The Financial Institutions (Recovery of Finance) Ordinance, 2001 (Relevant Procedures and Case Law)The Financial Institutions (Recovery of Finance) Ordinance, 2001 (Relevant Procedures and Case Law)

Josh and Mak International effectively caters to the needs of both financial institutions and borrowers, ensuring comprehensive legal support in the specialized field of banking litigation and finance recovery under Pakistani law.Our services include but are not limited to the following:

  1. Banking Litigation Services: Representing financial institutions and borrowers in suits filed under the Financial Institutions (Recovery of Finances) Ordinance 2001. This includes initiating suits for recovery of finances on behalf of banks, as well as defending borrowers against such claims.
  2. Legal Consultancy on Documentation and Compliance: Advising banks and financial institutions on proper documentation, compliance with mandatory provisions of the Ordinance, and ensuring adherence to the Bankers’ Books Evidence Act, 1891. This is critical for the success of suits for recovery under the Ordinance.
  3. Defence Strategy Formulation for Borrowers: Assisting borrowers in formulating defence strategies in cases filed under the Ordinance. This includes analyzing the sufficiency of evidence provided by financial institutions and advising on grounds for obtaining leave to defend.
  4. Execution and Enforcement of Decrees: Offering services related to the execution of decrees issued by Banking Courts, including the execution of mortgage decrees and the sale of mortgaged property. This also encompasses advising on compliance with the procedural aspects under the Ordinance and the CPC.
  5. Appellate Proceedings: Assisting clients in appellate proceedings under Section 22 of the Ordinance. This includes advising on issues of limitation, the procedure for filing appeals, and representing clients in appellate tribunals.
  6. Advisory Services on Jurisdictional Issues: Providing guidance on jurisdictional aspects and determining the appropriate forum for resolution of disputes under the Ordinance and related laws.
  7. Mediation and Settlement Services: Facilitating out-of-court settlements and negotiations between borrowers and financial institutions, in line with the principles of natural justice and fair play.
  8. Training and Workshops: Conducting training sessions and workshops for financial institutions and legal professionals on the nuances of the Financial Institutions (Recovery of Finances) Ordinance 2001, the CPC, and related statutes.
  9. Legal Opinions and Research: Preparing legal opinions and conducting research on complex legal issues arising under the Ordinance and its intersection with other legal frameworks.
  10. Review and Drafting of Loan Agreements: Reviewing and drafting loan agreements and related security documents to ensure compliance with legal requirements and to safeguard the interests of financial institutions.

Features of Financial Institutions (Recovery of Finance) Ordinance, 2001

The Financial Institutions (Recovery of Finance) Ordinance, 2001, encompasses a broad spectrum of financial recoveries. This includes, but is not limited to, loans and finances based on interest or markup, lease financing, credit cards, letters of credit, both long-term and short-term finance certificates, and various forms of consumer financing such as housing and investment finance. It is crucial to recognize that this ordinance represents a Special Law, distinct from general law, and thus takes precedence in matters specifically addressed within its scope.

Establishment of Banking Courts

The Banking Courts, situated at Divisional Headquarters, have a pecuniary jurisdiction for recovery suits up to Rs.5 Crores. In cases where the claim exceeds this amount, a High Court judge, directed by the Chief Justice of the relevant High Court, assumes jurisdiction as a Banking Court. This arrangement does not fall under the original jurisdiction of the High Court or its original civil jurisdiction. Notably, both financial institutions and customers can initiate suits against each other for any breach of contractual terms.

Powers of the Banking Court

Under Section 7 of the Ordinance, Banking Courts are vested with the powers of both a civil court (as per the Civil Procedure Code) and a criminal court (as per the Criminal Procedure Code). They have the authority to summon witnesses and enforce contempt of court provisions, as well as other legal powers stipulated in the law.

Procedure of the Banking Court

  1. Plaint: As outlined in Section 9 of the Ordinance, the plaint filed by a Financial Institution must include details like the total loan amount, payments made, and the outstanding balance. It must be signed by an authorized representative holding a valid power of attorney. Relevant case laws, such as 2004 CLD 587 (CM. Textiles vs. I.C.P.), provide further guidance on this aspect.
  2. Statement of Account: The plaint must be supported by a certified ‘Statement of Account’ as per the Bankers Books Evidence Act. The authenticity of this statement is generally presumed, but can be contested by the defendant with substantial evidence. Case laws including 2004 CLD 937 and others offer insights into the admissibility and correctness of these statements.
  3. Special Law Considerations: The special nature of this banking law implies that its provisions override general laws on the same subject. However, in areas where the banking law is silent, general laws, whether civil or criminal, apply.
  4. Service of Defendant: Upon acceptance of the plaint, the court issues notices to the defendant through various means, including court bailiffs, registered letters, courier services, and newspaper proclamations. The notice format is a show cause notice, demanding an explanation from the defendant against the issuance of a decree. Relevant case laws, such as PLD 1990 SC. 497 and others, provide guidance on valid service.
  5. Petition for Leave to Appear & Defend: Defendants must file a petition within 30 days of the first notice, as per Section 10 of the Ordinance, to contest the suit. Failure to do so allows the court to pass a decree in favor of the plaintiff. Case laws like 2004 CLD 1227 and 1999 SCMR 2353 are pertinent in this context.

Dishonouring of a Cheque

Under Sect. 20(4) of the Ordinance, the dishonouring of a cheque intended for loan repayment is a bailable offense, punishable by up to one year in prison, a fine, or both. If the cheque is issued in a private transaction, different legal provisions under the Pakistan Penal Code and the Civil Procedure Code apply.

Nature of Securities

Banks typically secure loans through various forms of collateral, including property mortgages, pledges of shares, hypothecation agreements, personal guarantees, and floating charges.

Difficulties in Realization of Due Amounts

Challenges in recovering due amounts include overvaluation of securities, depreciation of assets, difficulty in finding serious buyers, and potential defective titles.

Appeal

Decrees passed by Banking Courts can be appealed in the High Court within 30 days. Further appeals can be made to the Supreme Court. The Banking Crimes Court in Lahore has jurisdiction over banking crimes involving bank employees, customers, and debtors.

Checklist of Loan Documents

The documentation process is divided into three parts: borrower’s documents, finance documents, and security documents. Each category encompasses specific requirements, such as legal agreements, resolutions, personal guarantees, and relevant certificates.

Takeaways

The primary focus of Financial Institutions under this ordinance is the efficient recovery of outstanding dues. The ordinance provides robust mechanisms for this purpose, though instances of bad debts often arise from imprudent lending practices and inadequate security measures.

The key takeaways on the Features of Financial Institutions (Recovery of Finance) Ordinance, 2001, are as follows:

  1. Broad Scope of the Ordinance: The Ordinance applies to a wide range of financial recoveries, including various types of loans and finances, credit instruments, and consumer financing.
  2. Special Law Status: It is a Special Law, which means it takes precedence over general laws in areas specifically addressed by the Ordinance.
  3. Banking Courts: Established with specific pecuniary jurisdiction, Banking Courts at Divisional Headquarters handle recovery suits up to Rs.5 Crores. For higher amounts, a High Court judge presides over the case.
  4. Dual Powers of Banking Courts: Banking Courts are endowed with the powers of both civil and criminal courts, allowing them to address a wide range of legal matters.
  5. Procedural Requirements: The Ordinance outlines specific procedures for filing plaints, including requirements for statements of account and valid power of attorney. Relevant case laws provide additional guidance.
  6. Dishonouring of Cheques: Different legal provisions apply depending on whether the dishonoured cheque is part of a transaction involving a financial institution or a private dealing.
  7. Nature of Securities: The Ordinance details various forms of securities that banks can use, including mortgages, pledges, hypothecation, and personal guarantees.
  8. Recovery Challenges: Identifies challenges in recovering dues, such as overvaluation of securities, asset depreciation, and potential legal disputes over property titles.
  9. Appeal Process: Decisions of Banking Courts can be appealed in the High Court and potentially in the Supreme Court. The Ordinance also addresses banking crimes and their jurisdiction.
  10. Loan Documentation Checklist: Provides a comprehensive checklist for loan documentation, categorizing them into borrower’s documents, finance documents, and securities.
  11. Focus on Efficient Recovery: The Ordinance aims to facilitate efficient recovery of dues by financial institutions, highlighting the importance of prudent lending practices and adequate security measures.

These takeaways encapsulate the fundamental aspects and implications of the Financial Institutions (Recovery of Finance) Ordinance, 2001, providing a clear overview of its scope, procedures, and impact on financial recoveries in Pakistan.

Relevant Laws : 

Financial Institutions (Recovery of Finances) (Amendment) Ordinance 2001
Financial Institutions (Recovery of Finances) Adaptation and Enforcement Order 2001
Financial Institutions (Recovery of Finances) Ordinance 2001
Financial Institutions (Secured Transactions) (Amendment) Ordinance 2020

Rules :
Banks and Financial Institutions (Efficiency and Discipline) Rules 1975
Financial Institutions (Recovery of Finances) Rules 2018

Based on the analysis of the selected recent case law below , several key takeaways emerge regarding the application and interpretation of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance), and its interplay with the Civil Procedure Code (CPC) and other relevant statutes.

These takeaways provide valuable insights for legal practitioners, particularly in the context of banking litigation:

  1. Streamlined Procedures for Banking Suits: The judgments consistently emphasize that suits under the Ordinance follow a streamlined and expedited procedure. This is particularly evident in cases focusing on Sections 9 and 10 of the Ordinance, which mandate a restricted scope of inquiry limited to the amounts claimed or disputed and the facts supporting these amounts.
  2. Mandatory Nature of Provisions: The courts have underscored the mandatory nature of specific provisions of the Ordinance, particularly those relating to the filing and adjudication of suits. This highlights the strict compliance required by financial institutions and defendants in banking litigation.
  3. Role of Documentation and Evidence: The importance of proper documentation, especially the certified copy of the statement of accounts as per the Bankers’ Books Evidence Act, 1891, is a recurring theme. Courts have shown readiness to grant leave to defend in cases where financial institutions fail to meet these documentary requirements.
  4. Applicability of the CPC: While the Ordinance provides a specialized framework for banking litigation, the CPC remains applicable in certain aspects, such as in the context of attachment before judgment (Order XXXVIII, Rule 5). However, the Ordinance’s provisions take precedence where there is a specific mechanism provided, particularly in appellate procedures.
  5. Limitation and Condonation of Delay: The judgments provide clarity on the computation of limitation periods for appeals under Section 22 of the Ordinance and the application of the Limitation Act. The courts have been stringent in applying limitation rules, emphasizing the need for timely legal action.
  6. Scope of Banking Court’s Authority: The case law illustrates the extent of the Banking Court’s authority, particularly in matters related to the sale of mortgaged property and execution of decrees. The Banking Court’s role in ensuring transparency and due process in such sales is highlighted.
  7. Jurisdictional Aspects: The judgments also touch upon jurisdictional issues, such as in the context of the Banking Tribunals’ Ordinance, demonstrating the nuanced approach required in determining the appropriate forum for banking disputes.
  8. Principles of Natural Justice and Fair Play: Despite the streamlined nature of procedures under the Ordinance, the courts have ensured that the principles of natural justice and fair play are upheld. This is evident in cases where leave to defend is granted to ensure that defendants have an opportunity to present their case.

These takeaways reflect a judicial approach that balances the need for expeditious resolution of banking disputes with the principles of justice and fairness. They offer guidance on navigating the complexities of banking litigation under the Financial Institutions (Recovery of Finances) Ordinance, 2001, and its interplay with other legal frameworks.

A Review of Recent Cases :

 2023 SCMR 890 (Supreme Court) & 2023 CLD 589 (Supreme Court)

Case Summary: Both cases involve Kauser Parveen and KASB Bank, with the co-owners of mortgaged property alleging fraud and objecting to the bank’s auction.

Legal Findings: Section 19 of the Ordinance confers authority on the bank to sell mortgaged properties upon a Banking Court’s decree. Notably, the Banking Court isn’t bound to adhere to Order XXI of the Civil Procedure Code (C.P.C.), allowing flexibility in executing decrees. These cases illustrate the Ordinance’s strength in empowering banks to execute decrees without stringent adherence to C.P.C. procedures.

2023 CLD 247 (Quetta High Court, Balochistan)

Case Summary: Sabir Traders’ appeal against the National Bank of Pakistan was dismissed due to non-compliance with the procedural requirements of the Ordinance.

Legal Findings: The judgment underscores the strict compliance required under Sections 22(1), (2) of the Ordinance, especially concerning statutory limitations and notice requirements. The interplay with the Limitation Act emphasizes that the special law (the Ordinance) takes precedence over general laws.

 2023 CLD 329 (Peshawar High Court)

Case Summary: Kamran Filling Station vs. Habib Bank Limited highlighted the mandatory provisions of Section 10 of the Ordinance regarding the borrower’s obligations.

Legal Findings: The decision emphasizes the Ordinance’s strict requirements for borrowers to justify their loan amounts and repayments. Non-compliance can result in the rejection of a defense application and a swift decree in favor of the financial institution.

2023 CLD 1116 (Lahore High Court, Lahore)

Case Summary: Bahawalpur Cotton Company vs. United Bank Limited case revolved around the procedural aspects of the Ordinance, especially regarding leave to appear applications.

Legal Findings: The court highlighted the Banking Court’s duty under Section 10 to consider leave applications irrespective of the applicant’s appearance, showcasing the procedural rigidity of the Ordinance.

2023 CLD 1086 (Lahore High Court, Lahore)

Case Summary: Asghar Ali vs. National Bank of Pakistan questioned the Banking Court’s decree against a borrower without adequately considering the borrower’s defense.

Legal Findings: The judgment stressed the importance of a meaningful review of defenses under Section 9 and 10, ensuring fair consideration of the borrower’s arguments.

2023 CLD 1021 (Lahore High Court, Lahore)

Case Summary: S.M. Nisar and Company vs. Askari Bank involved a dispute over unaccounted payments in a loan recovery suit.

Legal Findings: This case underlines the necessity for borrowers to substantiate their claims with tangible evidence under Section 10, demonstrating the onus placed on borrowers in disputes.

 2023 CLD 995 (Lahore High Court, Lahore)

Case Summary: It focused on the procedural requirements for banks under Section 15 of the Ordinance concerning the sale of mortgaged properties.

Legal Findings: This case highlights the Ordinance’s detailed procedural requirements for financial institutions, emphasizing transparency and due process in mortgage property sales.

2023 CLD 928 (Lahore High Court, Lahore)

Case Summary: Muhammad Shahid Khan vs. Faysal Bank Ltd. dealt with the amendment of a decretal amount after the High Court’s judgment.

Legal Findings: This case illustrates the principle of finality in judicial decisions and the limits of Banking Courts under Section 27 of the Ordinance, respecting the hierarchy of judicial review.

2023 CLD 715 (Lahore High Court, Lahore)

Case Summary: Summit Bank Limited vs. OTO Pakistan (Pvt.) Ltd. concerned the legality of charging markup beyond the expiry period of an agreement.

Legal Findings: The judgment underscores the Ordinance’s scope in addressing issues of unlawful financial charges, affirming the courts’ role in scrutinizing and moderating bank claims.

2023 CLD 655 (MCB BANK LIMITED vs ADEEL SHAHBAZ STEEL MILLS):

This case underscores the primary objective of FIRO 2001: to expedite the recovery of loans from defaulting customers.

It delves into the definitions and jurisdiction of Banking Courts, established under Section 5, emphasizing their role in adjudicating matters under FIRO 2001.

The case illustrates how the Banking Courts, though governed by the provisions of FIRO 2001, default to the Code of Civil Procedure, 1908 (CPC) in scenarios where the Ordinance is silent.

2023 CLD 554 (Rana MUHAMMAD AUSAF vs HOUSE BUILDING FINANCE COMPANY LIMITED):

This case provides clarity on the concept of ‘date of default’ and its implications on the imposition of costs and mark-up.

It shows the interplay between the terms of the finance facility, the due date of payment, and the FIRO 2001 provisions, particularly in determining the appropriate charges post-default.

2023 CLD 491 (MCB BANK LIMITED vs TANVEER SPINNING AND WEAVING MILLS):

This case highlights the stringent requirements under FIRO 2001 for a defendant to be granted leave to defend in a suit for recovery of finance.

It stresses the mandatory nature of certain provisions in FIRO 2001 and the consequences of non-compliance, particularly in the context of executing and acknowledging financial agreements.

2023 CLD 404 (UZMA TAHRIM vs HABIB BANK LIMITED):

This case examines the scope of Section 11(1), especially concerning the passing of interim decrees in recovery suits.

It clarifies that interim decrees can be passed before granting leave to defend, especially when admitted amounts are due.

2023 CLD 372 (AL-BARKAT SEED CORPORATION vs SILK BANK LIMITED):

This case emphasizes the procedural rigor in the processing of applications for leave to defend.

The judgment underscores the Banking Court’s duty to promptly pass judgment and decree upon dismissal of a leave application, as per FIRO 2001.

2023 CLD 324 (MEEZAN BANK LIMITED vs Syed HASSAN MEHMOOD SHAH):

This case demonstrates the necessity for Banking Courts to decide on applications for leave to defend before proceeding to judgment, ensuring compliance with the relevant provisions of FIRO 2001.

2023 CLD 307 (MAKKAH TRADERS vs MCB BANK LIMITED):

This case delves into the specifics of ex-parte decrees under FIRO 2001, particularly in situations where defendants absent themselves during proceedings.

2023 CLD 290 (ABDUL HAQ KHAN vs BANK OF PUNJAB):

This case brings to light the importance of proper authorization in the institution and verification of a plaint under FIRO 2001, emphasizing procedural correctness.

2023 CLD 235 Lahore-High-Court-Lahore: This case illustrates the principle that disputes regarding collateral in bank loan recovery suits do not necessarily constitute a ground for granting leave to defend. The court held that the issue of a shortfall in pledged stocks would be addressed during execution proceedings, not as a defense in the loan recovery suit. The High Court’s decision to decree the suit in favor of the bank under Section 19 of FIRO 2001 underscores the robust legal framework facilitating financial institutions in recovering loans.

2023 CLD 85 Lahore-High-Court-Lahore: This case delves into the procedural nuances of executing a decree, particularly concerning public auctions under Section 19 of FIRO 2001 and CPC’s Order XXI Rules. The ruling emphasized that a bid from a single bidder does not constitute a ‘public auction’ and highlighted the court’s discretion under Order XXI Rule 90 CPC in demanding a deposit or security. The court invalidated the auction sale due to various procedural lapses, illustrating the judiciary’s commitment to ensuring fairness in execution proceedings.

2023 CLD 920 Karachi-High-Court-Sindh: This case touches upon the authority to file a suit under FIRO 2001 and the doctrine of indoor management. The court decreed the suit for recovery of finances, noting that the bank’s statement of account complied with the Bankers’ Books Evidence Act 1891, and the defendants did not dispute it significantly. The ruling underscores the principle that the authority under a Power of Attorney is recognized under Section 9 of FIRO 2001, emphasizing the importance of procedural compliance in finance recovery suits.

2023 PCrLJ 697 Karachi-High-Court-Sindh: This case provides an interesting intersection between criminal and financial law. It was held that FIRO 2001 applies when there’s a customer-financial institution relationship. The court directed police action in a scenario where pledged sugar bags were missing, signifying the application of criminal breach of trust provisions beyond the strict confines of financial disputes.

2023 CLC 1495 Karachi-High-Court-Sindh: This case involves the principle of res-judicata and its applicability in the context of property disputes and financial recovery. The court declined to reject the suit, distinguishing the present case from previous litigation. This decision illustrates the nuanced application of the doctrine of res-judicata in cases involving financial institutions and property matters.

2022 SCMR 1868 Supreme-Court: This case pertains to the commencement of the limitation period for appeals under Section 12(5) of the Limitation Act 1908 in the context of FIRO 2001. The ruling clarifies that the limitation period does not stop merely by filing an application for certified copies; payment for these copies is crucial.

2022 CLD 128 Quetta-High-Court-Balochistan: This case highlights the process of investigating wilful default under FIRO 2001 and the Financial Institutions (Recovery of Finances) Rules 2018. The court quashed a premature complaint filed by a bank for wilful default, emphasizing that such a complaint should follow after a suit’s decision and liability determination.

2022 CLD 80 Peshawar-High-Court: This case focuses on the mode of charging markup and its compliance with standard banking practices under Section 5(8) of FIRO 2001. The High Court remanded the case for a fresh decision, stressing the necessity for expert evidence in determining the legitimacy of the markup charged.

2022 CLD 1555 Lahore-High-Court-Lahore: This case deals with the issue of condonation of delay in filing an appeal under FIRO 2001. The court held that Section 5 of the Limitation Act 1908 does not apply due to the specific provision for limitation in FIRO 2001, reinforcing the principle of strict adherence to statutory time limits in financial recovery matters.

2022 CLD 1494 Lahore-High-Court-Lahore: This case addresses the filing of separate suits for different finance facilities under Section 9 of FIRO 2001. The court rejected the contention that separate suits for each facility were impermissible, emphasizing that each facility could independently trigger a cause of action.

2022 CLD 1494 (Lahore High Court) – S.G. Polypropylene (Private) Ltd. vs. Allied Bank Limited

This case emphasizes the scope and application of FIRFO 2001, especially Section 9, in conjunction with the Civil Procedure Code (CPC). The Lahore High Court clarified that the mere inclusion of CPC provisions in a suit filed under FIRFO 2001 doesn’t render the suit incompetent. It underscores the compatibility of the CPC with FIRFO 2001, except where explicitly excluded. This decision reinforces the principle that FIRFO 2001 is a specialized statute designed to expedite financial recovery by financial institutions, without completely sidelining the provisions of the CPC.

2022 CLD 1454 (Lahore High Court) – First Punjab Modaraba vs. Aftab (Pvt.) Limited

This judgment deals with Sections 19 and 22 of FIRFO 2001 and their interplay with the Limitation Act, 1908. The court highlighted the non-suspension of execution proceedings during the pendency of an appeal unless explicitly stayed. The decision emphasizes the need for financial institutions to adhere to the limitation period prescribed under the Limitation Act for executing decrees, affirming that FIRFO 2001 doesn’t inherently stay execution proceedings during an appeal. This interpretation is crucial for understanding the execution process under FIRFO 2001.

2022 CLD 1412 (Lahore High Court) – Agmore International (Pvt.) Limited vs. Bank of Punjab

This case primarily focused on Sections 9, 12, and 22 of FIRFO 2001. It dealt with the setting aside of an ex-parte decree and the obligations related to the service of process. The court held that a failure to notify a change of address, which led to the non-service of process, cannot be grounds for setting aside an ex-parte decree. This ruling underscores the importance of communication between financial institutions and customers, and it highlights the procedural rigours of FIRFO 2001 in recovery suits.

2022 CLD 1395 (Lahore High Court) – Mian Furqan Idrees vs. JS Bank Limited

This case provides insight into the liability of guarantors under FIRFO 2001, particularly Sections 9 and 22, and the Contract Act, 1872. The court held that resigning from a company’s board or transferring shares doesn’t absolve guarantors of their liabilities. The judgment highlights the comprehensive nature of guarantor liability under FIRFO 2001 and the Contract Act, emphasizing the coextensive liability of guarantors with the principal debtor.

2022 CLD 1058 (Lahore High Court) – Humayun Mirza vs. SHO, Police Station Shahpur Sadar

This case illustrates the application of Section 2(c) of FIRFO 2001 and its interaction with criminal law provisions. The court clarified that FIRFO 2001 applies where there is a customer-financial institution relationship. This case is significant for its demarcation between criminal breach of trust cases and recovery cases under FIRFO 2001, emphasizing the distinct jurisdiction and applicability of FIRFO 2001 in financial matters.

2022 CLD 1002 (Lahore High Court) – Choudhary Rice Mills vs. The Bank of Punjab

In this case, the court dealt with Section 10 of FIRFO 2001 and its interplay with the CPC. The judgment underscored the exceptional nature of granting leave to defend under FIRFO 2001, contrasting it with the CPC’s general rule. The decision stresses the stringent requirements for defendants seeking leave to defend under FIRFO 2001, highlighting the ordinance’s emphasis on expeditious recovery and curtailing frivolous defenses.

2022 CLD 892 (Lahore High Court) – House Building Finance Corporation vs. Amir Rafi

This case involved Sections 3, 9, and 22 of FIRFO 2001, focusing on the recovery of finances, including insurance charges and future rent. The court’s ruling on the applicability of cost of funds from the date of default (as per Section 3 of FIRFO 2001) rather than from the date of suit is significant. It clarifies the financial obligations of borrowers under FIRFO 2001, especially 

2022 CLD 622 (Lahore High Court) – Syed Gul Hassan Gillani vs. House Building Finance Corporation Limited

This case elucidates the application of Sections 9, 10, and 22 of FIRFO 2001. The appellant’s failure to challenge the statement of accounts or to identify any exaggeration in the principal amount or mark-up highlighted the importance of a substantial defense in FIRFO cases. The High Court’s decision to dismiss the appeal, upholding the Banking Court’s judgment, underscores the necessity for appellants to present a compelling challenge to the plaintiff’s claims under FIRFO 2001.

2022 CLD 261 (Lahore High Court) – MCB Bank Limited vs. Mushtaq and Company

This judgment involves Sections 19, 9, and 22 of FIRFO 2001, along with the Civil Procedure Code (CPC) and the Limitation Act. The case clarifies that the limitation for execution of a decree under FIRFO 2001 commences from the date of decree, irrespective of whether the decree-holder seeks court intervention. The court set aside the Banking Court’s dismissal of the execution application, noting the continuous nature of the execution process in FIRFO 2001 and the non-applicability of certain limitations from the CPC.

2022 CLD 251 (Lahore High Court) – SME Bank Limited vs. Punjab Store (Three aspects)

Mandatory Nature of Section 3: This aspect of the ruling emphasizes the obligatory nature of Section 3 of FIRFO 2001, requiring strict adherence without liberal interpretation.

Power/Duty of Banking Court under Section 3: This part of the judgment highlights that Section 3 imposes a substantive obligation on defaulting customers and empowers the Banking Court to award costs of funds as compensation.

Suit for Recovery Under Sections 3 & 9: The judgment reinstates the responsibility of the Banking Court to grant cost of funds from the date of default in cases of breach of financial obligations, highlighting the actionable nature of defaults under Sections 3 and 9.

2022 CLD 229 (Lahore High Court) – Habib Bank Limited vs. Common Traders (Pvt.) Limited

This case discusses Sections 22 and 19 of FIRFO 2001 in the context of the Limitation Act and the CPC. It demonstrates the importance of including necessary parties in appellate proceedings and adhering to limitation periods, emphasizing that an appeal becomes time-barred if a necessary party is added after the limitation period.

2022 CLD 84 (Lahore High Court) – Muhammad Saleem vs. Pak Brunei Investment Company Ltd.

This case focuses on Sections 9, 10, 7, and 22 of FIRFO 2001, along with the Court Fees Act and the Suits Valuation Act. It highlights the necessity for Banking Courts to consider the entire case, including the plaintiff’s claim and the defendant’s defense, before granting leave to defend. The judgment stresses the importance of addressing applications for leave to defend before proceeding with jurisdictional issues.

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2022 CLC 1397 (Lahore High Court) – Fact Finders (Pvt.) Ltd. vs. CNBC Pakistan

This case pertains to Section 9 of FIRFO 2001, along with Sections 7(4) and 22(3) of the same ordinance, and the Defamation Ordinance 2002. It underlines the special law nature of FIRFO 2001, prioritizing it over other ordinances like the Offences in Respect of Banks (Special Courts) Ordinance. It also clarifies that FIRFO 2001 exclusively governs insurance-related matters, while defamation suits can be filed under the Defamation Ordinance 2002.

2022 CLD 1523 (Karachi High Court) – Saeed Akhtar vs. Muslim Commercial Bank Pakistan Ltd.

In this case, Sections 2(c), 9, 19, and 22 of FIRFO 2001, along with Section 12(2) of the CPC, are examined. The judgment clarifies the scope of banking suits, emphasizing that parties not part of the original banking suit cannot challenge orders passed in such suits. This ruling delineates the limited scope of FIRFO 2001, focusing solely on disputes between customers and financial institutions regarding financial recoveries.

2022 CLD 1499 (Karachi-High-Court-Sindh):

This case highlights the importance of due diligence in mortgage processes under FIRFO. It emphasizes that a bank cannot enforce a mortgage against a property if the mortgager did not have the title at the time of mortgage. It also reflects the principles of property law where a transferor cannot confer a better title than they possess. The bank’s failure to ensure proper title and possession before accepting the property for mortgage purposes led to the court ruling against attachment of the property.

2022 CLD 1478 (Karachi-High-Court-Sindh):

Here, the court scrutinized the definition of a ‘customer’ under FIRFO. It underlined that a person cannot be treated as a customer, and hence liable under FIRFO, without clear evidence of such a relationship, such as the execution of a guarantee or being a mortgager. This decision emphasizes the importance of clear, documented financial relationships and protects individuals from being wrongfully implicated in recovery suits.

2022 CLD 118 (Karachi-High-Court-Sindh):

This ruling addresses the limitation period for the sale of mortgaged property under Section 15 of FIRFO. The court clarified that the same limitation period applicable to filing a suit for recovery (under Section 9 of FIRFO) applies to the sale of mortgaged property. This interpretation ensures consistency in the application of limitation periods across different recovery mechanisms.

2021 CLD 791 (Quetta-High-Court-Balochistan):

This case asserts that the Limitation Act’s provisions for condonation of delay do not apply to appeals filed under Section 22 of FIRFO. FIRFO being a special law with its own limitation period for filing appeals takes precedence, thus reinforcing the principle of special law overriding general law provisions.

2021 CLD 752 (Quetta-High-Court-Balochistan):

It highlights the mandatory nature of FIRFO’s provisions regarding service of notices and the obligation to file an application for leave to defend within a prescribed time. This case underscores strict adherence to procedural timelines in banking litigation.

2021 CLD 675 (Quetta-High-Court-Balochistan):

The court here emphasizes the mandatory nature of FIRFO’s requirements for an application for leave to defend. Non-compliance results in rejection, illustrating the stringent approach of the courts in ensuring compliance with FIRFO’s procedural mandates.

2021 CLD 553 (Quetta-High-Court-Balochistan):

This case brings into focus the principles of natural justice and effective service of notices as per FIRFO. The court stresses the need to ensure proper service of notices before passing ex parte decrees, integrating the doctrine of audi alteram partem (listen to the other side) with FIRFO’s procedures.

2021 CLD 468 (Quetta-High-Court-Balochistan):

Similar to 2021 CLD 791, this case reaffirms that Section 5 of the Limitation Act does not apply to appeals under FIRFO, underscoring the special nature of FIRFO and its self-contained procedural framework.

2021 CLD 25 (Quetta-High-Court-Balochistan):

This ruling deals with the mandatory requirements of FIRFO in relation to the application for leave to defend. The case underlines the courts’ strict approach in enforcing FIRFO’s procedural requirements, especially in the context of recovery suits.

2021 CLD 1418 (Peshawar-High-Court): This case underscores the importance of effective service upon defendants under Sections 9(5), 10, and 22 of the Ordinance. The court held that if service is effected in any of the modes outlined in Section 9(5), it is deemed valid. The duty of a borrower to inform the bank of any change in address was emphasized. The appeal was dismissed as the ex parte decree was considered validly decreed.

2021 CLD 1396 (Peshawar-High-Court): The case revolves around the adjudication of an application for leave to defend under Sections 10, 9, and 22. The court found that the defendants failed to substantiate their claims with evidence, such as the death certificate of one of the defendants. Therefore, the appeal was dismissed, reinforcing the principle that substantial questions of law and fact must be demonstrated for leave to defend.

2021 CLD 1345 (Peshawar-High-Court): This case dealt with the scope of Sections 9 and 22 of the Ordinance, in conjunction with the Bankers’ Books Evidence Act and the Limitation Act. It highlighted that recovery suits can be filed by a Manager in his personal capacity and that computer-generated statements of accounts are valid documents. The appeal was dismissed as the recovery suit was timely and followed due procedure.

2021 CLD 1248 (Peshawar-High-Court): The focus here was on Sections 27, 9, and 22, discussing the finality of a Banking Court’s order and its power to correct clerical or typographical errors in a decree. The court ruled that the Banking Court had rightly corrected the decretal amount, dismissing the appeal.

2021 CLD 1430 (Lahore-High-Court-Lahore): Addressing Sections 10, 9, and 22, along with the Banker’s Books Evidence Act, this case emphasized the need for proper certification of statements of account in recovery suits. The defendant’s failure to provide substantial evidence led to the dismissal of the appeal.

2021 CLD 1372 (Lahore-High-Court-Lahore): This case involved Sections 10, 9, 7, and 22, and Articles 199, 10A, and 4 of the Constitution. It highlighted the plaintiff bank’s failure to provide certified statements of account and documents relating to the disbursement of finance. The court granted leave to defend to the defendant, emphasizing the fundamental right to a fair trial and due process.

2021 CLD 1351 (Lahore-High-Court-Lahore): This case, appearing twice with the same citation, dealt with Section 302 and Section 9 of the Ordinance, focusing on the distinction between unwillingness and inability to pay debts in the context of winding up a company. It clarified that a winding-up petition cannot be used as a tool for debt recovery when there is a bona fide dispute.

2021 CLD 1220 (Lahore-High-Court-Lahore): The focus was on Section 9 and Section 7, clarifying that a Branch Manager is authorized to file a suit on behalf of a bank.

2021 CLD 1212 (Lahore-High-Court-Lahore): This case involved Sections 9(3), 10(4), 10(5), and 22(3) of the Ordinance and Order XLI, Rule 11 of the Civil Procedure Code. It emphasized the need for substantiated grounds in appeals against Banking Court decrees and dismissed the appeal for lack of substantive grounds.

2021 CLD 1418 (Peshawar High Court): Muhammad Amir Safdar vs. The Bank Alfalah Limited

Key Issues: Effective service upon defendants, ex parte decree, setting aside of.

Analysis: This case emphasizes the importance of valid service under Section 9(5) of the FIRFO. The court held that even if service is effected in any one of the modes prescribed by the Ordinance, it constitutes valid service. The case also highlights the borrower’s obligation to inform the bank of any change in address. The decision upholds the ex parte decree, underscoring the importance of compliance with notification requirements under the FIRFO.

2021 CLD 1396 (Peshawar High Court): Muhammad Karim vs. United Bank Limited

Key Issues: Application for leave to defend, substantial questions of law and fact.

Analysis: The court’s decision in this case revolves around the adjudication of substantial questions of law and fact as per Section 10 of the FIRFO. The rejection of the application for leave to defend was based on the lack of substantial evidence, such as a death certificate to support the defendants’ claims. The decision underscores the necessity for defendants to provide substantial proof to support their claims in suits filed under the FIRFO.

2021 CLD 1345 (Peshawar High Court): Irfanullah vs. Standard Chartered Bank of Pakistan

Key Issues: Limitation in suit for recovery of finances, validity of computer-generated statements.

Analysis: This case highlights the application of Section 9 of the FIRFO and the Limitation Act. It affirms the validity of computer-generated statements of account, which aligns with the modern banking practices. The court’s interpretation here is crucial for understanding how technological advancements are accommodated within the legal framework of financial recovery suits.

2021 CLD 1248 (Peshawar High Court): National Bank of Pakistan City Branch, Peshawar vs. Haroon Qayyum

Key Issues: Decree of Banking Court, finality of order, correction of decretal amount.

Analysis: This case illustrates the Banking Court’s authority under Section 27 of the FIRFO to correct clerical or typographical errors in a decree. It indicates a balancing act between the finality of the Banking Court’s orders and the need to correct genuine errors.

2021 CLD 1430 (Lahore High Court): Trust Investment Bank Limited vs. The Bank of Punjab

Key Issues: Certification of statement of account, restructuring of finance facility.

Analysis: The court’s decision focuses on the proper certification of statements of account as per the Banker’s Books Evidence Act in conjunction with the FIRFO. The decision also touches upon the implications of restructuring finance facilities and the evidentiary requirements in such scenarios.

2021 CLD 1372 (Lahore High Court): Jamal Tube (Pvt.) Ltd., Lahore vs. First Punjab Modarba, Lahore

Key Issues: Fundamental right of fair trial and due process, failure to append certified statement of account.

Analysis: This case emphasizes the mandatory requirement of filing a complete and accurate statement of account with the plaint under Section 9 of the FIRFO. It also highlights the importance of upholding the fundamental right to a fair trial and due process, as enshrined in the Constitution of Pakistan.

2021 CLD 1351 (Lahore High Court): M/s International Petrochemicals (Pvt.) Limited vs. Pakistan Industrial Development Corporation (Pvt.) Limited

Key Issues: Distinction between unwillingness and inability to pay, winding up of company.

Analysis: This case delves into the interpretation of Section 302 of the Companies Act and Section 9 of the FIRFO. The court clarified that a winding-up petition cannot be used as a tool for debt recovery when there is a bona fide dispute regarding the debt. This distinction between unwillingness and inability to pay is crucial for cases involving corporate debtors.

2021 CLD 1220 (Lahore High Court): Gohar Ayub vs. First Punjab Modarba Management Company Limited

Key Issues: Authority of Branch Manager to file suit, procedural requirements.

Analysis: The decision in this case clarifies that a Branch Manager is authorized to file a suit on behalf of the bank under Section 9 and Section 7 of the FIRFO. This aspect is important for understanding the delegation of authority within banking institutions for the purpose of litigation.

2021 CLD 1212 (Lahore High Court): Malik Tariq Mehmood vs. The Bank of Punjab

Key Issues: Grounds for appeal against Banking Court decrees, compliance with procedural requirements.

Analysis: This case emphasizes the necessity of substantiated grounds for appeals against decrees of the Banking Court, particularly under Sections 9(3), 10(4), 10(5), and 22(3) of the FIRFO, in conjunction with Order XLI, Rule 11 of the CPC. The decision highlights the stringent requirements for challenging Banking Court decisions.

2021 CLD 586 Lahore High Court: Muhammad Ismail vs. Muhammad Adil

Issue: The relationship between the FIRFO and the execution of decrees under CPC Section 47.

Analysis: This case demonstrates the Banking Court’s jurisdiction under the FIRFO. The court concluded that in cases involving financial institutions and customers, the Banking Court has exclusive jurisdiction. This finding is crucial for understanding how FIRFO overrides the general provisions of the CPC regarding execution of decrees.

2021 CLD 536 Lahore High Court: Muhammad Saee Khan vs. Judge Banking Court

Issue: The procedure for leave to defend under FIRFO Sections 9 and 10, and the Banking Court’s inherent powers.

Analysis: This case elucidates the Banking Court’s power to reject a plaint under FIRFO, emphasizing that the leave to defend is a critical aspect of the process. The decision highlights the necessity of disclosing a cause of action in the plaint and the Banking Court’s discretion to reject the plaint based on the defendant’s defenses.

2021 CLD 434 Lahore High Court: Bahawalpur Cotton Company vs. United Bank Limited

Issue: Authority to file recovery suits under FIRFO Section 9.

Analysis: This case clarifies the authority required to initiate recovery suits. It affirms that a general power of attorney suffices for the initiation of such suits, reinforcing the FIRFO’s focus on expediting financial disputes.

2021 CLD 422 Lahore High Court: M. Javed Shafi vs. Station House Officer, Police Station Shorkot City

Issue: The scope of FIRFO’s jurisdiction in criminal matters.

Analysis: The case establishes that FIRFO has jurisdiction over criminal offenses involving financial institutions and customers, thereby limiting the role of local police in such matters. It underscores the FIRFO’s overriding effect over other laws, including the Criminal Procedure Code and the Penal Code.

2021 CLD 383 Lahore High Court: Nauman Almas vs. State

Issue: Jurisdiction of the Banking Court under FIRFO for criminal offenses.

Analysis: Similar to CLD 422, this case confirms that FIRFO governs offenses related to financial institutions and their customers. The decision emphasizes the exclusive jurisdiction of the Banking Courts in these matters, thereby excluding the ordinary criminal courts.

2021 CLD 130 Lahore High Court: Decent Builders and Developers vs. Standard Chartered Bank (Pakistan) Limited

Issue: Requirements for leave to defend under FIRFO Section 10 and the necessity of producing a statement of account.

Analysis: This case highlights the bank’s obligation to provide a complete and certified statement of account with the plaint. The court’s decision to grant leave to defend based on the bank’s initial failure to meet this requirement illustrates the FIRFO’s emphasis on detailed financial documentation in recovery suits.

2021 YLR 1028 Lahore High Court: Nauman Almas vs. State

Issue: Reiterates the jurisdiction of the Banking Court under FIRFO for criminal offenses.

Analysis: This case is a reiteration of the principles laid out in CLD 383 and CLD 422, emphasizing the Banking Court’s exclusive jurisdiction in criminal matters involving financial institutions and customers.

2021 PCrLJ 787 Lahore High Court: Usman Saeed vs. Judge Accountability Court No. 3, Lahore

Issue: Jurisdiction of Banking Court versus Accountability Court under FIRFO.

Analysis: This case distinguishes between offenses under the FIRFO and those under the National Accountability Ordinance. It clarifies that FIRFO’s jurisdiction is limited to disputes between financial institutions and customers, while the Accountability Court has jurisdiction over offenses committed by public office holders.

2021 CLD 951 Karachi High Court: Muhammad Haseeb Fatani vs. Federation of Pakistan

Issue: The implication of FIRFO Section 20 in the context of Exit Control List.

Analysis: This case links FIRFO with Exit from Pakistan (Control) Ordinance, 1981. It highlights the legal consequences for individuals declared as willful defaulters or absconders under FIRFO, affecting their ability to leave Pakistan.

2021 CLD 578 Karachi High Court: Mrs. Farnaz Ahmed vs. Faysal Bank Limited

Issue: Computation of limitation period for filing an appeal under FIRFO Section 22.

Analysis: This case focuses on the procedural aspects of FIRFO, specifically the computation of the limitation period for appeals. It clarifies how the time taken for obtaining certified copies of decrees impacts the limitation period, thereby integrating FIRFO with CPC procedural rules.

2021 CLD 557 Karachi High Court: BreCast Industries (Pvt.) Limited vs. House Building Finance Corporation

This case primarily addresses Section 22 of FIRFO, concerning the appeal process in the context of interlocutory orders issued by Banking Courts. It emphasizes the legislative intent to expedite trials by restricting appeals against interlocutory orders, thereby streamlining the resolution process in financial disputes. The case reflects a balance between the efficiency of legal proceedings and the rights of the parties involved.

2021 CLD 406 Karachi High Court: Dr. Bhagwan Dass vs. Habib Bank Limited

In this case, the focus is on Sections 2(c) and 9(1) of FIRFO. The court held that only a ‘customer’ as defined under FIRFO has the standing to initiate a banking suit. This interpretation plays a crucial role in determining the parties’ rights and obligations in financial disputes, ensuring that only those directly involved can challenge banking transactions.

2021 CLD 194 Karachi High Court: National Bank of Pakistan vs. Pakistan Textile City Limited

This case discusses the importance of complying with Section 9 of FIRFO, which mandates the filing of a statement of account. The judgment underscores the necessity for financial institutions to adhere strictly to procedural requirements under FIRFO, emphasizing transparency and accountability in financial transactions.

2021 CLD 113 Karachi High Court: Mian Ejaz Ahmed vs. Meezan Bank Limited

Section 19 and 22 of FIRFO, along with Order XXI, Rule 1 of the CPC, are examined in this case. It deals with the execution of consent decrees and the scope of Banking Courts in handling such executions. The ruling reinforces the principle that Banking Courts cannot exceed the bounds of the decree and highlights the limited scope of appeals in interlocutory matters under FIRFO.

2021 CLC 1222 Karachi High Court: Muhammad Haseeb Fatani vs. Federation of Pakistan

This case intertwines Sections 2 and 20 of FIRFO with the Exit Control List regulations. It illustrates how FIRFO’s provisions, especially regarding willful defaulters and absconders, impact other legal areas, like immigration control. The judgment signifies the broader implications of financial defaults beyond the banking sector.

2021 CLD 986 Islamabad: Ali Raza vs. MCB Bank Limited

Sections 9, 16, and 22 of FIRFO are at play in this case, along with Order VII, Rule 11 of the CPC. It focuses on the Banking Court’s authority to reject plaints not falling within FIRFO’s scope, particularly concerning the repossession of vehicles and subsequent recovery suits. The decision clarifies the limitations of FIRFO in dealing with certain types of financial disputes.

2021 CLD 690 Islamabad: Saif Ur Rehman Khan vs. Banking Court, Islamabad

Here, Sections 15, 19, and 10 of FIRFO are evaluated alongside Article 199 of the Constitution and Order XXI, Rule 66 of the CPC. The case addresses the execution of Banking Court decrees, especially in the sale of mortgaged property. It highlights the finality of orders pertaining to such sales and the availability of an appellate remedy under FIRFO.

2020 SCMR 1069 Supreme Court: Muhammad Mansha vs. Industrial Development Bank of Pakistan

This case focuses on Sections 5 and 23(2) of FIRFO. It elucidates the Banking Court’s authority under FIRFO, particularly concerning property transactions post-judgment. The judgment clarifies the non-retroactive application of certain FIRFO provisions, underscoring the legal distinctions between different types of banking courts and their decrees.

2020 CLD 574 Quetta High Court: Ghazi Rice Mills vs. National Bank of Pakistan

The case involves Sections 7, 9, and 10 of FIRFO. It deals with the mandatory requirements for an application for leave to defend under FIRFO. The judgment underscores the stringent compliance required from defendants in banking suits, particularly in detailing financial transactions and payments to financial institutions.

2020 CLD 638 Lahore High Court: Muhammad Shoaib Arshad vs. Federation of Pakistan

This case centers on Sections 2(c) and 15 of FIRFO, as amended in 2016. The key issue is the concurrent use of the terms “customer” and “mortgagor”. The court held that for the purpose of invoking remedy under Section 15 of FIRFO, the term ‘mortgagor’ is to be treated as ‘customer’. This interpretation is significant for understanding who may seek relief under FIRFO, particularly in cases involving mortgaged property. The ruling also explores the scenario where the finance beneficiary and the mortgage executor are different entities, determining the applicability of Sections 9 or 15 of FIRFO in such cases.

2020 CLD 415 Lahore High Court: Fiqas (Pvt.) Limited vs. Habib Metropolitan Bank Limited

This case examines Sections 9 and 10 of FIRFO. It focuses on the requirements for obtaining leave to defend in a suit for recovery of finance facility. The judgment highlights the strict compliance required under Section 10(4) of FIRFO and the consequences of failing to meet these requirements. The case demonstrates the importance of substantiating defenses with adequate evidence and adhering to the procedural prerequisites of FIRFO.

2020 CLD 274 Lahore High Court: Messrs Gulistan Power Generation Limited vs. Bank of Punjab

In this case, Sections 9 and 10 of FIRFO are again under scrutiny. The focus is on the scope of leave to defend in a suit for recovery of a finance facility. The judgment underscores the necessity for raising substantial questions of law or fact that warrant a full trial. It exemplifies the rigorous standard required for an application for leave to defend under FIRFO, emphasizing the need for it to be in consonance with FIRFO’s provisions.

2020 YLR 1096 Lahore High Court: Essem Hotels Limited vs. The Bank of Punjab

This case involves Order XXI, Rules 66, 67, and 68 of the CPC, along with Section 15 of FIRFO. It addresses the sale of mortgaged property and the procedural aspects of public auction, including the proclamation of sale, determination of reserve price, and compliance with CPC rules. The ruling illustrates the procedural intricacies involved in executing a decree under FIRFO, ensuring adherence to both FIRFO and CPC requirements.

2020 MLD 2078 Lahore High Court: M. Javed Shafi vs. S.H.O. Police Station Shorkot City

Here, Section 406 of the Pakistan Penal Code (PPC) is considered alongside Sections 7 and 20 of FIRFO. The case deals with the jurisdiction of the Banking Court and the scope of FIRFO in matters involving criminal breach of trust. It demonstrates FIRFO’s dominance in disputes between banks and customers, limiting the role of local police and emphasizing the specialized jurisdiction of Banking Courts.

2020 CLC 982 Lahore High Court: Mst. Nasrin vs. Muslim Commercial Bank Limited

This case involves Order XXI, Rule 54 of the CPC, and Sections 9 and 22 of FIRFO. It focuses on the execution of a decree for recovery of finances and the attachment of property. The ruling stresses the finality of decrees and the limited scope for challenging execution proceedings under FIRFO, particularly when the property is transferred through inheritance.

2020 CLD 1243 Karachi High Court: National Bank of Pakistan vs. Amna Export (Private) Limited

Sections 9(2) and 10 of FIRFO and Section 4 of the Bankers’ Books Evidence Act 1891 are central to this case. It examines the admissibility and evidentiary value of bank statements in recovery suits. The judgment highlights the requirement for banks to support their claims with duly certified statements of accounts as per FIRFO and the Bankers’ Books Evidence Act. This case reflects the intersection of FIRFO with other evidentiary laws and the standards imposed on financial institutions in substantiating their claims.

2020 CLD 904 (Karachi-High-Court-Sindh): This case delves into the procedural aspects of the sale of mortgaged property following a decree of the Banking Court. It clarifies the applicability of Rules 3 and 4 of the Financial Institutions (Recovery of Finances) Rules, 2018, in the context of whether these rules apply to sales conducted with or without the intervention of the Banking Court. The judgment confirms that these rules are applicable when a financial institution acts independently, without the Banking Court’s intervention, for selling the mortgaged property.

2020 CLD 473 (Karachi-High-Court-Sindh): This case emphasizes the mandatory nature of Sections 9 and 10 of the Ordinance. It underscores that banking suits under the Ordinance are confined to disputes regarding “availed”, “claimed”, or “disputed amounts” and that the trial process is streamlined to focus on these aspects. The decision reinforces the need for parties to clearly plead and state the nature of the accounts involved, as per the mandatory provisions of Sections 9 and 10.

2020 CLD 366 (Karachi-High-Court-Sindh): This judgment highlights the importance of filing a certified copy of the statement of accounts in suits for the recovery of finance. The Bank’s failure to provide this crucial document led to the grant of unconditional leave to defend to the defendants. This case underscores the critical role of documentation in substantiating claims under the Ordinance.

2020 CLD 310 (Karachi-High-Court-Sindh): This case discusses the applicability of Section 12(2) of the CPC in banking matters, noting that it cannot replace the appeal process as provided under Section 22 of the Ordinance. It illustrates the distinct procedural pathways available in banking-related litigation under the Ordinance and the CPC.

2020 CLD 269 (Karachi-High-Court-Sindh): This case clarifies the computation of limitation periods for appeals against judgments and decrees under Section 22 of the Ordinance. It specifies that the period of limitation commences from the date of the judgment, not the decree, highlighting the procedural nuances in appeals in the context of financial recovery suits.

2020 CLD 238 (Karachi-High-Court-Sindh): The court in this case clarified that applications under Section 16 of the Ordinance, which relate to attachment before judgment, injunction, and the appointment of a receiver, can only be filed by a financial institution, not a borrower. This distinction emphasizes the specific procedural rights and limitations for different parties under the Ordinance.

2020 CLD 129 (Karachi-High-Court-Sindh): This case deals with the issue of limitation and the failure to seek condonation of delay in filing a suit for the recovery of finance. It highlights the importance of adhering to the procedural requirements under Section 24(2) of the Ordinance, especially regarding the condonation of delays.

2020 CLD 110 (Karachi-High-Court-Sindh): This judgment deals with the placement of a company’s name on the defaulter list of the Electronic Credit Information Bureau (eCIB) of the State Bank of Pakistan. The court found that the placement was unwarranted, as there was no established financial agreement or security documentation between the parties. This case underscores the significance of due process and the proper establishment of financial agreements before taking punitive actions like listing on the eCIB.

2020 CLD 49 (Karachi-High-Court-Sindh): This case clarifies who is authorized to file a plaint on behalf of a financial institution under Section 9 of the Ordinance. It distinguishes the provisions of the Ordinance from those of the Banking Tribunals’ Ordinance 1984 and the Banking Companies (Recovery of Loans, Advances, Credits, and Finances) Act 1997, in terms of who can initiate proceedings.

2020 CLD 904 Karachi-High-Court-Sindh (Sheikh Kashif Imtiaz vs. Faysal Bank Limited):

This case primarily interprets Sections 15 and 19 of the Ordinance in conjunction with Rules 3 and 4 of the Financial Institutions (Recovery of Finances) Rules, 2018. The key issue was the applicability of the rules for the sale of mortgaged property with or without the intervention of the Banking Court. The court held that these rules apply only when a financial institution undertakes the sale of mortgaged property on its own accord, without the intervention of the Banking Court. This interpretation reflects an emphasis on the dichotomy of procedures prescribed in the Ordinance for the sale of mortgaged properties.

2020 CLD 473 Karachi-High-Court-Sindh (Anees-ur-Rehman vs. Faysal Bank Limited):

This decision focuses on Sections 7, 9, 10, and 2(d) of the Ordinance. It underscores the mandatory nature of the provisions under Sections 9 and 10, emphasizing that a banking suit under the Ordinance is specifically confined to the amounts claimed or disputed, and the facts supporting these amounts. The judgment curtails unnecessary factual details and prolongation of trials, indicating a streamlined approach for adjudication of banking suits.

2020 CLD 366 Karachi-High-Court-Sindh (Allied Bank of Pakistan vs. Callmate Telips Telecom Limited):

In this case, the court emphasized the importance of a certified copy of the statement of accounts under Section 9(2) of the Ordinance, read with the Bankers’ Books Evidence Act, 1891. The absence of this crucial document led to the granting of unconditional leave to defend to the defendants, reflecting the strict adherence to procedural requirements for banking suits.

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2020 CLD 310 Karachi-High-Court-Sindh (Pak Land Corporation (Pvt.) Ltd. vs. KASB Bank Ltd.):

This judgment dealt with Section 22 of the Ordinance and Section 12(2) of the CPC. It clarified that the provisions of the CPC are applicable in banking matters but cannot replace the appellate mechanism provided under Section 22 of the Ordinance.

 2020 CLD 269 Karachi-High-Court-Sindh (First Pakistan Security Limited vs. Bank Alfalah Limited):

The court here interpreted Section 22 of the Ordinance, particularly regarding the computation of the limitation period for appeals. It was held that the limitation period starts from the date of judgment, not the date of the decree, thereby clarifying the procedural aspects of appeals under the Ordinance.

2020 CLD 238 Karachi-High-Court-Sindh (Haji Abdul Razzak (Deceased) vs. Faysal Bank Limited):

This case involved Sections 16 and 9 of the Ordinance, along with Order XXXVIII, Rule 5 of the CPC. The court determined that an application under Section 16 could only be filed by a financial institution, not a borrower, and discussed the scope of adjudication under Order XXXVIII of the CPC in the context of attachment before judgment.

2020 CLD 129 Karachi-High-Court-Sindh (United Bank Limited vs. Ghulam Rafiq):

This case touched upon Sections 9, 22, and 24 of the Ordinance and Article 120 of the Limitation Act. The court’s decision focused on the failure to seek condonation of delay in filing the suit, thereby upholding the Banking Court’s dismissal of the suit for being beyond limitation.

2020 CLD 110 Karachi-High-Court-Sindh (Sukkur Beverages Private Limited vs. Federation of Pakistan through Secretary Finance):

Sections 25A and 93C of the Ordinance and Section 9 were at the forefront in this case. The High Court directed the removal of the petitioner company’s name from the defaulter list of the State Bank of Pakistan, as there was no financial agreement between the parties under the ambit of the Ordinance.

 2020 CLD 49 Karachi-High-Court-Sindh (First Dawood Investment Bank Limited vs. Bank Islami Pakistan Limited):

This case concerned Section 9 of the Ordinance and Section 6 of the Banking Tribunals’ Ordinance. It clarified that under the Ordinance, a suit could be filed by an authorized officer of a financial institution, whereas under the Banking Tribunals’ Ordinance, a suit could be filed by the institution itself.

Conclusions

(1)The aforementioned cases showcase the varied dimensions of the FIRFO’s application in Pakistan’s legal landscape. These decisions underline the strict compliance required with the procedural and substantive provisions of the FIRFO and the CPC. Key themes across these cases include the necessity for proper documentation and certification of financial statements, the rights and obligations of the parties, and the adherence to procedural timelines and requirements. The courts have consistently emphasized the need for thorough compliance with the FIRFO’s provisions, ensuring that rights of both financial institutions and borrowers are protected while facilitating the speedy recovery of finances.

(2)These cases collectively demonstrate the diverse aspects of the Financial Institutions (Recovery of Finances) Ordinance 2001 and its interplay with other legal provisions such as the Civil Procedure Code, the Bankers’ Books Evidence Act, and the Limitation Act. They underline the Ordinance’s specific and streamlined procedure for banking suits, emphasizing the importance of procedural compliance, proper documentation, and the distinct pathways available for legal recourse in banking-related litigation.

(3) The FIRFO, as interpreted in these cases, serves as a comprehensive framework for expediting financial disputes while balancing the interests of all parties involved. These cases demonstrate how Pakistani courts navigate the intersection of banking law and civil procedure, ensuring that the spirit of the FIRFO in expediting financial disputes is upheld without compromising on the principles of justice and fair play.

Appendix -1 

THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES)

ORDINANCE, 2001

ORDINANCE NO.  XLVI  OF 2001

AN

ORDINANCE

 

To repeal, and, with certain modifications, re-enact, the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997.

WHEREAS it is expedient to repeal and with certain modifications, re-enact the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, for the purposes hereinafter appearing;

AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

NOW, THEREFORE, in pursuance of the Proclamation of Emergency of the fourteenth day of October, 1999 and Provisional Constitution Order No. 1 of 1999, read with the Provisional Constitution (Amendment) Order No. 9 of 1999, and in exercise of all powers enabling him in that behalf, the President of the Islamic Republic of Pakistan is pleased to make and promulgate the following Ordinance:-

Short title, extent and commencement.- (1) This Ordinance may be called the Financial Institutions (Recovery of Finances) Ordinance, 2001.

(2)             It extends to the whole of Pakistan.

(3)             It shall come into force at once.

2. Definitions.- In this Ordinance, unless there is anything repugnant in the subject or context

a) “financial institution” means and includes(i)   any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a government savings bank, but excludes the State Bank of Pakistan;

(ii) a modaraba or modaraba management company, leasing company, investment bank, venture capital company, financing company, unit trust or mutual fund of any kind and credit or investment institution, corporation or company; and

(iii)   any company authorised by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify;

b) “Banking Court” means

(i) in respect of a case in which the claim does not exceed fifty million rupees or for the trial of offences under this Ordinance, the Court established under section 5; and

(ii)  in respect of any other case, the High Court.

(c) “customer” means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier;

(d) “finance” includes

(i)   an accommodation or facility provided on the basis of participation in profit and loss, mark-up or mark-down in price, hire-purchase, equity support, lease, rent-sharing, licensing charge or fee of any kind,  purchase and sale of any property  including commodities, patents, designs, trade marks and copy-rights, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate, musharika, morabaha, musawama, istisnah or modaraba certificate, term finance certificate;

(ii)         facility of credit or charge cards;

(iii)       facility of guarantees, indemnities, letters of credit or any other financial engagement which a financial institution may give, issue or undertake on behalf of a customer, with a corresponding obligation by the customer to the financial institution;

(iv)    a loan, advance, cash credit, overdraft, packing credit, a bill discounted and purchased or any other financial accommodation provided by a financial institution to a customer;

(v)    a benami loan or facility that is, a loan or facility the real beneficiary or recipient whereof is a person other than the person in whose name the loan or facility is advanced or granted;

(vi)    any amount due from a customer to a financial institution under a decree passed by a Civil Court or an award given by an arbitrator;

(vii)   any amount due from a  customer to a financial institution which is the subject matter of any pending suit, appeal or revision before any  Court;

(viii)         any other facility availed by a customer from a financial institution.

(e)      “obligation” includes

(i)           any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and

(ii)         any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise; and

(iii)       all duties imposed on the customer under this Ordinance; and

(f)   “rules” means rules made under this Ordinance.
3.   Duty of a customer.-

(1) It shall be the duty of a customer to fulfil his obligations to the financial institution.

 

(2)   Where the customer defaults in the discharge of his obligation, he shall be liable to pay, for the period from the date of his default till realization of the cost of funds of the financial institution as certified by the State Bank of Pakistan from time to time, apart from such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force.

 

(3)   For purposes of this section a judgment against a customer under this Ordinance shall mean that he is in default of his duty under sub-section (1), and the ensuing decree shall provide for payment of the cost of funds as determined under sub-section (2).

4. Ordinance to override other laws.- The provisions of this Ordinance shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

 

5.      Establishment of Banking Court.-

(1) The Federal Government may, by notification in the Official Gazette, establish as many Banking Courts as it considers necessary to exercise jurisdiction under this Ordinance and appoint a Judge for each of such Courts and where it establishes more Banking Courts  than one, it shall specify in the notification the territorial limits within which each of the Banking Courts shall exercise its jurisdiction.

 

(2) Where more Banking Courts than one have been established to exercise jurisdiction in the same territorial limits, the Federal Government shall define the territorial limits of each such Court.

(3) Where more Banking Courts than one have been established in the same or different territorial limits, the High Court may, if it considers it expedient to do so in the interest of justice or for the convenience of the parties or of the witnesses, transfer any case from one Banking Court to another.

(4) A Judge of a Banking Court shall be appointed by the Federal Government after consultation with the Chief Justice of the High Court of the Province in which the Banking Court is established and no person shall be appointed a Judge of a Banking Court unless he has been a Judge of a High Court or is or has been a District Judge.

(5) A Banking Court shall hold its sitting at such places within its territorial jurisdiction as may be determined by the Federal Government.

(6) A Judge of a Banking Court, not being a District Judge, shall be appointed for a term of three years from the date on which he enters upon his office.

(7) The salary, allowances and other terms and conditions of service of a person appointed as a Judge of a Banking Court shall be such as the Federal Government may determinej

(8)   The Banking Court may, if it so requires, be assisted in technical aspects of banking transactions involved in any case by an amicus curiae who has at least ten years experience of banking at a senior management level in a financial institution of repute or the State Bank of Pakistan and has the following qualifications, namely:-(i)     a degree in Commerce and Account or in Economics; or

(ii)   a degree in Business Administration; or

(iii) has completed a course in banking from the Institute of Bankers, Pakistan.

(9)   Remuneration of the amicus curiae, and the party or parties by whom it will be payable, will be determined by the Banking Court, keeping in view the circumstances of each case. 

6.      Resignation and removal of Judges.-

(1) A person, not being a District Judge, appointed as a Judge of a Banking Court under section 5 may, by notice in writing under his hand addressed to the Federal Government, resign from his office.

 

(2)   A person appointed as a Judge of a Banking Court under section 5 may be removed from office in consultation with the Chief Justice of the High Court.

7.      Powers of Banking Courts.-

(1)  Subject to the provisions of this Ordinance, a Banking Court shall

(a)   in the exercise of its civil jurisdiction  have all the powers vested in a civil Court under the Code of Civil Procedure, 1908 (Act V of 1908);

 

(b)   in the exercise of its criminal jurisdiction, try offences punishable under this Ordinance and shall, for this purpose have the same powers as are vested in a Court of Sessions under the Code of Criminal Procedure, 1898 (Act V of 1898):

 

Provided that a Banking Court shall not take cognizance of any offence punishable under this Ordinance except upon a complaint in writing made by a person authorized in this behalf by the financial institution in respect of which the offence was committed.

(2) A Banking Court shall in all matters with respect to which the procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908 (Act V of 1908), and the Code of Criminal Procedure, 1898 (Act V of 1898).

(3) All proceedings before a Banking Court shall be deemed to be judicial proceedings within the meaning or sections 193 and 228 of the Pakistan Penal Code (Act XLV of 1860), and a Banking Court shall be deemed to be a Court for purposes of the Code of Criminal Procedure, 1898 (Act V of 1898).

(4)      Subject to sub-section (5), no Court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under this Ordinance, including a decision as to the existence or otherwise of a finance and the execution of a decree passed by a Banking Court.

(5)      Nothing in sub-section (4) shall be deemed to affect(a) the right of a financial institution to seek any remedy before any Court or otherwise that may be available to it under the law by which the financial institution may have been established; or

(b) the powers of the financial institution, or jurisdiction of any Court such as is referred to in clause (a); or

require the transfer to a Banking Court of any proceedings pending before any financial institution or such Court immediately before the coming into force of this Ordinance.

(6) All proceedings pending in any Banking Court constituted under the Banking Companies (Recovery of Loans, Advances, Credits or Finances) Act, 1997 (XV of 1997), including suits for recovery of “loans” as defined under that Act shall stand transferred to, or be deemed to be transferred to, and heard and disposed of by, the Banking Court having jurisdiction under this Ordinance. On transfer of proceedings under this sub-section, the parties shall appear before the Banking Court concerned on the date previously fixed.

(7) In respect of proceedings transferred to a Banking Court under subsection (6), the Banking Court shall proceed from the stage which the proceedings had reached immediately prior to the transfer and shall not be bound to recall and re-hear any witness and may act on the evidence already recorded or produced before the Court from which the proceedings were transferred.8.      Suit for recovery of written off finances, etc.-

(1) Subject to sub-section (2), and notwithstanding anything contained in the Limitation Act, 1908 (IX of 1908) or any other law, a financial institution may, within three years from the date of coming into force of this Ordinance, file a suit for the recovery of any amount written off, released or adjusted under any agreement, contract, or consent, including a compromise or withdrawal of any suit or legal proceedings or adjustment of a decree between a financial institution and a customer on any day on or after the first day of January, 1990 and before the coming into force of this Ordinance, if it can establish that the amount was written off, released or adjusted for political reasons or considerations other than bona fide business considerations.

 

(2)   No suit under sub section (1) shall be filed unless its filing has been approved by

(a)   the Board of Directors, in the case of a financial institution incorporated within Pakistan,

(b)   or the chief executive (by whatever name called or designated) of the financial institution in Pakistan, in the case of a financial institution incorporated outside Pakistan.

9.  Procedure of Banking Courts.-

(1) Where a customer or a financial institution     commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.

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

(3) The plaint, in the case of a suit for recovery instituted by a financial institution, shall specifically state

(a)  the amount of finance availed by the defendant from the financial institution;

 

(b)  the amounts paid by the defendant to the financial institution and the dates of payment; and

 

(c)  the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit.

(4) The provisions of section 10 of the Code of Civil Procedure, 1908 (Act V of 1908), shall have no application for and in relation to suits filed hereunder.

(5)   On a plaint being presented to the Banking Court, a summons in Form No. 4 in Appendix ‘B’ to the Code of Civil Procedure, 1908 (Act V of 1908) or in such other form as may, from time to time, be prescribed by rules, shall be served on the defendant through the bailiff or process-server of the Banking Court, by registered post acknowledgement due, by courier and by publication in one English language and one Urdu language daily newspaper, and service duly effected in any one of the aforesaid modes shall be deemed to be valid service for purposes of this Ordinance. In the case of service of the summons through the bailiff or process-server, a copy of the plaint shall be attached therewith and in all other cases the defendant shall be entitled to obtain a copy of the plaint from the office of the Banking Court without making a written application but against due acknowledgement. The Banking Court shall ensure that the publication of summons takes place in newspapers with a wide circulation within its territorial limits.

 

10. Leave to defend.-

(1) In any case in which the summons has been served on the defendant as provided for in sub-section (5) of section 9, the defendant shall not be entitled to defend the suit unless he obtains leave from the Banking Court as hereinafter provided to defend the same; and, in default of his doing so, the allegations of fact in the plaint shall be deemed to be admitted and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof or such other material as the Banking Court may require in the interests of justice.

 

(2) The defendant shall file the application for leave to defend within thirty days of the date of first service by any one of the modes laid down in sub-section (5) of section 9:-

 

Provided that where service has been validly effected only through publication in the newspapers, the Banking Court may extend the time for filing an application for leave to defend if satisfied that the defendant did not have knowledge thereof.

 

(3)   The application for leave to defend shall be in the form of a written statement, and shall contain a summary of the substantial questions of law as well as fact in respect of which, in the opinion of the defendant, evidence needs to be recorded.

 

(4)   In the case of a suit for recovery instituted by a financial institution the application for leave to defend shall also specifically state the following

 

(a) the amount of finance availed by the defendant from the financial institution; the amounts paid by the defendant to the financial institution and the dates of payments;

 

(b)   the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit;

 

(c)  the amount if any which the defendant disputes as payable to the financial institution and facts in support thereof:

Explanation.- For the purposes of clause (b) any payment made to a financial institution by a customer in respect of a finance shall be appropriated first against other amounts relating to the finance and the balance, if any, against the principal amount of the finance.

 

(5)   The application for leave to defend shall be accompanied by all the documents which, in the opinion of the defendant, support the substantial questions of law or fact raised by him.

(6)   An application for leave to defend which does not comply with the requirements of sub-sections (3), (4) where applicable and (5) shall be rejected, unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement.

(7)   The plaintiff shall be given an opportunity of filing a reply to the application for leave to defend, in the form of a replication.

(8)   Subject to section 11, the Banking Court shall grant the defendant leave to defend the suit if on consideration of the contents of the plaint, the application for leave to defend and the reply thereto it is of the view that substantial questions of law or fact have been raised in respect of which evidence needs to be recorded.

(9)   In granting leave under sub-section (8), the Banking Court may impose such conditions as it may deem appropriate in the circumstances of the case, including conditions as to deposit of cash or furnishing of security.

(10) Where the application for leave to defend is accepted, the Banking Court shall treat the application as a written statement, and in its order granting leave shall frame issues relating to the substantial questions of law or fact, and, subject to fulfillment of any conditions attached to grant of leave, fix a date for recording of evidence thereon and disposal of the suit.

(11) Where the application for leave to defend is rejected or 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.

(12) Where an application for leave to defend has been filed before the coming into force of this Ordinance, the defendant shall be allowed a period of twenty-one days from the date of coming into force of this Ordinance, or from the date of first hearing thereafter, whichever is later, for filing an amended application for leave to defend in accordance with the provisions of this Ordinance.

 

11. Interim Decree.-

(1) If the Banking Court on a consideration of the contents of the plaint, the application for leave to defend of the defendant and the reply thereto, is of the opinion that the dispute between the parties does not extend to the whole of the claim, or that part of the claim is either undisputed, or is clearly due, or that the dispute is mainly limited to a part of the principal amount of the finance or to any other amounts relating to the finance, it shall, while granting leave and framing issues with respect to the disputed amounts, pass an interim decree in respect of that part of the claim which relates to the principal amount and which appears to be payable by the defendant to the plaintiff.

 

(2) The interim decree passed under sub-section (1) shall, for all purposes including appeal and execution, be deemed to be a decree passed under this Ordinance, and any amount covered thereby or recovered in execution thereof shall be adjusted at the time of the final decree:

Provided that it shall be open to the Banking Court notwithstanding the pendency of any appeal, to modify, in part or in whole, or reverse, the terms of the interim decree at the time of the final disposal of the suit and pass such order as it may deem just and proper:

Provided further that neither the Banking Court nor the High Court acting under sub-section

(3) of section 22 shall stay execution of an interim decree unless the judgment-debtor deposits in cash with the Banking Court the amount or amounts admitted by the judgment-debtor to be payable to the financial institution under clause (c) of sub-section

(4) of section 10, and furnishes security for the balance decretal amount if any, inclusive, in the case of a suit filed by a financial institution, of cost of funds determined under section 3, and other costs.

12.Power to set aside decree.- In any case in which a decree is passed against a defendant under sub-section (1) of section 10 he may, within twenty-one days of the date of the decree, or where the summons was not duly served when he has knowledge of the decree, apply to the Banking Court for an order to set it aside; and if he satisfies the Banking Court that he was prevented by sufficient cause from making an application under section 10, or that the summons was not duly served,  the Court shall make an order setting aside the decree against him upon such terms as to costs, deposit in cash or furnishing of security or otherwise as it thinks fit and allow him to make the application within ten days of the order.

 

13. Disposal of suit.- (1) A suit in which leave to defend has been granted to the defendant shall be disposed of within ninety days from the day on which leave was granted, and in case proceedings continue beyond the said period the defendant may be required to furnish security in such amount as the Banking Court deems fit, and on the failure of the defendant to furnish such  security, the Banking Court shall pass an interim or final decree in such amount as it may deem appropriate.

(2)   The requirement of furnishing security under sub-section (1) shall be dispensed with if, in the opinion of the Banking Court, the delay is not attributable to the conduct of the defendant.

 

(3)   Suits before a Banking Court shall come up for regular hearing as expeditiously as possible and except in extraordinary circumstances and for reasons to be recorded, a Banking Court shall not allow adjournments for more than seven days.

 

(4) Where leave to defend is granted and evidence is to be recorded, the parties may file affidavits in respect of the examination-in-chief of any witness who is not to be summoned through the Banking Court, and where such affidavits are filed, the Banking Court shall give notice thereof to the other contesting parties and on the date fixed for recording evidence, shall, subject to such modification as may be required for purposes of production and exhibiting of documents, or otherwise in accordance with law, treat the affidavit as examination-in-chief and allow the contesting parties an opportunity for cross-examination on the basis thereof.  

14.Decree in suits relating to mortgages.- Where the suit filed by a financial institution before the Banking Court is for the enforcement of a mortgage of immovable property the Banking Court will not be required to pass a preliminary decree as provided in Order XXXIV of the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908), but shall directly pass an interim or final decree for foreclosure or sale.

 

15. Sale of mortgaged property.-

(1) In this section, unless there is anything repugnant in the subject or context

(a)     “mortgage” means the transfer of an interest in specific immovable property for the purpose of securing the payment of the mortgage money or the performance of an obligation which may give rise to a pecuniary liability;

 

(b)     “mortgage money” means any finance or other amounts relating to a finance, penalties, damages, charges or pecuniary liabilities, payment of which is secured for the time being by the document by which the mortgage is effected or evidenced, including any mortgage deed or memorandum of deposit of title deeds; and

(c)      “mortgaged property” means immovable property mortgaged to a financial institution.

(2) In case of default in payment by a customer, the financial institution may send a notice on the mortgagor demanding payment of the mortgage money outstanding within fourteen days from service of the notice, and failing payment of the amount within due date, it shall send a second notice of demand for payment of the amount within fourteen days. In case the customer on the due date given in the second notice sent, continues to default in payment, financial institution shall serve a final notice on the mortgager demanding the payment of the mortgage money outstanding within thirty days from service of the final notice on the customer.

(3)   When a financial institution serves a notice of demand, all the powers of the mortgagor in regard to recovery of rents and profits from the final mortgaged property shall stand transferred to the financial institution until such notice is withdrawn and it shall be the duty of the mortgagor to pay all rents and profits from the mortgaged property to the financial institution.

Provided that where the mortgaged property is in the possession of any tenant or occupier other than the mortgagor, it shall be the duty of such tenant or occupier, on receipt of notice in this behalf from the financial institution, to pay the rent or lease money or other consideration agreed with the mortgagor to the financial institution.

(4) Where a mortgagor fails to pay the amount as demanded within the period prescribed under sub-section (2), and after the due date given in the final notice has expired, the financial institution may, without the intervention of any Court, sell the mortgaged property or any part thereof by public auction and appropriate the proceeds thereof towards total or partial satisfaction of the outstanding mortgage money:

Provided that before exercise of its powers under this sub-section, the financial institution shall cause to be published a notice in one reputable English daily newspaper with wide circulation and one Urdu daily newspaper in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property, including name and address of the mortgagor, details of the mortgaged property, amount of outstanding mortgage money, and indicating the intention of the financial institution to sell the mortgaged property. The financial institution shall also send such notices to all persons who, to the knowledge of the financial institution, have an interest in the mortgaged property as mortgagees.

(5)   The financial institution shall be entitled, in its discretion, to participate in the public auction, and to purchase the mortgaged property at the highest bid obtained in the public auction.

(6)   Where the mortgagor or his agent or servant or any person put in possession by the mortgagor or on account of the mortgagor does not voluntarily give possession of the mortgaged property sought to be sold or sought to be purchased or purchased by the financial institution, a Banking Court on application of the financial institution or purchaser shall put the financial institution or purchaser, as the case may be, in possession of the mortgaged property in any manner deemed fit by it:

Provided that the Banking Court may not order eviction of a person who is in occupation of the mortgaged property or any part thereof under a bona fide lease, except on expiry of the period of the lease, or on payment of such compensation as may be agreed between the parties or as may be determined to be reasonable by the Banking Court.

Explanation.- (1) Where the lease is created after the date of the mortgage and it appears to the Banking Court that the lease was created so as to adversely affect the value of the mortgaged property or to prejudice the rights and remedies of the financial institution, it shall be presumed that the lease is not bona fide, unless proved otherwise.

(7)   For purposes of execution and registration of the sale deed in respect of the mortgaged property, the financial institution shall be deemed to be the duly authorized attorney of the mortgagor and a sale deed executed and presented for registration by duly authorized attorneys of the financial institution shall be accepted for such purposes by the Registrar and Sub-Registrar under the Registration Act, 1908 (XVI of 1908).

(8)   Upon execution and registration of the sale deed of the mortgaged property in favor of the purchaser all rights in such mortgaged property shall vest in the purchaser free from all encumbrances and the mortgagor shall be divested of any right, title and interest in the mortgaged property.

(9)   Net sale proceeds of the mortgaged property, after deducting all expenses of sale or expenses incurred in any attempted sale, shall be distributed ratably amongst all mortgagees in accordance with their respective rights and priorities in the mortgaged property. Any surplus left, after paying in full all the dues of mortgagees, shall be paid to the mortgagor.

(10) A financial institution which has sold mortgaged property in exercise of powers conferred herein shall file proper accounts of the sale proceeds in a Banking Court within thirty days of the sale.

(11) All disputes relating to the sale of the mortgaged property under this section including disputes amongst mortgagees in respect of distribution of the sale proceeds, shall be decided by the Banking Court.

(12) Neither the Banking Court nor the High Court shall grant an injunction restraining the sale or proposed sale of mortgaged property unless ¾

(a)   it is satisfied that no mortgage in respect of the immovable property has been created; or

(b)   all moneys secured by mortgage of the mortgaged property have been paid; or

(c)   the mortgagor or objector deposits in the Banking Court in cash the outstanding mortgage money.

(13) The rights and remedies provided under this section are in addition to, and not in lieu of, any other rights or remedies a financial institution may have under this Ordinance.

(14) The provisions contained in this section shall have effect notwithstanding anything contained in this Ordinance.

16. Attachment before judgment, injunction and appointment of Receivers.-          

(1) Where the suit filed by a financial institution is for the recovery of any amount through the sale of any property which is mortgaged, pledged, hypothecated, assigned, or otherwise charged or which is the subject of any obligation in favour of the financial institution as security for finance or for or in relation to a finance lease, the Banking Court may, on application by the financial institution, with a view to preventing such property from being transferred, alienated, encumbered, wasted or otherwise dealt with in a manner which is likely to impair or prejudice the security in favour of the  financial institution, or otherwise in the interest of justice ¾

(a)            restrain the customer and any other concerned person from transferring, alienating, parting with possession or otherwise encumbering, charging, disposing or dealing with the property in any manner;

 

(b) attach such property;

 

(c) transfer possession of such property to the financial institution; or

(d) appoint one or more Receivers of such property on such terms and conditions as it may deem fit.(2) An order under sub-section (1) may also be passed by the Banking Court in respect of any property held benami in the name of an ostensible owner whether acquired before or after the grant of finance by the financial institution.

 

(3) In cases where a customer has obtained property or financing through a finance lease, or has executed an agreement in connection with a mortgage, charge or pledge in terms whereof the financial institution is authorized to recover or take over possession of the property without filing a suit, the financial institution may, at its option:

(a)            directly recover the same if the property is movable; or

 

(b) file a suit hereunder and the Banking Court may pass an order at any time, either authorising the financial institution to recover the property directly or with the assistance of the Court:

Provided that in the event the financial institution wrongly or unjustifiably exercises the direct power of recovery hereunder it shall be liable to pay such compensation to the customer as may be adjudged by the Banking Court in summary proceedings to be initiated on the application of the customer and concluded in thirty days.

(4) Nothing in sub-sections (1) to (3) shall affect the powers of the Banking Court under Order XXXVIII Rules 5 and 6 of the Code of Civil Procedure, 1908 (Act V of 1908) to attach before judgment any property other than property mentioned in sub-section (1).17. Final Decree.- (1) The final decree passed by a Banking Court shall provide for payment from the date of default of the amounts found to be payable on account of the default in fulfillment of the obligation, and for costs including, in the case of a suit filed by a financial institution cost of funds determined under section 3.

(2) The Banking Court may, at the time of passing a final decree, also pass an order of the nature contemplated by sub-section (1) of section 16 to the extent of the decretal amount.

18. Banking Documents.-(1) No financial institution shall obtain the signature of a customer on banking document which contains blanks in respect of important particulars including the date, the amount, the property or the period of time in question;

(2) Finance agreements executed by or on behalf of a financial institution and a customer shall be duly attested in the manner laid down in Article 17 of the Qanun-e-Shahadat Order, 1984 (P.O. 10 of 1984);

 

(3)      Nothing contained in sub-section (1) and (2) shall affect the validity of any document executed prior to the date of enforcement of this Ordinance;

 

(4)      Notwithstanding any thing contained in this section or any other law, the Banking Court shall not refuse to accept in evidence any document creating or purporting to create or indicating the creation of a mortgage, charge, pledge or hypothecation in relation to any property or assumption of any obligation by a customer, guarantor, mortgagor or otherwise merely because it is not duly stamped or is not registered as required by any law or is not attested or witnessed as required by Article 17 of the  Qanun-e-Shahadat Ordinance, 1984 (P.O. 10 of 1984) and no such document shall be impoundable by the Banking Court or any other Court or authority:

Provided that nothing contained in this sub-section shall operate to defeat the legal rights of a bona fide purchaser for value without notice of a document which ought to have been registered.19. Execution of decree and sale with or without intervention of Banking Court.-

(1) Upon pronouncement of judgment and decree by a Banking Court, the suit shall automatically stand converted into execution proceedings without the need to file a separate application and no fresh notice need be issued to the judgment-debtor in this regard. Particulars of the mortgaged, pledged or hypothecated property and other assets of the judgment-debtor shall be filed by the decree-holder for consideration of the Banking Court and the case will be heard by the Banking Court for execution of its decree on the expiry of 30 days from the date of pronouncement of judgment and decree:

 

Provided that if the record of the suit is summoned at any stage by the High Court for purposes of hearing an appeal under section 22 or otherwise, copies of the decree and other property documents shall be retained by the Banking Court for purposes of continuing the execution proceedings.

(2)   The decree of the Banking Court shall be executed in accordance with the provisions of the Code of Civil Procedure, 1908 (Act V of 1908) or any other law for the time being in force or in such manner as the Banking Court may at the request of the decree-holder consider appropriate, including recovery as arrears of land revenue.Explanation.- The term assets or properties in sub-section (2) shall include any assets and properties acquired benami in the name of an ostensible owner.

 

(3) In cases of mortgaged, pledged or hypothecated property, the financial institution may sell or cause the same to be sold with or without the intervention of the Banking Court either by public auction or by inviting sealed tenders and appropriate the proceeds towards total or partial satisfaction of the decree. The decree passed by a Banking Court shall constitute and confer sufficient power and authority for the financial institution to sell or cause the sale of the mortgaged, pledged or hypothecated property together with transfer of marketable title and no further order of the Banking Court shall be required for this purpose.

(4)   Where a financial institution wishes to sell mortgaged, pledged or hypothecated property by inviting sealed tenders, it shall invite offers through advertisement in one English and one Urdu newspaper which are circulated widely in the city in which the sale is to take place giving not less than thirty days time for submitting offers. The sealed tenders shall be opened in the presence of the tenderers or their representatives or such of them as attend:Provided that the financial institution shall be entitled in its discretion, to purchase the property at the highest bid received.

(5)   The provisions of sub-sections (5), (6), (7), (8), (9), (10), (11) and (12) of section 15 shall, mutatis mutandis, apply to sales of mortgaged, pledged or hypothecated property by a financial institution in exercise of its powers conferred by sub-section (3).

 

(6)   The Banking Court and the financial institution shall be entitled to seek the services and assistance of the police or security agency in the exercise of powers conferred by this section.

(7)   Notwithstanding anything contained in the Code of Civil Procedure 1908 (Act V of 1908), or any other law for the time being in force(a) the Banking Court shall follow the summary procedure for purposes of  investigation of claims and objections in respect of attachment or sale of any property, whether or not mortgaged, pledged or hypothecated, and shall  complete such investigation  within 30 days of filing of the claims or objections;

(b) if the claims or objections are found by the Banking Court to be malafide or filed merely to delay the sale of the property, it shall impose a penalty upto twenty percent of the sale price of the property.

(c)  the Banking Court may, in its discretion, proceed with the sale of the mortgaged, or pledged or hypothecated property if, in its opinion the interest of justice so require:

Provided that the financial institution gives a written undertaking that in the event the objections are found to be valid, or are sustained, it shall in addition to compensating the aggrieved party by the payment of such amount as may be adjudged by the Banking Court also pay a penalty upto twenty percent of the sale proceeds and such amounts shall be recoverable from the financial institution in the same manner as in execution of decrees passed hereunder.

20.  Provisions relating to certain offences.-

(1) Whoever

(a)  dishonestly commits a breach of the terms of a letter of hypothecation, trust receipt or any other instrument or document executed by him whereby possession of the assets or properties offered as security for the re-payment of finance or fulfillment of any obligation are not with the financial institution but are retained by or entrusted to him for the purposes of dealing with the same in the ordinary course of business subject to the terms of the letter of hypothecation or trust receipt or other instrument or document or for the purpose of effecting their sale and depositing the sale proceeds with the financial institution; or

 

(b) makes fraudulent mis-representation or commits a breach of an obligation or representation made to a financial institution on the basis of which the financial institution has granted a finance; or

 

(c)  subsequent to the creation of a mortgage in favour of a financial institution, dishonestly alienates or parts with the possession of the mortgaged property whether by creation of a lease or otherwise contrary to the terms thereof, without the written permission of the financial institution; or

(d)  subsequent to the passing of a decree under section 10 or 11, sells, transfers or otherwise alienates, or parts with possession of his assets or properties acquired after the grant of finance by the financial institution, including assets or properties acquired benami in the name of an ostensible owner

shall, without prejudice to any other action which may be taken against him under this Ordinance or any other law for the time being in force, be punishable with imprisonment of either description for a term which may extend to three years and shall also be liable to a fine which may extend to the value of the property or security  as decreed or the market value whichever is higher and shall be ordered by the Banking Court trying the offence to deliver up or refund to the financial institution, within a time to be fixed by the Banking Court, the property or the value of the property or security.

Explanation  – Dishonesty may be presumed where a customer has not deposited the sale proceeds of the property with the financial institution in violation of the terms of the agreement between the financial institution and the customer.

(2)  Whoever knowingly makes a statement which is false in material respects in an application for finance and obtains a finance on the basis thereof, or applies the amount of the finance towards a purpose other than that for which the finance was obtained by him, or furnishes a false statement of stocks in violation of the terms of the agreement with the financial institution or falsely denies his signatures on any banking document before the Banking Court, shall be guilty of an offence punishable with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

 

(3)      Whoever resists or obstructs, either by himself or on behalf of the judgment debtor, through the use of force, the execution of a decree, shall be punishable with imprisonment, which may extend to one year, or with fine, or with both.

 

(4)      Whoever dishonestly issues a cheque towards re-payment of a finance or fulfillment of an obligation which is dishonoured on presentation, shall be punishable with imprisonment which may extend to one year, or with fine or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honoured and that the bank was at fault in not honouring the cheque.

(5) Where the person guilty of an offence under this Ordinance is a company or other body corporate, the chief executive by whatever name called, and any director or officer involved shall be deemed to be guilty of the offence and shall be liable to be prosecuted against and punished accordingly. (6) All offences under this Ordinance shall be bailable, non-cognizable and compoundable. 

21.      Application of fines and costs.-

(1) A Banking Court may direct that the whole or part of any fine or costs imposed under this Ordinance shall be applied in or towards

(a)    payment of costs of all or any proceedings under this Ordinance; and

 

(b)    payment of compensation to an aggrieved party.

(2)    An order under sub-section (1) shall be deemed to be a decree passed under this Ordinance for purposes of execution.22. Appeal.-

(1) Subject to sub-section (2), any person aggrieved by any judgment, decree, sentence, or final order passed by a Banking Court may, within thirty days of such judgment, decree, sentence or final order prefer an appeal to the High Court.

(2)   The appellant shall give notice of the filing of the appeal in accordance with the provisions of Order XLIII Rule 3 of the Code of Civil Procedure (Act V of 1908) to the respondent who may appear before the Banking Court to contest admission of the appeal on the date fixed for hearing.

 

(3)   The High Court shall at the stage of admission of the appeal, or at any time thereafter either suo motu or on the application of the decree holder, decide by means of a reasoned order whether the appeal is to be admitted in part or in whole depending on the facts and circumstances of the case, and as to the security to be furnished by the appellant:

Provided that the admission of the appeal shall not per se operate as a stay, and nor shall any stay be granted therein unless the decree-holder has been given an opportunity of being heard and unless the appellant deposits in cash with the High Court an amount equivalent to the decretal amount inclusive of costs, or in the case of an appeal other than an appeal against an interim decree, at the discretion of the High Court furnishes security equal in value to such amount; and in the event of a stay being granted for a part of the decretal amount only, the requirement for a deposit in cash or furnishing of security shall stand reduced accordingly.(4) An appeal under sub-section (1) shall be heard by a bench of not less than two Judges of the High Court and, in case the appeal is admitted, it shall be decided within 90 days from the date of admission.(5) An appeal may be preferred under this section from a decree passed ex-parte.(6) No appeal, review or revision shall lie against an order accepting or rejecting an application for leave to defend, or any interlocutory order of the Banking Court which does not dispose of the entire case before the Banking Court other than an order passed under sub-section (11) of section 15 or sub-section (7) of section 19.(7) Any order of stay of execution of a decree passed under sub-section (2) shall automatically lapse on the expiry of six months from the date of the order whereupon the amount deposited in Court shall be paid over to the decree-holder or the decree-holder may enforce the security furnished by the judgment-debtor.23. Restriction on transfer of assets & properties.-

(1) After publication of summons under sub-section (5) of section 9, no customer shall, without the prior written permission of the Banking Court transfer, alienate, encumber, remove or part with possession of any of his asset or property furnished to the financial institution as security by way of mortgage, pledge, hypothecation, charge, lien or otherwise pending final decision of the suit filed by the financial institution under this Ordinance, and any such transfer, alienation, encumbrance or other disposition by the customer in violation of this sub-section shall be void and of no legal effect:

 

Provided that the customer may sell any such asset or property which has been retained by or entrusted to him for purposes of dealing with the same in the ordinary course of business subject to the terms of the letter of hypothecation or trust receipt or other instrument or document executed by him, or for purposes of effecting their sale and depositing the sale proceeds with the financial institution:

Provided further that the customer before making the sale shall file in the Banking Court a statement supported by affidavit, containing full particulars of such asset or property, and within three days after the sale shall submit a full account thereof to the Banking Court and the financial institution.(2) After pronouncement of judgment and decree by the Banking Court, including an interim decree under section 11, no judgment-debtor shall without the prior written permission of the Banking Court transfer, alienate, encumber or part with possession of any assets or properties and any such transfer, alienation, encumbrance or other disposition by a judgment-debtor in violation of this sub-section shall be void and of no legal effect.(3) The provisions of sub-section (1) shall also apply to a person who has furnished any security on behalf of a customer to the financial institution on the basis of which finance was granted, provided such person is a defendant in the suit filed under section 9 or is added as a defendant thereafter.24. Application of the Limitation Act, 1908 (Act IX of 1908).-

(1) Save as otherwise provided in this Ordinance, the provisions of the Limitation Act, 1908 (Act IX of 1908) shall apply to all cases instituted or filed in a Banking Court after the coming into force of this Ordinance.

 

(2) A suit under section 9 may be entertained by a Banking Court after the period of limitation prescribed therefor, if the plaintiff satisfies the Banking Court that he had sufficient cause for not filing the suit within such period.

25. Power to make rules.-The Federal Government may, by notification in the Official Gazette, make rules for carrying out the purposes of this Ordinance.

26. Removal of difficulties.- If any difficulty arises in giving effect to any of the provisions of this Ordinance, the Federal Government may, by notification in the Official Gazette, make such provisions as it thinks fit for removing such difficulties.

27. Finality of order.- Subject to the provisions of section 22, no Court or other authority shall revise or review or call, or permit to be called, into question any proceeding, judgment, decree, sentence or order of a Banking Court or the legality or propriety of anything done or intended to be done by the Banking Court in exercise of jurisdiction under this Ordinance:

Provided that the Banking Court may, on its own accord or on application of any party, and with notice to the other party or, as the case may be, to both the parties, correct any clerical or typographical mistake in any judgment, decree, sentence or order passed by it.

28. Indemnity.- No suit, prosecution or other legal proceeding shall lie against the Federal Government or a Banking Court or a financial institution or any person for anything which is in good faith done or intended to be done under this Ordinance or any rule made there under.

29. Repeal.-The Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (Act XV of 1997) is hereby repealed.

(2) Notwithstanding the repeal of the (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (Act XV of 1997) and the provisions of this Ordinance, decrees in cases relating to interest-bearing loans which have not been converted into finance shall be passed in accordance with the provisions of section 15 of the said Act. Amended vide the Financial Institutions (Recovery of Finances) (Amendment) Ordinance, 2001 dated 30-09-2001

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