1. ' The questions involved in the matter is whether the suit is maintainable/ within the jurisdiction of Banking Court under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance in short). The above question has arisen under the following circumstances.
2. ' Plaintiff a Banking Company filed Suit No,93 of 2000 in banking jurisdiction of this Court against (i)
3. Bilal Spinning Mills Limited, (ii) Sarfraz A. Malik and (iii) the defendant. The defendants therein filed a joint application under section 10 of the Ordinance for leave to defend the suit. In para. 12 of supporting affidavit, the following plea was raised:-- "12. That clause 7 (iii) of the FSA required the submission of fresh personal guarantees of defendants Nos,2 and 3. However, since the restructured liabilities were otherwise adequately secured, the defendant No,2 did not execute any personal guarantee in vour of the plaintiff-Bank as there was no need for it. The defendant No,2 cannot, therefore, be deemed to be a guarantor under the law for the repayment of any outstanding amount under the FSA and his name is liable to be struck off from the array of the defendants."
4. ' During the hearing, the application for leave to defend the suit, it was contended by the defendant that the Court, exercising banking jurisdiction, had no jurisdiction to grant mandatory injunction for execution of a fresh personal guarantee. Accordingly be consent the suit against the defendant was withdrawn with permission to file a fresh suit. After the withdrawal of the earlier suit, the- present suit has been filed with assertions that a Finance Set/dement Agreement (FSA) was arrived between the plaintiff and Bilal Spinning Mills Limited on 7-10-1998. Under clause 7 of the FSA, it was agreed the personal guarantees of Mr. Iftikhar A. Malik and Mr.Sarfraz A. Malik will be submitted alongwith statement of personal Networth Statement. The Bilal Spinning Mills Limited sent a letter on 19-10-1998 enclosing therewith an undertaking by the defendant that on his return to Pakistan he will execute a personal guarantee as per text faxed to him. Since it was necessary to unfreeze the limits of the company, the plaintiff agreed and accepted the promise of the defendant to execute the Guarantee on his return to Pakistan. Under the circumstances, the plaintiff is entitled to receive and the defendant is liable to execute a personal guarantee as per the format attached.
5. The company is indebted by virtue of the decree in Suit No,93 of 2000 to pay to the plaintiff the decretal amount of Rs,422,000,000 with 15% mark-up from 21-10-2000 till its recovery. The cause of action has been shown to have accrued on 19-10-1998 when the defendant executed the undertaking and when the plaintiff withdrew the Suit No,93 of 2000 against the defendant with permission to file a fresh suit. It has also been disclosed that with filing of the present suit, the plaintiff has also filed a suit in identical terms before this Court in its ordinary civil jurisdiction (Suit No,1258 of 2001), with a plea that if the Court comes to the conclusion that it has no jurisdiction to try the suit in exercise of jurisdiction under the Ordinance, then the plaint of this suit be returned. It is also case of the plaintiff that in the facts and circumstances of the case, subsections (2) and (3) of section 9 of the Ordinance are not attracted as the suit against borrower has been decreed in the sum of Rs,422 million with mark-up @ 1.5%. The prayers made by the plaintiff are in the following terms:--
(i) Direct the defendant to execute a guarantee in term of the commitment by letter dated 19th October, 1998 and on execution of such document, decree the suit of the plaintiff for the sum of Rs,422 million with mark-up at 15% from 21-1-2000 till realization of the decretal amount.
(ii) To declare that the defendant is a customer within the meaning of section 2 (c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and is liable as guarantor and on such declaration to decree the suit for the amount of Rs,422 million with mark-up at 15% from 21-1-2000 till realization of the decretal amount.
(iii) Costs of the suit.
(iv) Such further and other reliefs which this Honourable Court may deem fit and proper in the circumstances of the case.
6. ' On service of summons on the defendant in terms of section 9, the defendant filed an application under section 10 of the Ordinance for leave to defend the suit by raising, inter alia, the maintainability 'of the suit in banking jurisdiction, which has been treated as preliminary issue while granting leave to defend the suit by order dated 15-1-2002.
7. ' I have heard Mr. Mushtaq Ahmed Memon, learned counsel for the defendant and Mr. Rasheed Ahmed Rizvi, learned counsel for the plaintiff.
8. ' Mr. Mushtaq A. Memon, learned counsel for the plaintiff has raised the following contentions:--
(1) The suit is not maintainable under the Ordinance, 2001 since the defendant is not a "customer" within the definition of the term contained in section 2(c) of the said Ordinance.
(2) The defendant had neither executed a guarantee nor was any finance extended to him, therefore, no cause of action has accrued within the territorial jurisdiction of this Court.
9. ' Mr. Mushtaq A. Memon, learned counsel for the defendant contended that the jurisdiction of a Banking Court is found in section 9(1) of the Ordinance, which is para materia to the provisions of section 9(1) of Repealed Act, which provides as follows:-- "9. Procedure of Banking Court.---(1) Where a customer or a financial institution commits a default in fulfilment of any obligation with regard to any finance the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise."
10. ' Mr. Mushtaq A. Memon contended that from the perusal of the provision of section 9(1) of the.
11. Ordinance, it is manifest that the jurisdiction of Banking Court is only attracted where a customer or a financial institution commits a default in fulfilment of any obligation with regard to any finance then the suit in a Banking Court could be instituted by presenting the plaint. He also referred the definition of term "customer" defined in clause (c) of section 2 of the Ordinance, which reads as follows:-- "'customer' means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier."
12. ' Mr. Mushtaq Ahmed Memon maintained that it is not the case of the plaintiff that on behalf of the defendant a guarantee or letter of credit has been issued by the plaintiff. The case of the plaintiff is that the defendant has agreed to be a surety. He contended that no doubt the plaintiff is a Financial Institution but the defendant cannot be termed to be a "customer". His submission was that presence of three conditions conjunctively are necessary to give the jurisdiction to this court under the provisions of Ordinance i,e, the relationship of the customer and financial institution, (2) default in fulfilment of any obligation, (3) with regard to any finance and to support. His contention, has referred the case of Avari Hotels Limited and others v. Investment Corporation of Pakistan and 6 others (2000 YLR 2407) wherein the provisions of the section 9(1) of the Repealed Act, an analogous provision to the section 9(1) of the Ordinance, was examined with reference to the jurisdiction of Banking Court in the following terms:-- "Again from a bare reading of the above section it is. Clear that the jurisdiction of a Banking Court is only attracted where a borrower/customer or a Bank commits a default in fulfilling any obligation with regard to any loan or finance. Only then could they institute a suit in the Banking Company by presenting a plaint duly supported by statement of account etc."
13. ' It was further observed: "that in view of all the, above provisions of the Act, in my opinion, in order that a Banking Court may assume jurisdiction in any particular matter it first must be established that there is a present relationship of borrower/customer and banker between the parties and further that some default has been committed by either party with regard to any loan or finance, obtained by the borrower/, customer from the bank , as a consequence of such relationship."
14. ' He, in further support of his contention, has also referred the case of Ramzan Ali v. Javed Industries and others (1999 CLC 1294) wherein the same view was reiterated.
15. ' Mr. Mushtaq Ahmed Memon to further strengthen his contention also referred my order dated 8- 3-2002 passed in Suit No,306 of 2001 (Karachi Electric Provident Fund v. National Investment (Unit)
16. Trust and another), dealing with a similar plea, I had observed that "to attract the jurisdiction of the Banking Court under section 9(1) of the Ordinance, there must be a default in fulfilment of any obligation with regard to any finance between a customer and financial institution. In the instant case, the defendant is a financial institution. The plaintiff cannot be a customer, as defined in clause (c) of section 2 of the Ordinance. The plaintiff being holder of unit certificate becomes sharer in the trust in which funds are pooled and invested in income producing securities. The position of the plaintiff thus is of an investor. The fixation of price and right to purchase the unit certificates will not bring the unit certificates as finance as defined in the Ordinance. It will remain an investment, analogous to the 'share'.
17. ' Mr. Mushtaq Ahmed Memon further contended that section 126 of the Contract Act defines the contract of guarantee, that a "Contract of Guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the persons in respect of whose default the guarantee is given is called the "principal debtor" and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.
18. ' Mr. Mushtaq Ahmed Memon contended that the contract of guarantee is trilateral contract, the surety, creditor and debtor are all parties to the contract.
19. ' Mr. Mushtaq Ahmad Memon, also referred the text on Contractual Requirements contained in Chapter 2, page 11 from Law of Guarantees by Geraldine Andrews, (Longman Publication), the author summarized the position of "guarantee" as follows:-- "a contract of guarantee or indemnity governed by English law must be formed, like any other contract, by offer and acceptance, with the intention of creating legal relations and must be supported by consideration if it is not given under seal. Its terms must also be sufficiently certain and complete to enable the Court to give effect to them."
20. ' Mr. Mushtaq Ahmed Memon contended that Annexure E-2 is only a promise. He pointed out that the letter purportedly written by the defendant was sent to Bilal Spinning Mills Limited that forwarded the letter to the plaintiff through Annexure E-1. The contents of Annexure E-2 read as follows:- ' The Manager, Alfalah Bank, Karachi.
21. ' Dear Sir, ' Re: Personal Guarantee of Mr. Iftikhar A. Malik ' This is to confirm that, on my return to Pakistan, I will execute the above Guarantee as per text faxed to me which is the same as signed by Mr. Sarfraz A. Malik.
22. ' Thanks and best regards.
23. (Sd.)
24. Iftikhar A. Malik.
25. ' Mr. Mushtaq Ahmed Memon maintained that wording of the letter does not evince the intention of the defendant that it should be treated as a guarantee, rather willingness to give a guarantee on his return. He further contended that there must be offer to guarantee and an acceptance of that offer to complete the contract of guarantee. He further contended that on receiving the letter, the plaintiff could have treated the letter as guarantee by serving a notice on the defendant. There is no notice by the plaintiff to defendant for treating the letter as guarantee. He referred the case of M Iver v. Richardson (1813) 1 M&S 557, wherein similar situation was addressed, the defendant gave a letter to the debtors, A & Co., which said: "I understand A & Co. Have given you an order... I can assure you, from what I know of A's honour and probity, you will be perfectly safe in crediting them to that amount; indeed, I have no objection to guarantee you against any loss from giving them this credit.
26. ' The letter was handed over by A & Co. To the plaintiffs, who subsequently attempted to sue the defendant as a guarantee. It was held:--
(a) that the wording of the letter did not evince a clear consent by the defendant that it should be treated as a guarantee, rather than as a mere indication that he would be willing to give a guarantee if application were made to him in the future; and
(b) that there was no notice given to the defendant by the plaintiffs that they were treating the letter as a guarantee."
27. ' Accordingly, there was neither an offer, nor a communicated acceptance, and the plaintiff claim failed.
28. ' Mr. Mushtaq Ahmed Memon also referred the case of Mt. Bittan Bibi and another v. Kuntu Lal and another (AIR 1952 Allahabad 996), wherein in similar controversy was addressed in paras. 22 and 23, in the following manners:-- "22. The main dispute centres round the liability . Of Kailash Nath. That liability arose, if at all, only under the letter Exh.14, written by him and his mother and his sister Seoti Bibi on 20-5-1937 to the respondents. Its gist is as follows: have borrowed Rs,7,100 odd on pawning ornaments. You have been making persistent demands for a long time for your money. We promised several times to pay it but have not been able to pay it so far. We made best efforts to raise money but unsuccessfully. As the interest is accumulating day by day we think it proper to authorize you to sell the pawned ornaments in the market, and appropriate the sale proceeds towards the amount due to you and if anything still remains due to you we would pay it very soon.
23. The learned District Judge treated this letter as a security deed executed- by Kailash Nath. He rightly remarked that a person who is a surety to a loan is also liable though the loan was not in fact taken by him. Though Kailash Nath did not borrow any money himself, he would be liable if he became a surety for its payment. Where the learned District Judge went wrong is in holding that Kailash Nath became a surety when he appended his signature to the letter. A surety is a person who gives a guarantee and a guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default: see section 126 of Contract Act. Kailash Nath did not give any guarantee through the writing; he did not say that if his mother did not pay the money he would pay it. Nor is there anything in the evidence to suggest that he undertook the liability not as a joint debtor but as a surety."
29. ' Mr. Mushtaq Ahmed Memon concluding his arguments contended that the \ defendant is not a "customer" as such the suit before Banking Court under the Ordinance is not maintainable for want of jurisdiction.
30. ' Mr. Rasheed Ahmed Rizvi, learned counsel for the plaintiff maintained that the cause of action flows in favour of the plaintiff through Finance Settlement Agreement (FSA in short) between the plaintiff and Bilal S inning Mills Limited signed by the defendant' as their r presentative, whereby entire outstanding of (1) new TF-I acilities with mark-up I was to be repaid in full before 31-12-2001 and (ii) New TF-II alongwith mark-up was to be repaid in full on or before December 31st, 2001 in instalments as per the repayment Schedule attached and signed by the bank and the customers through defendant as per clause 3. He pointed out that as per clause 7(iii), the personal guarantees of the defendant and Sarfraz A. Malik were to be submitted alongwith personal Networth Statement as per the format attached. Clause (8) of the agreement also provides that customer undertake to execute such documents and complete such formalities in relation to the documentation and securities as may be required inclusive of personal guarantees of Guarantors and such formalities to the absolute satisfaction of the Bank and its legal within the stipulated period of thirty days from the date of this Agreement shall be a condition precedent to the disbursement/availability of such facilities and the implementation of this agreement and under clause 14 (vi), --the customer confirm that the above arrangement and acknowledged and accepted which have been authorised by the Board of Directors as per resolution. He also contended that the agreement is signed by the defendant. He also pointed out that alongwith Annexure E, the plaintiff received the letter Annexure E-2, a promise to execute the guarantee by defendant on his return to Pakistan as per text faced and maintained that the defendant signed the documents referred to above, not in the capacity of the Director but in the capacity of representative and these documents are to be interpreted/constructed at the trial. These questions cannot be examined by the Civil Court. He has drawn my attention to the provision of section 7(4) of the Ordinance, which bars the jurisdiction of Civil Court with respect to any matter to which the jurisdiction of a Banking Court extends under this Ordinance, including a decision as to the existence or otherwise of a finance. Thus his contention was that the Banking Court has the jurisdiction in the matter in terms of section 9(1) of the Ordinance.
31. ' It may be noted that the provision of subsection (4) is subject to section 5 its clause (a) saves right of a financial institution to seek, any remedy before any Court. The expression "any Court", used in clause (a) of section 5, is wide enough to include Civil Court.
(5) Nothing in subsection. ,(4) shall be deemed to affect---
(a) the right of a financial institution to seek any remedy before any court otherwise that may be available to it under the law by which the financial institution may have been established; or (emphasis supplied).
32. ' Section 7(4) is neither exhaustive nor independent, but controlled by section 9(1) which contemplates presence of three pre-conditions for the exercise of jurisdiction; (1) the plaintiff be either financial institution or the customer; (2) cause of action on default in fulfilment of any obligation; (3) with regard to the finance (subject-matter).
33. ' He also contended that the term "obligation" has been defined in clause (e) of section 2 which includes-- (i)
(ii) or Performance of an undertaking or fulfilment of a promise; and (iii)
34. ' He emphasized by referring the expression "or performance of an undertaking or fulfilment of a promise" to contend that the defendant has promised through Exh.E-2 to execute the guarantee on his return. His failure to execute the guarantee would be default in fulfilment of a promise, is an obligation and contended that the term "customer" requires liberal interpretation in the light of definitions of terms "finance" and "obligation". He contended that the guarantee need not be in writing it could be oral, and referred the provisions of section 126 of the Contract Act, which defines the contract of guarantee that may be either oral or written, and- to support his submission, has referred the case of Mathura Das and others v. Secretary of State and another (AIR 1930 Allahabad 848) decided by the Division Bench of Allahabad High Court, dealing with the contract of guarantee, the Bench observed "that a contract of indemnity or a contract of guarantee may be created either by parol or by a written instrument. Guarantee need not necessarily be in writing; it may be express, by words of mouth, or it may be tacit or implied and may be inferred from the course of conduct of the parties concerned."
35. ' Mr. Rasheed A. Rizvi, pointed out that the above view was referred with approval by Division Bench of this Court in Nandlal Chanandas v. Firm Kishinchand-Butamal (AIR 1937 Sindh 50), while dealing with similar question, Bench observed thus:-- "contract of guarantee or indemnity can be created either by parol or by written instrument. It need not necessarily be in writing. It may be expressed or it may be implied and may be inferred from the course of conduct of the parties concerned. Mr. Rasheed A. Rizvi also referred the case of S. Chattanatha Karayalar v. The Central Bank of India (AIR 1965 SC 1856), wherein the question for determination was whether the status of the 3rd defendant in regard to the transaction of overdraft account is that of a surety or of a co-obligant, after constructing the promissory note and agreement of hypothecation, it was ruled that the status of 3rd defendant with regard to the transaction was that of a surety and not of co-obligant."
36. ' It was further observed that whereas the transaction between the parties is contained in more than one document, they must be read and interpreted together and they have the same legal effect for all purposes as if they were one document.
37. ' There is no cavil with the proposition enunciated in above cases that guarantee need not be in writing but it may be oral. In the instant case, oral agreement has not been pleaded by the plaintiff.
38. ' Mr. Rasheed Ahmed Rizvi also contended that the order dated 16-9-2002 was passed by consent of the parties, whereby the plaintiff was allowed to withdraw the suit against the defendant with permission to file a fresh suit, therefore, in terms of Article 114 of Qanun-eShahadat, the defendant is stopped from the challenging the right of the plaintiff to file the suit under the concept of promissory estoppel as enunciated by Supreme Court in cases of (1) Mst. Nur Jehan Begum v. Syed Mujtaba All Naqvi (1999 SCMR 2300) and (2) Pakistan through Minister of Finance Economic Affairs and another v. Fecto Belarus Tractors Limited (PLD 2000 SC 208). In former case, the doctrine of promissory estoppel was enunciated as follows:-- "The doctrine of promissory estoppel is based on principles of equity and justice. Where any person makes any representation orally or in writing and acting upon it, the other party changes his position, the person making such representation cannot resile from it."
39. ' Similar view was expressed in the later case. "That the true principle of promissory estoppel seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties and this would be so irrespective of whether there is any preexisting relationship between the parties or not. The doctrine of promissory estoppel need not be inhibited by the same limitation as estoppel in the strict sense of the terms".
40. ' Mr. Mushtaq Ahmed Memon, learned counsel for the defendant conversely maintained that estoppel cannot be pleaded against the defendant. There is no change in the stand taken by the defendant. He pointed out that plea of the defendant was that suit against him is not maintainable in Banking jurisdiction. The same plea has been taken by the defendant in the present proceedings.
41. Mr. Memon is right in his submissions, the doctrine of promissory estoppel can be pressed against any person who makes any representation orally or in writing and acting upon it, the other party changes his position, the person making such representation cannot resile from it.
42. ' Mr. Rasheed Ahmed Rizvi also contended that the jurisdiction cannot be exercised under the provisions of rule 11 of Order 7, C.P.C. For rejection of plaint on account of vagueness in the pleadings and pointed out that proper course in such cases would be that the party to be ordered to remove the vagueness and not reject the plaint. To support his contention, has referred the principle laid down in Seven Stars Goods Transport Co. v. The Administrator, Karachi Municipal Corporation (PLD 1976 Karachi 21), wherein the following observation was made:-- "it is an axiomatic principle of law that while considering the question of cause of action, the Court should apply its mind to the facts given in the plaint, and not to any matter, and it has to presume that every allegation made in the plaint was true. It could therefore, reject the plaint, if it came to the conclusion that if all the allegations are proved, the plaintiff would not be entitled to any relief whatsoever. Further, if there is any vagueness about the pleadings, the proper course is to order the party to remove the vagueness, and not to reject the plaint."
43. ' There is no cavil with the proposition enunciated in above case. Here the question is whether the suit of the plaintiff is maintainable before the Banking Court under the provisions of Ordinance, 2001.
44. ' Mr. Rasheed Ahmed Rizvi also contended that the plaintiffs suit is in fact suit for specific performance of contract and the Banking Court is competent to hear and adjudicate the case and referred the view taken by the Division Bench of Peshawar High Court in National Bank of Pakistan v.
45. Khalid Mehmood (2002 CLD 658), .That a Banking Court established under section 2(b) of the Repealed Act is competent to hear and adjudicate cases, inter alia, a suit for specific performance seeking enforcement of an agreement or contract to pay or re-pay and loan or Finance or to perform any obligation arising out of such agreement.
46. ' Mr. Mushtaq Ahmed Memon, learned counsel for the defendants has conceded that Banking Courts established under clause (b)(i) and (ii) of section 2 of the Ordinance are competent to hear and adjudicate the cases pointed out in above judgment but contended that the jurisdiction of the Banking Court is governed by section 9(1) of the Ordinance and the condition, precedent for bringing suit within the scope of Banking Court is that such suit must arise from a default of any obligation with regard to any finance by the Banking Institution or the customer. The defendant is not a customer within the meaning of term 'customer' used in section 2(c) of the Ordinance.
47. ' A close scrutiny of sections 7(4) and 9(1) of the Ordinance would reveal that a customer or a Financial Institution will be entitled to file a suit when any of them commits a default in fulfilling any obligation with regard to any loan for finance. The first requirement is that the parties should either be a customer or a Banking Institution, which have been defined in section 2 of the Ordinance.
48. According to subsection (c) of section 2, customer means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier. Therefore the plaintiff be either "customer" or "financial institution".
49. ' The second condition precedent for bringing a suit before the Banking Court is that such suit must arise from a default in fulfilling of any obligation and thirdly with regard to any finance. This suggests that if the transaction is outside the scope of finance even then any default in fulfilment of obligation will not bring a suit within the jurisdiction of Banking Court.
50. ' In the instant case, it is the plaintiffs case that the defendant had promised to execute a guarantee on future date which has not been fulfilled by him. This could be a default in promise but default in promise to execute a guarantee will not bring the defendant within the ambit of "customer" to bring a suit against him before the Banking Court.
51. ' Now the question is whether the plaint is to be J rejected or suit is to be dismissed.
52. ' The principles involved in rule 11 of Order 7, C.P.C. Are two folds. In the first place, it contemplates that a still borne suit should be properly buried, at its inception, so that no further time is consumed on a fruitless litigation. Secondly, it gives the plaintiff a chance to retrace his step K at earliest possible moment, so that if permissible under the law, he may found a properly instituted case. It is also well-settled that from the language of rule 11, that grounds enumerated therein for rejection of plaint are not exhaustive. In the instant case, the plaintiff has pleaded that a suit has already been filed on original civil jurisdiction of this Court pertaining to the same cause. The suit against the defendant was earlier withdrawn from the Banking Court on the ground that suit is not maintainable against the defendant, whereas, suit proceeded against the Bilal Spinning Mills Limited and Sarfraz Malik that has been decreed. The present suit is second in line under the Banking jurisdiction. The application for leave to defend has been accepted, the application has been treated as written statement and preliminary issue has been framed in terms of the provision of subsection (10) of section 10, by order dated 15-1-2002, therefore, the rejection of plaint would not be a proper exercise but dismissal of the suit on preliminary issue.
53. ' In view of the above discussions, I am of the view that the suit of the plaintiff against the defendant under the provisions of Ordinance, 2001 before the Banking Court is not maintainable in absence of relationship of Banker and customer. The suit is liable to be dismissed, that is dismissed, however, with no order as to costs.