1. The present case has come up for final arguments in view of the Order, dated 23-2-2000, where it was so ordered, upon the statement of the counsel, that no evidence is required as the documents filed are all admitted documents. The suit has been filed by the plaintiff for recovery of Rs.189,207,223.27. The said suit was filed before the Banking Tribunal No.2 Karachi originally on 26-7- 1994 under the Banking Tribunal Ordinance, 1984. The suit that was filed was initially against the defendants Nos.1 to 5 namely,, Messrs Azmat Trading Co. (Pvt.) Ltd. and the Director/Guarantors of the finances stated to have been granted by the plaintiff to the said defendants. It transpires, that subsequently, the defendant No.1 instead of seeking third party proceedings, moved an application for impleading the branch of IFIC Bank at LI Chudrigar Road Karachi as a party in these proceedings. By consent of the plaintiffs, the said branch of IFIC Bank was made a party and arrayed as Defendant No.6, in the present proceedings. The consent thus obtained was in respect of the IFIC Bank being liable to pay certain sums of money in respect of exports made by the defendant No.1 to Messrs Azmat Bangladesh (Pvt.) Ltd. In fact, thereafter, the plaintiff found it necessary to also amend the pleadings in the plaint, wherefore paras.3, 11, 12 and 13 were added to the plaint. I shall discuss these addition subsequently, however, the first issue that has to be tackled is as to whether there is finance, that may be due and payable by the defendant or not.
2. The facts of the case as has pleaded by the plaintiff in the amended plaint, filed per order, dated 2- 12-1996, is, that two facilities were granted by the plaintiff to the defendant No.1, the facilities being as follows:--- (a)FAPE-I Rs.20 Million(b) FBP-Rs.20 Million.
3. The first facility namely, FAPE-I, was granted under the State Bank of Pakistan's Refinance Scheme for Export Shipment. This facility was a "Pre Shipment Facility", which was to be secured against the delivery of documents and return of money against the exports made. The procedure followed under such a facility, usually is, that upon payment being made for the purpose of exports the same is secured by confirmed letter of credit. Upon the shipment being made, the borrowers are bound to hand over the documents of title/shipment to the bank, who in turn, acts in accordance with the instructions of the customer as also the letter of credit, already with the bank, to secure the credit from the consignee. In the event the documents are rejected, the same are returned to bank, who can then on the basis of the executed Bill of Exchange, claim refund/repayment of the finance lent/disbursed to them. In the event the documents are accepted by the consignee, the payment is liable to be recovered from the said consignee on the expiry of such period as may be mentioned on the Bill of Exchange by the bank.
4. For the purposes of such a facility, amazingly an agreement has stated to have been entered into, for the sale and purchase of commodity, being an agreement, dated 2-7-1991 filed alongwith plaint as Annexure "B". Such agreement could only be, where there is a facility under the mark-up system and which is provided in Annexure-II, to BCD Circular No.13. However, where there is purchase of Export Bills or negotiations of letter of credits, Annexure-II to BCD Circular No.13, (1)(b)(i), financing is on exchange rate differential in case of foreign currency bill, or (b)(ii), commission or mark down in case of rupee bills. In addition, the same Annexure-II in (I) (e), states that financing could also be granted on exports under the State Bank of Pakistan, Finance Scheme and the scheme for financing locally manufactured machine against Services Charges/ Concessional Services Charges and nothing more. This is an agreement, which seeks to purchase commodities and is categorically mentioned in the said agreement that, "the customer has agreed to sell to the bank raw material, finished/goods/spares/machinery etc. 'The goods that are sought to be purchased, are those which are mentioned in the agreement, whereas admittedly this is a case in which, there is in fact no sale and purchase of any commodity. The finance is by lending/purchase of Export Bill and which is covered by Annexure-II and could be on commission, by mark down in price or on exchange rate differential or on services charges. None is the case here.
5. It seems that no officer of the bank has ever bothered to look up the law and only act on certain printed forms that are placed before customers for the purpose of execution and filing up the documentation so that they may not be taken up as not having acted to take sufficient documents to secure the credit. This is not a credit, it is financing and in the manner as provided by BCD Circular No.13. The bank is bound to act in accordance with the all circulars as has been held in the case of Hashwani Hotels Limited v. Federation of Pakistan and others PLD 1997 SC 315.
6. It is clear from the record, therefore, that no sale having been effected, such could only be treated as a "Financing by Lending' or a 'Loan' within the categorical stipulation of law and as provided in Annexure-I to BCD Circular NO.13, where it is categorically provided, that loans shall only bear service charges and which is supported by Annexure-II where financing in respect of export refinance, is shown to be only on service charges and nothing else. Such service charges have not also been claimed in the present case.
7. The second finance i.e. (FBP), Finance against Bill Purchase which is covered by Annexure-II to BCD Circular No.13 and which could have been only on the basis of exchange differential in case of foreign currency bill. These were foreign currency bills against a limit granted in Pakistan rupees. A 'foreign currency bill', implies that the payment to be received was in foreign currency and that, it is against the export made, i.e., the export proceed against the Letter of Credit. Such is also a loan and therefore, no mark-up can also be granted under these facilities, notwithstanding the agreement that has been filed alongwith plaint, being Annexure "B/1", dated 2-7-1991. This is also an agreement that seeks sale of certain raw material/spares/finshing goods/machinery etc., which, admittedly there is none. The agreement of financing that has been entered into ought to have reflected that what was the actual transaction and required to be done. Thus, there should have been an agreement for purchase of bills as provided by law and without a buy back, as the same could not be bought back. These bills purchased in fact, would be the purchase of the "Bill of Exchanges", drawn by the Exporter (the customer of the bank), by the bank, for acceptance by the consignee. The face value of the Bill of Exchange is not paid by the bank but the bill is bought by marking down the price by an agreed percentage of the value. It is this marked down price that is paid by the bank to the customer. Thus, the bank has already earned on the proceeds to be recovered. It is the bank who has to recover the amount from the consignee. The Bill of Exchange has to be presented for payment in accordance with the law for the time being in force. Where after presentation, the Consignee refuses to accept the Bill of Exchange, and due protest is lodged, on the basis of the Bill of Exchange executed by the customer, the bank could proceed against the drawer, namely, the customer. Thus, it is the Bill of Exchange, which is the negotiable instrument under the Negotiable Instruments Act. The plaint in suit does not seek to recover money against any Bill of Exchange, but has been filed seeking to enforce payment against an Agreement of Financing, which in fact, admittedly has never been acted upon. However, as the receipt of money against the exports/bills have not been denied by the defendants, as such, the principal amount could be recovered, but only when it is shown that the Bills of Exchange have been refused by the consignee. This is not the case of the plaintiffs. In fact they have bought the negotiable instrument for value. Unless the document in original is produced, the bank cannot claim the amount against the said bill. I had asked Mr. Nafees Siddiqui as to whether the Bills are available, which was replied after seeking instructions from the officers of the bank present, that the originals were not available. It the Originals were available, possibly the present suit could have proceeded on the assumption that the bills have been rejected, but again such is not the case here. I had also given a day for this fact, but nothing was produced. The claim thus, against the bill, even if they were disbursed could not be given, as the payment was made by the bank for the purchase of valuable documents against which the amount due could be recovered from the consignee. The Bill of Exchange are set out in sets of two or more as required by the L/C. However, there is only one original. The original is negotiable. Thus, if no paid by the consignee, it could be negotiated against the drawer. The suit that has been filed does not seek to claim under the Bills of Exchange. If the original bill is not present it has to be presumed and that too without exception, that the same has been negotiated. Upon negotiation, the amount mentioned on the face of Bill is deemed to have been received. There is no stipulation in the plaint to suggest that it is otherwise.
8. Mr. Nafees Siddiqui has shown to me Annexures "I" to "1-4" stating that by these messages, it is clear that the consignees have refused to accept the Bills. This is a communication from the Corporate Branch of the plaintiff. If there was a refusal, the original bill of exchange would have been returned.
9. In fact, without the Bill of Exchange and other shipping documents, the goods exported against the Letter of Credit could not have been released. The Bill has not been produced. I am not inclined to accept the fact that the customer is liable as against the amount paid for Bills purchased unless the originals are produced. Otherwise such has not been pleaded. I would, therefore, reject the claim on the ground that the price of the bills are only payable on production of the negotiable instrument.
10. There can be nothing more glaring that the utter negligence shown by the officials of the bank in allowing such finances or disbursing money or making payments without appropriate documents to support such finances. The pleadings show utter lack of application of, both, the officials of the bank and the counsel. The officials of the bank ought to have known as to why they had paid the amount to the customer. The counsel ought to have drafted the pleadings in light of the law for the time being in force. In fact the negligence by the counsels shown at the initial stage could have been rectified at the time when the counsels were changed. In fact the pleadings were altered, and which was not required. By the amendment the bank has admitted having negotiated the bills, in that per the agreement between the plaintiff and IFIF Bank, the dues of the defendants were taken over by the said bank on behalf of Azmat Bangladesh Ltd. The plaintiffs could not claim under this head. If it would have been realized by any officer or subsequent counsels, that the plaint was incorrectly drafted, it should have been amended. Law prescribes the procedure. I am amazed, that even today, no one seemed to be prepared on the question. In fact the manner in which transactions in respect of export trade is conducted was also not known. It was the Court who was trying to educate the counsel as also the officers present in Court. This is shameful. How could a bank of this size of function without proper legal assistance.
11. There is also on record a statement filed on 16-9-2000 by the plaintiff bank, in which they have categorically stated that under the FAPE (General) a sum Rs.19.508 million were disbursed and have claimed a Buy Back Price of Rs.26.301 million at the rate of mark-up 20% per annum, Mark-up for the cushion period and all the period upto 31-12-1991 has also been claimed. In addition to the penalty to State Bank of Pakistan mark-up on refinances to pay to State Bank of Pakistan, Insurance Premium, Central Excise Duties, Muqadam Charges and Liquidity Damages have also been claimed. In the case of FBP it is stated that in fact, Rs.24.436 Million had been disbursed which was in excess of Rs.4.436 Million, in this case also rate of mark-up has been claimed at 20%. Mark- up for the cushion period and for the period up to 31-12-1991 has also been claimed. Mark-up on refinances paid to State Bank of Pakistan, Central Excise Duty and Liquidity Damages have also been claimed.
12. The total amount of disbursement made and admitted is Rs.19.508 Million in the FAPE (General) account. I have already declined the claim of the sum of, Rs.24.436 Million in the FBP account. There is on record also, a statement filed by the plaintiff, as to the actual receipt of various sums. This handwritten statement was filed on 1-3-1996, in which, an amount of Rs.85,520,826.01 has been stated to have been received on account of the defendant No.1 and Azmat Textile Mills Ltd.
13. However, in the break-up it has been shown that in the present suit, a sum of Rs.46,321,458.32 had been received at the rate of Rs.24.5266. In the present case, therefore, the amount received by the bank admittedly is Rs.46,321,458.32, whereas actual liability determined in fact is only--Rs.19.508 million. Subsequently, in the same document it is written again, in hand, that they have received a sum or Rs.1,300,000 against sale of pledged goods which is also required to be added to the above, which makes a total of Rs.47,621,458.32. From the above, it is apparent that, it is in fact the bank which has to pay to the defendants, a sum of Rs.28,113,458.32 instead of the defendants paying the amount claimed by the plaintiff. In fact it is claimed that after filing of the suit, a total sum of Rs.95,267,904.55 has been received. This, for the present I shall not be considering, as it is a claim by the defendants without any documentary evidence. The calculation above is on the basis given by the bank and not at the rate of Rs.36.9330 as agreed and reflected by order, dated 1-3-1999. I have only calculated on the basis of the bank's calculation on the basis of which in fact the customer/defendant has overpaid.
14. I shall now come to the question of defendants No.6 and its liability. Admittedly, the goods that had been exported to Bangladesh have been claimed from the defendants Nos.1 to 5 in addition, they claim the same from the defendant No.6 per memorandum of Standing, dated 1-9-1994. The claim in the said Memorandum of Standing was that a total sum of U.S. $ 11. 441,373. 42 that was taken up by Messrs Azmat Bangladesh Ltd./IFIC Bank Ltd. In fact, this amount then, as discussed above cannot be claimed from the defendants or any of them. Such an agreement was entered into in Bangladesh. Admittedly am amount of Rs.116,594,385.20 has been received from IFIC Bank Bangladesh, on 6-10-1996, on account of Azmat Trading Co. (Pvt.) Ltd., the Defendant No.1 and Azmat Textile Mills Ltd., the Defendant No.1 in Suit No.1702 of 1997. Claim of other amounts having being received by the bank has also been made by the defendants. This amount was received after the said agreement was entered into. Otherwise, also if there was any claim against IFIC Bank, it could only be in Bangladesh. IFIC Bank is not a 'borrower' or 'customer' within the meaning of the Banking Companies (Recovery of Loans, Advances, Credit and Finances) Act, 1997, and could not be sued under the provisions of the Banking Companies (Recovery of Loans, Advances, Credit and Finances) Act, 1997. In addition, under UCP 500, a branch of a bank in a different country cannot be sued, such is provided in Article 2(iii) of UCP 500. UCP 500 controls all documentary credits. The claim against IFIC Bank is, therefore, otherwise also not maintainable. Under the circumstances the joining of the IFIC Bank has not only been malicious, but the agreement to do so, by the plaintiff, it seems was, on a realization by the bank of the error on their part, that the claim against the defendants Nos.1 to 5 may not stand. It is therefore, that in para. 3 of the amended plaint it is categorically stated that.
15. "The defendant No.6 is IFIF Bank, who had taken over the management of Azmat Bangladesh Ltd., and liable to pay the suit amount as per agreement, the IFIC Bank has acknowledged the liability of Azmat Bangladesh Ltd. Photo copy of the agreement, dated 1-9-1994 is annexed hereto as A-1."
16. Further in paras. 11, 12 and 13, the plaintiffs have also admitted this position. In fact, it is categorically admitted that the documents had been delivered to IFIC Bank in Bangladesh. The Bills of Exchange, according to the plaintiffs themselves, therefore, were accepted and payment was to be made under the Bill of Exchange by Messrs Azmat Bangladesh Ltd. as is categorically stated in para.12 of the plaint. In fact, therefore, the bank is claiming from both the defendants Nos.1 to 5 and from Messrs Azmat Bangladesh Ltd., the same amount that cannot be done. In view of the above, and the factum of payment has already been made by Azmat Bangladesh Ltd., in fact in excess of the amount claimed in suit, the suit is dismissed with costs under section 35, C.P.C. to the defendants, that there is no liability of the defendants or any one of them payable to the plaintiff. In view of the unnecessary harassm ent caused by the filing of the plaint and for false and vexatious claims made by the plaintiffs against the defendants, Compensatory Cost under section 35-A of the Civil Procedure Code, in the sum of Rs.25,000 is granted against the plaintiffs payable to each defendant.
17. In view of the dismissal of the suit, C.M.A. 3675 of 2000 stands disposed of.
18. The actions of officers of the bank and the manner in which plaint has been drafted show a horrific picture of the manner in which the banks are operating. On the one hand, after the judgment which was delivered by the Honourable Supreme Court of Pakistan in the case of Dr. M. Aslam Khaki v.
19. Syed Muhammad Hashim and 2 others PLD 2000 SC 225, almost all the banks have, on one occasion or the others stated that the bank shall be put to severe loss. The loss caused is not because of lawful actions required to be done in accordance with the existence laws and the Islamic Provisions, but is caused because of the unjust, inequitable actions of the bank, in addition to their negligence and callous attitude. The banks are supposed to act diligently and all officers of the banks are supposed to act with caution and are required to know the law prevalent and all acts that have to be done by such officer has to be in accordance with such laws. In my view all the officers or any other persons, including counsels, concerned and dealing with the finances given under the present suit have been absolutely negligent and callous and have not even bothered to look at the case and manner in which they should present it before the competent Court. The facts contained in the plaint/suit speak volumes of the negligence of the bank officers and the approach, the high-handedness of such persons who are an authority, who require the customers to sign or execute any document which they want. All the counsels should have looked into the pleadings as also the law, and should have taken proper and necessary steps to rectify the same if they were not proper. The officers as also the counsel were not aware of the law and the banking practice. Severe action should be taken against the officers and all concerned and if the bank has suffered any loss that has been caused by the present finances being granted/disbursed or by the order passed in this present case, it is those officials/persons concerned, who should be made liable for the entire amount. A copy of this order shall be sent to the President of the Plaintiff Bank also and Governor, State Bank of Pakistan as also to the Minister of Finance, Government of Pakistan and the National Accountability Bureau for appropriate action.