SC 530) dealing with section 13(6) of the West Pakistan Urban Rent Restriction Ordinance, 1959.
12. In terms of agreement the default was absolutely clear, as against Rs,250 million only Rs,90 Lacs (Rs,9 million) was returned and after 1-5-1996 not a single penny was paid. Element of bona fide on the part of the petitioners was never manifested.
13. Under the circumstances, the relief claimed by the petitioners was rightly refused by the High Court. In consequence, leave to appeal is refused and the petitions are dismissed.