I.C.P. and others vs Messrs CHINIOT TEXTILE MILLS LTD.

ORDER

1. ' The plaintiffs, had agreed to grant consortium loan by way of finance against Term Finance Certificates to the extent of Rs,25.4 million to the defendant No,1. The terms of the facility are contained in the Investment Agreement dated 12-4-1989. Under the Investment Agreement, the purchase price was settled at Rs,44,996,276 repayable on or before 31-12-1992. The above purchase price was calculated with mark-up .At the rate of 22 paisa per rupee per annum but rebate at the rate of 7 paisa per rupee per annum was also agreed in the event of repayment as per the scheduled dates. In Schedules 'B' and 'C' to the agreement, the parties had worked out the amount of mark-up as well as the resale price separately both at the rate of 22% per annum and 15% per annum. Thus the defendant No,1 was required to make payment of instalments at lower rate of mark-up provided such repayments were made within due date(s). The final date of repayment was agreed in the present case as 31st December, 1992. Under the Islamic System of Banking any mark-up based facility extended to the customer, carries obligation to make payment of the marked-up price relevant only to the period for which the facility is granted. The party which grants the facility cannot claim any mark-up beyond the period of contract since such payment, necessarily, renders the mark-up based transaction into one of interest. In the present case, therefore, the agreement to pay extra mark-up at the rate of 7 paisa per rupee per annum, thus, would amount to payment of mark-up beyond the contract period and cannot be allowed. Looking at the agreement from another angle, it appears that payment of extra mark-up worked at the rate of 7 paisa per rupee per annum was in the nature of penalty for non-payment within time.

2. Such finding takes care of the objection regarding rate of mark-up raised by the defendants in the application for grant of leave.

3. ' The next contention urged in support of the application for grant of leave is that the defendants Nos.2 to 8 who have been sued as guarantors stand relieved from their responsibility in terms of section 133 of the Contract Act. Mr.Arfin, in this behalf has referred to letter dated 29-5-1997 which is filed as Annexure D-3 with the application for leave. Through this letter, the plaintiff-Bank is stated to have offered re-scheduling of the facility subject to increase of mark-up rate from 15% to 18.61% per annum. In reply, the learned counsel for the plaintiff-Bank has urged that the letter merely contained an offer which was not accepted by the defendant No,1 and the terms of finance had remained unchanged. Therefore, the defendants Nos.2 to 8 cannot assert discharge under section 133 of the Contract Act. The said contention of Mr. Anwar Muhammad appear to me, to be justified.

4. In any case, Mr.Arfin has stated at bar that in case, applicable rate of mark-up is determined as 15% per annum, the above objection raised by him may be treated to have been given up.

5. In the application for leave to defend, it is further urged that the defendant No,1 had repaid a sum of Rs,17,672,370 which had not been adjusted from the amount claimed by the plaintiff. The assertion made by the defendants, as above, is accepted by the plaintiffs upon verification of its record. Such objection, therefore, also needs no further inquiry.

6. ' The last argument raised on behalf of the defendants is that the plaintiffs had disbursed the amount of facility on different dates, and therefore, the mark-up should have been calculated from the date of disbursement. It is further urged that the plaintiffs had accepted such stand taken by the defendant No,1 and through supplementary agreement had agreed to reduction of the purchase price from Rs,44,996,276 to 41,195,896. The purchase price recalculated, as above, on the basis of dates of disbursement had been worked out with mark-up at the rate of 22% per annum.

7. On such analogy, according to the defendants, the purchase price ought to have been worked out to Rs,36,194,474 at the rate of 15% per annum. The defendants' said objection is pleaded in the affidavit as follows:-- "That the plaintiffs were required to disburse the entire amount of the finance of Rs,25,400,000 to the defendant No,1 in lump sum but the plaintiffs failed to do so and they disbursed this amount at different times. This also caused losses to the defendant No,

1. In any case, on account of non- disbursement of the amount at one time the purchase price was recalculated by the plaintiffs at Rs,41,195,896. In fact, the purchase price ought to have been Rs,36,149,474. Out of this amount payments made by the defendant No,1 to the plaintiffs in the amount of Rs,17,672,369 is to be deducted."

8. ' It is pertinent to note that the plaintiffs have chosen not to file any counter-affidavit in rebuttal of the above averment. In view of the failure on the part of plaintiffs to rebut the said statement, the learned counsel for the defendants Nos.1 to 8 has urged that the said plea be deemed to have been admitted. In support of such assertion, reliance has been placed on the cases of Juggi Lal Kamla Pat v. Ram Janki Gupta and another AIR 1962 Allahabad 407, Raja Himanshu Dhar Singh v.

9. Additional Registrar, Cooperative Societies, Uttar Pradesh, Lucknow and another AIR 1962 Allahabad 439 and The State v. Allah Yar PLD 1959 Lahore 16. While it is true that the statement contained in an affidavit is verified on oath and unless traversed through counter-affidavit, has to be deemed to have been admitted. However, the only admission which can be implied on account of non-filing of counter-affidavit from the above situation is that the plaintiffs had recalculated purchase price at rate of Rs,41,195,896 with mark-up at the rate of 22%. As to whether similar benefit would apply to calculation of mark-up at the rate of 15%, is a question which is to be determined on the basis of documents which are available on record. It is not the case of the defendants that purchase price payable within the scheduled dates was worked out at Rs,36,149,474 in the supplementary agreement. The obvious reason for non-mention of the lower rate of mark-up was that the supplementary agreement was sent for execution after expiry of the date for re-payment of finance initially agreed between the parties. A document has to be read in its entirety and in case it is assumed that the investment agreement, dated 12th April, 1989 was substituted by the Supplementary Agreement, the rate of markup will have to be calculated at the rate of 22% per annum. The argument that lower rate of mark-up be assumed to have been agreed through supplementary agreement between the parties, in my view, is far-fetched. What is written in the Supplementary Agreement shown to me during hearing, cannot be varied or modified by oral word contained in the so-called uncontroverted affidavit quoted hereinabove. The principle contained in Article 103 of Qanun-e-Shahadat supports me in this , respect. Moreover, the purchase price determined at Rs,38,761,092 in the Investment Agreement dated 12-4-1989 can only be changed through an express agreement between the parties. Such position besides being more beneficial to the defendants is also acceptable to the plaintiffs who have urged that disbursement of finance was never agreed to be made in lump sum. Besides, if novation through the Supplementary Agreement, is assumed, the defendants' contention about effective rate of mark-up being 15% per annum will stand negatived. Such course shall also have the effect of nullifying the guarantees executed by defendants Nos.2 to 8 and the consent given by Mr. Arfan in relation to their liability which is recorded hereinabove. For the present, therefore, I will assume that the Investment Agreement dated 12-4-1989 continues to be valid and subsisting and the plaintiffs are entitled to recovery of Rs,38,761,092 as the purchase price agreed thereunder subject to adjustment of repayments.

10. ' The last contention raised on behalf of the defendants, as above, is in the circumstances, repelled.

11. Consequently, the application for leave Civil Miscellaneous Application No,8024 of 1997, is dismissed.

12. ' Resultantly, the contents of plaint are to be deemed to have been admitted and the plaintiffs are entitled to decree in terms of the prayer. However, in view of my findings regarding extent of the liability which have been accepted by Mr.Anwar Muhammad, the plaintiffs' suit is decreed in the sum of Rs,21,088,722 against defendants Nos.1 to 8 jointly as well as severally with mark-up at the rate of 16% per annum from the date of institution of the suit till payment. The suit is also decreed in for sale of the mortgaged property described in Second Schedule of the Trust Deed dated 9-7-1989 subject to the claim of pari passu charge-holder, the defendant No,9. The plaintiffs are also entitled to costs of the proceedings.

13. It was urged by Mr.Mansoorul Arfin that the defendant No,1 would be willing to make payment of the outstanding amount in instalments. However, such request is opposed by the learned counsel for plaintiffs. The provisions of Act XV of 1997 do allow re-payment in instalments under section 5(2) thereof. However, such order is subject to satisfaction of Court amongst other of the effect that it is not feasible to make full recovery or the security and assets are found inadequate. There is nothing on the record to record any finding to the above effect, and therefore, the oral motion made by the learned counsel for defendants Nos.1 to 8, as above, is declined.