' The plaintiff-Bank has brought this suit for the recovery of an amount of Rs.60,510,885 against the defendants, as being the principal borrower, the mortgagers and the guarantors of the finance sought to be recovered through this suit, on the set of facts mentioned in the plaint; that the plaintiff on the request of defendant No,1 through sanction advice dated 1-10-2001 (Annexure-E with the plaint), approved temporary facility ERF-I of Rs.40.00 Million, as also renewed existing ERF-II of Rs.10.00 Million. The approval of ERF-I was conveyed to the defendant No,1 through letter dated 8- 10-2001 (Annexure-F to the plaint). These facilities were duly utilized by the defendant No,1 and are evidenced by the financing agreements dated 1-8-2001 and 1-10-2001 (Annexures-G and H respectively attached with the plaint), and the facilities were operated by defendant No,1 through Loan Accounts No,450625-04, No,452613-78 and No,452223-08.
2. It is mentioned in paragraph No,9 of the plaint that subsequently, vide sanction letter dated 19-4- 2002, the defendant No,1 was allowed the following financing facilities:---
(i) ERF-I.(FAFB/FAPC) Rs.40.00 Million (Facility No. 1)
(ii) FAFB Rs.10.00 Million (Facility No.2)
(iii) ERF Part-II Rs.10.00 Million (Facility No.3)
' The details of the applicable terms and conditions subject to which the three facilities were granted, are given in the aforementioned sanction letter dated 19-4-2002. These terms were duly accepted by defendant No, 1.
3. The finance agreement (IB-6) dated 28-2-2002 with regard to these facilities was duly executed and certain documents including the personal guarantees of defendants Nos.2 to 6 were also provided to the bank.
4. It is averred that this ERF-I facility was further subdivided into three facilities such as:-
(a) Pre-shipment/FAPC limit of 25.00 Million.
(b) Finance against Foreign Bills (FAFB) limit of Rs.10.00 Million.
(c) FAPC (additional FAPC limit of Rs.5.00 Million).
' The facilities at Serial Nos. (a) & (c) have not been repaid and on account of the above, a sum of Rs.32,968,764 till 31-1-2003 is overdue and payable by the defendants. As regards the facility at Serial No,(b) is concerned, the amount was utilized by defendant No,1 in terms of financing agreement (IB-6) dated 28-2-2002, which was supported by the necessary documents including the personal guarantees of defendants Nos.3 to 6. Qua this guarantee also, a sum of Rs.16,801,080 is overdue.
5. The facility No,3 amounting to Rs.10.00 Million mentioned in Para No,4 above, was allowed by way of ERF Part-II. This was utilized by defendant No,1 in terms of the finance agreement dated 28-2- 2002, and against the execution of the other necessary documents and is covered by personal guarantees of defendants Nos.2 to 6. In this account as well, a sum of Rs.10,741,041 is payable and outstanding against the defendants.
6. In paragraph No,13 of the plaint, it is stated, as to what properties were mortgaged and by whom, as the security for the re-payment of the aforesaid finance/ amounts. In the above backdrop, the plaintiff has sought the decree for the outstanding amount of finance extended to defendant No,1 and inter alia secured by the guarantees/mortgages by the other defendants.
7. All the defendants have filed a joint leave application and they have sought the unconditional leave to appear and defend on the grounds:--
(a) That the plaintiff has failed to perform its contractual as well as legal obligation, inasmuch as, that certain bills purchased/financed have not been collected by it. The details in this behalf are mentioned under the same ground.
(b) The consignments subject-matter of the financing were dispatched against the confirm orders and the consignee abroad executed, signed and delivered through its banker the bill of exchange to the plaintiff. The consignee got the documents retired and the goods released without any payment on the maturity dates. It was the responsibility of the plaintiff to effect the repatriation of the sale proceeds of the exported goods through foreign bank. In fact, the bank is responsible for non-realization of the export as it failed to take proper steps for recovery of the said amount and has thus, made the repatriation impossible.
(c) The bank has failed to discharge its duties in good faith and with reasonable care as provided in Articles of URC-522 and due to negligence on its part, the plaintiff cannot recover the said amount. It is further mentioned that the plaintiff has also failed to comply with the instructions and directions of State Bank of Pakistan prescribed for - the financing in the nature of FAFB and FAPC.
(d) The plaintiff has received the foreign remittances from the consignees abroad to the tune of US $ 1,38,816.36, but instead of adjusting the said amounts towards the amount of finance, the same were kept in a sundry account without any justification and instructions.
(e) That defendant No,1 had availed the Export Finance facilities, inter alia of FAFB, FAPC, but the bank unilaterally has converted the said facilities into finance for "Working Capital". By doing so, the plaintiff has breached the directive of the State Bank of Pakistan and has charged the mark-up at the rate of Rs.16.80% instead of 9%; thus, the said amount could not be charged.
(f) The Export Refinance Part-II limit to the tune of Rs.10.00 Million was neither disbursed nor utilized by the defendant No,1, rather the plaintiff without any instructions of the defendants converted the undisbursed amount into Term Deposit Receipts and has illegally charged a sum of Rs.233,642 as mark-up thereupon.
(g) It is also set out as a ground that as the finances provided by the plaintiff-Bank to the defendants were in the nature of export refinancing, therefore, the plaintiff under the law and also the BPD Circular-13 of the State Bank of Pakistan, was obliged to collect these amounts from the foreign purchaser/bank at the time of negotiation of the L.C, release and delivery of the goods and to have the bill of exchange negotiated; but having failed to do so, the plaintiff cannot ask for the recovery of these amounts.
(h) The plaint is not in accordance with the law and there is non-compliance of mandatory provisions of sections 10(3)(a) to 10(3)(c) and section 9(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, and the form of the suit is incorrect.
(i) The statement of account does not correspond with the averments of the plaint. The amounts shown as outstanding are per se contradictory.
(j) The agreements are without consideration.
(k) The limit ERF-Part-II was not utilized and the buyback transaction took place on 28-2-2002.
(1) The bank has failed to realize the amount of L/C (sight).
(m) The facilities granted and the documents appended along with the plaint in this behalf are sham and fraudulent, particularly such documents were got signed from the defendants in blank.
' In support of his various contentions, Syed Hamid Ali Shah, learned counsel for the defendants has relied upon the following judgments:-- ' National Bank of Pakistan v. Messrs Elegzender and Company and 2 others (PLD 1987 Lahore 290); ' Fine Textile Mills Ltd. Karachi v. Haji Umar (PLD 1963 SC 163), Bankers Equity Limited and 5 others v.
Messrs. Bentonite Pakistan Limited and 7 others (2003 CLD 931), United Bank Limited v. Ch. Ghulam Hussain (1998 CLC 816), United Bank Limited v. Messrs Azmat Trading Co. (Pvt.) Ltd. And 5 others (2001 CLC 1172), Muhammad Iqbal and others v. The Australasia Bank Ltd. (1984 SCMR 919), Messrs Kohinoor Trading (Pvt.) Ltd. v. Mangrani Trading Co. And 2 others (1987 CLC 1533), Messrs Pakistan International Airlines v. Messrs National Bank of Pakistan and another (1985 CLC 436) and National Bank of Pakistan v. Shahyar Textile Mills Ltd. (2003 CLD 1370).
8. Syed Hamid Ali Shah, the learned counsel for the defendants has laid great emphasis, that the export refinancing by any Bank could only be on the basis of the confirmed orders; valid L/Cs; and other necessary commercial documents. And for such purpose, the State Bank has issued the instructions in the form of Circular-13, as to how the finance is to be disbursed and recovered; this does not cover the buy-back agreements. Moreover, such transaction is necessarily based upon the bills of exchange, which when accepted by the bank, would discharge the principal debtor (defendant No,1), and the bank as the holder in due course, is obliged to recover the amount from the drawee of the bill. However, in the present case, the bank has failed in its duty in this regard, and there is no proof on the record if these bills were ever presented; those were dishonored, any protest was made by the bank; moreover no notice was ever given to the defendant about the so- called dishonour, so as to render the said defendant liable, that to as a surety under the law and not otherwise.
9. The edifice of the above submission is founded upon the assumption that the export refinancing can only be achieved in the above manner. But in my view, this is not the correct legal position.
Because, where the parties have agreed otherwise, and specially when it is not shown that the bank had ever agreed for the discounting of the bill of exchange, the bank does not lose its right to recover the amount in the specific manner as has been agreed between the parties at the time of financing. In this case, it may be mentioned that out of their free-will and consent, the parties on the basis of the buy-back agreements had agreed for a particular mode of transaction and repayment, and no violation of any law or the instructions of the State Bank in this behalf is shown.
Therefore, it is unfounded to argue, that the amount cannot be recovered by the bank in the present manner. It may be pertinent to state here that, there is no prohibition in any law for the time being in force or the instructions of the State Bank that export refinancing cannot be made by the parties through the buy-back agreement. Therefore, such agreements/ transaction shall be protected on the principle that what is not prohibited by law, shall be permissible.
10. As regards the submissions, that the suit has not been filed by complying the provisions of section 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001; the buy-back agreements are without consideration; statement of accounts does not correspond to the averments of the plaint; the bank has been negligent in presenting the bills of exchange, due to which, the defendants have suffered losses; the buy-back agreement and other documents filed along with the plaint were procured in blank and are the result of fabrication and misrepresentation. Suffice it to say that, for the brief reasons to follow, all these arguments have no force.
11. The plaintiff has duly supported the plaint with all necessary documents, which since the inception of the transactions between the parties, were duly executed by them. These not only include the buy-back agreement, but also various other, such as the personal guarantees of the other defendants and the mortgage deeds as well. From the perusal of all these documents collectively, it is misconceived to argue, that any of such documents were blank at the time, when the defendants had effected their execution, particularly when no specific discrepancy has been pointed out, on the basis of which, the above conclusion can even remotely be drawn. To my mind, this is a bald allegation and has been made with an object to abortively wriggle out the effect of the admittedly executed documents between the parties. Moreover, I am also not convinced, if there is any error in the statement of accounts filed by the plaintiff along with the plaint. Whatever insignificant discrepancies have been pointed out, those- have been validly explained by the learned counsel for the plaintiff.
12. The learned counsel for the defendants has also failed to convince this Court, that the buy-back agreements are without consideration. As regards the other submission, that certain amounts have been received by the plaintiff, which have not been so adjusted, suffice it to. Say that, the position is otherwise. The statement of accounts filed along with the plaint duly reflects the credit/adjustment of such amounts. The plaintiff has not concealed, rather has explained the circumstances, under which, one of the amounts has been put to sundry account. I am also not prima facie convinced that the bank is instrumental in the release of the goods without proper recovery of the amounts due to the defendant No,1 from the foreign buyer or the L/C opening bank.
In any case, this proposition is the subject-matter of the other suit filed by the defendants. And to avoid any prejudice to the case of either party in that suit, no observation is called for, because this by itself is no ground for the leave in the present matter.
13. Before parting, I would like to reiterate, that the learned counsel for the defendants has vehemently submitted that on account of the acceptance of the bills of exchange, as the holder in due course, on non-presentation by the plaintiff-Bank, the defendant should stand discharged from the liability as the principal debtor and reliance in this behalf has been placed upon the judgments reported as 2001 CLC 1172 and 2003 CLD 1370. It is observed that the above two judgments of the Sindh High Court are based upon the premise that the financing by the bank was through discounting of the bills of exchange and there was no other independent repayment obligation on the part of the customer. But in the present case, the financing was clearly not against the discounting of the bills, but in fact as per terms of FAFB and FAPC facilities that were published by the bank in its manual, there was no requirement at all for the provision of the bills of exchange. The financing was clearly, as stated above, in terms of the sale of buy-back agreements.
' In the light of above, the -leave application of the defendants is hereby dismissed, with the result that the suit of the plaintiff is decreed as prayed for with costs of funds at the State Bank rate, to be finally determined at the time of execution of the decree.