' SYED JAMSHED ALI, J.---The judgment and decree dated 12-3-1998 passed by the Banking Court-II, Faisalabad have been assailed in this appeal. It arises out of the following circumstances.
2. On 22-6-1995 the respondent-Bank filed a suit for the recovery of an amount of Rs.26,46,429.00 alongwith liquidated damages. It was averred that appellant No,1, a firm through its partners i.e. Respondents 2 and 3 applied for financial accommodation by way of running finance which was sanctioned for the first time on 16-8-1990 in the sum of Rs.75,000 with 45 Paisas per Rs.1,000.00 per day as the markup. The facility was renewed from time to time and the last renewal was made on 25-11-1993 for a sum of Rs.23,00,000.00 and apart from the finance agreement the appellants executed letter of continuity, personal guarantee of appellant No,2 and equitable mortgage by appellant No,2 followed by registered mortgage deed on 29-12-1993. And on the date of suit an amount Rs.26,46,429 was outstanding against the appellants. This included, apart from the principal amount, mark-up for the period from 25-11-1993 to 26-1-1995. An additional amount of 20% was also claimed by way of liquidated damages. On 27-8-1995, the appellants filed reply to the show-cause notice in which the claim of the respondent-Bank including the mark-up was disputed, the authority of the person instituting the suit on behalf of the bank was also questioned.
The learned Banking Court-II, Faisalabad, vide judgment and decree dated 12-3-1998 not only disallowed the application for leave to appear and defend but also decreed the suit in the sum of Rs.23,92,050.00. The liquidated damages claimed by the bank and mark-up for the period from 1- 7-1994 to 26-1-1995 was however, also disallowed.
3. The learned counsel for the appellants contends that a facility of Rs.15,00,000.00 was extended to the appellants with a mark-up of Rs.45 Paisas per Rs.1,000 per day and even according to the calculation of the respondent-Bank the total amount including the principal amount due from the appellants was Rs. 18,50,000.00 although he contends that the amount of mark-up on Rs.15,00,000.00 was Rs.2,46,375.00. Further, even if the total liability under the initial agreement dated 16-8-1990 was taken to be Rs.18,50,000.00 the appellants had paid more than an amount of Rs. 14,00,000.00 and, therefore, the suit of the respondent-Bank could not be decreed for an amount of Rs.2, 392,050.00. He submits that the statement of accounts submitted by the bank alongwith the suit was not duly certified and in any case it was not complete. It only covered the period from 25-11-1993 to 1-11-1994 only. The object thereof was to suppress payments made by the appellants to discharge their liability. He invited our attention to the letters of the bank dated 17-12- 1991, 30-12-1992 and 25-11-1993 according to which the bank of its own, has been renewing the facility and enhancing the limit or altering the rate of mark-up and these letters specifically recite that the renewal and enhancement of the facility was for the purpose of adjustment only. He maintains that the appellants had never availed the enhanced facility of 2.3 Million. According to him, even the renewal of the facility did not entitle the respondent-Bank to claim anything over and above the amount agreed between the parties by virtue of the agreement dated 16-8-1990. He contends that even with the finding in the judgment of the learned trial Court a case was made out for the grant of leave. He submits that the appellants had accepted availing of the facility under the agreement dated 16-8-1990 but had never accepted the claim of the respondent-Bank in the suit as erroneously assumed by the learned trial Court. He next contended that the suit was instituted through Mr. Tariq Hameed, in whose favour the power of attorney was executed by the Managing Director who was not competent to do so and it was only the Board of Directors who could appoint and constitute a valid attorney to act on behalf of the respondent-Bank. He submits that the bye-laws were not even produced on the record in support of the plea that the Managing Director of the Bank could competently appoint Mr. Tariq Hamid as an attorney of the Bank.
According to him the suit, not having been filed through a duly constituted attorney, was liable to be dismissed on the said score.
4. On the other hand, the learned counsel for the respondent-Bank submits that apart from the agreement dated 16-8-1990, the appellants had executed agreement dated 25-11-1993 in which they accepted their liability to pay back an amount of Rs.28,41,420.00 to the respondent-Bank and to secure the said amount, a mortgage deed was executed on 26-12-1993, registered in the office of the Sub-Registrar on 27-12-1993 and on 26-12-1993 a memorandum of deposit of title deeds was executed in which they had accepted their liability under the finance agreement dated 25-11-1993 and in the letter of hypothecation executed on 25-11-1993, the appellants admitted their liability to the tune of Rs.28,41,420.00. He further submits that although with the plaint, a duly certified copy of the statement of accounts was not appended yet during the proceedings of the suit a duly certified copy of the statement of account was submitted which we found on the record.
5. When confronted with the finance agreement dated 25-11-1993 and the documents executed by the appellants by way of security the contention of the learned counsel for the appellants was that since the appellants were debtors, these documents were got executed by the respondent-Bank under duress and coercion.
6. We have considered the submissions made by the learned counsel for the parties. In the impugned judgment of the learned Banking Court-II, Faisalabad the paragraphs are not numbered. However, at page 2 of the judgment the learned Banking Court recorded the following observations while rejecting the application of the appellants for leave to defend:-- "I have gone through the application (reply to show-cause notice). As a whole if read, it transpires that availing of the loan facility is admitted and the charge documents have been executed in between the parties. The allegations of the defendants are mere bald allegations and if the statement of account sustains with errors and entries made therein, are beyond the scope of loan agreement despite defendants have failed to make out a plausible defence. Since the availing of loan facility is not clearly denied. It is not reasonable to delay the matter for further period because ultimately the Court will arrive at that in between the parties documents have been executed and facility of loan has been availed. Therefore, application for leave to defend (reply of show-cause notice) is rejected accordingly."
7. We have also noted that the learned Banking Court allowed an adjustment of a sum of Rs.1,13,300.00 to the appellants which, according to the statement of accounts, had been paid by the appellants to the respondent from 1-12-1993 to 26-1-1994. We have also noticed that complete statement of accounts from the date of the agreement i.e. 16-8-1990 till the date of the filing of the suit was not placed on the record by the respondent-Bank. Its withholding by the respondent-Bank was significant. Since it was a facility based on mark-up, the respondent-Bank was not entitled to claim anything in excess of Rs.28,41,420.00 referred to as the purchase price in the agreement dated 25-11-1993. Therefore, the appellants were only liable to pay the said amount after taking into consideration the payments made by them from the date of availing of the facility till the institution of the suit. Unfortunately, this exercise was not done by the learned Banking Court nor it can be done by us in the absence of complete statement of accounts from the date of the first agreement.
8. The Bank of Punjab was created by virtue of Punjab Act No,XII of 1989. The general superintendence and direction of the affairs and the business of the bank has been entrusted to the Board under section 9 thereof. The said Board has been constituted under section 10. Section 11 thereof contemplates appointment of. a Managing Director by the Government. According to subsection (3) of section 11 the Managing Director of the bank is the Chief Executive Officer and subject to bye-laws in this behalf direct and control on behalf of the Board the affairs of the bank.
Section 25 contemplates the powers of the Board to make bye-laws. Clause (XXIX) of the said section provides for "the conduct, institution and defence of legal proceedings and the manner of signing pleadings".
9. From the perusal of the above provisions, it prima facie appears that the Managing Director, although empowered to direct and control the affairs of the bank but is not empowered to constitute someone as attorney to act on behalf of the bank. The question was therefore, required to be examined in further details with reference to the bye laws, if any, framed under section 25 of the said Act. Therefore, even to this score, a case was made out for the grant of leave to appear and defend to the appellants.
10. For what has been stated above, we are of the view that the appellants are bound by the finance agreement dated 25-11-1993 but their liability does not exceed the purchase price mentioned therein i.e. Rs.28,41,420.00 and they will be entitled to the claim adjustment of all the sums paid to the respondent-Bank from the date of original agreement i.e. 16-8-1990. Therefore, the quantum of liability of the appellants is to be worked out on that basis on receiving the evidence from the parties particularly the complete statement of accounts.
11. We allow this appeal, set aside the impugned judgment and decreed dated 12-3-1998 of the learned Banking Court and allow the application of the appellants for leave to appear and defend specifically on two questions :--
(i) The quantum of liability of the appellants and,
(ii) Whether the suit was instituted by a duly authorized person.
(iii) While determining the first question the learned Banking Court shall keep in view the observations made in this judgment. No order as to costs.