2003 C L D 1658

[Lahore]

Before Tanvir Bashir Ansari and Rustam Ali Malik, JJ

SILVER OIL MILLS (PVT.) LIMITED through Chief Executive and 13 others Appellants

Versus

Messrs UNION BANK LIMITED through Vice President and 4 others Respondents

Regular First Appeal No.3 of 2003, decided on 22nd May, 2003.

(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001) —

S.10(11) Leave to defend the suit with condition attached When the defendant fails to fulfil the conditions attached to the grant of leave to defend, the Banking Court shall forthwith proceed to pass judgment and decree in favour of the plaintiff against the defendant.

Malik Gul Hasan and Company and 5 others v. Allied Bank of Pakistan 1996 SCMR 237; Abdul Rauf Ghouri v. Mrs. Kishwar Sultana 1999 SCMR 929; Abdul Karim Jaffarani v. U.B.L. and 2 others 1984 SCMR 568 and General Investment Limited v. Dubai Bank Limited 1984 SCMR 634 ref.

(b) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001) —

Ss.22 & 10 Appeal Appellants cannot be permitted to re agitate the same question in appeal which has been effectively dealt with in their appeal filed earlier.

S.10 Civil Procedure Code (V of 1908), O.XXXVII, R.3(2) Leave to appear and defend suit Banking Court upon application by defendant is fully competent to grant leave to appear and defend the suit either unconditionally or subject to such terms as it thinks fit Such discretion to grant leave conditionally or unconditionally is left to the Court itself as contemplated under O.XXXVII, R.3(2), C.P.C. Discretion so exercised is not to be interfered with lightly unless it is shown that the same was exercised in a fanciful or arbitrary manner.

(d) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)

Ss.22 & 10 Appeal Decree, in the present case, had been passed in favour of the Bank not on the basis of a trial before the Banking Court, but in consequence of failure of the appellants to fulfill the conditions imposed upon them by the Banking Court Contention of the appellants that as the High Court had dismissed the appeal as being incompetent, the other findings contained in the said judgment would be inconsequential qua the rights of the parties, was a feeble attempt to wriggle out of the effects of the said judgment.

Dad Muhammad v. Qazi Muhammad Hayat 1996 CLC 1705 distinguished.

(e) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)

S.10 Bank had filed suit for recovery of Rs.85,246,891 ¬Defendant having failed to fulfil the conditions attached to the order of leave to appear and defend the suit, the suit was liable to be decreed in toto Banking Court, while decreeing the suit had passed a decree in the lesser sum which was not in accord with its earlier order High Court modified the judgment and decree of the Banking Court to be in the sum of Rs.85,246,891 with costs which was the total claim of the Bank.

Zulifiqar Khalid Maluka for Appellants.

Syed Iqbal Haider for Respondent No.1.

Date of hearing: 21st May, 2003.

JUDGMENT

TANVIR BAHSIR ANSARI, J. This regular first appeal is directed against the judgment and decree dated 25 11 2002 passed by the learned Banking Court in C.O.S. No.4 of 2001.

2. The facts are that Messrs Union Bank Limited respondent No.1 filed Suit No.4 of 2001 for recovery of an amount of Rs.8,52,46,891 alongwith mark up and costs before the learned Banking Court. The appellants filed an application for leave to defend the suit. As the original suit was filed under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, the appellants, upon the enactment of the Financial Institutions (Recovery of Finances) Ordinance, 2001 amended his application for leave to defend as provided under section 10 ibid. The application was considered and decided by the learned Banking Court vide order dated 3 1-2002. It was held that financial facility extended to the appellants/defendants by the plaintiff/ respondent No.1 was not denied. After considering the material on the record and in’ view of the nature of the controversy raised by the appellants, leave to appear and defend the suit was granted to the appellants/ defendants subject to the furnishing of cash security or Bank guarantee to the tune of Rs.7,10,39,076 to the satisfaction of the said Court. It was directed that failing the performance of the condition the suit shall be deemed to be decreed for the total claim of the plaintiff.

3. The appellants preferred an appeal against the said order dated 3 1 2002 and challenged the condition of furnishing cash security or Bank guarantee in the amount of Rs.7,10,39,076. The operation of the said order was suspended to the extent of the aforementioned condition by a Division Bench of this Court vide order dated 29 1 2002: The appeal was admitted to regular hearing on 24 4 2002. The respondent Bank challenged the order dated 24 4 2002 by filing C.P.S. L.A. No.1271 of 2002 before the Supreme Court. The petition for leave to appeal was dismissed on 18 9 2002 but with a direction that the appeal pending in this Court shall be disposed of within a period of six weeks.

It was further observed that the question as to whether leave to appear and, defend should have been granted by imposing a condition as has been done by the learned Single Judge by means of order dated 3 1 2002 can be dilated upon and decided by this Court in the light of the principles as enunciated by the Honourable Supreme Court in various decided cases.

4. Upon remand, the appeal was taken by a learned Division Bench of this Court. The merits of the conditions for leave to appear and defend were dilated upon and discussed in detail after hearing both the parties. It was held (with reference to the order dated 3 1 2002) that ” the impugned order is in accord with section 10(8) read with section 10(9) of the said Ordinance, 2001″. With reference to the contention then raised before the Court that the condition was harsh and that the grant of leave under such a condition would render the permission as illusory and ineffective, it was found as under:

“We have gone through the impugned order (dated 3 1 2002) alongwith the learned counsel for the parties as well as the application filed for grant of leave to defend. Having gone through the said documents we find that the factum of availing the finance was not denied. Similarly, the matter of securing the loan by mortgages and guarantees was also not denied. However, it was stated that the documents being relied upon by the respondent Bank did not represent the true state of affairs.”

5. It was concluded by their Lordships in the said judgment as under:

“We do find that in the said facts and circumstances of the case, the imposition of the condition cannot be held to be illegal or improper on the touchstone of the ratio of any of the judgment quoted by their Lordships (of the Supreme Court) for our guidance.”

6. It was in addition to these findings on merits that the learned Division Bench further held that appeal was also not competent in view of section 22(6) of the Ordinance of 2001. Resultantly, the appeal (Regular First Appeal No. 19 of 2002) was dismissed vide judgment dated 29 10 2002.

7. During the course of his submissions the learned counsel for the appellants stated that a petition for Special Leave to Appeal No.2159 of 2002 was filed by the appellants against the aforesaid judgment dated 29 10 2002. The said petition for leave to appeal was however, withdrawn by the appellants. The effect of the withdrawal shall be to clothe the judgment dated 29 10 2002 with finality.

8. The case came up before the learned Single Judge of this Court on 25 11 2002 when it was found that the appellants have not fulfilled the conditions of depositing cash or Bank guarantee as, directed in the leave grant order dated 3 1 2002. On account of this failure, the learned Single Judge correctly invoked the provisions of section 10(11) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and proceeded to pass a judgment and decree in the sum of Rs.7,10,39,076 with future mark up in favour of the respondent Bank against the appellants. In terms of the said judgment and decree, the appellants/defendants were liable to deposit the decretal amount in Court within 30 days failing which the proceedings before the learned Single Judge shall stand converted into execution proceedings.

9. Mr. Zulfiqar Khalid Maluka, Advocate for the appellants contended that on the basis of cogent and plausible defence made by the appellants before the learned Banking Court/ Single Judge of this Court, the appellants were entitled to an unconditional grant of leave to defend. He referred to the case of Malik Gul Hasan and Company and 5 others v. Allied Bank of Pakistan 1996 SCMR 237 to contend that in similar situation, only the demand of security would have met the ends of justice. The learned counsel for the appellants, further placed reliance on the case of Abdul Rauf Ghouri v. Mrs. Kishwar Sultana 1999 SCMR 929 to urge that in such cases it is appropriate to grant leave on condition of furnishing any solvent security to the satisfaction of the trial Court. He also referred to the rule laid down in Abdul Karim Jaffarani v. U.B.L. and 2 others 1984 SCMR 568 for the proposition that imposition of a harsh condition would in circumstances amount to rendering grant of leave to defend illusory. The learned counsel for the appellants was also at pains to contend that the Court while granting leave may accept the security which was furnished by the defendant at the time of obtaining loan if the Court is of the view that the same is sufficient to cover the amount/ claimed. Relying upon the case of General Investment Limited v. Dubai Bank Limited 1984 SCMR 634, he urged that in suitable cases, it is appropriate to remand the matter to the learned Banking Court for examining sufficiently and adequacy of the value of the mortgaged security vis a vis the amount claimed.

10. The learned counsel for the appellants challenged the filing of the suit itself on the ground that the plaint was deficient in necessary particulars as it was not accompanied by a certified copy of the statements of accounts which was obligatory under section 9(2) of the Financial Institutions Ordinance, 2001. He referred to section 9, subsection (2) which reads as under:

“9(2). The plaint shall be supported by a statement of accounts which in the case of a Financial Institution shall be duly certified under the Bankers Books Evidence. Act, 1891 and all other relevant documents relating to the grant of Finance. Copies of the plaint, statement of accounts and other relevant documents shall be filed with the Banking Court in sufficient numbers so that there is one set of copies of each defendant and one extra copy.”

Regarding the binding value of the judgment dated 29 10 2002 passed by a learned Division Bench of this Court in Regular First Appeal No.19 of 2002, it was contended that as the learned Division Bench had found that the appeal was incompetent under section 22(b) of the Ordinance, 2001, any other findings contained in the said order would not be binding upon the parties.

11. On the other hand, Syed Iqbal Haider, Advocate for respondent No.1 has strongly supported the judgment and decree passed by the learned Banking Court/Single Judge of this Court dated 25 11 2002. He contended that upon facts and circumstances of each case it is the discretion of the learned Banking Court to grant permission to appear and defend either unconditionally or subject to such conditions as are deemed fit by it. Such discretion having been exercised and also upheld in appeal, it was not open to challenge the same in the present proceedings He further contended that in terms of the order dated 3 1 2002, the learned Banking Court/learned Single Judge had directed that if the defendant failed to fulfill the conditions of the said orders, the suit shall be deemed to be decreed for the total claim of Rs.85,246,891 with costs. According to him, the decree dated 25 11 2002 is liable to be amended accordingly.

12. Arguments have been heard and record perused.

13. The relevant facts are that Messrs Union Bank Limited advanced financial facilities to the appellants between 1994 to 2000 and upon the violation of the appellants to discharge their financial liability filed a suit for recovery of Rs.85,246,891 alongwith mark up and costs under Act XV of 1997. The appellants filed an application for leave to appear, and defend. The said application was accepted by the Banking Court/learned Single Judge vide order dated 3 1 2002 subject to the condition that the appellants/defendants shall furnish cash security or Bank guarantee in the sum of Rs.71,039,076 to the satisfaction of the said Court within a period of one month. It was further held that in the event of the failure of the appellants/defendants to comply with the same, the suit shall be deemed to be decreed for the total claim of Rs.8,52,46,891 with costs etc.

14. The appellants, felt aggrieved of the aforesaid condition. The Regular First Appeal No.19 of 2002 was filed which was admitted to regular hearing by a learned Division Bench of this Court on 24 4 2002. Earlier on 29 1 2002 while dealing with C.M. No.1210 C of 2002 in R.F.A., the order dated 3 1 2002 was temporarily suspended and the appellants were allowed to furnish surety bonds instead of the condition as laid down in the order dated 3 1 2002. The order dated 24 4 2002 was challenged by the respondent/Bank before the Honourable Supreme Court. Vide order dated 18 9 2002 the petition for leave to appeal was dismissed and the case was remitted to the Division Bench of this Court with the observation that the questions as to whether leave to appear and defend should have been granted by imposing the condition as has been done by the learned Single Judge by its order dated 3 1 2002 may be dilated upon and decided by this Court in the light of principles as enunciated in the various judgments rendered by the Honourable Supreme Court upon the subject. The Regular First Appeal No.19 of 2002 was thereafter taken up by the learned Division Bench of this Court which decided the same vide order dated 29 1 2002, wherein, it was held that leave grant order dated 3 1 2002 was in accordance with law. It was also held that keeping in view the guidelines as laid down by the Honourable Supreme Court that the conditions laid down by the Banking Court/learned Single Judge were neither harsh nor did they render the permission to defend merely illusory. Regular First Appeal No. 19 of 2002 was thus dismissed.

15. We have also noticed that against this judgment, the appellants preferred C.P.L.A. No.2519 of 2002 which was admittedly withdrawn.

16. The proceedings taken thereafter by the Banking Court on 25 11 2002 were merely consequential in nature. According to section 10(11) of the Financial Institutions (Recovery of Finances) Ordinance 2001 where a defendant fails to fulfill the conditions attached to the grant of leave to defend, the Banking Court shall forthwith proceed to pass judgment and decree in favour of the plaintiff against the defendant.

17. The instant appeal raises the same questions which have been effectively answered, and decided by a learned Division Bench of this Court vide judgment dated 29 10 2002 passed in Regular First Appeal No.19 of 2002. The only remedy available to the appellants against the findings as contained in the judgment dated 29 10 2002 was to file an appeal before the Honourable Supreme Court which in fact was filed and then withdrawn. Upon no principle of law can the appellants be permitted to re agitate the same question before us which has been effectively dealt with in their appeal filed earlier.

18. It is trite law that Banking Court upon application by a defendant is fully competent to grant leave to appear and defend the suit either unconditionally or subject, to such terms as it thinks fit. Such discretion to grant leave conditionally or unconditionally is left to the Court itself as contemplated under Order XXXVII, rule 3, sub clause (2), C.P.C. Discretion so exercised is not to be interfered with lightly unless it is shown that the same was exercised in a fanciful or arbitrary manner. Nothing has been indicated from the record to suggest this position.

19. We are also not overly impressed by the submission made by the learned counsel for the appellants that the case is liable to be remanded to the learned Banking Court to decide whether the existing security in the shape of mortgage etc. was sufficient or not. The attempt made by the learned counsel to make submissions on merits either of the case of the plaintiff or the case of the appellants themselves is quite futile in the circumstances of the case. As stated hereinbefore, the decree has been passed in favour of the respondent Bank not on the basis of a trial before the learned Banking Court. Instead it was passed as a consequence of the failure of the appellants to fulfill the conditions imposed upon them by the learned Banking Court. The submission of the learned counsel for the appellants that as the learned Division Bench of this Court in its judgment dated 29 10 2002 had dismissed the appeal as being incompetent, the other findings contained in the said judgment, shall be inconsequential qua the I rights of the parties is a feeble attempt to wriggle out of the effects 6f the said judgment. The reliance placed upon the case of Dad Muhammad v. Qazi Muhammad Hayat 1996 CLC 1705 is not apt. We have also taken note of the fact that the respondent Bank had filed a suit for recovery of a sum of Rs.85,246,891. In terms of the order dated 3 1 2002, the suit of the plaintiff Bank was liable to be decreed in toto in case the appellants/ defendants failed to comply with the conditions imposed therein. The learned Banking Court while decreeing the suit has passed a decree in the sum of Rs.7,10,39,076 only which is not in accord with its earlier order.

20. The upshot of the above discussion is that we find no merit in this appeal which is dismissed. While dismissing the same we however, modify the judgment and decree dated 25 11 2002 to be in the sum of Rs.85,246,891 with costs which is the total claim of the Bank, as contemplated in the order dated 3 1 2002 passed by the Banking Court. The parties shall bear their own costs.

M.B.A./S 688/L Order accordingly.