1. ' SHABBIR AHMED, J.--The question in this appeal is whether the respondent Diner Club of Pakistan (Pvt.) Ltd. Is a Financial Institution as defined in the Financial Institutions (Recovery of Finance)
2. Ordinance, 2001, (for short-the Ordinance) to give jurisdiction to the Banking Court in case of default in obligation by the appellants. Mr. Arshad Tayabally was also appointed Amicus Curiae to assist the Court.
3. ' The above question emanates in the following circumstances:-- ' The respondent filed suit for recovery under section 9 of the Ordinance against the appellants. The respondent's case is that it is a subsidiary of Muslim Commercial Bank, Karachi after transfer of its shares, rights, management and control of administration, continuing its business in the name and style Messrs Diners Club Pakistan (Pvt.) Ltd., Karachi, a Company incorporated under the Companies Ordinance, 1984. The respondent at the request of the appellants sanctioned/granted Diners Club Card on the terms and conditions embodied in the application and accepted by the appellants. The appellants fully utilized the Charge Card facility extended to them but deliberately and dishonestly neglected/avoid /failed to pay the admitted outstanding amounts in the sum of Rs,1,73,618,88. The suit was filed by one Norbert L. Fermandes, Officer/Attorney of the plaintiff.
4. ' On service of summons, the appellants filed separate applications for leave to defend the suit. The appellant No,1 raised the pleas that the suit filed on 28-8-2000 is beyond the statutory period of limitation as on or about June, 1997, the plaintiff had cancelled the Card and demanded all the outstanding amount from the defendant, therefore, the suit is barred by time. Secondly, plaintiff is not a Financial Institution nor the defendant is a Customer, therefore, the suit is not maintainable.
5. ' Whereas, appellant No,2 pleas were that his name was entered only as Supplementary Card holder no payments were/are due against such Supplementary Card except for a sum of Rs,282,50 on 26-12-1996 as is obvious from the statement of the account filed with the plaint. He never applied for, nor was issued any Credit Card except the Supplementary Card. There was no privity of contract between the parties as Customer as defined in the Ordinance.
6. ' The leave to defend application was dismissed on 25-7-2002, the suit of the respondent was decreed against the appellants for a sum of Rs,79,808.19 with costs future mark-up at agreed rate and costs of funds as notified and certified by the State Bank of Pakistan. The suit was also converted into execution proceedings in terms of section 19 and the decree holder was directed to submit the particulars of the mortgaged, pledged or hypothecated property and other assets of the judgment-debtors within 30 days from the date of order. Hence the present appeal by appellant.
7. ' We have heard the learned counsel for the parties and learned Amic u s Curiae.
8. ' In the instant case, the appellant No,1 is Credit Card Holder whereas the appellant No,2 is Supplementary Card Holder. The appellant No,1 in such situation would be guarantor for the liability against Supplementary Card. The appellant No,2 would be responsible for the liability of Supplementary Card only. Respondent No,2 be the Supplementary Card user, cannot be responsible for the liability of Card holder i.e. The appellant No,
1. In such circumstances, suit for recovery against Card holder and Supplementary Card holder for the suit amount jointly and severally is not warranted unless the liability is equal and joint.
9. ' The learned counsel for the appellants raised two fold contentions; firstly, the Banking Court has no jurisdiction in the matter, secondly, the suit was barred by time. It was further contended by him that learned Judge erred in granting the decree in favour of the respondent through impugned judgment.
10. ' At the very outset, the learned counsel for the respondent maintained that the respondent is a subsidiary of the Muslim Commercial Bank, as such, plaintiff can bring the suit being subsidiary of the holding bank.
11. ' The 'subsidiary' and 'holding company' have been defined in section 3 of the Companies Ordinance, 1984; that a company or body corporate shall be deemed to be a subsidiary of another if--(a) that other company or body corporate directly or indirectly controls, beneficially owns or holds more than fifty percent of its voting securities or otherwise has power to elect and appoint more than fifty percent of its directors and (b) the first mentioned company or body corporate is a subsidiary of any company or body corporate which is that other's subsidiary with a proviso which is not relevant here.
12. ' It may be stated that by virtue of being subsidiary of a Bank, the respondent cannot assume the business of the holding company of Banking business, its business would remain confined to the business for which it was formed and detailed in its Memorandum of the Association, therefore, it is wrong to contend that the Messrs Diners Club Pakistan' (Pvt.) Ltd. Being subsidiary of the Muslim Commercial Bank, a Banking Company, therefore, it will be a Financial Institution, unless it is covered by the definition of `financial institution' contained in clause (a) of section 2 of the Ordinance.
13. ' In order to invoke the jurisdiction of Banking Court, the parties must be 'Financial Institution' and Customer and the cause i.e. Default in fulfilment of any obligation, with regard to any finance.
14. ' Learned Amicus Curiae has pointed out that the plaintiff company is under liquidation by Creditors voluntary winding up to substantiate his contention, he pointed out Form 26 dated 22-12- 1999, whereby the following resolution was passed:-- `RESOLVED that it has been proved to the satisfaction of the Creditors that the Company cannot by reason of its liabilities continue its business and that it is advisable to wind up the Company voluntarily and Mr. Muhammad Aleemuddin son of Shaikh Dawood of C-70, Block 8, Gulshan-e- Iqbal, Karachi be and is hereby appointed as Liquidator for the purpose of Creditor's voluntary winding up with powers to exercise all necessary acts in this connection and incur expenses properly as may be required for liquidation proceedings and that the remuneration of the liquidator be and is hereby fixed at a sum of token Re.1 in addition to his costs, charges and expenses.'
15. ' He also pointed out Public notice with regard to Creditors voluntary winding up was published in the Gazette of Pakistan, December 25, 1999 and notice from Liquidator therein as well. On these premises, it was maintained by him that the plaintiff company is under liquidation and suit could have been filed by the Liquidator not by the ex-management of company.
16. ' Learned counsel for the respondent vehemently contended that there is no winding up order from the Court and suit can be filed by the company.
17. ' The contention that there cannot be winding up of a company without an order from the company Judge, is devoid of any substance. It may be pointed out that 'winding-up' provisions are contained in Part XI of the Ordinance. Section 297 thereof provides three modes of winding up that are:--
(1) by the Court; or
(2) voluntarily; or
(3) subject to the supervision of the Court.
18. ' It may also be stated that provisions for winding up by the Court are contained in sections 305 to 357, whereas provisions for voluntary winding up are contained in sections 258 to 395. Section 362 pertains to declaration of insolvency in case of voluntary winding up. Sections 363 to 371 contain the provisions applicable to the member's voluntary winding up, whereas sections 372 to 382 containing the provisions applicable to the Creditor's voluntary winding up.
19. ' On appointment of liquidator, all the powers of the Directors, Chief Executive and other officers stand ceased except for the purpose of giving notice of resolution of winding up and appointment of liquidator and filing of consent of the liquidator as required under the Ordinance in terms of sections 364 and 375 of the Ordinance.
20. ' Learned Amicus Curiae has pointed out the definition of `Financial Institution' as contained in section 2(a) of the Ordinance, is analogous to the definition of Banking Company' defined in section 2(a) of the late Act, 1997:-- `2(a) 'financial institution' means and includes:---
(i) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a Government savings bank, but excludes the State Bank of Pakistan;
(ii) a Modaraba or Modaraba management company, leasing company, investment bank, venture capital company, financing company, unit trust or mutual fund of any kind and credit or investment institution, corporation or company; and
(iii) any company authorized by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify.'
21. ' He pointed out that the perusal of definition of financial institution' as contained in the Ordinance and the Banking Companies' as defined in the Act of 1997 would reveal that the companies dealing in the Credit Card or Charged are included in the definition of 'financial institution'. The respondent/plaintiff could file the suit provided the default is with regard to finance. His further contention was that on account of its winding up, the suit cannot be filed by the management.
22. ' Face with this situation, Mr. Zubair Qureshi, learned counsel for the respondent obtained time to ascertain the factual aspect and came with an agreement between the respondent/plaintiff through its liquidator and the Muslim Commercial Bank, whereby Muslim Commercial Bank acquired the rights with regard to the 'charged book-debts' through agreement dated 30-6-2000.
23. The agreement itself is destructive of the respondent claim. The recital thereof are as follows:- ' Whereas Muslim Commercial Bank owns 95% of the issued share capital of DCP and is the principal creditor of DCP.
24. ' And whereas DCP has secured its liabilities and obligations towards Muslim Commercial Bank inter alia by a charge by way of hypothecation of book-debts and receivables to the extent of Rs,400 million pursuant to letter of hypothecation of book-debts dated 22-9-1995 as supplemented by letters of hypothecation of book-debts dated 19-3-1996 and 18-8-1996 (hereinafter jointly referred to as the 'Changed Book-debts')
25. ' And whereas the creditors of DCP have passed a resolution for voluntary winding up of DCP and DCP in the process of final winding up.
26. ' And whereas prior to the winding up of DCP and as partial settlement of obligations of DCP towards Muslim Commercial Bank as a secured creditors, DCP has agreed to execute this Agreement.
27. ' The relevant clauses are as follows:-- 12) DCP confirms that it has no right; title or interest in the Charged Book-debts or any part thereof and Muslim Commercial Bank by virtue of holding the charge over, the Charged Book-debts is exclusively and absolutely legally and beneficially entitled to all the Charge book-debts to the exclusion of any claim from DCP or any other unsecured creditors of DCP.
(3) Muslim Commercial Bank shall have the absolute and exclusive right to recover the Charged Book-debts in its own name and its own right and in such purposes, the charge receivable stand fully released, transferred, assigned and relinquished in favour of Muslim Commercial Bank.
(4) Muslim Commercial Bank shall have the authority and right to have itself substituted as the owner of the Charged Book-debts in place of DCP and any legal proceedings or suits filed in the name of DCP or filed against DCP and to institute new proceedings directly in the name of Muslim Commercial Bank.'
28. ' By the aforesaid agreement, the Diners Club has transferred/assigned all rights, title and interest with regard to the Charged Book-debts to Muslim Commercial Bank on 30-6-2000. Subsequently, the suit was filed in the year 2002 by the Diners Club of Pakistan, when the Club had no right, title and interest with regard to the debts which was already assigned to Muslim Commercial Bank, thus respondent had no cause of action to bring the suit for recovery. A party having no cause of action, cannot bring the suit in respect of the assigned/transferred debt.
29. ' Respondent's counsel faced with the situation, was not able to maintain that the respondent had the cause of action to file the suit against the appellants.
30. ' Resultantly, the appeal is allowed with costs and the judgment and decree are set aside, the suit of the respondents is dismissed, without prejudice to the right and interest of Muslim Commercial Bank.