UNITED BANK LIMITED Versus SHAFIQ TEXTILE MILLS LIMITED
ORDER
1. The plaintiff in Suit No. 3/92 has filed the suit for recovery of Rs.87,214,372,25 from the defendants: It is alleged that the plaintiff had granted to the defendant No. l a loan of Rs.12.5 million in 1983 and, as security for the loan, the defendants executed various documents such as the promissory note, and guarantee and also deposited the documents of title by way of equitable mortgage. The loan of Rs.12.5 million was subsequently enhanced to Rs. 30 million in December, 1983, and a fresh set of security documents was executed by the defendant. All these documents provided for payment of interest. Then, as is stated in paragraph 11 of the plaint, after the change over to mark‑up system, various defendants executed documents in favour of the plaintiff with regard to the said enhanced limit of Rs. 30 million and the defendant No. l executed the security documents which are Annexures S and T to the plaint. These documents provide for mark‑up and were in substitution of earlier documents which had provided for interest.
2. Suit No. 112 of 1991 has been filed by the plaintiff for recovery of Rs.37,399,895,65. The relevant allegations are contained in paragraphs 4,5, 6 and 7 of the plaint, which are that the plaintiff had granted to the defendant No. 1 credit facilities on the basis of interest and the defendant had executed the various documents of security on that basis; and that subsequently, as mutually agreed between the parties, the basis of the aforesaid facilities granted by the plaintiff to the defendant No. 1 was converted from 1‑7‑1985 to mark‑up from interest.
3. It is clear from the facts alleged in the two cases that the original transactions between the parties were on the basis of payment of interest but that the, transactions were subsequently, by mutual agreement between the parties, converted to ones on the basis of mark‑up. There was, thus, a clear substitution, or novation, of the contracts between the parties. The questions of effect of such substitution and the jurisdiction of the Banking Tribunal established under the Banking Tribunals Ordinance, 1984, were considered by a Division Bench of this Court in C.P. No. 1089 of 1988, wherein it was held that in such cases the Banking Tribunal has jurisdiction. However, the learned counsel have chosen to address various arguments to support their contention that this Court has, notwithstanding the decision of the Division Bench, jurisdiction to entertain these two suits.
4. Mr.A.I. Chundrigar has contended, firstly, that because section 8(2)(b) of the Banking Companies (Recovery of Loans) Ordinance, 1979, provides for grant of mark‑up, this Court has jurisdiction to entertain a suit in which mark‑up has been claimed. He contends, secondly, that the provisions of the Banking Tribunals Ordinance apply only to a transaction arrived at on the basis of mark?up for the first time after the Ordinance has been enforced and that they cannot apply to 'the transactions such as the ones in these suits where the loan was originally granted on the basis of interest but subsequent converted to one of the basis of mark‑up. According to him the word "provided" in section 2(e) of the Banking Tribunals Ordinance must be confined to a fresh loan granted on the basis of mark‑up. He finally contends that this is a suit for interest‑cum‑mark?up. The argument seems to be that the claims in the suits are for interest as well as for mark‑up.
5. Mr. A.H. Mirza for the defendants in Suit No. 3/92 submits that the Banking Companies (Recovery of Loans) Ordinance, 1984 is a general statute and the provision therein for mark‑up is no longer effective in view of the special provisions enacted in the Banking Tribunals Ordinance, 1984. As for the contention that the Ordinance of 1984 is restricted to fresh transactions on the basis of the mark‑up, 'Mr. Mirza submits that in order to construe the word "provided" in section 2(e) of that Ordinance, the intention of Legislature must be taken into account, and the intention, according to him, is that all cases in which the transaction has been entered into on the basis of mark‑up should be tried by the Banking Tribunal. As Mr. Chundrigar's argument that the suit is for interest as well as mark‑up, Mr. Mirza contents himself by referring to paragraph 11 of the plaint to show that the suit is exclusively for a claim of mark‑up.
6. It is true that section 8(2)(b) of the Banking Companies (Recovery of Loans) Ordinance; 1979, provides that the Special Court shall, in the case of loan given on the basis of mark‑up, grant mark‑up, at the agreed rate; but that provision was inserted by an amendment made in 1983 when the Special Court admittedly had jurisdiction to entertain suits for recovery of loans granted on the basis of interest as well as mark‑up. Section 8(2)(b) was not really concerned with conferring any jurisdiction on the Special Court and the sole purpose of the provision was to require Special Courts, in the cases in which it had the jurisdiction, to allow mark‑up, rental, hire or service charges as the case may be where the loan was granted on the basis of mark‑up lease, hire purchase of service charges. By the Ordinance of 1984, the jurisdiction of the Special Courts to entertain the cases of the kind included in section 8(2)(b) of the Ordinance of 1979 has been excluded. Therefore, no' question of a Special Court granting mark‑up can now arise.
7. The contention of Mr. Chundrigar that the word "provided" in section 2(e) of the Ordinance of 1984 must be confined to such loans as were granted for the first time on mark‑up basis and should not be extended to the loans which were originally granted on interest basis but were subsequently converted to mark‑up basis was not supported by the language of section 2(e) itself as there is nothing in that language to suggest that the meaning of the word "provided" should be restricted as suggested by Mr. Chundrigar and there is no reason why the word "provided" cannot be taken to refer to loans originally granted on interest‑basis but subsequently converted to mark‑up basis, for, in the latter case, conversion is in effect tantamount to fresh grant.,,
8. The arguments that this suit is for a claim based on interest as well as on mark‑up is obviously not correct and is negatived by the averments in the plaint and particularly the averment in paragraph 11 of the plaint.
9. Mr. Anwar Mansoor Khan appearing for the defendant in Suit No.112/91 contends, firstly, that because the plaintiff has claimed interest in prayer (iv) of the plaint, the suit is for a claim of interest and not mark‑up and, therefore, this Court has jurisdiction. Mr. S. Mamnoon Hassan, on the other hand, submits that the word ' interest' in prayer (iv) of the plaint is a typographical error and that, as shown by paragraph 7 of the plaint, the claim is entirely for recovery of loan based on mark‑up. Mr. Mamnoon Hassan's submission is correct.
10. It is next submitted by Mr. Anwar Mansoor Khan that proviso (a) to section 5(3) of the Banking Companies Ordinance, 1984, confers upon banking companies a right to choose a forum for filing suits. Section 5(3) and the proviso (a) are in the following terms:‑
11. "No Court other than a Banking Tribunal shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Tribunal extends under this Ordinance, including a decision as to the existence or otherwise of finance and execution of a decree passed by a Banking Tribunal:‑‑
12. Provided that nothing in this subsection shall be deemed to effect‑‑
(a) the right of a banking company to seek any remedy before any Court or otherwise that may be available under the law by which the banking company may have been established or under that law as amended from time to time. "
13. Now it is not disputed by the counsel that in the present case the Banking Tribunal has jurisdiction by virtue of the provision of section 5(l) of the Ordinance but his argument is that because of the proviso and, particularly, the word "otherwise" therein, the jurisdiction of this Court has been saved and the plaintiff, therefore, has been given the option to file a suit either before the Banking Tribunal or before this Court. The argument, however, is flawed. The Ordinance having, by section 5(1)(a) thereof, conferred jurisdiction on the Banking Tribunal in respect of claims filed by a Banking Company against a customer in respect of, or arising out of finance provided by it, provides, by section 5(3), that no Court other than a Banking Tribunal shall have or exercise jurisdiction with respect to any matter to which the jurisdiction of a Banking Tribunal extends. That is a substantive provision and excludes the jurisdiction of all Courts, including this Court, to entertain a suit of the kind referred to in section 5(1)(a). The proviso to section 5(3) is just that, namely, a proviso and has, therefore, to be strictly construed and cannot be so interpreted as to whittle down the substantive provision of the statute: and, in any case, there is nothing in the language of the proviso to warrant the interpretation sought to be placed on it by the counsel. It is clear that the only right of a Banking Company, which is saved by the proviso is the right to seek remedy under the law by which it may have been established; and it is not the plaintiff's case that it was established by any law or that any remedy, other than through a Banking Tribunal, has been conferred upon it by such law, or, more specifically, that a right to file a suit in this Court has been conferred upon the plaintiff by any law by which it may have been established. It is, therefore, clear that the plaintiff does not have the option contended for by the counsel. The word "otherwise" is the proviso in no manner affects the question of jurisdiction and its only effect is that if a remedy for recovery, otherwise than through a Court, is conferred upon a Banking Company by a law by which it was established, such a remedy would not be affected by the provisions of section 5(3) of the Ordinance.
14. It was then submitted by Mr. Anwar Mansoor Khan that under Article 212 of the Constitution the Legislature is empowered to establish administrative tribunals for the purposes specified therein and to confer exclusive jurisdiction on such tribunals; and that, therefore, it cannot establish any other Courts or Tribunals with exclusive jurisdiction; but the argument overlooks the fact that Article 175 of the Constitution provides for establishment, apart from the Supreme Court and High Courts, of "Such other Courts as may be established by law"; and that no Court shall have any jurisdiction save as is or may conferred on it by the Constitution or under any law. However, at this stage Mr. Anwar Mansoor Khan says that it was not his intention to challenge the validity of the establishment of the Banking Tribunal or its jurisdiction and that what ‑ he meant was that Article 212 of the Constitution is concerned only with the creation of administrative Tribunals of exclusive jurisdiction and that the Banking Tribunal having been set up not under that Article but under Article 175 is subordinate to High Court. This later argument, namely, that the Banking Tribunal is subordinate to High Court, is a part of his submission based on Article 203 of the Constitution.
15. Mr. Anwar Mansoor Khan states that a suit filed by the defendant against the plaintiff's is pending and that if the plaintiff's suit were to be tried by the Banking Tribunal, not only will the defendant be unable to apply for its stay under section 10, C.P.C. but there will be a possibility of conflict of judgments. In these circumstances, he submits, this Court should, in exercise of its supervisory jurisdiction under Article 203 of the Constitution, continue to entertain this suit and consolidate it with the suit filed by the defendant against the plaintiff. Assuming that the Banking Tribunal is a Court subordinate to this Court, the question that arises is whether the scope of the supervisory jurisdiction extends to this Court trying a suit when its jurisdiction to do so is expressly barred by section 5(3) of the Banking Tribunals Ordinance, 1984. In support of his submission the learned counsel has cited the case of Iftikhar Ahmed v. The Muslim Commercial Bank Ltd. (PLD 1984 Lahore, 69), Sharaf Faridi and 3 others v. The Federation of Islamic Republic of Pakistan (PLD 1989 Karachi 404 and Mst. Gaman v. Taj Din (PLD 1968 Lahore 987). None of those cases, however, support his contention; and in Sharaf Faridi's case, Ajmal Mian, C.J. (as he then was) observed:
16. "It may be' observed that the High Court exercises supervisory jurisdiction of two types i.e. judicial which is conferred on the High Court by virtue of Article 199 of the Constitution provisions of the Civil Procedure Code, Criminal Produced Code and other relevant enactments either as an Appellate Court or Revisional Court and the second of supervisory jurisdiction is administrative.
17. In my view Article 203 relates more to administrative aspect than the judicial aspect .... "
18. Six other learned Judges of the Bench in that case concurred with the view expressed by the learned Chief Justice. It would appear from the passage cited above that whatever may be the scope of supervisory jurisdiction, under Article 203, .it cannot extend to this Court trying a suit when its jurisdiction to do so has been expressly barred.
19. It is further submitted by the learned counsel that jurisdiction under Article 203 can be exercised in cases of grave dereliction of duty, or flagrant violation of law, where grave injustice would result unless the High Court interferes. Assuming that this is so, the first place there has been no dereliction of duty or violation of law on the part of any subordinate Court yet to justify any interference to prevent injustice resulting from dereliction of duty or violation of law is not the something as assumption of jurisdiction which is expressly barred by law. Mr. Mamnoon Hassan adopted the arguments advanced by Mr. Chundrigar and the argument of Mr. Anwar Mansoor Khan that by virtue of the proviso to section 5(3) of the Ordinance of 1984, this Court has jurisdiction to entertain the suit. He, however, did not subscribe to the argument that jurisdiction under Article 203 of the Constitution is attracted in the circumstances of this case and cited the case reported in 1989 CLC 524.
20. None of the learned counsel made any attempt to distinguish the decision of the Division Bench referred to above. The facts in that case were similar to the facts in the present cases in that interest based loan granted earlier was subsequently converted into one based on mark‑up and it was held that "when the previous credit accommodation based on interest gave way to a new finance agreement executed on non‑interest basis the original contract was completely extinguished and no reliance can be placed upon the former for interpretation of the terms of the later" and further that in such a case the Court is only required to determine whether the new agreement is in conformity with the definition of "finance given" in section 2(e) of the Ordinance. It is not disputed by any one that the agreements in the present cases fall within the meaning of the term "Finance" in section 2(e) of the Ordinance. It follows that in both the cases the Banking Tribunal has jurisdiction and that the jurisdiction of this Court is, therefore, barred. In the event, the plaints in the two suits have to be returned to the respective plaintiffs for filing before a proper forum. Order accordingly.
21. In view of the above Order C.M.As. 1595/92 and 7839/92 in Suit No.112/91 have become infructuous and are hereby dismissed.
22. A.A./U‑12/K ?????????????????????????????????????????????????????????????????????????? ??????????? Order accordingly.