MALIK MUHAMMAD QAYYUM, J.- This first appeal under section 21 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 arises of of the judgment and decree dated 7.1.1998 passed by the Banking Court No; IV, Lahore for the recovery of Rs. 2,17,81,589/- alongwith mark-up and costs against the appellants.
2. The respondent-Allied Bank of Pakistan Ltd. had filed a suit for the recovery of Rs. 2,17,81,589/- against the appellants and other respondent alleging that at the request of the defendants, the Bank opened two Letters of Credits for import of 500 and 440 Metric Tons of palam oil for the amounts of U.S. Dollars 347, 500 and 235,180 respectively, according to the respondent-Bank, the defendants on the payment of Rs. 4.2 million got 150 Metric tons of Palm Oil released leaving the balance of 349.495 metric tons which was under pledge with respondent No. 1 and was lying with the Customs Authorities at Karachi. According to respondent No. 1-Bank, the appellants failed to pay the balance amount or have the goods released with the result that the Customs Department shelled the storage Tanks in which the oil was stored under the custody and control of respondent No. 1 Bank, It was further averred in the plaint that despite repested reminders, the defendants failed to liquidate their liability and as on the date of the filing of the suit, a sum of Rs. 2,17,81,589/- were due and payable.
3. On having been served with the summonses, the appellants moved an application under section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and finances) Act, 1997 for leave to appear and defend the suit, in which one of the pleas raised was that respondent No. 1- Bank has failed to account for the pledged goods and as such it was not entitled to recover any amount from the appellants, In the reply filed by the respondent-Bank, it was reiterated that it was the responsibility and liability of the appellants to have the goods cleared from the customs on the payment of duty and, therefore, the respondent bank was not liable to account for the goods which were lying with the Customs Department.
4. The learned Trial Court after hearing arguments of the parties repelled the various objections raided before it on behalf of the appellants, It may be stated that originally in the plaint, the Chairman, Central Board of Revenue and Collector of Customs, Karachi had been impleaded as parties but on a statement made by the learned counsel for respondent Bank on 14.10.1993, the suit was withdrawn as against them. The application for leave to appear and defend the suit filed by the appellants was dismissed by the Trial Court on 7.1.1998 without holding any further inquiry.
5. The learned counsel for the appellants has contended that 350 metric tons of palm oil was under pledge with the respondent-Bank which was liable to be accounted for and in the absence whereof the Bank could not recover any money from the appellants. Reliance has been placed by the learned counsel on sections 172 to 176 of the Contract Act and the judgment of the Court in A.M.
Burg and another v. Central Exchange Bank Ltd. (PLD 1966 Lah. 1) and the decision of the Indian Supreme Court in Uco Bank v. Ham Ckander Sarkar ((1990) 3 Supreme Court Cases 389). On the other hand, the learned counsel for respondent No. 1 Bank has reiterated that it was the obligation of the appellants to have paid customs duty and to have the goods cleared which they have failed to do and as such the respondent Bank cannot be held liable or accountable for the palm oil.
6. It is admitted between the parties that the two Letters of Credit were opened for the import of 500 and 440 metric tons of edible oil which arrived in Pakistan and was lying with the Customs Department. This oil stood pledged with respondent No. 1-Bank. The appellants after making payment of Rs. 4.2 Million go 440 metric tons of edible oil released leaving a balance of about 350 metric tons which was lying with the Customs Authorities.
7. The moot question between the parties is as to who was responsible for clearance of goods from the Customs Department and as to what happened to the palm oil in question. The proposition of law is well-settled that if some goods have been pledged as security for repayment of the loan, the pledgee is liable to account for thous good in the absence of which he is not entitled to seek recovery of the amount due under the transaction of loan. I was so held by this Court in A.M. Burq and another v. Central Exchange Bank Ltd. And others (PLD 1966 Lahore 1). It was observed that "the principle in equity is that the creditor is not entitled to receiver the amount of his secured debt which he cannot return the security. The Indian Supreme Court in Uco Bank's case supra held that:- "The banker bailee gratitious or for reward is bound to take the same care of the property entrusted to him as a reasonably prudent and careful man may fairly be expected to take of his own property of the like description. A paid bailee must use the greatest possible care and is expected to employ all precautions in respect of the goods deposited with him. If the property is not delivered to the true owner, the banker cannot avoid his liability in conversion, In the light of these principles the Bank could not avoid the liability to return the goods as agreed upon or to pay an equivalent amount to the plaintiff. Even assuming that the goods were delivered to a wrong person he has to own the responsibility to pay the plaintiff. The liability of banker to customer in such a case is absolute even if no negligence is proved. When Bank received the price of the goods from the customer, it must deliver the goods to him. It is immaterial whether the Bank acted as bailee or in any other capacity."
8. From the respective contentions of the parties it is quite obvious to us that a serious and bone fide dispute arose between them which could not be decided by the learned Trial Court without obtaining written statement from the appellants, framing issues and recording evidence.
Unfortunately, the application for leave to appear and defend the suit was summarily rejected by the Trial Court without any justification. Clearly, a triable issue has been disclosed by the defendants and as such they were entitled to the grant of leave to appear and defend the suit.
9. Furthermore, it is not clear from the record as to what happened to the balance of edible oil which was lying with the Customs Department, It is also to be seen that the respondent-Bank itself had been serving notice on the appellants calling upon them to have the goods released, failing which the respondent-Bank expressed its intention to sell the goods. However, despite non- payment of any amount by the appellants, the respondent-Bank did not make any effort to have the gods released from the customs and to sell the same for the recovery of the amount due from it. It is also not understandable as to why the names of the Collector of Customs and that of Chairman, Central Board of Revenue were struck of the record on the unilateral statement made by the learned counsel for the plaintiff. As the pledged goods were in the custody and control of the Customs Department at the time of filing of the suit, the Customs Department and Collector Customs were necessary parties to the suit. This aspect of the case has been totally ignored by the Trial Court which proceeded to. Dismiss the application for leave to appear and defend without any justification and decreed the suit of respondent-Bank without recording evidence. The procedure adopted by the Trial Court in the circumstances of the case was not justified in law.
In view of what has been stated above, this appeal is accepted, the judgment and decree dated 7.1.1998 is set aside and the appellants' application for the grant of leave to appear and defend the suit is accepted. The case is remanded to the Trial Court for decision afresh after obtaining written statement from the defendants, framing issues and recording evidence of the parties. No order as to costs.