' Industrial Development Bank of Pakistan, a Banking Company constituted under the Industrial Development Bank of Pakistan Ordinance, 1961, (hereinafter referred to as plaintiff) has filed the present suit for the recovery of Rs,31,136,687.91, as on 16-7-1998, against Messrs N.T.N. (Pvt.) Limited a Company incorporated under the Companies Ordinance, 1984 and four others, out of which defendants Nos.2 to 4 have been arrayed as Directors and guarantors, whereas defendant No,5, Malik Muhammad Zafar, has been impleaded as the legal heir of one Malik Muhammad Iqbal deceased, the original Director/guarantor.
2. According to the facts of the case the plaintiff, at the request of the defendants, sanctioned a local currency financial assistance of Rs,12.450 million for setting up a new Solvent Extraction Unit at Pattoki, District Kasur, vide sanction letter dated 18-2-1990, as amended on 8-4-1992. It has been averred that the re-payment of this financial facility was secured through the execution of charge documents including financing agreement, D.P. Note, agreement of hypothecation in respect of customer's own property and agreement to sell (by Bank to customer re: immovable property). In order to further secure the said financial assistance, defendant No,1 initially deposited the title deeds with the plaintiff of its fixed assets, namely, plots of land measuring 32 Kanals situated at Chak No,3, Bhaikot, Sub Tehsil Pattoki, Tehsil Chunian, District Kasur, with all the building, factory, superstructures and fitting etc., it thereafter executed memorandum of deposit title deed dated 25-6-1992 and thus, mortgaged the properties. It has also been asserted that defendant No,1 executed an irrevocable general power of attorney on 27-6-1992, defendants Nos.2 and 4 and predecessor-in-interest of defendant No,5, namely, Malik Muhammad Iqbal, jointly executed a letter of guarantee dated 25-6-1992, in favour of the plaintiff. Consequent to that, charge of plaintiff was also got registered with the Deputy Registrar of Companies, Lahore, who issued Certificate of Registration of Mortgage dated 27-6-1992.
3. According to the plaint at the request of the defendants, plaintiff also sanctioned an additional financial assistance of Rs,1.550 million through sanction letter dated 16-3-1994. In order to secure the said additional financial assistance, defendant No,1 executed financing agreement, D.P. Note, agreement of hypothecation, agreement to sell (re: customer's movable property), agreement to sell (by Bank to customer re: movable property) and memorandum of deposit of title deeds. In furtherance thereof an irrevocable general power of attorney dated 1-6-1994 and a joint letter of guarantee dated 29-5-1994, by defendants Nos.2 to 4 and Malik Muhammad Iqbal, original defendant No,5, were also executed. This additional charge was also got registered with the Deputy Registrar of Companies and the requisite certificate was issued. It has been asserted in the plaint that defendant No,1 utilised a sum of Rs,10,582,500 out of Rs,12.450 million (1st sanction) and Rs,1,317,500 out of Rs,1,550,000 (2nd sanction), aggregating to Rs,11,900 out of Rs,14,000,000. However, the undisbursed amount of Rs,2.100 million was withdrawn by the plaintiff on 3-4-1997. According to the plaintiff a sum of Rs,31,136,687.91 became due for payment to the plaintiff by the defendants as on 16-7-1998, the defendants miserably neglected to discharge their liabilities -under the aforesaid financial facilities and despite various demands failed to pay the suit amount and thus, committed default. In the above perspective and plaintiff filed the present suit for recovery under section 9 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (hereinafter referred to as Act (XV of 1997) against the defendants.
4. In response to the summons/process issued by this Court, as prescribed under section 9(3) of Act XV of 1997, defendants Nos.1 and 2, on 10-5-1999, filed an application (P.L.A. 62-B of 1999) seeking leave to defend the suit. However, defendants Nos.3 to 5 failed to file any such application within the stipulated period, with the result that this Court passed an ex parte decree against the said set of defendants vide judgment and decree dated 26-5-1999. Later on, as a consequence of setting aside of ex parte decree, on their different applications, defendants Nos.4 and 5 applied for leave to defend the suit by way of filing two separate applications (P.L.As. Nos.85 and 93-B of 1999).
So far as defendant No,3 is concerned, although he filed a belated application (C.M. No,439-B of 1999) seeking setting aside of ex parte decree dated 26-5-1999, alongwith an application for condonation of delay (C.M. No,440-B of 1999), yet this Court, on 4-10-2000, dismissed his aforementioned two applications, resultantly the ex parte decree dated 26-5-1999, still stands intact and operative as against defendant No,3.
5. At present three applications, seeking leave to defend the suit are awaiting decision, one is P.L.A.
No,62-B of 1999, filed by defendants Nos.1 and 2, second is P.L.A. No,93-B of 1999, by defendant No,5, whereas the third one is P.L.A. No,85-B of 1999, filed on behalf of defendant No,4 P.L.A. No,62-B of 1999 and P.L.A. No,93-B of 1999, are identical in nature and similar in subject-matter, rather one is photocopy of another, therefore, they are being taken together.
6. Although in these two applications numerous grounds have been taken for leave to defend the suit, yet the learned counsel has confined his arguments only to the extent of three pleas. The learned counsel has firstly contended that the project could not be completed due to the acts and omissions of the plaintiff, they delayed the matter on one pretext or the other, therefore, the project could not be put to commercial production and as such enormous losses were caused to defendant No,1. It has next been contended that defendant No,1 did not receive any payments from the plaintiff, rater all the payments were made by the plaintiff to the suppliers of the components of the factory directly and defendants Nos.1 and 2 have nothing to e3 with the said transactions.
Thirdly it has been contended that there was a change of management and an agreement was executed between the defendant-Company and one Mohsin Rafique, about which the plaintiff was duly informed, therefore, defendants Nos.1 and 2 are not liable to pay any amount to the plaintiff- Bank. Conversely, the learned counsel of the plaintiff while controverting the afore noted contentions has submitted that it was on account of the misfeasance and malfeasance of the defendant-Company itself, which may have caused losses to them as they are themselves responsible for the non-completion of the project. He has further submitted that as per the arrangements, the financial facilities were availed by defendant No,1, which availment of the facilities have even not been denied by the defendants either in the present applications or even in the arguments of the learned counsel. The learned counsel of the plaintiff has denied that any change of management was accepted by the plaintiff and argued that the plaintiff was not party to the agreement, said to have been executed between the defendant No,1 and Mohsin Rafique and as such they have no nexus with the alleged transaction allegedly undertaken between the aforesaid two persons.
7. So far as the first contention of the learned counsel regarding the non-completion of the project is concerned, the exercise of determining, on account of whose fault and negligence the project could not be completed, cannot be undertaken by this Court in the present suit. Suffice it to say that the defendants have, as a matter of fact, admitted availment of the financial facilities. They have, neither in their applications nor in the arguments of the learned counsel denied the availment of the financial facilities, even the execution of the documents has not been disputed. It is the assertion of the said defendants that the project could not be completed on account of the acts, omissions and conduct of the plaintiff as it could not provide the finances at the appropriate time and stage. Conversely, the stance of the plaintiff-Bank is that defendants could not properly utilize the finances and due to their own acts and mismanagement, if they have suffered any losses, the plaintiff cannot be held responsible. The learned counsel of the defendants has also stated that the Company had already filed a suit for recovery of some amount as damages against the plaintiff, which is pending in this Court. The said assertion is not sufficient, within the parameters of law, for the grant of leave to defend the suit and if any suit for damages has been filed by the defendants, it would be decided on its own merits. In that suit the defendants will, of course, have to, inter alia, prove the breach of contract on the part of the plaintiff-Bank entitling them for damages and then the quantum of damages. Even otherwise in support of the said contention, the defendants failed to bring any material on record, even prima facie, to prove that they have, in fact, suffered any losses. No amount of alleged damages caused to the defendants has either been mentioned in their leave applications or in any of the documents. No documentary evidence in support of the said assertion has been placed on record in order to prima facie show that defendant No,1 has in fact suffered any losses and if so what is the quantum of such losses.
Mere a bald assertion regarding causing losses would not entitle the defendants for the grant of leave to defend the suit. Be that as it may this issue is not relevant for the purposes of decision of the applications in hand/suit and could be adjudicated upon in the suit filed by the defendants against the plaintiff. This contention of the learned counsel has no force. As regards the next contention it is reiterated that defendant No,1 has not denied the availment of the financial facilities, therefore, it does not lie in the mouth of said defendants to say that no transaction was undertaken between the parties. Even if it is presumed that some payments were made directly to the suppliers those must be pursuant to some arrangements between the parties and in accordance with the agreement. Record of the case manifests that the defendants never agitated this alleged plea before and the same, for the first time, was taken now after the institution of the suit. The said defendants failed to bring on record any material or document to prove that they have not received any amount and that all the payments were made directly to the suppliers. This plea of the said set of defendants proceeds on mis-conception, without any legal foundation and does not have any substance in order to warrant the grant of leave to defend the suit.
8. Next contention of the learned counsel regarding the change of management has equally no force. Although a letter dated 3-7-1997, is on record, purportedly showing that Mohsin Rafique wrote to the plaintiff, highlighting therein that he has executed some agreement with defendant No,2. The said letter was neither acknowledged nor even replied by the plaintiff and that is sufficient to show the worth of that letter. If any letter about the alleged change of management was written to the plaintiff-Bank, that does not mean that the plaintiff is a party to that arrangement. I have also examined the agreement dated 3-5-1997, said to have been executed between defendant No,2 and Mohsin Rafique. This document, alone, does not advance the case of the defendants in order to get the leave, as the defendants failed to place on record any other document written by the plaintiff thereby acknowledging the alleged change of management. Admittedly, the alleged agreement was executed between defendant No,2 and Mohsin Rafique and the plaintiff is not a signatory/party to that agreement. The Bank has not even acknowledged the said agreement and pursuant to that even no correspondence was exchanged between the parties regarding the change of management. Even if for the sake of arguments, it is presumed that the management was changed in the year 1997, in that case the defendants failed to show that any fresh- charge documents were executed. Unless the fresh charge documents, including the mortgage, finance agreements and personal guarantees and others were executed and furnished to the plaintiff- Bank and consequent there to the previous documents were released and the guarantees were discharged by the plaintiff, it cannot be said that the change of management has been affected/acknowledged. In the absence of all this, how it can be said that the change in the management was made. In this case neither the so-called change of management was accepted by the Bank nor the alleged incoming management has furnished the fresh documents, including the finance agreements, guarantees and the mortgage, nor the charge documents and other allied instruments were released/discharged by the plaintiff, therefore, I am of the considered view that there was no change of management and it is a lame excuse only to manipulate a ground for the grant of leave.
9. As regards P.L.A. No,85 of 1999, the learned counsel has raised a solitary contention that as defendant No,4, namely, Mrs. Akhtar Anwar resigned from the management of the Company, which was accepted on 26-4-1994, therefore, the said defendant is not responsible to liquidate the financial liabilities of defendant No,1 and, thus, the learned counsel has prayed that the said defendant is entitled for the unconditional leave to defend the suit. The contention of the learned counsel is, to say the least is wholly misplaced and misconceived. Although Form XXII issued by the Deputy Registrar shows that Mrs. Akhtar Anwar resigned from the management of the Company since 26-4-1994, yet the said resignation would not absolve the liabilities already undertaken by the said defendant, through the execution of documents, which have neither been denied nor disputed, before the said date. According to the provisions of Contract Act in case a surety retracts from his commitment that will not discharge the surety from the liability already incurred by it. All the documents attributed to the said defendant pertain to the period prior to 26-4-1994, therefore, defendant No,4 cannot escape from her liabilities already incurred by her through the execution of the documents before that date, more so when the availment of the financial facilities and the execution of the documents have not been denied. Furthermore, admittedly, no notice for revocation of guarantee, as contemplated under section 130 of the Contract Act, was served upon the plaintiff by defendant No,4, as such it cannot be said that, defendant No,4 stood discharged as surety. In the absence of notice the guarantees furnished by the said defendant could not possibly be revoked.
10. The aforesaid set of defendants have as a matter of fact acknowledged the availment of the financial facilities by defendant No,1 and have also admitted the execution of all the documents, photo copies of which have been placed on record. It is apparent from their leave application as well as from the arguments of the learned counsel that none of the defendants have denied the execution of the documents. Even no objection has been raised to the statement of accounts, certified copies of which are on record, meaning thereby that all the defendants have admitted each and every entry of the statement of accounts and also that the suit amount is due from them.
It has been admitted by the defendants that defendant No,2 was called upon by the plaintiff to deposit an amount of Rs,5,20,000 before June, 1997, and in case of such deposit, the financial facilities can be re-scheduled. This admission pre-supposes that the financial facilities were in fact availed, the defendants committed the default, they could not liquidate the liabilities and as such an eventuality of re-scheduling the financial facilities happened. This impliedly, inter alia, amounts to acknowledgement of default in the re-payment of finance facilities.
11. Section 10 of Act XV of 1997, 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 so-called dispute raised by all the defendants is neither serious nor bona fide. The defendants have comprehensively failed to make out a case for the grant of leave to defend the suit. In view of the reasons and conclusions, all the three P.L.As, are devoid of force and thus, the same are dismissed.
12.As the defendants have failed to obtain the leave to appear and defend the suit and as a consequence of dismissal of the three P.L.As., as discussed above, the allegations made in the plaint are deemed to be correct as provided under section 9(4) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, and law declared by the Hon'ble Supreme Court in the case of Messrs Ahmad Autos and another v. Allied Bank of Pakistan Limited PLD 1990 SC 497, The plaintiff has placed on record the photocopies of all the documents, on the basis of which they have filed the present suit, the execution whereof has not been denied by the defendants even in their application for the grant of leave to defend or/and in the arguments of the learned counsel, as such the execution of all the documents shall be deemed to be admitted.
Furthermore, the statement of accounts, which is duly verified/certified under the Bankers' Books of Evidence Act, 1891, is also on record, regarding the correctness of which no. Objection was raised by any of the defendants and the presumption of correctness is also attached to it under the law, therefore, the entries made therein are presumed to be true and correct. There is no rebuttal of the afore-mentioned documents on record by the defendants.
' In view of the foregoing reasons a decree for the recovery of Rs,31,136,687.91, as on 16-7-1998, with costs is passed in favour of the plaintiff and against defendants Nos.1, 2, 4 and 5 (an ex parte decree for the said amount had already been passed against defendant No,3, on 26-5-1999) jointly and severally. The plaintiff shall also be entitled for the recovery of amount of mark-up, in terms of section 15(1)(b) of Act XV of 1997, at the contracted rate or at the latest rate of the Banking Company for similar finance whichever is higher, from the date of institution of the suit till the date of payment/realization.