National Bank of Pakistan (hereinafter referred to as Bank) has filed the present suit for the recovery of Rs,41,14,53,836 alongwith accruing mark-up, costs, service charges and damages, before the then Banking Tribunal (since defunct), against defendant No,1, statedly, Modaraba existing under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance (XXI of 1980), managed by defendant No,6, engaged in the business of manufacture and export of textile/polyester goods and cotton products etc, wherein defendants Nos.2 to 5 have been arrayed as defendants in the capacity of Directors of defendant No,1 and reportedly the real beneficiaries of the "finances" and defendant No,6, a Modaraba Company of defendant No,1, had been sued as mortgagor/surety for the repayment of the outstanding liabilities. It has been stated in the plaint that pursuant to the request of defendant No,1, which was maintaining an account with the plaintiff, who claimed to have procured export orders for their products project from abroad and for the compliance of the said orders, approached the plaintiff for routing their export through the plaintiff and thus requested the plaintiff to negotiate export bills at the defendants' risk and costs. It has been averred in the plaint that pursuant to the above, the plaintiff started negotiating the export bills of defendants from time to time and credited the value of respective export bills into the account of defendant No,1, and thereafter the amount was withdrawn by the defendants from their said account. It has been narrated by the plaintiff that out of several export bills negotiated by the plaintiff, repatriation/repayment of 84 export bills is outstanding and despite having made hectic efforts, for the repatriation of the value of the export bills with the foreign banks, the plaintiff failed to receive the amount from abroad and thereafter the plaintiff approached the defendants to procure the repatriation of the export bills involving colossal value in foreign currency, but to no effect. According to the plaintiff, when the defendants failed to get the repayment from abroad, they through the signing and execution of money bond, guarantee (IB.20), acknowledged the outstanding liabilities against the defendants. It has further been stated in the plaint that according to the provision of Foreign Exchange Regulation Act, 1947, and declaration of Form-E, signed by the defendants, they are bound to arrange repatriation of the sale proceeds of export goods, which they failed to pay despite repeated demands. It has further been averred in the plaint that the defendants mortgaged certain properties and the charge was registered with the Registrar of Companies, who issued requisite 'certificate of registration of mortgage. In the above back drop, the plaintiff has contended in the plaint that the defendants failed to adhere to the terms and conditions of the sanction letter and thus became defaulters with the result that a sum of Rs,41,14,53,836 fell due against the defendants in the following manner:--- Value of the export proceeds of billsRs.23,99,90,574,00 Mark-up of 18 months calculated @ 49 paisas per 1000 daily product basisRs,7,81,92,590.00 Mark-up of 210 days Rs, 2,46,95,033.90 20% liquidated damages Rs,6.85.75,636.00 Total outstanding liability Rs,41,14,53.836.00 According to the plaintiff-Bank, the defendants failed to pay the outstanding liabilities, despite various efforts and demands made by plaintiff from time to time thus, the defendants committed default, which necessitated-the filing of the suit in hand, on 29-2-1996, under the provisions of Banking Tribunals Ordinance, 1984 (since repealed).
2. In the response to the show-cause notice, issued by the then Banking Tribunal, Faisalabad, under section 6(2) of the Banking Tribunals Ordinance, 1984 (since repealed), the defendants, on 25-3- 1994, filed reply to the aforesaid show-cause notice, wherein it was contended that as the Banking Tribunal is not a Modaraba Tribunal, therefore, the suit cannot proceed; the Banking Tribunal at Faisalabad has got no territorial jurisdiction to adjudicate the suit; the suit suffers from misjoinder and non-joinder of necessary parties; the defendants Nos.2 to 6 are neither guarantors nor mortgagors, nor real beneficiaries; that no case of recovery of money is made out against the defendants and that defendants Nos.2 to 5 are merely Directors of the defendant No,1 and defendant No,1 was only transacting business with the plaintiff. On merits it was submitted that the export bills tendered by defendant No,1 were purchased by Bank and it was the plaintiffs responsibility to collect the proceeds from the beneficiary. The execution of IB-9, at the time of the sale negotiations of the export bills, was also denied. It was submitted in the reply that nothing is outstanding against the defendants, and it was the responsibility of the bank to realize the proceeds of the export bills, however, the defendants are ready to render possible assistance to the plaintiff for the recovery of unpaid bills of export. In view of the above submissions, it was prayed by the defendants that the suit filed by the bank may be dismissed.
3. During the pendency of the suit, Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, was promulgated and, therefore, the plaintiff filed an application seeking transfer of the case under section 2(b)(i) of the said Act to this Court, as with the enactment of the new Act, the Banking Courts, Faisalabad, established under the provisions of the said Act lacked pecuniary jurisdiction to try the suit. The Act XV of 1997, repealed Banking Tribunal Ordinance, 1984 and according to section 7(6) of Act XV of 1997, all proceeding pending before any Banking Tribunals under the Banking Tribunals Ordinance, 1984, stood transferred or deemed to be transferred to the Banking Court, therefore, per force of the aforesaid provision of law, the Banking Court No,1, Faisalabad, transferred the instant suit to this Court. On 30-8-2001 Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001 was promulgated and per force of section 29 of Ordinance, 2001 repealed Act XV of 1997. However, according to section 7(6) of the latest Ordinance, 2001, all the proceedings pending in any Banking Court, including suit for recovery, shall stand transferred or deemed to be transferred and heard by the Banking Court established under the latest Ordinance of 2001. The present suit, which was pending before the Banking Court, constituted under Act XV of 1997, after promulgation of latest Ordinance and per force of section 7(6) of the latest Ordinance was transferred and deemed to be pending for disposal before this Court, established under section 5 of Ordinance XLVI of 2001. In the above perspective, the reply filed by the defendants to the show-cause notice, issued by the then Banking Tribunal Faisalabad under the law was treated as an application for leave to defend the suit, after the promulgation of Ordinance XV of 1997, which was numbered as PLA No,91-B/01. An Application for the grant of leave to defend the suit filed by the defendants was pending before this Court before the coming into force of Ordinance XLVI of 2001, promulgated on August 30, 2001, therefore, when this case came up for hearing for the first time, on 14-9-2001, this Court, per force of section 10(12) of the latest Ordinance of 2001, allowed the defendants, a period of 21 days for filing the amended petition for leave to defend the suit in accordance with the provisions of the latest Ordinance, of 2001.
However, the said defendants chose not to file the amended application for leave to defend in accordance with the provisions of this Ordinance and on 10-10-2001, the learned counsel stated before this Court that he would be relying upon the reply to the show-cause notice submitted before the then Banking Tribunal. Now the admitted position is that the defendants did not file any amended application under the latest Ordinance of 2001, and their previous application (PLA No,91- B/01) is pending.
4. The learned counsel for the defendants while reiterating the stance taken in the leave application, has contended that since the case relates to Modaraba therefore, exclusive jurisdiction to adjudicate upon the suit is only by "Modaraba Tribunal" constituted under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance ()XXI of 1980) and this Court has no jurisdiction to adjudicate upon the matter. He has further contended that defendants Nos.2 to 5 have been sued only on the basis of their Directorship of defendant No,1 and that they did not execute any documents in favour of the plaintiff, therefore, at least to that extent they are entitled for an- unconditional leave to defend the suit. He has further submitted that no case for the recovery of the suit amount has at all been made out as nothing is outstanding against the defendants. He has further contended that the collection of export bills was the responsibility of the plaintiff and after the submission of export bills, to the plaintiff, the defendants had nothing to do with the transaction and thereafter it remains the sole responsibility of the plaintiff. Conversely the learned counsel of the plaintiff has raised a preliminary objection that as the defendants failed to adhere to the mandatory provisions of section 10(12) of Ordinance XLVI of 2001, thereby failing to submit an amended application for leave to defend, therefore, the present application, which was treated as an application for the grant of leave to defend under the provisions of Act, XV of 1997, is liable to be rejected summarily. However, on merits, he has submitted that the instant case does not fall within the jurisdiction of "Modaraba Tribunal", therefore, the only Court which has the jurisdiction to try the suit is this Court and not the "Modaraba Tribunal". He with reference to para.3 of the plaint, has urged that in this case the defendants Nos.2 to 5 were not only sued as Directors but they have also been sued as they are real beneficiaries and responsible and liable for the affairs and liabilities of the defendant No,1. He has further submitted that the defendants have acknowledged their liabilities through the different letters addressed to the plaintiff, which have been placed on record.
5. In the above back-drop, the pivotal question which has arisen for determination is as to whether the application for leave to defend the suit, which was treated as such under the provisions of Act XV of 1997, is liable to be considered or in view of the non-filing of amended application for leave to defend, as provided under section 10(12) of the Ordinance XLVI of 2001, despite allowing a period of 21 days to the defendants. The previously instituted application its liable to be summarily rejected.
The perusal of section 10(12) of Ordinance XLVI of 2001 manifests that where an application for the leave to defend has been filed before the coming into force of this Ordinance of 2001 the defendants would be allowed a period of 21 days for filing an amended application for leave to defend in accordance with the provisions of this Ordinance. It would be advantageous to reproduce the said provision of law which is as follows:--- 10(12). "Where an application for leave to defend has been filed before the coming into force of this Ordinance, the defendant shall be allowed a period of twenty-one days from the date of coming into force of this Ordinance, from the date of first hearing thereafter, whichever is later for filing an amended application for leave to defend in accordance with the provisions of this Ordinance."
(Underlining is mine).
6. I am of the considered view that in the aforenoted provision of law the words "an amended application for leave to defend" and "in accordance with the provisions of this Ordinance" are of great significance. It flows from the above that when an application for leave to defend is already pending at the time of the enforcement of the latest Ordinance of 2001, then the defendants shall be allowed a period of 21 days and are required through the filing of amended application thereby sufficiently complying with the provisions of subsections (3), (4) and (5) of section 10 of Ordinance, 2001. These provisions of law provide that application for leave to defend shall be in the form of a written statement, containing a summary of substantial question of law and facts and also specifying certain particulars to be furnished by the defendants regarding the finances, i,e, finance availed, the amount paid by the defendants and that such an application must be accompanied by all the documents in support of the substantial question of law and facts raised by the defendants. In this case, admittedly, the defendants failed to file amended application under section 10(12) of the Ordinance, 2001, and, therefore, there is no compliance of the provisions of the aforenoted provisions of law, thus the defendants failed to file an amended application in accordance with the provisions of this Ordinance.
7. Now the next question arises as to whether the provisions of section 10(12) of Ordinance, 2001. Are mandatory or directory. The basic principle for the interpretation of the statute is that when a provision of law is couched with the penal consequences, then that provision of law would be considered as a mandatory provision of law where no penal consequence entail to the non- compliance of a provision of law, in that case the said provision of law would be taken as directory.
Now we will have to see whether any penal consequences have been provided for the non- compliance of the provisions of section 10(12) of the Ordinance of 2001. For this one has to go to subsection (6) of section 10 of the new Ordinance, 2001, which is reproduced below:-- 10(6). "An application for leave to defend which does not comply with the requirements of subsections (3), (4) where applicable and (5) shall be rejected, unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement."
8. From the bare reading of above provision of law there is no doubt that it has been provided that an application for the grant of leave, which does not comply with the requirements of subsections (3), (4) and (5) of section 10 of Ordinance, 2001, shall be rejected, unless the defendant discloses any sufficient cause for his inability to comply with any such requirement. In this case, admittedly, the defendants have not filed an amended application for leave to defend, did not comply with the requirement of subsections (3), (4) and (5) of section 10 and also failed to disclose any cause, what to talk of sufficient cause, for their inability to comply with any such requirement. After the reading of provision of subsection (6) of section 10, I am of the considered view that the provisions of section 10(12) of Ordinance, 2001, are mandatory in nature as the non-compliance of the said provision of law entail the penal consequences, as provided under section 10(6) of the Ordinance, 2001. In this case, despite the grant of period of 21 days, which is statutorily fixed, the defendants failed to file an amended application D in accordance with the provisions of this Ordinance and did not comply with the provisions of section 10(3)(4) and (5) of Ordinance, 2001, therefore, as per the provisions of section 10(6) the application for leave to defend the suit is hereby rejected, therefore, per force of section 10(11) of Ordinance XLVI of 2001, this Court is obliged to pass judgment and decree in favour of the plaintiff and against the defendants.
9. Notwithstanding the fact that the application for leave to defend the suit is hereby rejected and the defendant has no defence to raise and after the dismissal of the said application this Court is not obliged to consider the contents of leave application, yet in the present case I am proceeding to decide the contentions raised by the learned counsel for the defendants. As regards the first contention regarding the jurisdiction of this Court, section 25 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (hereinafter called Ordinance, 1980) provides that Modaraba Tribunal have jurisdiction in respect of a claim filed by a holder of Modaraba certificates against the Modaraba Company or by the Modaraba Company against any other party with whom it has entered into business transaction relating to Modaraba Fund. In order to determine the question of jurisdiction of the Modaraba Tribunal, one has to see the nature of transaction undertaken by the parties to the present suit. The case of the plaintiff is that the Bank started negotiating the export bills of defendants from time to time, credited the value of respective export bills into the account of defendant No,1 maintained with the plaintiff and the amounts were then withdrawn by the defendants from the said account, as reflected in the statement of accounts. Now the question has arisen, whether this nature of transaction of business falls within the definition of "Modaraba" and "Modaraba Certificate", "Modaraba Company" of "Modaraba Business". These terminologies have been defined in section 2(A), (B) (b) and (c)) of Ordinance, 1980. From the bare perusal of the definitions of the above, it is evident that the transaction undertaken by the parties was not a "Modaraba Business", neither "Modaraba Certificates" were issued nor the plaintiff is "Modaraba Company". The jurisdiction of Banking Tribunal would, undoubtedly, extend in the cases, when a claim is to be filed by the "holder of Modaraba Certificate" against the "Modaraba Company' or by a "Modaraba Company" against any "other party with whom it has entered into business". Admittedly the plaintiff is neither a holder of Modaraba Certificate, nor a Modaraba Company, therefore, I am of the view that the present case does not fall within the jurisdiction of Modaraba Tribunal. Another aspect of the case is that in their leave application, the defendants, without elaborating how the case does fall within the jurisdiction of the Modaraba Tribunal, has feebly stated in para.2 of preliminary submissions that "the suit cannot proceed before this Tribunal as it is not Modaraba Tribunal as envisaged by law". The defendants-Company failed to specifically plead in their leave application about lack of jurisdiction of the Banking Tribunal. The defendants have taken this objection very vaguely and on this ground too their so-called objection, regarding the jurisdiction of the Banking Tribunal, is devoid of any force, more so, when their application had already been rejected. The case of the plaintiff amply falls within the definition of "finance" as given in section 2(E) and "customer" as given in section 2(c) of the Banking Tribunals Ordinance, 1984. In view of this, the first contention of the learned counsel of the defendants is without any legal foundation thus the same is repelled.
10. So far as the next contention of the learned counsel to the effect that defendants Nos.2 to 5, having no nexus with the transaction, have been impleaded only as Directors of defendant No,1, upon the examination of the record, I find that the defendants filed an application under Order I, rule 10, C.P.C., on behalf of the defendants, before the defunct Banking Tribunal asserting therein that defendants Nos.2 to 5 have been impleaded as defendants in the suit, as Directors of the Company and so-called beneficiary and as they are neither the guarantors nor the mortgagors and their names have wrongly been added in the list of the defendants, therefore, with the filing of this application, they prayed that their names may be deleted from the array of the defendants.
After the receipt of the reply from the plaintiff, the defendants Banking Tribunal, vide order, dated 12-5-1996, while rejecting the aforenoted application, came to the conclusion that value of the export bills were credited into the account and later on utilized and withdrawn by these Directors.
For the clarity, a portion of order, dated 12-5-1996 is reproduced below:-- "The account in the name of defendant No,1 was opened through an express resolution and the value of export bills etc. Were credited into the said account and later on utilized and withdrawn by these Directors. The plaintiff-Bank, therefore, rightly impleaded Directors of the company as defendants in the suit."
Admittedly, the said order, dated 12-5-1996 was not called in question by the defendants through the ailment of any of the remedies before the higher forum, thus there cannot be two opinions that the same has attained finality and the parties are bound by the terms of the said order. In view of the said order, the defendants are precluded from raising any plea at this stage, when the same stood finally concluded by the Court of competent jurisdiction at the relevant time, which order binds both the parties. Apart from this, defendants Nos.2 to 3 have also executed a personal guarantee, dated 21-6-1994, therefore, the contention of the learned counsel that the defendants have no nexus with the suit, in which they have been impleaded as Directors, or they have executed no documents, on the face of the record, has no force.
11. During the examination of the record, I have found that apart from executing different documents, the defendants, through different letters, have admitted their liability unequivocally. In this regard letters, dated 2-6-1994, 4-8-1994, and 31-8-1994 can be referred. Apart from this, defendant No 1 executed a money bond for money borrowers, thereby acknowledging the availment of financial facility for a sum of Rs,25,31,68,794 from the plaintiff and also gave a mode of repayment of the said "finance" to the plaintiff, which defendant is also witnessed. This document may not be treated as some negotiable instrument as defined in Negotiable Instruments Act, yet the same can, at least, be considered as an acknowledgement of liability by the defendants.
12. In view of the above discussion and reasons, the defendants have comprehensively failed to raise substantial question of law and facts to be tried by this Court in respect of which evidence needs to be recorded apart from the fact that the application stands rejected as the defendants failed to file an amended application for leave to defend, as discussed above, the present application for leave to defend (PLA No,91-B/01) is hereby dismissed.
13. As a consequence of the dismissal of the application for grant of leave to defend the suit the allegations made in the plaint shall be deemed to be admitted. The plaintiff-Bank has produced photocopies of all the documents, on the basis of which it has filed the present suit, execution, whereof has not specifically been denied by the defendants in their application for grant of leave meaning thereby that execution of all the documents is deemed to be admitted by the defendants.. Moreover the statement of accounts which are duly verified/certified under the Bankers' Books Evidence Act (XVIII of 1891), also on record to which presumption of correctness is attached. There is no rebuttal of the aforementioned documents on record.
14. I find from the perusal of para.10 of the plaint that a sum of Rs,6,85,75,639 has been added in the suit amount as 20% liquidated damages. The plaintiffs are not entitled to recover amount of liquidated damages as per the principle laid down in a judgment reported as Allied Bank of Pakistan Ltd. v. Messrs Aisha Garments and others (2001 M LD 1955), wherein it has been held that the plaintiff is not entitled to recover the amount of liquidated damages, thus the said amount of Rs,6,85,75,639 had to be deducted from the suit amount, which comes to Rs,34,28,78,197.
15. In view of the above discussion and findings, a decree for recovery of Rs,34,28,78,197 with costs is passed in favour of the plaintiff and against all the defendants jointly and severally. The plaintiff- Bank shall also be entitled for the costs of funds to be as determined under section 3(2) of Ordinance XLVI of 2001.