 |
 |
 |
Suit 493-98 (UBL v[1]. Gravure Packaging & ots.)
IN
THE HIGH COURT OF SINDH, KARACHI
Suit
No.493/1998.
J
U D G M E N T
Date
of hearing: 16.05.2001.
Plaintiff: United Bank Ltd.
through Mr. Azizur Rehman, Advocate.
Defendants: M/s. Gravure Packaging,
Jehangir, Mrs. Noor Jehan,
Abdul Kalim Baazka and Rafya
through M/s. Saalim Salam Ansari
and Abid Sherazi, Advocates.
ANWAR MANSOOR KHAN, J.- The
present suit has been filed by the plaintiff against the defendants
for recovery of Rs.33.081 millions as due on
2.
The said account was transferred from the I.I. Chundrigar Road Branch
to the Corporate Branch of the Plaintiff Company where fresh agreements
were entered into which have been filed with the plaint as Annexure-R
and S (Ex---P/18 and Ex---P/19). Under the said agreement the
same amount namely Rs.7.20 million was mentioned as re-purchase price
with a prompt payment bonus of Rs.0.258 million. In the second
agreement, however, it seems that the said Bills of Exchange were
purchased by the bank for Rs.1.5 million and sold to the defendant
No.1 for Rs.2 million repayable on or before
3.
The written statement has been filed by the defendants in which preliminary
objections as to the maintainability of the suit were taken on the
ground that in fact the suit is for rendition of account and not a
suit for recovery and that the claim of liquidated damages is unlawful.
It was further stated that the agreements are not witnessed and are
violative of Article 17(2) of the Qanoon-e-Shahadat Order, 1984
and that the person filing the plaint had no authority to verify the
same. The suit has been filed as a mortgage suit. The
objection has been taken that the mortgage per the Islamic financing
and the law prevalent could only be that by possession and, therefore,
the memorandum of deposit of title deed and mortgage are invalid and
cannot be looked into. The objection is also taken that the
amount includes exaggerated amount of mark-up and the same cannot
be allowed. The execution of the guarantees has also been disputed
by the defendants No.2 to 5 as, according to the said defendants,
the same are not actual signatures of the defendants. The same
is not decided and cannot be accepted in view of Article 17(2) of
the Qanoon-e-Shahadat Order, 1984. In addition to the denial
of guarantee, the defendants have also denied the payments claimed
by the plaintiff on account of L/Cs and according to the defendants,
the same had been paid off. However, the plaintiffs have admitted
the factum of the payment to the extent of Rs.6,848,855.00 as, according
to them, the same has been admitted in Ex---D/11. The defendants
have filed a statement of account which according to them is under
the formula given by the State Bank of
“(A) N.I.C.F. ACCOUNT
OUTSTANDING
MARK-UP
MARK-UP
TOTAL
LESS
BALANCE
OF
OF CUSHION
OUTSTAND-
ADJUST-
AMOUNT/O.D
365 DAY
PERIOD OF
ING BEFORE
MENT
ON
UPTO
Rs.
Rs.
Rs.
Rs.
Rs.
4006142/-
878161/-
505243/-
5389546/
4083524/-
NET BALANCE AFTER ADJUSTMENT(S)
Rs.1306022/-
(B) N.I.D.F. ACCOUNT
1234325/-
139726/-
80390/-
1454441/-
135000/-
NET BALANCE/OUTSTANDING AFTER
ADJUSTMENTS/REPAYMENTS
Rs.1319441/-
(C)
U.S. AID L/c Account’s OUTSTANDING
Rs.5768798/-
(D)
O.S. P.A.D. L/c Account’s OUTSTANDING Rs. 580000/-
GRAND OUTSTANDING/BALANCE
Rs.8974261/-“
4.
The defendants have vehemently contested the addition of mark up on
mark up and subsequent agreements, stating that the same is unlawful
and cannot be allowed. Infact what has been claimed is that the subsequent
agreements are void, not having been acted upon. The plaintiffs
have also claimed damages on account of breach of agreement.
5.
The following issues were framed:
1.
Whether the plaintiff bank has charged mark up on mark up ?
If so, what is its effect?
2.
Whether the suit is bad for non joinder of necessary party?
3.
Whether defendants No.2 to 5 are liable as guarantors and if so to
what extent?
4.
Whether the defendants are liable to pay the suit amount?
5.
What should the decree be?
6.
Before all the issues could be argued, I had asked Mr. Aziz as to
how Markup on markup could be charged in view of the clear circular
of the State Bank of
7.
Mr. Aziz stated that notwithstanding the said decisions, he would
wish to reiterate his contentions that he had made in the case of
Qayyum Spinning and in the unreported case, being Habib Bank Ltd.
V Hafiz Textile Mills Ltd. Suit No. B-153 of 2000.
8.
Mr. Aziz stated that, with regard to SBP Circular Nos.13 and 32 dated
20·June 1984 and 26·11·1 984 respectively. He stated that the two
Circulars are among many which SBP has been issuing from time to time
and the two Circulars in actual fact have to be examined. The first
Circular No. 13 according to him will not be attracted where renewal
of loan is made subsequently, since "renewal" amounts are
merely extension and continuation of the earlier agreement between
the parties. Circular No.32 merely pertains to different items of
Bank charges and therefore cannot be made basis for striking down
the contract between the parties. In other words Circular No.32 does
not have the effect that it over rides Circular No.13. In the case
of UBL Vs. Central Cotton Mills Ltd. reported as 2001 MLD 78 (S.B.)
deals with the said two Circulars. The learned Single Judge of the
High Court of Sindh Karachi came to the conclusion that Circular No.13
is not overridden by Circular No.32. He said that in SBP Circular
No. BID(Gen)2470/601 ·Q4·90 of 17·06·1990 which was addressed to all
Banks with regard to the treatment to be given to rescheduled loans
and capitalisation of mark up/interest and the guidelines were given.
In Clause 2.1 of the said Circular, the "restructured" loan
has been defined as one whose terms and conditions have been modified
principally because of deterioration in the borrowers financial condition,
in order to provide reduction in interest rate or principal or a capitalisation
of interest accrued. Clause 2.2 refers to a "rescheduled"
loan and defines it as one in which effective interest rate terms
remain unchanged from original terms but principal repayment terms
have been extended because of project delays and such loan has been
defined as not a restructured loan. According to him, clause 7.1 provided
for capitalised mark up/interest on loans and defined the words as
‘uncollected interest’ which is added to ‘unpaid principal’ in accordance
with contractual loan agreement.
9.
It is his case that in the said Circular and the guidelines attached
to the same, the word “interest” has really been utilized to mean
interest and/or markup as is evident from line 5 of the Circular itself.
He said that on the date of Circular i.e. 17·06·1990 five years had
elapsed from the date on which the system of markup had been introduced.
Guidelines, according to him were issued by HBL to its various officers
in order to deal with rescheduling, restructuring and writing off
which was contained in the aforesaid Circular of SBP dated 17·06·1990.
He said that the guidelines issued by SBP were attached. Circular
No.4 of 17·02·2000 was also issued by SBP under the heading "Rescheduling/restructuring
of non·performing loans". The Banks as per
10.
Mr. Aziz argued the position of Novation of Contract and stated that
in the unreported judgment of the Division Bench of the High Court
of Sindh dated 08·01·1999, the decision which was reached was in line
with a number of cases which had mentioned, being 1994 CLC 2272 (Karachi)
D.B. and 2000 CLC 1602(Karachi) S.B. He said that it was held
by the Division Bench of the High Court of Sindh Karachi that, where
a fresh agreement was entered into and the Defendant acknowledged
that a certain sum was due from him which formed consideration under
the new agreement, the liability of the Defendant under the original
contract was completely extinguished and there was a fresh contract
substituting the old contract and which was in the nature of novation
of a contract within the meaning of Section 52 of the Contract Act,
1872. The Division Bench has placed reliance for purposes of interpretation
of Section 62 of the Contract Act on PLD 1964 S.C. 337. Likewise he
said that in the second reported the conclusion of the learned single
Judge was that Section 62 of the Contract Act clearly provides that
if parties to a Contract agree to substitute a new contract for the
old one or to rescind or alter it, the original contract between the
parties need not be performed and that, there is nothing in the Contract
Act or in any other law which prohibits the parties from altering
terms of the original contract or executing a new contract to substitute
the old one. It was further held that the subsequent agreement amounted
to novation of the old contract, the consideration of which was the
agreement of the Bank to extend time for payment of the outstanding
liabilities of Defendant No.1.
11.
On of the point of actual disbursement it was argued by Mr. Aziz stating
that there need not be any actual disbursements when a Bank allows
rescheduling or restructuring of an existing debt. Therefore in rescheduling,
the liability to pay to the Bank is amended or recast giving further
time for repayment to the Bank. He said that, in this connection the
definition of the word "debt" would also be relevant and
for the meaning of the word, he has relied on PLD 1983 Karachi 176
(D.B.) where it was held that a debt in the hand of a debtor does
not belong to him but it belongs to the person to whom it is payable.
A debt is something that is owed by one person to another. It is an
obligation and liability to pay or return something. He states that
similarly in the above referred case reported in 2000 CLC 1502 (Karachi)
S.B., the learned Single Judge utilized the words “outstanding liabilities
of Defendant No.1” which was treated as consideration for the new
contract. Thus the outstanding liabilities constituted the debt payable
to the Bank. Since the acknowledgement of liability contained in the
fresh agreement is available, fresh disbursements obviously was not
required, as otherwise there would be duplication, and the Bank will
be out of pocket by actually disbursing the outstanding amount again
to its borrower/customer.
12.
Mr Aziz said that the judgment reported in PLD 2000 S.C. 225 is actually
the one passed by Shariat Appellate Bench of the Supreme Court consisting
of 5 Judges. The Supreme Court has given directions and in any case
until 30·06·2001 the present laws will continue to be valid. Therefore
the contents of the judgment have not come into force so far. A large
number of steps have to be taken by the Federal Government and other
agencies including Banks for different phases of transformation which
is still to be effected. He had also referred during the arguments
to the various Articles of the Constitution of Pakistan, inter alia
Article 203·H(1) which provides that all pending proceedings
in any Court or Tribunal shall continue and the points in issue therein
shall be decided in accordance with the law for the time being in
force. He referred to a judgment of a learned Single Judge of the
High Court of Sindh, Karachi, in Suit 1700/99 where it was held that
the said judgment of the Shariat Appellate Bench of the Supreme Court
and injunctions of Islam cannot be pressed into service to avoid payment
of outstanding liabilities since verse 2:280 does not create a right
in favour of a debtor for payment of what is acknowledged as due.
13.
Mr. Aziz said that Industrialists and Traders make lot of money by
borrowing from Banks, etc. and the money really comes from even small
depositors who put their money into the hands of the Banks. The interest
or mark up paid by these Industrialists and Traders is included in
their accounts and they get benefit of increased prices for their
produced/manufactured items and they are allowed to reap benefits
by showing interest/mark up as costs of production which interest/mark
up is allowable expenditure in income tax returns.
14.
Mr. Aziz said that therefore rescheduling, restructuring and entering
into fresh agreement to renew the facility by adding markup is valid.
It shall only be effective after the judgment of the Shariat Appellate
Bench of the Supreme Court becomes applicable. Mr. Aziz adopted the
arguments made by Mr Ejaz advocate in the Qayuum Spinning case and
argued that notwithstanding the fact that the said judgment is not
applicable, it is necessary to dilate upon the history as to how and
what was the actual perspective that the bankers had understood in
respect of the said system. He has referred to the judgment in the
case of Dr. M. Aslam Khaki (supra). He stated that the said judgment
also notices the manner in which the system was to work and referred
to a note that has been mentioned in the judgment of Mr. Junejo.
He has stated that the State Bank of Pakistan considered that the
entire transaction of purchase and repurchase as a notional transaction,
and that, because it was considered as a notional transaction where,
the mark up was not serviced, rescheduling was allowed by addition
of markup on the un-serviced markup. Such rescheduling / restructuring
was the only way that the banks could save their money, and earn thereon.
He stated therefore, renewal by way of entering into a fresh agreement
was considered appropriate. He stated that the circulars namely BCD
Circular No.13 and BCD Circular No.32 did not give any idea how the
transaction were to take place and it was therefore a belief that
such transactions could be entered into or done. He said that it was
common knowledge that notional sale and such like transactions were
valid transaction. He stated that disbursement for purchase in such
notional transaction was not necessary and that the amount of debt
on a particular date could be deemed to be proper and appropriate
disbursement. Mr. Aziz stated that if a view is taken by this court
that subsequent agreements are invalid agreements it will cause an
irreparable injury and harm to the banks whereby, the banks may in
fact collapse. In the judgment of Dr. M. Aslam Khaki (supra) a discussion
on the concept of Negotiable Instrument Act, 1881 has been referred
to. Sections 79 and 80 of the said Act have also been cited. Reference
has been made to a booklet on markup system by Mr. Justice Moulana
Muhammad Taqi Usmani in which a detailed discussion has been held
as to the mark up system as is in vogue and has been in practice in
the banks. It has been pointed out that the practice adopted under
the garb of mark up is authoritative of the conditionalities attaching
to Bai Moajjal as the permissibility of such a transaction is dependent
on fulfillment of the various conditions as enshrined in the Quaranic
injunctions in the order of the court. It has been stated by
Mr. Aziz that in BCD Circulars Nos.13 and 32, the concept of Bai Moajjal
or Murabaha, has not been stated and what was categorically said in
the notifications of the State Bank of Pakistan, was that mark up
could be charged on a transaction, but mark up on mark up could not
be charged, in that there was nothing to stop the banks from entering
into such fresh agreements for renewal, restructuring or rescheduling.
His emphasis lay on the fact that, upon mark up having been charged
under the agreement the same became a debt and such debt became due
and payable within the stipulated period. He said that in the books
of accounts such was a credit payable by the debtor, therefore, the
debtor was in fact using the money of the creditor, namely the bank.
According to him, subsequent agreements were nothing but agreements
for sale and purchase where, the commodity being sold was notional
and that in fact, the debt payable under the first agreement became
the notional sale of notional goods at a purchase price of such goods,
and markup was added to arrive at a notional repurchase price and
so forth. He said that it has now been explained as to how the bank
should finance and what is the meaning of ‘Riba’ or mark up on mark
up. He stated that no doubt, now under the new definition that has
been given by the case of Dr. M. Aslam Khaki, subsequent agreements
would be deemed to be invalid agreements on the account of the fact
that the Supreme Court has held that purchase if any, has to be actual
purchase and not a notional transaction. Mr. Aziz Advocate further
submitted that the question of increase on money was also not understood
by the banks, in fact State Bank of Pakistan had also not understood
the concept of money which has now been stated in the said judgment
of the Supreme Court. He stated that it could not have been even thought
of or understood that money could not earn money by way of additional
mark up on a debt. According to him, it is this judgment which
has cleared the concept of money and that in doing so it is stated
that the money is not a ‘commodity’ and therefore cannot be traded
like a trade of a commodity. He stated that it has been held, therefore,
that only commodities could be traded which were in accordance with
the principle that “Allah has allowed trade and prohibited Riba”.
According to him, therefore, in view of the above the Honourable Shariat
Appellate Bench of the Supreme Court had given a regulatory timetable
whereby, a date of implementation has been given. He stated that under
the measures to be taken for the purposes of creating an infrastructure
and a legal framework a summary has been given in the order passed
by the court. It was stated that the solution to the economic revival
has to be taken into account and that the Federal government shall
cause a board to be created for arranging exchange of information
of financial institutions about feasibility of project etc. and all
technical assistance with regard to the anomalies emerging in the
practical operation of financial institutions or difficulty arising
out of the operation of financial practice etc. and that all this
was to be done by the 30th June, 2001, whereafter the laws and
provisions of laws to the extent that those declared to be repugnant
of injunctions of Islam shall cease to have effect from 30th June,
2001.
The question is whether the
amount of purchase price (which has been stated
to be the debt of the customer) can be increased? And if so in what
circumstances?
The answer to this question
depends on the meaning ascribed to the word “increase” and accordingly
the increases in the amount of purchase price are classified as follows:
(a)
Increase which are not permissible
(A)
Mark-up on any overdue installment, where the finance facility is
payable in installments and the amounts and due dates of installments
are specified in the Agreement.
(B)
Mark-up on overdue amounts in cases of lump sum payment agreements.
(b)
Increases which are permissible
(A)
Where the amount of mark-up is to be booked by the Banks on accrual
basis in each quarter on the basis of outstanding balance and such
outstanding balance also includes the mark-up for the previous quarters.
In these cases, the banks can
be allowed to charge mark-up on the outstanding balance (inclusive
of previous mark-up debits) as the bank under its general lien and
right to set-off is allowed to apply the credit balance of the Customer
to offset the liabilities of the Customer. Accordingly any mark-up
recovered by the Bank by debiting the account of the Customer should
be recognized as a withdrawal by the Customer.
(B)
At the time of fresh sanction [renewal] of the working capital facilities,
some times the amount of the facility is enhanced. The amount of the
fresh finance facility is used to adjust the outstanding liabilities
of the Customer in respect of he previous facility. Naturally the
outstanding amount of the facility also includes mark-up. It is sometimes
argued that the amount of the second facility amounts to mark-up on
mark-up or capitalization of mark-up or roll-over.
Fresh finance facility is granted
to the Customer by the Bank. The amount of the facility can be utilized
by the Customer for any purpose and the mere fact that the Customer
used such amount to pay back its liabilities which included some amount
of mark-up would not make the amount of the fresh facility mark-up
on mark-up.
The proposition would be further
clarified with the converse argument i.e. the Customer could have
paid the outstanding liabilities from its own resources or by obtaining
a finance facilities of equal amount from a separate institution.
In such a case the argument of the later facility being mark-up on
mark-up, capitalization of mark-up or roll-over cannot be sustained.
In such cases the enhanced
amount of the facility or the such amount of the facility as has been
used to settle earlier liabilities on account of mark-up cannot be
termed as increase in the purchase price and is therefore permissible.
(C)
It also needs to be clarified that the grant of a fresh finance facility
of a similar nature particularly in cases of working capital facilities
is not restructuring or rescheduling of the liabilities. Accordingly,
any increase in amount of the later facility is not increase the marked-up
price of the earlier facility.
(D)
A number of times, the overdue facilities (mostly long term) are restructured
or rescheduled. Again restructuring and rescheduling of the over due
facilities is structured in the following manner:
·
by way of grant of fresh facilities
·
by way of a new schedule of payment
15.
Mr. Aziz ur Rehman advocate further argued that under the Banking
Companies Ordinance, 1962 the word loans, advances and credit have
been defined to include finances as defined in the Banking Tribunals
Ordinance, 1984. The Ordinance in section 2(e) defines a finance
to mean:-
“(e) ‘finance’ includes an
accommodation or facility under a system which is not based on interest
but provided on the basis of participation in profit and loss, mark-up
or mark-down in price, hire-purchase, lease, rent-sharing, licensing,
charge of fee of any kind, purchase and sale of any property, including,
commodities, patents, designs, trade marks and copyrights, bills of
exchange, promissory notes or other instruments with or without buy-back
arrangement by a seller, participation term certificate, musharika
certificate, modarba certificate, term finance certificate or any
other mode other than an accommodation or facility based on interest
and also includes guarantees, indemnities and any other obligation,
whether fund based or non-fund based, and any accommodation or facility
the real beneficiary whereof is a person other than the person to
whom or in whose name it was provided; and” (Underlining is mine.)
Mr. Azizur Rehman states that
finance includes ”accommodation or facility”. According to him
an accommodation in terms of the Webster’s dictionary means:-
“accommodation ...1. Act of
accommodating, or state of being accommodated; specif.: a Act of fitting
or adapting, or state of being fitted or adapted; adaptation; adjustment;
-- often followed by to. “The organization of the body with accommodation
to its functions.” Sir M. Hale. b Adaptation of conduct in order
to comply or conform; obligingness. c Provision of what is needful
or desirable for convenience; specif., the giving of pecuniary aid.”
According to him, the mark-up
or interest that is accrued on a loan or finance is capitalised and
once it is capitalised it becomes a part of the loan and cannot be
separated or distinguished. Mr. Azizur Rehman refers to the
meaning of the word capitalise as contained in Webster’s New International
Dictionary of the English Language, Second Edition, 1937 which
is as under:-
“Capitalise ...1. To convert
into capital, or to use as capital; hence, to make use of for the
sake of profit; to turn to one’s immediate advantage.”
Mr. Azizur Rehman has also
referred to the case of HASHWANI HOTELS LIMITED. v. FEDERATION OF
PAKISTAN and others (PLD 1997 S.C. 315) in which it has been held:-
“...One view can be that each
amount of disbursement will constitute an accommodation or loan agreement,
the other view can be that he disbursements of the various amounts
made by the banks were in performance of the above three loan agreements
already executed. If we were to prefer the above first view,
it will affect the vested right of the banks to recover interest at
the rate of 14% under the loans agreement and, therefore, the construction
which does not affect the vested right of a party is to be preferred.”
It has further been held:-
“A perusal of the above quoted
definition indicates that it includes loan of money and, therefore,
it can be held that the word “accommodation” used in the above Circular
of 15.02.1981 refers to loan agreement...”
Thus, according to Mr. Azizur
Rehman, the agreement entered into between the plaintiff and the defendant
is one of accommodation where the loans have been restructured and
upon restructuring of loan the banks have accommodated the defendant
and, therefore, it is obligatory upon the defendant to pay back the
entire amount agreed upon. According to Mr. Azizur Rehman the
word obligation has been defined in the Oxford dictionary to mean:-
“Obligation ...1. The act of
obligating, or binding , oneself to a course of action; a putting
under a promise, vow, or oath, as in initiation into an organization
(see OBLIGATE, v.,5)
2. The agreement, promise,
contract, oath, or the like, by which one is obligated or bound.
3. That which a person is bound
to do or forbear; any duty imposed by law, promise, or contract, by
the relations of society, or by courtesy, kindness, etc.
4. That which obligates or
constrains; the binding power of a promise, contract, oath or vow,
or of law; as, the obligation of conscience, of affection, or of ideals.
5. State of being bound ‘legally
or morally’. “Bound in filial obligation.
6. State of being indebted
for an act of favor or kindness; also the act itself; as, to place
others under obligations.
7. Obs. a Binding tie. b Liability.
c Civility.
8. Law. A bond with a condition
annexed, and a penalty or non-fulfilment. In a larger sense,
it is a formal and binding agreement or acknowledgement of a liability
to pay a certain sum or do a certain thing.”
He states that as there was
an accommodation it was the obligation of the defendant to have abided
by the contract and promise made as, the obligation is in fact a state
of being indebted for an act done by the plaintiff for him.
16.
Mr. Azizur Rehman further states that under section 25 of the Banking
Companies Ordinance, 1962, the State Bank has exceeded its authority
to issue such directions. According to him under section 25
of the said Ordinance, the State Bank of Pakistan could have issued
such a direction as legislation in respect of Islamic modes of financing
could only be done by legislation. He refers to section 21 of
the Enforcement of Shariat Act, 1991 and states that under the said
provision all laws are to be enacted exclusively by Majlis-e-Shoora
(Parliament) and the Provincial Assembly as the case may be and no
law shall be deemed to have been made unless it is made in the manner
laid down in the Constitution. Mr. Azizur Rehman states that
this is a deeming provision and in view of the definition given of
the word “deem” in the case of SIRAJUDDIN v. SARDAR KHAN (1993 SCMR
745) a fiction of law has been created and that any law that is promulgated
or devised through a mode other than by an Act of the Parliament or
the Provincial Assembly shall be void and not liable to be acted upon.
According to him, therefore, the State Bank Circulars are invalid
and void thus incapable of being acted upon.
17.
Mr. Aziz thus concluded the arguments saying that in holding that
the banks have unlawfully rescheduled/restructured/renewed by entering
into fresh agreement adding markup, the banks shall collapse.
18.
The Defendants have argued and have filed their Written Arguments
in which, they have reiterated the contents of the Written Statement.
It is stated that the plaintiff has claimed that (1) NICF (2) NIDF
(3) PAD Finance Facilities were allowed / granted to defendant Company.
The Defendants have summarized the claim as follows :-
In Million
1). NICF
a). Principal 9.857
} This liability
is claimed
b). Mark-up1.874
} on the basis of
Finance
c). Misc:Charges 0.088 }
Agreement i.e. 09th May
Total: 11.819 }
1993.Annexure:Z-5 and
Z-34 of the Suit i.e. A/C
No:01-670-2164-6
2). NIDF I
a). Principal Amount
13.837 }
Claimed on the basis of
} Agreement
dated 13-05-1993
b). Mark-up 3.691
} Annexure Z-8
& Bank
c). Misc.Charges
} Statement
A/C No:
and Exp.0.141 }
741-0256-8 Annexure:
} Z-35.
Total: 17.668
3). NIDF. II
Principal
0.116 }
Annexure: Z-35
} Account No:
741-0237-2
4). PAD
a)Amount Disbursed 0.581} Annexure:
Z-36
b).Mark-up 0.158
} Account No:
775-0035-9
Total 0.739 }
Annexure:
19.
The Defendants claim that, the plaintiff claimed these outstanding
liability on the basis of above documents and prayed for the recovery
of the finance by Sale of mortgaged property, by defendant No:1,
with Mark up, relying upon the Judgment of Honourable Lahore High
Court reported as 2001 CLC 158 (Lahore) Muhammad Ramzan Versus
Citibank N.A.
20.
It is stated that, the claim could only have been granted in light
of Finance Agreements, Annexure: ‘V’ to the plaint, dated 01-01-1991
(NICF Accounts) where the purchase price is shown at Rs. 9.893 (M)
and Buy-back at Rs. 12.453(M) and the (Agreement dated 09-05-1993
Annexure: Z-5 where purchase price is Rs.12.453 & buy back price
Rs. 16.074 (m). It is submitted that the amount was never disbursed
to defendant No:1 under the said agreement. It is further stated,
that the plaint also does not disclose this fact.
21.
It was further stated that, in the NIDF A/c i.e. Agreement dated 13.05.1993
Annexure:Z-8, no disbursement is shown, but only execution of agreement
is mentioned. The Plaintiff witness has not said at any place in his
evidence that there was any actual disbursement. In fact, he
has admitted that “—Nothing was disbursed in cash to the Defendant
No. 1 excepting the amount of Rs.7.500 million. No explanation has
been advanced for the other agreements and the claim.
22.
The assertion of the Defendants is that they had in their Written
Statement, denied the quantum of amount as claimed by Bank. The defendant’s
witness in his evidence Exb: No:6, has submitted the explanation regarding
the Loan facility. It is stated by Mr. Abid, that, in the cross examination,
the plaintiff admitted that “the date of execution of Ex: “C” is earlier
than the date of purchase of stamp on which letter has been written”.
It is also argued that the defendant has received the copy of debit
note from the Plaintiff bank which is for Rs.59,83,045, in excess
and never deleted after.
23.
It was argued that the plaintiff was entitled to recover Rs. 1.2 million,
being the difference of selling and buy back price but Defendant has
charged the mark-up amounting to Rs.1,930,451/- on NICF & Rs.354,638/-
on U.S. Aid L.C totaling to Rs.2,285,089/- on the following dates
Annexure: Z-34 (Ex 6/24).
DATE
AMOUNT
01-04-1989
….
Rs. 5,97,840/- }
03-05-1989
….
Rs. 2,15,297/- }
A. 31-07-1989
….
Rs. 0,74,215/- }NICF
15-08-1989
….
Rs. 4,62,653/- }
30-12-1989
….
Rs. 5,80,446/- }
Amount debited by the bank to this NICF A/c. on the following dates.
07-03-1989
: Rs.
45,895/-}
29-05-1989
: Rs.
46,362/-} Ex: 6/24
26-06-1989
: Rs.
82,969/-} R/w Annex:
B.
07-09-1989
: Rs.
45,985/-} Z-34
29-11-1989
: Rs.
48,362/-}
26-12-1989
: Rs.
82,696/-}
_____________
Total of A+B Rs.
22,85,089/-
24.
It is stated that since the buy back agreements contained the amount
of prompt payment bonus, and that the bonus was nothing but penalty,
the same could not be claimed. The plaintiff bank, therefore ought
to have given the relief for Rs. 0.258 being the payment Bonus
as per Clause-3 of Annex: R to the Suit, but instead of allowing the
relief, (I) excess mark up amounting to Rs.7,30,451/- plus Rs.
2,58,000/- (being payment, Bonus) , making total of Rs.9,88,451/-
has been charged from defendant, by debiting it to Account for the
period 01-01-1989 to 31-12-1989. It was due to the excessive
charge and compounding mark up, that the Plaintiff claimed that there
was a default in the huge amount that is being claimed. The entire
amount is thus liable to be deleted.
25.
It was further argued that the second Agreement i.e. Annexure” R,
no fresh agreement was executed for the year 1990 i.e. 01-01-1990
to 31-12-1990 and A/c remained in operation upto 28-11-1990 when last
cheque bearing No:00297915 was withdrawn for Rs. 2,50,000/- and thereafter
A/c was never allowed to operate, the cheques issued by Defendant
were also dishonored no loan facility or withdrawals allowed after
that date.
26.
It was argued that during the period 01-01-1990 to 31-12-1990,
the plaintiff bank charged a mark up, amounting to Rs. 16,63,308/-
on the following dates:
01-04-1990
: Rs.
86,979/-
09-06-1990
: Rs.
46,971/-
30-06-1990
: Rs.
6,55,841/-
01-11-1990
: Rs.
85,561/-
30-12-1990
: Rs.
7,87,956/-
Total Rs. 16,63,308/-
27.
It was alleged that, on the contrary the amount deposited by the defendant
during this period i.e. 01-01-1989 to 31-12-1990 is Rs. 1,90,09,483/-
against the withdrawal of Rs.1,81,79,791, net positive deposits balance
was Rs.8,29,692/-. This, was stated to be the period, when the
plaintiff bank started to debit the amount unauthorisedly without
issuing any debit voucher to defendant.
28.
As to the NICF agreement dated 01-01-1991, it was shown that no transaction
was ever allowed by the plaintiff bank to be made and no disbursement
were been made nor shown. Annexure:Z-34 which is the Bank Statement
filed by the plaintiff in Opening Balance is shown
at Rs. 98,93,834/- and thereafter, for the entire period debits were
created by the bank, however no physical or actual disbursements have
been shown. It was further argued that even during the period from
01-01-1989 to 31-12-1990 the plaintiff bank continued to charge excessive
mark up which was also compounded. This was done despite the fact
that the marked up price was agreed to in the agreement. For
the period 01-01-1991 to 30-06-1991 the Plaintiffs charged Mark
up unauthorisedly in the Account. The details of such are contained
in Ex.6/24 to 6/26 showing the unauthorized entries in NICF A/c. These
unauthorised amount were again charged by Bank in its NIDF & PAD
accounts thereby raising the liability from 65,66,401/- to the suit
amount in three years compounding the mark up and also debited account
with no explanation no debit voucher is issued by bank to defendant
company. The defendant approached the plaintiff bank vide Ex: 6/29
to 6/42 and asked the plaintiff bank to explain/ reconcile the amount
debited by them in the Account but the plaintiff bank failed
to reconcile the same. Vide Ex 6/29 the defendant demanded the bifurcation
of mark up and Principal amount but there was no response as to such
request. Vide Ex: 6/30 the defendant complained to the plaintiff that
they were charging excessive mark, but again there was no reply. Vide
Ex: 6/31, the defendant pointed out the discrepancy in the account
and submitted the calculation to the Bank by calculating the mark
up, but again of no avail. Vide letter dated 24th November,
1993 Ex: 6/32 the defendant informed, that the re-scheduling
intended to be made is incorrect, and denied to accept the liability.
Vide letter 08th February,1994 Ex: 6/33 the defendant requested the
plaintiff regarding the reconciliation of the amount vide letters
dated 16th February,1994 , 28th July,1994 the defendant again
requested and shown their view regarding the quantum of excessive
liability continuously shown by the bank.
29.
It is argued that, finally on 4th July,1994, the defendant again submitted
the complete working of NIDF and NICF A/c
to the plaintiff bank. In this Statement the defendant worked out
the calculation of mark up on Daily Product Basis . But the plaintiff
bank once again failed to delete or reconcile the entries unauthorizedly
/ illegally debited to the account. Thereafter the defendant vide
their letters Ex: 6/38 to 6/43 reminded the plaintiff bank for the
settlement of the Account but to no avail. The plaintiff’s claim
execution of the agreements only. On the contrary no disbursements
were made as per the agreements discussed above, hence the Agreements
were without consideration and void. Reliance has been placed
on the case of UBL V/s. Chaudhary Ghulam Hussain reported as
1999 PTCLR 162 (Lahore) wherein it was held that: “Agreement without
consideration would be treated as Void:
“9.
The appellant bank, has also placed reliance on two financing agreements:
(i)
agreement dated 2.7.1986 (page 461) executed by the parties whereunder
respondents Nos.1 and 2 were to be allowed financial facility of Rs.80,80,434/-
for a period ending on 30.6.1987 and in terms thereof respondents
Nos.1 and 2 were required to pay back Rs.9,697 Millions.
(ii)
Agreement dated 22.9.1987 (page 465) according to which respondents
Nos.1 and 2 were to avail of facility of Rs.98,35,660/-. This
facility was to come to an end on 21.9.1998 and in terms thereof
respondents Nos.1 and 2 were required to pay the buy back price of
Rs.11,803 Millions on or before 21.9.1988.
It is claimed that though respondents Nos.1 and 2 had availed of the
above-noted two financial facilities as well, but they have defaulted
to clear their dues, arising thereunder.
10.
From the perusal of the record, it transpires that there is no sanction
advice available for creation of these financial facilities.
Significantly, the statement of account filed by the appellant does
not show any disbursement, whatsoever, under these two agreements
which have to be treated as void, being without consideration.
The supporting material of these agreements i.e. D.P.C. Notes etc.
(pages 483, 485, 487 and 489) also suffer from the same fatal defect
and cannot be looked into for holding that respondents Nos.1 and 2
had incurred any financial liability thereunder. We hold accordingly.”(Emphasis
is mine).