TRUST INVESTMENT BANK LIMITED Versus The BANK OF PUNJAB
JAWAD HASSAN, J .---Through this Appeal, filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the "Ordinance"), the Appellant has challenged the validity of the judgment and decree dated 14.11.2013 passed by learned Single Judge in Chamber in C.O.S No.125 of 2012 whereby leave to defend filed by the Appellant was dismissed and suit of the Respondent Bank was decreed. In this case, customer banker relationship of the Appellant, which is also a financial institution, was to grant of running finance facility against certificate of investment payable with periodical profit.
A. BRIEF FACTS OF THE SUIT.
2. Succinct facts necessary for determination of this lis are that the Appellant being a Public Limited Company is running its business by obtaining finance facility from the Respondent-Bank since 2003 creating a customer bank relationship between them. Initially, the Appellant was granted a Running Finance Facility (RF-Facility) in the sum of Rs.45,000,000/- by the Respondent Bank vide Facility Offer Letter dated 09.06.2003. Said finance facilities, on request of the Appellant had been renewed/enhanced/sanctioned from time to time. The Appellant was also granted a sum of Rs.500,000,000/- against a Certificate of Investment (COI) which was repayable with periodical profit. The Appellant committed default in making payment qua the aforementioned facilities and approached the Respondent Bank with the request for conversion of Certificate of Investment (COI) and Running Finance Facilities (RF-Facilities) into two demand facilities. Accepting this request, the Respondent Bank led to sanction the rescheduling/restructuring Package, vide its Facility Offer Letter dated 08.10.2011. In consideration for the demand finance facilities created, the Appellant executed a Settlement Agreement dated 29.11.2011 wherein the Appellant acknowledged the outstanding amount due by it and accepted that the security and collateral already provided to the Respondent Bank would continue until the entire amount due and payable by the Appellant, was satisfied. The Appellant also executed an Agreement for Financing on Markup Basis on 29.11.2011, wherein the purchase price of Rs.321,796,000/- was payable in three years, in quarterly installments commencing from 31.03.2012 with the last installment payable on or before 30.09.2014. Demand Promissory Note, Letter of Debit Authority, Letter of Installment, Letter of Hypothecation and Supplementary Letter of Hypothecation were also accepted by the Appellant. The demand finance facilities were utilized by the Appellant by adjusting all outstanding amounts. The Appellant made payment of Rs.5,000,000/-thereafter no further payment was made back by it. In the demand finance facilities, the total amount due from the Appellant becomes Rs.315,468,188/- as on 30.06.2012. The Appellant has acknowledged its liability in its Annual Audited Account for the Financial Year June, 2011 and also in the Account for the quarter ending December 31, 2011.
B. LEAVE TO DEFEND
3. The Appellant filed a petition (PLA No.231/B/2012) under section 10 of the Ordinance seeking unconditional leave to defend the suit with the assertions that there were a number of questions of law and facts involved which could not be resolved without recording of evidence of the Appellant. The PLA was replicated and rebutted by the Respondent Bank and thereafter learned Single Judge vide impugned judgment dated 04.11.2013, decreed the suit in the sum of Rs.315,468,188/- along with the cost of funds holding the Respondent Bank entitled to recover the decreed amount through sale of hypothecated properties.
C. SUBMISSIONS OF LEARNED COUNSEL FOR THE APPELLANT
4. It is contended by learned counsel for the Appellant that the impugned judgment and decree dated 04.11.2013 has been passed in violation of provisions of section 24-A of the General Clauses Act, 1897, as it lacks legal reasoning because a number of objections raised by the Appellant qua maintainability of the Suit as well as to the legality of the Statement of Accounts annexed with the plaint by the Respondent Bank were not duly considered and appreciated because the Statement of Accounts was not in accordance with sections 2(8) and 4 of the Bankers' Books Evidence, Act, 1891 (XVI of 1891); that non-disbursement of Running Finance to the Appellant, charging and recovering illegal charges and failure to annex all the relevant and necessary documents with the plaint by the Respondent Bank, concealment of material facts and the finance facilities provided by the Respondent Bank, these all were not taken into account while passing the impugned judgment despite the fact that all these questions could only have been resolved through framing of issues and calling up the parties to lead evidence but the learned Single Judge did not take all these into account as well as the contentions raised in the PLA and argued before the Court; that Civil Miscellaneous Applications No.660-B of 2013 and 661-B of 2013 submitted under Order VII, Rule 11, C.P.C. for appointment of a Chartered Accountant for determination of Appellant's liability were left undecided before passing the impugned judgment, which is against the law because before disposal of the Suit these applications should have been decided. Similarly, in reply to the C.M. No. 659-B of 2012, the Appellant had asserted that, as the Respondent Bank had overcharged, therefore, hypothecated properties should not be attached but even without disposing of the said applications, the suit was decreed; that the learned Single Judge has wrongly observed that the Appellant had already admitted his alleged liability in its Annual Audited Account for the Financial Year Jun, 2011 and in the Account for the quarter ending in December 31, 2011; that while passing the impugned judgment, the learned Single Judge also ignored the fact that it is a settled law that claim of the Respondent Bank should stand on its own legs and cannot rely upon the weakness of the defense, thus the Respondent Bank in unequivocal terms has failed to establish its claim; the learned Single Judge also erred in law when failed to acknowledge that the Certificate of Investment (COI) does not fall within the definition of Finance, as defined in Section 2(d) of the Ordinance; that the alleged statements of accounts annexed with the plaint were not valid ones because it were not duly certified as per Bankers' Books Evidence Act, 1891 and that Section 4 of the said Act in this regard guides that only a certified copy of any entry in a Banker's Book can be received in legal proceedings and that too is also violative of section 2(8) of the said Act. Adds that even otherwise, these statements of accounts attached with the plaint are pertaining to the principal amount of Running Finance and do not relate to the current account of the Appellant. Reiterating, learned counsel for the Appellant maintains that the Respondent Bank was not entitled to charge any markup and markup over markup which falls within definition of compound markup and that despite the fact that no disbursement in regard to the alleged facilities has been shown in the alleged statements of account, yet markup has been charged illegally. Adds that the suit was not filed by an authorized person on behalf of the Respondent Bank. Further maintains that relying upon the Agreement while passing the impugned judgment was based upon unlawful object, as per the provisions of section 23 of the Contract Act. Reliance has been placed upon "Khair-Ul-Nisa v. Mohd Ishaque" (PLD 1972 SC 25), "National Bank of Pakistan v. K.D.A." (PLD 1999 Karachi 260) and "Nazir Ahmad Khan v. Muhammad Ashraf Khan" (PLD 1975 Karachi 598) wherein it has been held that judgment or decree, even on admission of defendant, cannot be granted in the proceedings which are found not maintainable.
D. SUBMISSIONS OF LEARNED COUNSEL FOR THE RESPONDENT
5. Contrarily, it is contended by Mr. Shoaib Rashid, ASC that the Respondent Bank filed the suit strictly, as per requirement under section 9 of the Ordinance by meeting all the procedural formalities; that various Finance Facilities have been granted to the Appellant but the suit against it was filed to the extent of outstanding facilities only; that in the year 2003, the Appellant was granted a Running Finance Facility (RF-Facility) in the sum of Rs.45,000,000/- by the Respondent Bank vide facility offer letter dated 09.06.2003. During the subsequent years, the Running Finance Facility granted to the Appellant had been renewed, enhanced and revised from time to time against execution of various finance and security documents by the former. Mr. Shoaib Rashid, ASC argues that the Appellant was also granted a sum of Rs.500,000,000/- against which a Certificate of Investment (COI) was issued and delivered to the Respondent Bank which was payable with periodical profit, the redemption date of which had subsequently been extended from time to time on the request of the Appellant; that on commission of default by the Appellant qua the finance facilities availed by it, an amount of Rs.279.752 million being the principal amount and an amount of Rs.21.325 million representing the markup as of September 30,2011 became overdue, as follows:-
Sr.#
Facility
Principal Outstanding
Markup
1
R.F.
Rs.146.419 M
Rs.11.281 M
2
COI
Rs.133.333 M
Rs.10.044 M
Total
Rs.279.752 M
Rs.21.325 M
Adds that on request of the Appellant for conversion of its Certificate of Investment (COI) and Running Finance Facilities into two demand finance facilities, the Respondent Bank led to sanction the rescheduling/restructuring Package, vide its Facility Offer Letter dated 08.10.2011 in the terms accepted by the Appellant; that in consideration of DF-I and DF-II and for effecting/restructuring Package, it executed Settlement Agreement (Agreement) with the Respondent Bank on 29.11.2011 wherein the Appellant acknowledged the outstanding amount due by it and accepted that the security and collateral already provided to the Respondent Bank would continue until the entire amount due and payable by the Appellant was satisfied. Besides, the Appellant also executed an Agreement for Financing on Markup Basis on 29.11.2011 wherein the purchase price of Rs.321,796,000/- was payable in three years quarterly installments commencing from 31.03.2012 with the last installment payable on or before 30.09.2014. Further contended that these finance documents were executed by the Appellant in connection with DF-I and DF-II Facilities, Demand Promissory Note, dated 29.11.2011 for Rs.321,796,000/-, Letter of installment dated 29.11.2011, Letter of Debit Authority, Undertaking dated 29.11.201, Letter of compliance with SBP Regulations, Letter of Authority/standing instructions dated 29.11.2011, Letters of hypothecation about nineteen (19) in number pertaining to dates commencing from 25.06.2003 till 05.07.2010; that the demand finance facilities were utilized by the Appellant by adjusting all outstanding amounts; that the Appellant made payment of Rs.5,000,000/- thereafter he did not make any payment; that in the demand finance facilities the total amount due from the Appellant is Rs.315,468,188/- as on 30.06.2012. Mr. Shoaib Rashid, ASC maintained that each and every document annexed with the plaint either the statement of accounts or other document is correct, genuine and in accordance with the Bank record and nothing has been concealed while filing the suit or replication to the PLA before this Court; Lastly, prayed for execution of the decree passed by learned Single Judge, as this matter was started way back in 2003 and now in 2021, the Appellant still intends to drag it further unnecessarily.
6. We have heard learned counsel for the parties and also have gone through the record.
D. OPINION OF THE COURT
7. It is apparent from the record that the Appellant and the Respondent Bank were under a relationship of customer and financial institution since 2003 in terms of sections 2(a) and 2(c) of the Ordinance and the course of their relationship was regulated based on the facility of finance availed by the Appellant and extended by the Respondent Bank and squarely comes within the purview of definition provided under section 2(d) of the Ordinance. In year 2003, a Running Finance Facility (RF-Facility) was granted in favour of the Appellant in the sum of Rs.45,000,000/- vide Facility Offer Letter dated 09.06.2003. The said RF-Facility, on the request of the Appellant, was renewed and a sum of Rs.50,000,000/- against a Certificate of Investment (COI) was also granted in terms of letter dated 08.10.2011. The Appellant, through Board Resolution dated 31.10.2011, approached the Bank with the request to convert COI and RF-Facilities into two demand facilities which was accordingly allowed through Settlement Agreement dated 29.11.2011. The said agreement was duly acknowledged by the Appellant with certain terms and conditions. Moreover, the Appellant also executed an Agreement for Financing on Markup Basis on 29.11.2011, wherein the purchase price of Rs.321,796,000/- was payable in three years quarterly installments commencing from 31.03.2012 with the last installment payable on or before 30.09.2014. Demand Promissory Note, Letter of Debit Authority, Letter of Installment, Letter of Hypothecation and Supplementary Letter of Hypothecation were also accepted.
8. The grievance of the Appellant is that the impugned judgment and decree has been passed without looking into the substance of the record as well as pleas raised by the Appellant in application for leave to defend the suit. It is alleged by the learned counsel for the Appellant that the Single Judge in Chamber has not taken into consideration the fact that statement of accounts was not duly certified in terms of Section 2(8) of the Bankers Books Evidence Act, 1891 (the "Act") while the stance of the counsel for the Respondent is that the Bank had attached genuine and correct statement of account in accordance with the provision of the Act. Pertinently, statement of account is one comprehensive document containing the entire history of the account containing credit and debit entries in a chronological order and is only required to contain verification at the end of such document. We have noted that the statement of account submitted before the learned Single Judge in Chamber carried a note at the end stating "Certified that the entries contained in the above Statement of Account are true copies of the entries contained in ordinary course of business and that the said books are still in the custody of the bank" and also each page of the account statement was duly stamped and initialed by the concerned official of the Bank which amply and adequately met the requirements of Section 2(8) of the Act. Reliance is placed on "Muhammad Saleem Khan v. MCB Bank Limited" (2020 CLD 737). So far as the contention of learned counsel for the Appellant with regard to restructuring of COI facility and non-disbursement of amount is concerned, learned Single Judge in Chamber has observed that "The Defendant then executed a Board Resolution dated 31.10.2011, which also shows that they requested for restructuring of the COI facility and the running finance facility as per terms and conditions mentioned in the offer letter dated 08.10.2011 duly executed by the Defendant. The Defendant then executed Settlement/ Arrangement Agreement wherein the restructuring of the COI and the running finance facility into DF-I and DF-II is clearly mentioned. These documents are not denied. Only disbursement is denied. In a case where the liability has been admitted, restructured, physical disbursement is not necessary".
9. It may be noted that renewal, rescheduling, restructuring of a finance facility only ensued upon default, non-payment, delayed payment or inability in payment of outstanding liability by a customer who normally sought such concession upon admission of his liability and in the case in hand, the previous finance facilities availed by the Appellant were finally restructured/renewed through Settlement Arrangement dated 29.11.2011 according to which restructuring of COI and the running finance facilities into DF-I and DF-II were executed and admitted by the Appellant. The learned Division Bench of this Court in "Syed Abbas Ali v. Bank of Punjab through Manager and others" (2015 CLD 1409) has observed that "restructuring or renewal was also a facility or accommodation granted by the bank to a customer and was therefore to be recognized as an "obligation" within the meaning of S. 2(e) of the Financial Institutions (Recovery of Finances) Ordinance, 2001". It has further been observed that "financial institutions in case of restructuring or rescheduling of previous finance, were not obliged to bring on record statements of accounts prior to the agreement through which restructuring had been made; as such was an admitted amount duly acknowledged by the customer and no disbursement of amount was involved in the matter as the case being that of restructuring and not that of fresh finance".
10. Through the instant appeal, the Appellant has also challenged the veracity of the documents produced by the Respondent Bank before the learned Banking Court but it is just a bald allegation without any substance or proof. The Appellant could not produce anything in support of its stance taken in the PLA. Regarding the entries of statement of accounts, there is nothing untoward seen as some of the alleged disputed entries are pertaining to disbursement of finance facility to the Appellant. Adjustment of markup has also been made in accordance with law and no markup over markup has been charged by the Respondent Bank. Admittedly, the Appellant has not denied the execution of documents in favour of the Respondent Bank, however, has challenged their authenticity verbally and without any documentary proof.
11. As the application of Appellant for leave to defend lacked fulfillment of mandatory requirements, it has rightly been rejected by drawing decree against the Appellant qua the suit filed by the Respondent Bank. The Appellant has failed to substantiate its stance taken in the petition for leave to defend that the Respondent Bank did not file necessary documents, which in Appellant's opinion supported the substantial questions of law and fact, as required under Section 10(9) of the Ordinance. Also, the Appellant did not comply with the mandatory requirements of 10(5) of the Ordinance, and were bound to face consequences for such non-compliance because as per section 10(6) of the Ordinance, application for the grant of leave, which does not comply with the requirements of subsections (3), (4) and (5) of section 10 of Ordinance, shall be rejected, unless the Appellant disclosed any sufficient cause for its inability to comply with any such requirement. The provisions of Section 10(5) of Ordinance are mandatory in nature, as the non-compliance of the said provisions of law entail the penal consequences, as provided under section 10(6) of the Ordinance. Further, execution of documents filed with plaint is not denied by the Appellant in its leave to defend and thus was rightly held not entitled for leave to defend the suit. Since the Appellant has not discharged its obligations as per the agreement, the suit has rightly been instituted by the Respondent Bank. It is a trite proposition of law that where the defendant has not complied with the mandatory requirement of law, the Plaintiff is entitled to have the suit decreed in his favour as mandated under Section 10(12) of the Ordinance. With respect to the contention that miscellaneous applications were pending when the suit was decreed, suffice is to observe that as per law if leave to defend is not preferred or allowed, it is the duty of the Court to decree the suit.
12. The upshot of above discussion is that the Appellant has failed to establish any ground for grant of leave to defend before the Banking Court, hence the PLA No.231-B of 2012 has rightly been rejected under Section 10 of the Ordinance.
13. We, therefore, fully agree with the findings of the Banking Court and do not find any illegality in the impugned judgment and decree which has been passed in consonance with the spirit of law, hence, does not call for interference by us.
14. In the above circumstances, this Appeal, being devoid of any merit, is hereby dismissed with no orders as to cost.
KMZ/T-15/L Appeal dismissed.