' On 16-12-1999, Allied Bank of Pakistan, incorporated in Pakistan under Companies Act, 1913, (hereinafter referred to as plaintiff), claiming to be a "Banking Company" as defined in Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (hereinafter referred to as Act XV of 1997), through Messrs Iftikhar-ul-Haque, Manager and Khalid Ishaq, Manager Advances, statedly, Principal Officers, holding general power-of-attorneys authorizing them to institute the suit, sign and verify the plaint and, reportedly, conversant with the facts of the case, have filed the present suit for the recovery of Rs.60,321,629 as on 10-12-1999, together with liquidated damages and future mark-up, against defendant No,1, a company limited by shares (hereinafter referred to as defendant company) as customer/principal debtor, whereas defendants Nos.2 to 4, Directors of the company, have been arrayed as defendants in the capacity of the guarantors, while defendant No,5, PICIC, has been impleaded as first charge holder of the properties/assets of the company, as a pro forma defendant and no relief has been claimed against the said defendant.
2. It has been stated in the plaint that the defendant company was maintaining a current account with the plaintiff since 29-4-1992; that pursuant to the resolution, dated 27-7-1992, passed by the Board of Directors of the defendant company, it approached the plaintiff for obtaining certain financial facilities and consequent thereto the plaintiff, vide sanction letter dated 24-11-1992, extended the following financial facilities to the defendant company:--
(i) Cash Finance. Rs.12 Million.
(ii) Running Finance. Rs.7 Million.
(iii) Finance against Packing Credit.20 Million
(vi) Letter of Credit (for import of raw material).Rs.5 Million
(v) Letter of Guarantee (Fvg.
Collector of Customs).Rs.2.5 Million ' It has been averred in the plaint that in acknowledgement and to secure the afore-mentioned financial facilities, the defendants executed voluminous documents and furnished separate securities in different facilities, mentioned above, and, furthermore, defendants Nos.2 to 4 executed personal guarantees favouring the plaintiff, detail of all such documents has elaborately been given in para 7(c) of the plaint. It has further been narrated in the plaint that the defendant- Company created a second charge of all its immovable properties and assets in favour of the plaintiff-Bank by way of execution of a Memorandum of Deposit of title deeds. PICIC, on 5-8-1993 and 30-12-1993, issued no objection certificates in favour of the plaintiff for creating a second charge on the fixed assets of the company to the tune of Rs.9.500 Million and Rs.25 Million.
According to the plaint, the charge created by the defendant-Company in favour of the plaintiff, was got registered with the Office of the Registrar, Joint Stock Companies, who in token of the acceptance of the said creation, issued requisite certificate. All the financial facilities were availed by the defendant-Company, which facilities, according to the plaintiff, were renewed/extended till June, 1994, whereafter the said facilities were again renewed/enhanced vide sanction advice dated (sic) thereafter at the request of the defendant-Company, the plaintiff extended another fresh financial facility by way of finance against foreign export bills (FAFEB) upto Rs.15 Million, however, the said facility was adjusted and there is no dispute/claim between the parties regarding the said financial facility. It has further been averred in the plaint that pursuant to the execution of supplementary letter of hypothecation dated 12-4-1994, upto a maximum of Rs.80 Million, and supplementary Memorandum of deposit of title deed dated 12-4-1994, by the defendant company, Form XVI for modification of charge was filed in the office of the Registrar, Joint Stock Companies, pertaining to the enhancement of limit from Rs. 50,661,000 to Rs. 80 Million in favour of the plaintiff-Bank, for which PICIC issued N.O.C., dated 27-11-1994, in favour of the plaintiff. According to the plaintiff, the above mentioned financial facilities were renewed/extended by the plaintiff, on 2-1-1996, but the defendant-Company failed to adjust the afore-mentioned financial facilities till 30-1-1997. It has been stated in the plaint that consequent to the letters dated 30-8-1997 and 26-11-1997, issued by the defendant company, the plaintiff, on 28-12-1997, Subsequently after detailed negotiations, the plaintiff, on 31-12-1998, revised the rescheduling/ restructuring of the above mentioned outstanding liabilities on the following terms and conditions:- -
(i) No repayment was to be demanded in the year 1998 which was to be considered as grace period.
(ii) The Finance Against Imported Merchandise (F.I.M.) liability of Rs.5.245 (M), was separated from the Demand Finance Facility, which would be adjusted upon release of the whole consignment from the Customs Authorities after the decision of the Court.
(iii) The total repayment period for the Demand Finance Facility was extended upto 31-12-2005 with reduced mark-up @ 16% per annum.
(iv) The defendant-Company shall pay the Demand Finance Facility on monthly basis as per agreed schedule.
(v) Rs.14.692 (M) being the already frozen amount of markup and the mark-up for the year 1998 i.e. Rs.6.319 (M) aggregating Rs.21.91 (M) be recovered in 84 equal monthly instalments of Rs.0.250 (M) each, during the period 1-1-1999 to 31-12-2005.
(vi) The FAFEB facility was renewed/enhanced upto Rs.50 (M) subject to the supply of Clearance Certificates from the respective Banks/ D.F.Is.
' In the said backdrop, the plaintiff has contended in the plaint that the defendants have become defaulters, with the result that a sum of Rs.60,321,629 fell due against the defendants as on 10-12- 1999. According to the plaintiff the defendants failed to pay the aforesaid outstanding liabilities together with mark-up, liquidated damages and other charges, despite various efforts and demands made by the plaintiff through service of notices and legal notices, thus, the defendants committed a default which necessitated the filing of the present suit for recovery with the prayer that a decree for recovery of the said sum be passed against the defendants alongwith mark-up, liquidated damages, service charges and other expenses.
3. Pursuant to the issuance of summons by this Court, through all the modes of service prescribed under the relevant law, defendants Nos.1 to 3 filed P.L.A. No, 16-B of 2000, and defendant No,5 filed P.L.A. No, 18-B of 2000, seeking leave to defend the suit, while defendant No,4 did not enter appearance and chose not to file any such application and thus, he was proceeded ex parte vide order dated 4-2-2C00. The plaintiff-Bank filed replies to the said applications. It was contended by defendants Nos.1 to 3 in their application that the suit of the plaintiff is without any cause of action; that the facility is neither a finance, as the renewal is neither finance nor loan; that this Court lacks accounts would show that no amount was disbursed; that the authenticity, admissibility and enforceability of the section of accounts was challenged; that the agreement of fmancing would show that the facility was an interest/mark-up facility; that mark-up has also been declared un- Islamic by the Shariat Bench; that the suit is barred by time and that the plaint is not in accordance with the provisions of Ordinance XLVI of 2001. It was, thus, prayed that the suit of the plaintiff be dismissed or in the alternative/unconditional leave to defend may be granted.
4. During the pendency of the aforesaid P.L.As., Financial Institutions (Recovery of Advances)
Ordinance, XLVI of 2001 (hereinafter referred to as Ordinance, 2001) was promulgated on 30-8-2001, 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 (sic) of latest Ordinance, 2001, and per force of section 7(6) of the said 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, as applications for the grant of leave to defend the suit, filed by the defendants, were pending before this Court before the coming into force of Ordinance, 2001, promulgated on August 30, 2001, therefore, when this case came up for hearing before this Court, for the first time, on 2-9-2001, this Court per force of section 10(12) of Ordinance, 2001, allowed the defendants a period of 21 days for filing the amended petitions for leave to defend the suit, in accordance with the provisions of Ordinance, 2001. It appears from the record that pursuant to the said order defendants Nos. 1 to 3, purportedly filed an amended application for leave to defend the suit, While the pro forma defendant P.I.C.I.C., chose not to file such an application. Now the admitted position is that an application for the grant of leave to defend (P.L.A.
No,16-B of 2002), purportedly, filed by defendants Nos.1 to 3, styled as an amended application under the provisions of defendant No,5 did not file any amended application for leave to defend the suit. The plaintiff filed reply to the amended application seeking leave to defend the suit filed by defendants Nos.1 to 3. I propose to decide these two applications as follows:- ' P.L.A. No,16-B of 2000.
5. Upon the examination of an amended application seeking leave to defend the suit, filed by defendants Nos.1 to 3, on 6-10-2001, purportedly, under the provisions of section 10(12) of Ordinance No,XLVI of 2001, it is evident that the said application has neither been signed by any of the defendants nor the same has been verified in accordance with law. Similarly the said application is not supported by any affidavit. The said application has only been signed by the learned counsel for the said defendants. In the above backdrop, the pivotal question, which has arisen is as to whether such an application for leave to defend the suit, despite legal infirmities, can be considered as an amended leave . Application as provided under section 10(12) of Ordinance XLVI of 2001, or in view of filing such an application, despite allowing a period of 21 days to the said defendants the previously instituted application can be considered or deserves to be summarily rejected. In order to determine that whether such an application can be taken as an application under the aforesaid provisions of law, one has to examine the afore-noted provisions of law.
Perusal of section 10(12) of Ordinance XLVI of 2001, manifests that where an application for leave to defend has been filed before the coming into force of latest 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, 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 defendant shall be allowed a period of 21 days and is 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 questions of law and facts and also specifying certain particulars to be furnished by the defendants regarding the finances, i.e. Finance availed, the application must be accompanied by all the documents in support of the substantial questions 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 afore-noted provisions of law, thus, the defendants failed to file as amended application in section 10(3) of Ordinance No,XLVI of 2001, provides that the application for leave to defend shall be in the form of written statement and shall contain substantial questions of law and facts, in respect of which evidence needs to be recorded, meaning thereby the same shall be signed and verified in accordance with the provisions contained in C.P.C. For signing and verification of the writteh statement. In the above perspective, I am of the considered view that although allegedly an amended application has been filed, yet due to the facts that it is neither signed nor verified by any of the defendants nor the same is supported by affidavits of the defendants and due to non-compliance of the provisions of sections 10(3), (4) and (5), it cannot be considered as an application within the parameters set up under section 10(12) of Ordinance No,XLVI of 2001.
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 and 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, 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, undoubtedly it has been (sic) 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 as held in the preceding paras.
The defendants have not filed an amended application for leave to defend, did not comply with the requirements 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 reading the 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 provisions 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 in accordance with the provisions of this Ordinance and did not comply with the provisions of sections 10(3), (4) and (5) of section 10(6) the application for leave to defend the suit is liable to be rejected and 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. In view of the above discussions and reasons the defendants failed to raise substantial questions of law and facts to be tried by this Court in respect of which, evidence need to be recorded, as they failed to file an amended application seeking leave to defend the suit under the provisions of Ordinance, 2001, therefore, P.L.A. No,16-B of 2000, stands rejected.
P.L.A. No,18-B of 2000.
10. Nobody has entered appearance on behalf of PICIC to pursue their application. Furthermore, no amended application as prescribed under the provisions of section 10(12) of Financial Institutions (Recovery of Finances) Ordinance, 2001, has been filed, thus, on account of the reasons given above, the present application, filed by PICIC, stands rejected in exercise of powers provided under section 10(6) and proceeded ex parte vide order dated 4-2-2000, he did not file any application seeking leave to defend the suit from the very inception and even uptil now has not instituted any application, amended or otherwise, either seeking leave to defend the suit or for setting aside ex parte order dated 4-2-2000.
11. Although the amount of liquidated damages has not been included in the statement of account, yet upon the examination of the plaint, especially prayer clause of it, it is evident that the plaintiff has claimed 20% as liquidated damages. Suffice it to say, that in such-like cases the plaintiff is not entitled to claim liquidated damages as per the law laid down in Allied Bank of Pakistan Ltd., Faisalabad 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 claim of the plaintiff qua the liquidated damages is hereby rejected.
12. As a consequence of the dismissal of the applications for the grant of leave to defend the suit, the allegations made in the plaint shall be deemed to be admitted. The plaintiff Bank has produced photo-copies in the present suit, execution whereof has not specifically been denied by the defendants in their applications for the grant of leave to defend the suit, meaning thereby that execution of all the documents is deemed to be admitted by the defendants. Moreover, the statements of accounts, which are duly verified/certified under the Bankers Book of Evidence Act (XVIII of 1891), are also on record to which presumption of correctness is attached. There is no rebuttal of the aforementioned documents on record.
13. In view of the above discussion and findings, a decree for recovery of Rs.60,321,629 with costs is passed in favour of the plaintiff and against defendants Nos.1 to 4 jointly and severally. The plaintiff-Bank shall also be entitled for the costs of funds to be determined under section 3(2) of Ordinance XLVI of 2001.