' JAWWAD S. KHAWAJA, J.---The present (Regular First Appeal No,668 of 2001) and Regular First Appeal No,675 of 2001 are being heard and decided together as these appeals arise from the same judgment and decree dated 26-7-2001 passed by the learned Banking Court No,II, Lahore. Regular First Appeal No,668 of 2001 has been filed by Messrs Combined Oil Extraction (Pvt.) Limited and two others, namely, Muhammad Arshad and Ansar Mahmood, who are, for convenience, referred to in this judgment as the appellants' Regular First Appeal No,675 of 2001 has been filed by the Industrial Development Bank of Pakistan (IDBP) which was the plaintiff before the learned Banking Court. Two of the defendants before the learned Banking Court, namely, Muhammad Amin and Abdul Majeed Sheikh have not assailed the impugned decree dated 26-7-2001 and have, therefore, been arrayed as respondents in both appeals.
2. Briefly stated the facts of the case are that IDBP filed a suit against the defendants on 1-12-2000 for recovery of an amount of Rs,36,91,971.77 as the sum due to IDBP on account of finance provided by it to the defendants. Messrs Combined Oil Extraction (Pvt.) Limited was arrayed in the suit as principal debtor, while the other defendants were sued in their capacity as guarantors for re- payment of the liabilities of the aforesaid principal debtor. Only Muhammad Arshad and Ansar Mahmood appellants/defendants filed an application seeking leave to appear and defend. The said leave application was dismissed by the learned Banking Court and as a result, the suit filed by IDBP was decreed to the tune of Rs,36,91,971.77.
3. IDBP and the appellant-Company had initially entered into a financing agreement dated 3-9- 1985 whereby IDBP had agreed to advance a sum of Rs,25,00,000 to the company and the said company had agreed to pay to IDBP the marked-up amount of Rs,35,26,064. The said amount was to be repaid over 10 years, which included a two-year grace period. The admitted position is that under the aforesaid financing agreement, a cum of Rs,22,50,000 was actually disbursed. The appellant-Company, however, committed default in meeting its repayment commitments. Vide letter dated 20-3-1991, the company informed IDBP that its project was lying closed due to technical faults in the machinery. A request was, therefore, made to reschedule the financial obligations of the company. This request was acceded to and the amount due from the Company was re-scheduled vide letter dated 10-6-1991 issued by IDBP. The principal amount, including over dues as on 10-6-1991, was Rs,23,45,478.04.
4. Learned counsel for the appellants argued, firstly, that ' on the basis of the amount disbursed, which was Rs,22,50,000, the marked-up price payable by the appellant-Company was only Rs,31,73,457 and not the amount of Rs,35,26,064, which was mentioned in the financing agreement dated 3-9-1985 on the basis of the principal amount of Rs,25,00,000. He also contended that IDBP had created three separate accounts i,e, Accounts Nos, 1326-A9, 1326-B6 and 1326-C3. According to him, these three accounts were unauthorized because the appellant-Company had only one account with IDBP. The arguments of learned counsel for the appellants, however, ignore the fact that the appellant-Company had itself applied for re-scheduling on account of the difficulties being faced by it. The re-scheduling as noted above, was allowed by IDBP in terms of its letter dated 10-6-1991. It is clear from a reading of the said letter that the amount of Rs,8,80,000, reflected in the statement of Account No,1326-C3, is strictly in accordance with the said rescheduling. The said amount comprises the sum of Rs,6,14,000 which was overdue on 10-6-1991 and the amount of Rs,2,66,000 being the instalment which was to fall due on 30-9-1991. The statement of Account No,1326- C3 shows the various credit and debit entries. The same have not been challenged by the appellant-Company which did not even file an application seeking leave to appear and defend.
Likewise, the statement of Account No,1326-A9 is also in accordance with the re-scheduling agreed between IDBP and the appellant-Company.
5. Learned counsel for the appellants next argued that the period of the financing ended on 3-9- 1995 and, therefore, no mark-up could have been charged by IDBP subsequent to the said date.
This argument is also misconceived because the term of 10 years fixed by the agreement dated 3- 9-1985 stood modified at the request of the appellant-Company itself vide terms of rescheduling set out in IDBP's above referred letter dated 10-6-1991. As such, the appellant-Company was obliged to pay the agreed rate of return on the amount, which became overdue.
6. Learned counsel for the appellants relied on Circulars Nos,32 of 1984 and 19 of 1984 issued by the State Bank of Pakistan to argue that no mark-up on markup or penal sum could be charged during the currency of the agreed period nor could such mark-up be charged after the expiry of the period mentioned in the financing agreement. In support of his contention, learned counsel relied on the case titled Habib Bank v. Messrs Qayyum Spinning Ltd. 2001 M LD 1351.
7. It was argued by learned counsel for the appellants that IDBP had charged mark-up on mark-up which was not permissible and had also calculated penal interest by way of fine which was also contrary to the above-referred circulars and the law laid down in the case of Qayyum Spinning Ltd.
Referred to above. In order to ascertain if this contention had valid basis, the case was adjourned on 11-12-2002 to facilitate the parties in reconciling their respective accounts. On the basis of the aforesaid reconciliation, the Bank has reduced the amount of its claim from Rs,36,91,971 to Rs,31,24,000.17.
8. Learned counsel for the appellants, however, was not satisfied with the revised figure given by IDBP. He argued that the marked-up amount was the maximum liability of the appellants and because the appellant-Company had admittedly paid a sum of Rs,22,19,297 in Account No,1326-A9 and a further sum of Rs,9,26,810 in Account No,1326-C3, the appellants had discharged their entire liability towards IDBP. This contention,, we find, is misconceived. The appellant company did not adhere to the terms agreed by it for repaying the finance availed by it. The company itself sought, and was allowed, re-scheduling of the finance. The appellants agreed to repay the finance as re- scheduled. If, in fact, they had met their contractual commitments, there would have been no additional claim against them. The claim of IDBP has arisen because the appellants did not repay the finance in accordance with agreed terms.
9. It was also argued by learned counsel for the appellants that IDBP should have filed a suit for recovery immediately upon the occurrence of a default by the appellant-Company and that the claim asserted by the Bank has arisen only because the Bank delayed the filing of its suit. This contention is also not well founded. The appellant-Company through its Chief Executive Muhammad Arshad (appellant No,2) had itself approached the Bank vide letter dated 16-11-1999 with a proposal to liquidate the outstanding liability by .Taking advantage of an incentive scheme issued by the State. Bank. The proposal made by the appellant-Company was accepted by the Bank. The appellant-Company also made an initial payment of Rs,8,00,000 on 16-11-1999 but thereafter failed td meet its commitments. In these circumstances, it is not open to the appellants to argue that IDBP was at fault for not filing its suit when the appellant-Company had initially committed default in meeting its payment obligations.
10. In view of the above discussion, Regular First, Appeal No, 668 of 2001 is partly allowed and the impugned decree is modified. As a result, the amount due from the appellants is reduced to Rs,31,24,000.17 with costs.
11. As a result of the above discussion. Regular First Appeal No,675 of 2001 filed by IDBP is dismissed.