HABIB BANK LTD. vs M/s. FAROOQ COMPOST FERTILIZER CORPORATION LTD.

1. ' WAJIHUDDIN AHMED, J.---- Through a Finance Agreement dated 8-2-1986 between the appellant- Bank and the respondent No,1, the latter, as Customer, confirmed having sold to the bank goods for a sum of Rs,2,500,000, termed sale price, likewise confirming having repurchased the said goods from. the bank at a price of Rs,3,118,200, termed as the purchase price. Though there are unfilled blanks in the aforesaid agreement for Finance, placed on record before the learned Banking Tribunal No,II, it transpired that the transaction period was between 8-2-1986 and 30-6-1986.

2. Another term of the referred agreement stipulated that in the event of the respondent No,1 Customer paying the purchase price on the dates specified the bank was to pay to the Customer Rs,225,750 as and by way of prompt payment bonus, which stipulation evidently never came into operation as there was no such prompt payment. Upon the facts, which unfolded before the learned Tribunal in the absence of the respondent, the proceedings being ex parte, it would appear that the then manager of the bank branch extended finance far in excess of the sanctioned finance limit, the respondent No,1, in the meantime, frequently depositing and withdrawing amounts without any apparent reservation or restraint. The suit for recovery, instituted before the learned Banking Tribunal somewhere in 1992, was numbered as 23 of 1992 and decreed, having remained undefended. While decreeing the suit the learned Chairman of the Tribunal, Mr. Justice (Retd.) G.M. Kourejo, took a serious note of the bank/its officers extending finance beyond the prescribed limit but exercised restraint, the then manager having during the intervening period, been transferred abroad. This latitude, in our view, was hardly warranted. The officer remained in service and could have been called to account. This should be done now.

3. ' The decree passed in the suit is questioned by the bank on the grounds that the learned Tribunal declined mark-up beyond the transaction period and also refused damages upon the dues of the bank at 20% of the amount claimed. We heard Mr. Abdul Majeed Khan, Advocate, at length and finding no merit in the appeal, dismissed it in limine for reasons, which are recorded here.

4. In the first place, "finance", within the meanings of section 2(e) of the Banking Tribunals Ordinance, 1984, does not involve any equivalent of interest and by its own force does not carry returns beyond the stipulated period unless emanating in due course of law or expressly covenanted, again within the framework of law. In the relevant agreement, envisaging sale and purchase of goods, we find no such term nor perhaps a term to that effect could be improvised, the reason beings that such an improvisation may have exposed itself as a degenerative, relegating the transaction to one, carrying interest. Patently, a provision for sale and repurchase of the goods within periods specified (Bai Muajjal), culminating in repurchase, is calculated to advance the concept of trade and to forestall the extension of interest. Such agreements are to be construed in the light of Islamic Fiqh.

5. The Enforcement of Shariah Act, 1991, lends support to this observation because that legislation declares the Qur'an and Sunnah as the Supreme Law of the land and, if more than one interpretations be possible, enjoins upon all Courts to interpret statute-law in a manner consistent with Islamic principles and jurisprudence. Relevant to our theme, trade and commerce is to be encouraged and Riba, correspondingly, eliminated. Accordingly, we find that the learned Tribunal, acted in accordance with law and within the parameters of the agreed stipulations, when it disallowed any mark-up beyond the period of the contract, extending it only for the cushion period of 210 days, calculated to facilitate institution and conclusion of proceedings for recovery.

6. Resultantly, if the bank had been vigilant and did not keep extending the facility indiscriminately there may have been no occasion for it either to claim any additional mark-up or even damages.

7. This portion of the order is, therefore, quite unexceptionable As to the next contention of the learned counsel that liquidated damages at 20% have been disallowed, even though expressly contracted, from the date of demand to the date of payment, all that we need to say is that liquidated damages themselves, under section 74 of the Contract Act, 1872, call for proof and proof was wanting before the learned Tribunal. In addition, the statutory dispensation itself under section 11(4) of the Banking Tribunals Ordinance envisages liquidated damages only as a follow-up measure pursuant to passing of a decree, if any, when the decretal amount remains unsatisfied beyond a period of 30 days from the date of the decree and the Tribunal, on an application of the Decree-holder, imposes a penalty in the nature of liquidated damages, the quantum being discretionary. The statute thus remaining specific as regards the liquidated damages, both with reference to the points of time and discretion, impliedly, precludes liquidated damages in any other context except subject to what follows below perhaps where, pursuant to an agreement, proof is tendered of any loss upon non-payment, relief for which may be prayed for. But as we have said, no such proof was tendered before the Tribunal. The same aspect, additionally is also covered by the cushion period of 210 days, above referred. Such provision, clearly, covers the period between demand and default as well as that likely to be consumed in the institution and conduct of proceedings for recovery. A claim for agreed liquidated damages, always subject to actual loss in terms of section 74 of the Contract Act, 1872, thus could be a plausible equivalent of mark-up for the cushion period and any so-called liquidated damages, therefore, may hardly arise in the face of the cushion period, aforesaid.

8. ' For such reasons the impugned judgment and decree of the learned Tribunal suffers from no infirmity, either as to the facts or law. No interference is called for and, therefore, the appeal was dismissed, as above.