' On 13-10-2001, Bank of Khyber, claiming to be a "Banking Company" and "Financial Institutions", within the meaning and scope of section 2(a) of The Financial Institutions (Recovery of Finances)
Ordinance, 2001 (hereinafter referred to as Ordinance XLVI of 2001) through its Branch Manager, statedly duly authorized, aware of the facts of the case and able to depose the same, instituted a suit for the recovery of Rs,75,848, 911.23 against Messrs Spencer Distributions Limited, a company limited by shares (hereinafter referred to as a company), which has been sued in the capacity of "customer", within the meaning of section 2(c) of Ordinance 2001, defendants Nos,2 to 9 were sued in the capacity of Directors, defendants Nos, 2 and 3 were stated to be the guarantors and while defendants Nos,10 to 15 were arrayed as in the suit in the capacity of guarantors/mortgagers,
2. It has been stated in the plaint that defendant No,1 opened C.D. Account with the plaintiff-Bank and thereafter, through its authorized Directors, i,e, defendants Nos,2 and 3, approached the plaintiff-Bank for the grant of certain financial facilities and pursuant thereto the defendant No,1, since 1997, availed (a) Running Finance (R/F) Limit of Rs,28 million (b) Letter of Credit (L/C); and (c)
Letter of Guarantor (L/G) joint limit of Rs,50 million, as per the terms and conditions reflected in the sanction memoranda and other documents as well. According to the plaintiff-Bank, running finance was originally sanctioned for Rs,10 million, which amount was disbursed and availed by defendant No,l. This facility vi as firstly renewed enhanced from 10 million to Rs, 1.4 million and then from 14 million to 28 million on 22-7-1999. It has been stated in the plaint that the letter of credit limit was initially granted, for the sum of Rs,10 million, which was subsequently renewed on various dates and finally, it was extended to Rs,50 million, as a result of merger of two facilities i,e, L/C and L/ G. Out of total established letters of credit, the defendant No,1 could not retire or negotiate the documents under 58 letters of 'credit, as a result whereof, the plaintiff had to extend "forced finance " to the tune of Rs,39,493,227.00, for payment of various amounts. So far as the facility- regarding letter of guarantee is concerned, it is the case of the plaintiff that initially an amount of Rs,10 million was extended under the letter of guarantee limit, which was lastly enhanced on 30-3-2001 to Rs,50 million, as according to the plaintiff, the L/C and L/G facilities were merged, as mentioned above.
Out of the guarantees got issued by defendant No,1 from the plaintiff seven guarantees were presented to the plaintiff for encashment and the plaintiff paid a sum of Rs,10.300 million to the beneficiaries of these guarantees thus a "forced demand finance" of Rs,10.3000 million was established. It has been averred in the plaint that in order to secure the running finance, the defendant No,1 executed certain documents as elaborated in para. 10 of the plaint. Subsequently the defendant No,1, in consideration and in acknowledgement of the total outstandings in all the accounts, executed fresh documents, the details of which have been given in para. 11 of the plaint.
In order to further secure the repayment of the dues, payable by the defendant No,1, charges on the fixed and other assets of defendant No,1, were created on 23-2-1997, which were registered with the Registrar of the Companies, who issued certificates of registration of charge dated 23-2-1997 and 13-9-1999. Furthermore, in order to collaterally secure the repayment of outstanding amounts, the defendants Nos,10 to 15 created mortgage of their immoveable properties, the details of the said properties and the documents deposited by the concerned defendants have been given in para.13 of the plaint.
3. According to the plaintiff, the defendants failed to discharge their liabilities and neglected to liquidate the amounts falling due against them in all the financial facilities, despite various demands made by the plaintiff from time to time, through issuance of various letters, inasmuch as the legal notices were also served. The case of the plaintiff is that on account of acts and omissions of the defendants, they have become defaulters with the result that a sum of Rs,75,848,911.23 fell due against the defendants jointly and severally in the following manner:-- {{TABLE}} I-Running Finance (R/ F)
Principal Rs,279,991,39.48 Mark-up Rs, 11,814,03.52 Total Rs,291,805,43.00 II-L/C & L/G Consolidated Principal Rs,466,683,68 Mark-up Rs,18,575,50 (Adjusted against margins of L/C & L/ G)
Total Rs,466, 683,69 Total of I & II: Rs,75,848,911.23 (Suit Amount) {{TABLE}} ' As per the stance of the plaintiff, the defendants failed/neglected to repay the outstanding dues/financial facilities and their failure to adjust the liabilities, despite various efforts made by the plaintiff and his functionaries, necessitated the filing of the present suit under the provisions of Ordinance XLVI of 2001.
4. In response to the summons issued by this Court, through all the modes of service provided under the law, PLAs Nos,132-B, 135-B, 137-B and 139-B of 2001 were filed on behalf of defendant No,9, defendants Nos,4 to 7, defendants Nos,1 to 3 and defendant No,10 respectively. As defendants Nos,8 and 11 to 15 failed to file any such application seeking leave to defend the suit, therefore, this Court passed a decree for the recovery of Rs,75,848,911.23 with costs and costs of funds against defendants Nos,8 and 11 to 15, vide judgment and decree dated 7-12-2001, which is still operative, holds the field and is intact. On 29-3-2002, at the request of the learned counsel of the plaintiff the name of defendant No,9 was deleted from the array of the defendants. During the pendency of the proceedings in the suit, winding-up order against defendant No,1 was passed and consequent thereto copy of order dated 9-5-2002 was placed on record by the plaintiff, wherein the learned Company Judge allowed plaintiff to continue with the instant suit. On the statement of the learned counsel for the plaintiff, recorded by this Court on 19-7-2002, the names of defendants Nos,4 to 7 were deleted from the list of the defendants, in view whereof their leave application (P.L.A. No,135-B of 2001) was dismissed having become infructuous. As defendant No,9 was deleted on 29-3-2002, therefore, his application (P.L.A. No,132-B of 2001) was also dismissed.
' In the above perspective, now the admitted position, which has emerged at the present juncture, qua the pendency of the applications, is that the applications filed by the defendants Nos,4 to 7 and 9 were dismissed having become infructuous, as noted above, vide order dated 19-7-2002, while now only two applications PLA No,137-B of 2001 (filed by defendants Nos,1 to 3) and PLA No,139-B of 2001 (filed by defendant No,10) are pending awaiting decision, which applications, I propose to decide one by one, as under:-- P.L.A. No,137-B of 2001
5. So far as the defendant No,1 is concerned, the learned official liquidator has raised no defence on behalf of defendant No,1 and as a matter of fact, has admitted the liabilities qua the said defendant.
' As regards defendants Nos,2 and 3, the learned counsel, while admitting the signatures of the said defendants on the letters of guarantees dated 17-4-2002 (page 552), 1-2-2000 (page 554) and dated 31-3-2001 (page 556), has only disputed the amounts mentioned in those guarantees and has further submitted that the said guarantees are not properly stamped and that those have no relevance with the pleas raised by the plaintiff. Conversely, the learned counsel for the plaintiff- Bank, while refuting the aforenoted contentions, has submitted that the pleas now raised by. The said defendants were not taken in the leave application, that requirements of section 10(3), (4) and
(5) have not been complied with while filing leave application, the power of attorney in favour of the learned Advocate has been forged and that the amounts mentioned in the letters of guarantees reflect the accumulated amount of three finances. In this perspective, he has submitted that the leave application filed by the said defendants may be dismissed.
6. As regards the objection raised by the learned counsel for the plaintiff regarding the maintainability of A the application under discussion, due to lack of fulfillment of subsection (3), (4) and (5) to my mind, the said contention has substance.
' Upon the examination of the instant leave application, I find that the said defendants failed to give amount of finance availed by the defendants; the amount paid by them; the dates of payment; amount of finance and other amounts relating to the finance payable by the defendants to the financial institutions; the amount of finance and other amounts, which the defendants dispute as payable to the financial institutions, thus, the said defendants have comprehensively failed to adhere to the provisions of section 10(4) of Ordinance of 2001. In the above back drop, now the pivotal question, which has arisen for determination by this Court is as to whether the instant leave application, filed by the said set of defendants, is liable to be rejected summarily. Provisions of section 10(3), (4) and (5) of Ordinance XLVI of 2001, inter alia, provide that the application for leave to defend shall be in the form of a written statement, containing summary of substantial questions of law and facts, and also giving certain particulars to be furnished by the defendants regarding the finance, i,e, finance availed, amount paid by the defendants etc. And that such an application must be accompanied by all the documents in support of substantial questions of law and facts raised by the defendants. If the aforenoted provisions of law are placed in juxtaposition with the contents of the application, filed by the aforementioned set of defendants, the only irresistible conclusions, which can be drawn is that the said defendants did not comply with the aforesaid provisions of law. In the above perspective, I am constrained to hold that the said defendants have comprehensively failed to file leave application, as required under the law, and they have not complied with the requirements of section 10(4) and (5) of Ordinance XLVI of 2001, thus, the defendants failed to file leave application in accordance with the provisions of the said Ordinance.
7. Section 10(6) of Ordinance XLVI of 2001 provides 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 XLVI of 2001, the same shall be rejected, unless the defendants able to show sufficient cause for their inability to comply with any such requirements. In this case, as noted above, the application filed by these defendants does not fulfil the requirements of sections 10(4) and (5) of Ordinance XLVI of 2001. Additionally, they have not been able to show in their application, any cause, what to talk of sufficient cause for their inability to comply with said requirements.
8. Now the question, which arises is as to whether the provisions of section 10(6) of Ordinance XLVI of 2001 is mandatory or directory. Basic principle for the interpretation of statute is that when a provision of law has been couched with the penal consequences, the said provisions of law would be considered as a mandatory provision of law and where no penal consequences entail to the non-compliance of a provision of law, in that case, the said provision of law would be taken as directory. Having gone through the provisions of section 10(6) of Ordinance XLVI of 2001 as noted above, I am of the considered view that this provision of law is mandatory in nature, as the non- compliance of said provision of law entails the penal consequences of rejection of leave application, as provided in the aforenoted provision of law. In the present case, as the defendants did not comply with the aforenoted provisions of law, therefore, the presumption would be that no application for grant of leave to defeni a suit is deemed to be pending and the present application for leave to defend is liable to be rejected per force of section 10(6) of Ordinance XLVI of 2001.
9. Now coming to the merits of the application and the contentions raised by the learned counsel for the defendants. Adverting to the first contention raised by the learned counsel regarding the execution of documents, suffice it to say that these defendants have not denied the sanctioning of the financial facilities favouring defendant No,1 and their signatures on all the documents annexed with the plaint by the plaintiff in support of their claim. It is evident from the record that at the time of availment of the financial facilities, as noted above, the defendant-company not only executed the charge documents, but other defendants also mortgaged their properties and in addition thereto the rest of the defendants executed their personal guarantees favouring the plaintiff. As noted above, the company executed finance agreements, Demand Promissory Notes, Letters of Continuity and Letters of Pledge. Additionally the company created charge over the assets of the company, which was duly registered, at their behest, with the Registrar of Companies and the certificates issued by the said department are on record. It appears from the record that the defendants executed various documents in favour of the plaintiff, signatures whereof, by these defendants, are admitted. The present defendants have baldly denied the execution of the documents without any legal foundation and basis, completely forgetting that they have admitted their signatures on all the documents. The act of denial of execution of the documents appears to be desperate attempt, on the part of the defendants, to wriggle out of their contractual obligations and to save themselves from liquidating the financial liabilities, incurred by them through the execution of the documents. To my mind, after the execution of the documents, availment of different financial facilities by defendant No,1 and failure to liquidate them, now it does not lie in the mouth of the defendants to assert that they did not execute the documents. Above all, no defence at all has been pleaded on behalf of the company. In the back-drop of the said discussion, I am of the view that these defendants executed all the documents, are denying their execution only to avoid their liabilities and thus, the contention of the learned counsel has no force.
10. Now coming to the other contention raised by the learned counsel. As noted above, the defendants Nos,2 and 3 have admitted their signatures on the guarantees, but have only disputed the amounts mentioned therein. Section 20 of the Negotiable Instruments Act, provides that where one person signs and delivers to another a paper stamped in accordance with law, either wholly blank or having written thereon an incomplete negotiable instrument, in order that it may be made, or completed into a negotiable instrument, he thereby gives prima facie authority to the person who receives that paper to make or complete it, as the case may be. Furthermore, section 118 of the Negotiable Instrument Act, provides that certain presumptions are attached to the negotiable instruments, which, inter alia, includes that negotiable instruments, was made or drawn for consideration and that every negotiable instrument bearing a date was made or drawn on such date.
Even if it may be considered that the documents were given blank, even then in view of the aforenoted provisions of law the defendants are estopped to challenge the legality, validity and genuineness of these documents. In this regard Muhammad Sharif v. Muhammad Hashim Paracha and another (PLD 1987 Karachi 76); S.K. Abdul Aziz v. Mahmoodul Hassan and 3 others (1988 CLC 337); Haji Karim and another v. Zikar Abdullah (1973 SCMR 100); Allied Bank of Pakistan Ltd. v. Messrs Gujrat Friends Traders and others (PLD 1988 Lahore 166); Messrs United Bank Limited v. President Bazm-e-Salat and another (PLD 1986 Karachi 464); Bazm-e-Salat and others v. Messrs United Bank Ltd. (PLD 1989 Karachi 150); Prudential Commercial Bank Ltd. v. Hydari Ghee Industries Ltd. And 9 others (1999 MLD 1694) and Messrs Bank of Oman Limited v. Messrs East Asia Trading Co, Ltd. And 4 others (1987 CLC 288), can be referred.
11. So far as the plea of the learned counsel that the documents are not duly stamped, suffice it to say that section 18(4) of the Ordinance XLVI of 2001 provides a complete answer to the said contention of the learned counsel, which, inter alia, provides that the Banking Court shall not refuse to accept in evidence any document, because it is not duly stamped. The contention of the learned counsel is devoid of any force.
12. It is discernible from the documents on record, that the said defendants signed/executed the documents and undertook, as per terms of the personal guarantees and other documents, to liquidate the outstanding amounts in case, the principal debtor i,e, the company fails to liquidate the amounts. In view of the execution of the personal guarantees and other documents as well, the said defendants cannot now shirk from liquidating their liabilities, and they are jointly and severally liable to liquidate the liabilities of company under the provisions of the Contract Act.
12-A. No other ground has been urged on behalf of the said defendants in support of the application for the grant Of leave to defend the suit.
' In the above perspective, defendants Nos,1 to 3 have comprehensively failed to raise any serious and bona fide dispute warranting the grant of leave to defend the suit, thus the application in hand, filed on behalf of the aforenoted defendants, is found to be devoid of any force and is hereby dismissed on the grounds of non-maintainability and on merits as well.
PLA No,139-B of 2001
13. The instant application has been filed on behalf of the defendant No,10 seeking leave to defend the suit. The learned counsel representing the said defendant, in support of the present application, has contended that she would not execute the letter of guarantee and the mortgage deed. He has added that the alleged execution of the said documents by the defendant No,10, who is a house wife, has nothing to do with the running of the company or its finances and had no role to play in the affairs of the company, was out of the question, moreso when she is the "Pardanasheen" lady.
On the other hand the learned counsel for the plaintiff, while refuring the aforenoted contention, has submitted that the aforesaid documents were executed by the defendant No,10, she stood guarantor/mortgagor and under the said garb, the said defendant cannot take the plea that she did not execute the said documents.
14. Upon the examination of the contents of the aforenoted application, I find that the defendant No,10 has also not complied with the provisions of section 10(6) of Ordinance, 2001, thus for the reasons stated in paras. Nos,6 , 7 and 8 of this judgment, this application deserves to be rejected.
15. Now coming to the contention raised by the learned counsel. Stance of the defendant No,10 is that she never executed the documents i,e, Letter of Guarantee dated 20-4-2001 (page 560) and the Mortgage deed dated 17-1-2001 (page 607) attributed to her, as such, she never stood as guarantor or mortgagor. Examination of the said documents manifests that the defendant No,10, in fact, signed and executed the personal guarantee, which is also attested by two attesting witnesses, as required under the law, and one of the witnesses is the husband of the defendant No,10. So far as the mortgage deed is concerned, the same has duly been executed by the defendant No,10 through her husband, acting as her attorney, and has also been registered with the Sub-Registrar, Model Town. Not only this, but the defendant No,10 has also executed the memorandum of deposit of title deed dated 18-1-1997. The said defendant has simply denied her signature on the aforenoted documents, without placing on record any prima facie proof, which could furnish a valid ground for the grant of leave to defend the suit to her. I am of the view that mere bald denial of execution of the documents is not sufficient ground for the grant of leave, - unless it is prima facie shown that the documents have been forged and fabricated. As noted above, according to the plaintiff, defendant No,10 executed letter of guarantee, the mortgage M deed and memorandum of deposit of title deeds. In this regard, judgment rendered by Division Bench of this Court, reported as Ghazala Arif v. Union Bank Ltd. (Now Emirates Bank International, Lahore (2000 CLC 1201), can be referred, wherein this Court in similar circumstances repelled the contention raised by the person who denied the execution of documents, the relevant portion would be advantageous to be reproduced below:-- "We are not impressed by this contention of the learned counsel. The bare denial of signatures on the letter of guarantee without any prima facie proof could not furnish a ground for the grant of leave to appear and defend the suit. If the arguments of the learned counsel that in all cases, where signatures on the documents are denied, leave must be granted is accepted, it would result in defeating the very purpose for which the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 has been promulgated."
16. Another aspect of the case is that the said defendant failed to assert or place on record any material to show that these documents were either forged by the plaintiff or by the remaining defendants. It has nowhere been alleged by the said defendant, that her signatures were forged by the plaintiff-Bank or its functionaries. It has nowhere been denied that the defendant No,1 did not avail the financial facilities. Mere vague denial of the execution of the documents would not absolve the said defendant from liquidating the liabilities, incurred by her through the execution of the personal guarantee and the mortgage deed. Needless to mention that the defendant No,10 has not even challenged the statements of accounts appended alongwith the plaint, neither any entry in any of the statements of accounts has been disputed.
17. In view of the aforenoted discussion, the defendant No,10 has also failed to raise substantial questions of law and facts to be tried by this Court in respect of which evidence needs to be recorded. Furthermore the said defendant has also failed to file the leave application, thereby complying the provisions of section 10(4) and (5) of Ordinance XLVI of 2001, therefore, the present application is devoid of any force and the same is dismissed on the aforenoted two counts.
Main case
18. With the dismissal of the aforenoted two applications, under the law, the allegations made in the plaint shall be deemed to be admitted. The plaintiff has produced photo-copies of all the documents alongwith the plaint, on the basis of which it had field the suit. The signatures whereof have not been denied by the defendants, meaning thereby that the execution of these documents deemed to be admitted by the defendants. Furthermore the statements of accounts are duly verified/certified under the Bankers' Book Evidence Act, 1891, to which no serious infirmity has been alleged and the presumption of correctness is attached to said statements of accounts.
Additionally, there is no rebuttal of the aforementioned documents on record.
19. In view of the above discussion and findings, a decree for the recovery of Rs,75,848,911.23, with costs, is jointly and severally passed in favour of the plaintiff-Bank and against the defendants Nos,1, 2, 3 and 10, which is to be executed, inter alia, by the sale of the mortgaged/ pledged properties. The plaintiff shall also be entitled for the costs of funds to be determined under section 3(2) of the Ordinance XLVI of 2001. Needless to mention that the names of the defendants Nos,4 to 7 and 9 were ordered to be deleted by this Court, while the judgment and decree dated 7-12-2001 passed against the defendants Nos,8 and 11 to 15 is still intact and shall hold the field.