2009 C L D 1346

[Karachi]

Before Ms. Soofia Latif, J

HABIB BANK LTD.---Plaintiff

Versus

PARAGON INDUSTRIES (PVT.) LTD. through Chief Executive and 5 others---

Defendants

Suit No.B-75 and C.M.As. No5.11320, 11321 of 2008, decided on 26th May, 2009.

(a) Financial Institutions (Recovery of Finances) Ordinance (LXVI of 2001)---

----S.10--Application for leave to defend---Maintainability---Suit for recovery of finance

was filed against company and its directors--Application for leave to defend the suit was
filed by a person who had been authorized by directors through resolution of the
company but no power of attorney or any authority existed in his favour on behalf of
directors---Validity---Resolution was signed by directors of company and not by them in
their personal capacity---Except such resolution no other authority letter or power of
attorney had been given by the defendants in their personal capacity, nor any affidavit of
defendants was filed in support of petition, therefore, the defendants could not claim to
have filed any application on their behalf---Application was considered to have only filed
by company being authorized by resolution in circumstances.

1998 CLC 1152 and 2004 CLD 1227 rel.

(b) Financial Institutions (Recovery of Finances) Ordinance (LXVI of 2001)---

----S. 10---Application for leave to defend the suit---Mandatory requirements--

Application for leave to defend the suit filed by defendants did not fulfill mandatory
requirements of S.10 (3), (4) and (5) of Financial Institutions (Recovery of Finances)
Ordinance, 2001, and no sufficient cause was shown in their application for their inability
to comply with the requirements---Effect---Such application for leave to defend the suit
was liable to be dismissed under S.10 (6) of Financial Institutions (Recovery of Finances)
Ordinance, 2001.

Bank of Khyber v. Messrs Spencer Distribution Ltd. 2003 CLD 1406; Allied Bank of
Pakistan Ltd. v. Mohib Fabric Industries Ltd. 2004 CLD 716; Habib Bank Ltd. v. Messrs
Sabcos (Pvt.) Ltd. 2006 CLD 244 and Sandi Pak Industrial and Agriculture Investment
Company (Pvt.) Ltd. v. Mohib Textile Mills Ltd. and others 2002 CLD 1170 rel.

(c) Financial Institutions (Recovery of Finances) Ordinance (LXVI of 2001)---

----Ss.9 & 10---Negotiable Instruments Act (XXVI of 1881), S.20---Recovery of bank

loan---Application for leave to defend the suit---Blank documents---Effect---Defendants
claimed that blank documents were got signed by bank at the time of sanction of loan---
Validity---If documents were given blank, even then in view of S.20 of Negotiable
Instruments Act, 1881, defendants were estopped to challenge legality, validity and
genuineness of such documents---In view of execution of personal guarantees and other
documents, defendants could not shirk from liquidating their liabilities and they were
jointly and severally liable to liquidate the liabilities of company under the provisions of
Contract Act, 1872---Defendants failed to raise any serious and bona fide dispute
warranting grant of leave to defend the suit---Plaint was verified on oath, therefore,
allegations made therein were presumed to be admitted---Bank had produced photocopies
of all documents on the basis of which suit was filed, execution whereof had been
admitted by defendants in their application for leave to defend the suit---Statement of
accounts was duly verified/certified under Bankers' Books Evidence Act, 1891, to which
presumption of correctness was attached---There was no rebuttal by defendants of
documents placed by bank on record---Suit was decreed in circumstances.
Page No. 1 of 7
Muhammad Sharif v. Muhammad Hashim Paracha and others PLD 1987 Kar. 76; Abdul
Aziz v. Mahmoodul Hassan and others 1988 CLC 337; Prudential Commercial Bank v.
Hyderi Ghee Industries Ltd and others 1999 MLD 1694; Bank of Khyber v. Spender
Distributors 2003 CLD 1406 and Bazm-e-Salat and others v. Messrs united Bank Ltd.
PLD 1989 Kar. 150 rel.

Zeeshan Energy Ltd and others v. Faisal Bank Ltd. 2004 CLD 1741; Messrs International
Traders through Proprietorship and others v. Union Bank Limited 2003 CLD 1464;
Messrs Alma Industries (Pvt.) Ltd. and others v. Allied Bank of Pakistan Limited 2003
CLD 1770; Karim Bakhsh v. House Building Finance Corporation 2004 CLD 212; Tariq
Javed and another v. National Bank of Pakistan 2004 CLD 838; PLD 2008 SC 140; CLD
2005 Law Notes 94; 2002 CLD 876; Mst. Mahmooda Begum and others v. Major Malik
Muhammad Ishaq and others 1984 SCMR 890; Mst. Hawa v. Muhammad Yousuf and
others PLD 1969 Kar. 324 and Messrs Ideal Life Insurance Co. Ltd. and another v. Mst.
Khairunnisa A.G. Mirza 1980 CLC 1375 ref.

(d) Pardanashin lady---

----Evidence---Scope---Legal protection given to paradanashin or illiterate woman cannot

be transmuted into legal disability.

Nadeem Akhtar for Plaintiff.

Ramesh Kumar for Defendants Nos. 1 to 5.

Neel Kashev for Defendant No.6.

ORDER

MS. SOOFIA LATIF, J.---By this order, I intend to dispose of two applications bearing
C.M.A. No.11320 of 2008 filed by defendants Nos.1 to 5 and C.M.A. No.11321 of 2008
filed by the defendant No. 6 for leave to defend the above suit.

The circumstances giving rise to these C.M.As. are that the plaintiff Messrs Habib Bank
Limited filed a suit for recovery of Rs.69,677,726.25 against the defendants on the
grounds that at the request of defendants Nos. 1 and 2 a running finance facility and a
sight letter of credit facility were sanctioned through an agreement for financing on mark-
up basis dated 21-1-2003 and the sale price was agreed at Rs.8 Million and the purchase
price payable by the said defendants to the plaintiff on or before 31-12-2003 was agreed
at Rs.9.840 Million. As a security for repayment of the above mentioned purchase price,
the, defendants Nos.1 and 2 executed a promissory note, letter of hypothecation dated 21-
1-2003 in favour of plaintiff. In order to further secure the repayment the defendant No.6
executed her personal guarantee dated 21-1-2003 in favour of plaintiff. According to the
plaintiff the defendants Nos. 1 and 2 instead of settling their outstanding liabilities, again
requested the plaintiff for extension of aforesaid facilities of different amounts from time
to time, which were sanctioned to them through different agreements of financing and on
every time as a security for repayment, defendants Nos. 1 and 2 executed promissory
notes, letters of hypothecations, trust receipts and defendant No.2 also executed personal
guarantee and defendant No.6 also mortgaged her immovable property viz. plot No. B-
13, Block-A, measuring 400 square yards, K.D.A. Officers Cooperative Housing Society
Ltd, she also executed memorandum of deposit of title deeds dated 26-3-2003 and 15-8-
2007 in favour of the plaintiff. It is also the case of plaintiff that despite all the
concessions and renewals granted by the plaintiff at the request of defendants, they have
committed deliberate and wilful breach of the terms and conditions of the above said
agreements and they are deliberately avoiding to pay the outstanding amount to the
plaintiff. According to the plaintiff the summary of disbursement of amount, repayments,
mark-up and the total outstanding is as under:--

"A. Running Facility:

Page No. 2 of 7
 Amount disbursed Rs.33,355,677.74
Amount repaid Rs.23,579,266.03
Principal outstanding Rs.9,776,411.71
Mark-up Rs.1, 288, 710.54
Rs. 11,065, 122.25

B. Demand Finance Facility

Amount disbursed Rs. 15,000,000.00

Amount repaid Rs. 1,875,000.00
Principal outstanding Rs. 13,125,000.00
Mark-up Rs.1,720,528.00
Rs. 14,845,528.00

Total outstanding amount of the above mentioned Running Finance Facility (A) and
Demand Finance Facility (B) comes to A+B=Rs.25,910,650.25."

According to the plaintiff interest based facilities in foreign exchange in the sum of US$
542,479.00 was also sanctioned out of which a sum of US$ 33,272.00 is payable by the
defendant No.1 towards the interest at the agreed rate, thus total amount payable by the
defendant No.1 to the plaintiff comes to US$ 575, 751.00. Hence, the above suit.

In response to the summons issued to the defendants through all modes of service
provided under the law, the defendants Nos.1 to 5 filed leave to defend application jointly
whereas defendant No.6 filed leave to defend application separately.

The defendants Nos.1 to 5 in their applications have challenged the maintainability of

suit. They have not denied the disbursement of loan, availing of loan amount, execution
of documents. They have taken a plea that their signatures were obtained by the plaintiff
on blank papers. However, the defendants Nos. 1 to 5 have disputed the rate of mark-up.

In her leave to defend application the defendant No.6 has denied the execution of
personal guarantee, memorandum of deposit of title deed and mortgage deed. According
to her she is old, illiterate and Pardanasheen lady aged about 80 years never executed
such documents. She also disputed her signatures on the above said documents.
According to her the documents were always with her son and the Bank might have
collusively got possession of the said documents.

In the end, the defendants Nos.1 to 6 have prayed for grant of leave to defend the suit
unconditionally.

I have heard learned counsel for the parties at length and also gone through the entire
documents available on record very carefully.

C.M.A. No.11320 of 2008

The contention of Mr. Ramesh Kumar appearing for defendants Nos.1 to 5 is that the suit
is not maintainable as framed. It is urged that the defendants Nos. 1 to 5 are entitled to
grant unconditional leave to defend the above suit as the statement of account has not
been prepared in terms of the agreement and the calculation is based on adding interest
upon interest, hence requires evidence. It is further urged that all the documents i.e.
agreements of finance, promissory notes, letter of hypothecations and memorandum of
guarantees were signed on blank documents, therefore, do not have any sanctity under the
provisions of the Financial Institution (Recovery of Finances) Ordinance, 2001. It is also
urged that the plaintiff have committed breach of its commitments by adding mark-up
upon mark-up while preparation of the statement of accounts, therefore, it requires to be
re-assessed by an independent Accountant. Mr. Ramesh has requested for the grant of
unconditional leave to defend to the defendants Nos. 1 to 5.

Conversely, Mr. Nadeem Akhtar appearing for plaintiff has contended that the C.M.A.
No.11320 of 2008 is not maintainable as it has been filed and verified by the defendant
No.3 Hafizur Rehman for self and allegedly on behalf of defendants Nos.1, 2, 4 and 5.
Page No. 3 of 7
Whereas no authorization or power of attorney has been filed by him to show that he has
any authority on behalf of defendants Nos.1, 2, 4 and 5. In support of his contentions Mr.
Nadeem has relied upon 1998 CLC 1152 and 2004 CLD 1227. Mr. Nadeem has further
contended that the defendants have not discussed at all in their applications, actual
amount availed by them or disbursed by the plaintiff, the amount repaid by them, and the
amount which is outstanding according to them, therefore, in view of non-compliance of
such mandatory requirements of subsections (3) and (4) of section 10 of Ordinance of
2001, applications are liable to be dismissed. In support of his contention he has relied
upon Bank of Khyber v. Messrs Spencer Distribution Ltd. 2003 CLD 1406, Zeeshan
Energy Ltd. and others v. Faisal Bank Ltd. 2004 CLD 1741 and Allied Bank of Pakistan
Ltd. v. Mohib Fabric Industries Ltd. 2004 CLD 716. Mr. Nadeem has denied that the
plaintiff had obtained the signatures of defendants on blank documents. However, he has
contended that leave to defend cannot be granted mere on the ground that blank
documents were executed when such execution of the documents is not denied or
disputed. In support of his contentions Mr. Nadeem has relied upon Messrs International
Traders 'through Proprietorship and others v. Union Bank Limited 2003 CLD 1464;
Messrs Prima Industries (Pvt.) Ltd. and others v. Allied Bank of Pakistan Limited 2003
CLD 1770; Karim Bakhsh v. House Building Finance Corporation 2004 CLD 212 and
Tariq Javed and another v. National Bank of Pakistan 2004 CLD 838. Mr. Nadeem has
further contended that in several letters written by the defendants to the plaintiff they
have not only admitted having committed default but they also promised to settle their
outstanding liabilities and such letters prove all the admissions of the defendants
regarding outstanding amount against them, therefore, the defendants Nos.1 to 5 are not
entitled to any leave to defend the suit.

Having considered the respective contentions advanced by both learned counsel, case-law
cited by them, it appears that though the defendants in the above applications have
challenged the maintainability of suit but neither in the application nor during the' course
of arguments the learned counsel appearing for defendants has satisfied this Court as to
under what provision of law the suit is not maintainable. No case-law has been cited by
him in this regard, hence no substance is found in the above contentions.

As regards the first preliminary objection raised by the counsel for plaintiff regarding
non-signing of application by defendants Nos.2, 4 and 5, it appears from the application
that admittedly it has been signed by the defendant No.3 Hafizur Rehman as authorized
agent of defendants Nos.1, 2, 4 and 5. Along with the application a resolution has been
filed, which shows that the defendant No.3 Hafizur Rehman was authorized to handle and
sign all papers related to the case between H.B.L. and Paragon Industries (Pvt.) Limited.
Admittedly this resolution is signed by the Directors of the company and not by the
defendants Nos.2, 4 and 5 in their personal capacity. Except this resolution no other
authority letter, power of attorney to have been given by defendants Nos.2, 4 and 5 to
defendant No.3 in their personal capacity, has been filed nor any affidavit of defendants
Nos.2, 4 and 5 has been filed in support of the application, therefore, they cannot claim
the present application to have been filed on their behalf, too and the application will be
considered - only filed by the 'defendant No.3 and also on behalf of defendant No.1 being
authorized by a Resolution. Reference can be made in the case of Messrs U.B.L v. Sindh
Technical Industries 1998 CLC 1152 and Masood Alam v. Muslim Commercial Bank
2004 CLD 1227.

Adverting to the next preliminary objection of learned counsel for the plaintiff regarding
non-compliance with the mandatory requirement of subsections (3) and (4) of section 10
of Financial Institution (Recovery of Finances) Ordinance, 2001, it is obvious from listed
application that the requirements of section 10(3)(4) have not been complied with while
filing above application. The defendants failed to give actual amount of finance availed
by them; the amount paid by them; the dates of payment; amount of finance and other
amounts relating to the finance payable by them to the plaintiffs Bank; the amount of
finance and other amounts, which they dispute as payable by the plaintiffs bank; thus, the
defendants have comprehensively failed to comply with the provision of section 10(4) of
the Ordinance, 2001. In such circumstances I have to see whether the above application
filed by the defendants in the present form is maintainable. The provisions of sections
10(3)(4) and (5) of Ordinance, 2001, inter-alia provide that the application for leave to
defend shall be in the form of a written statement, containing summary of substantial
questions of law and facts, and also giving certain particulars to be furnished by the
Page No. 4 of 7
defendant regarding the finance, i.e. finance availed, amount paid by the defendant etc.
and that such an application must be accompanied by all the documents in support of
substantial questions of law and facts raised by the defendants. If the afore-noted
provisions of law are placed in juxtaposition with the contents of the applications, filed
by the aforementioned set of defendants, the only irresistible conclusion, which can be
drawn is that the defendants did not comply with the aforesaid provisions of law. In the
above perspective, I have no hesitation to say that the defendants have failed .to file
leave applications as required under the law and they have not complied with the
requirement as contained in sections' 10(3)(4) and (5) of Ordinance, 2001.

Section 10(6) of Ordinance, 2001 provides that an application for the grant of leave,
which does not comply with the requirements of subsections (3), (4), (5) of section 10
(ibid), the same shall be rejected, unless the defendant disclose therein sufficient cause
for his inability to comply with any such requirement. In the instant case as discussed
above, the application filed by the defendants does not fulfil the mandatory requirements
of sections 10(3), (4) (5) of the Ordinance, 2001. Moreover, the defendants have also not
shown sufficient cause in their applications for their inability to comply with the said
requirements, even the learned counsel for defendants have also not satisfied me on this
point, therefore, the above application is liable to be rejected under section 10(6) of the
Ordinance, 2001. Reference can be made to the cases of Zeeshan Energy Ltd. and 2
others v.' Faisal Bank Ltd. 2004 CLD 716, 741; Habib Bank Ltd v. Messrs Sabcos (Pvt.)
Limited 2006 CLD 244, Bank of Khyber v. Messrs Spencer Distribution 2003 CLD 1406,
Sandi Pak Industrial and Agriculture Investment Company (Pvt.) Limited Ltd. v. Mohib
Textile Mills Ltd. and others 2002 CLD 1170.

Coming now to the merits of application, in their applications the defendants have not
denied the sanctioning of the financial facilities in favour of defendant No.1. They have
also not denied the execution of all documents and their signatures thereon. It is obvious
from the record that at the time of availing the facilities, the defendant's company not
only executed the .charge documents but the defendant No.6 also mortgaged her property
and in addition thereto the defendants Nos.2, 3 and 6 executed their personal guarantees
favouring the plaintiff. It also appears from the record that the defendants Nos.1 and 2
executed finance agreements, demand promissory notes, letter of hypothecations, Trust
receipt, and bill of exchange. However, they have raised objection that their signatures
were obtained on all documents including guarantees on blank papers, hence do not have
any sanctity under the provision of Ordinance, 2001. It is well-settled principle of law
that signing of blank document amounts to creating or impliedly authorizing the bank to
fill in any amount at a later point of time. In this regard I am fortified by the law laid
down in Messrs United Bank Ltd., v. President, Bazm-e-Salat and another PLD 1986 Kar.
464 and Messrs Bank of Oman Limited v. Messrs East Asia Trading Co. Ltd. and 4 others
1987 CLC 288. It has been observed that admittedly all the defendants have not denied
the execution of any document, therefore, the defendants are estopped to wriggle out
from this position on the well known principle of approbate and reprobate as per principle
laid down by the Honourable Supreme Court in the case of Haji Ghulam Rasool and
others v. The Chief Administrator of Auqaf, West Pakistan PLD 1971 SC 376. In the
instant case upon the execution of the finance agreements which are twenty in numbers, I
find that all were signed on behalf of Paragon Industries, therefore, this contention of
learned counsel for defendants has no force and does not appeal to common sense that the
-defendant No.3 being educated person could have signed on blank papers at the force of
plaintiffs bank. Admittedly neither the defendants made any complaint to any Forum nor
approached to any Court of law for cancellation of above said documents. This plea of
defendants appears to be desperate attempt to wriggle out of their contractual obligations
and to save themselves from liquidating the financial liabilities incurred by them through
the execution of the documents, availment of different financial facilities by defendant
No.1 and failure to liquidate them.

As regard the amount of guarantees, the defendants Nos.2 and 3 have disputed the
amount of guarantees, but admitted their signatures thereon. Section 20 of the Negotiable
Instrument Act, provides that where one person signs and delivers to another a paper
stamped in accordance with law, either wholly blank or having written thereon an
incomplete negotiable instrument, in order that it may be made, or completed into a
negotiable instrument, he thereby gives prima facie authority to the person who receives
that paper to make or complete it, as the case may be. Even if it may be considered that
Page No. 5 of 7
the documents were given blank, even then in view of the above-noted provisions of law
the defendants are estoppel to challenge the legality, validity and genuineness of these
documents. Reference can be made to the cases of Muhammad Sharif v. Muhammad
Hashim Paracha and others PLD 1987 Kar. 76, Abdul Aziz v. Mahmoodul Hassan and
others 1988 CLC 337, Prudential Commercial Bank v. Hyderi Ghee Industries Ltd and
others 1999 MLD, 1694, Bank of Khyber v. Spender Distributors 2003 CLD 1406,
Bazm-e-Salat and others v. Messrs United Bank Ltd. PLD 1989 Kar. 150.

In the instant case it is proved from the documents on record that the defendants have
signed/executed the documents and undertaken, as per said terms of the personal
guarantees and other documents to liquidate the outstanding amount in case the principal
debtor i.e. the company fails to liquidate the amounts. Further in their letters annexures P-
71, P-72, P-73, P-74 and P-76 the defendants have clearly admitted the claim of plaintiff
and they promised to settle their outstanding liabilities. In view of the execution of the
personal guarantees and other documents as well, the said defendants cannot now shirk
from liquidating their liabilities, and they are jointly and severally liable to liquidate the
liabilities of company under the provision of the contract Act.

For the reasons discussed above, defendants Nos. 1 to 5 have comprehensively failed to
raise any serious and bona fide dispute warranting the grant of leave to defend the suit,
thus the listed C.M.A. No.11320 of 2008 is found to be devoid of any force and is hereby
dismissed on the ground of non-maintainability and on merits as well.

C.M.A. No.11321 of 2008

Mr. Neel Kashev appearing for defendant No.6 has also challenged the maintainability of
the suit and contended that the defendant No.6 is an old and Pardanasheen lady aged
about 80 years and illiterate woman and at the time of execution of mortgage papers she
did not have any independent advise to understand the papers which were got signed
from her by the Bank with misrepresentation of the facts, hence the mortgaged is illegal in
the eyes of law. Mr. Neel Kashev has denied that the defendant No.6 in consideration of the
facilities mentioned in the plaint, as security for re-payment had mortgaged her immovable
property viz. plot No.B-13, Block-A, measuring 400 square yards, K.D.A, Officers
Cooperative Housing Society Ltd. Karachi and he also denied that she had executed any
memorandums of deposit of title deeds dated 26-3-2003 and 15-8-2007 in favour of
plaintiffs Bank. Mr. Neel Kashev has also denied that the defendant No.6 has handed over
any title documents to the plaintiff. It is urged that the documents which are always in the
possession of her sons and the Bank might have collusively got possession of the said
documents. Mr. Neel Kashev has requested to grant unconditional leave to defend to the
defendant No.6. In support of his contentions he has relied upon PLD 1969 Karachi 324,
PLD 2008 SC 140, CLD 2005 Law Notes 94 and 2002 CLD 876.

Conversely Mr. Nadeem Akhtar appearing for plaintiff contended that admittedly defendant
No.6 had executed memorandum of deposit of title deeds dated 26-3-2003 and 15-8-2007
and registered mortgage deed dated 9-5-2003 and 10-11-2007. Mr. Nadeem has drawn my
attention to the photographs of defendant No.6 appearing on the registered mortgage deed
and contended that the photographs of defendant No.6 appearing on the above documents
did not appear of a Pardanasheen lady and further mortgage documents were witnessed by
her own son the defendant No.3. In support of these contentions Mr. Nadeem has relied
upon Mst. Mahmooda Begum and others v. Major Malik Muhammad Ishaq and others
1984 SCMR 890, Mst. Hawa v. Muhammad Yousuf and others PLD 1969 Kar. 324, Messrs
Ideal Life Insurance Co. Ltd. and another v. Mst. Khairunnisa A.G. Mirza 1980 CLC 1375.
He has further contended that during the period from March, 2003 to November; 2007 the
defendant No.6 did not take any action against the plaintiff and her son who according to
her, got her signature on the mortgage documents nor he initiated any proceeding for
cancellation of mortgage documents nor applied for return of the original title documents of
the mortgage property.

Having considered the respective submissions advanced by the learned counsel, I do not
find any substance in the contention of learned counsel for defendant No.6. The
memorandum of deposit of title deeds dated 26-3-2003, 15-8-2007, registered mortgage
deed dated 9-5-2003, 10-11-2007 show that her photograph appearing on the above said
mortgage documents do not appear of a Pardanasheen lady. Moreover, the registered
Page No. 6 of 7
mortgage deeds Annexure P.68 and 69 were admittedly executed before the concerned sub-
Registrar, in presence of witnesses who admittedly is the son of defendant No.6. It also
appears that at Sr. Nos. 3 and 4 there is specific endorsements of the sub-Registrar that the
defendant No.6 admits the execution of these deeds. Such facts rebut the said plea of
defendant No.6 that she is Pardanasheen lady and she had not signed such documents. In
the case of Mst. Mahmooda Begum and others v. Major Malik Muhammad Ishaq and
others 1984 SCMR 890, it has been held that "a Pardanasheen lady is one who remains
behind the curtain and has no communication except from behind the pardah with any male
person save a few privileged relations or dependents. Such lady has no access to
independent advice other than from such persons. Pardahnasheen lady as a matter of rule is
not ignorant, weak minded having no capacity to understand her affairs because of living in
seclusion".

In the case of Mst. Hawa v. Muhammad Yousuf PLD 1969 Kar. 324, it has been observed
that the fact that whether independent advice was available to a Pardanasheen lady at the
time when she entered into a transaction can be taken into consideration in order to
determine whether she thoroughly comprehended, and had deliberately offer own freewill
carried out the transaction. It is found that the document was conceived and executed by
her freewill, it shall be upheld notwithstanding the fact that the executant is a Pardanasheen
lady. The legal protection given to a Pardanasheen or an illiterate woman cannot be
transmuted into a legal disability.

It is also to be noted that besides the execution of memorandum of deposit of title deeds,
registered mortgage deeds, the defendant No.6 also executed four personal guarantees and
in her application she has not denied the execution of such guarantees her signature
thereon. Nothing has been mentioned either in the application or in her affidavit that she
ever made any complaint or lodged F.I.R about missing of documents of her property or
that she approached to any forum, if her signature was manipulated on the mortgage
documents. All such facts clearly show that the defendant No.6 had executed and signed
such documents with her own wish and now she has taken such objections only in order to
save herself from the outstanding liability of the plaintiff.

For the reasons discussed above, the defendant No.6 also failed to raise substantial question
of law and facts to be tried by the Court in respect of which evidence needs to be
recorded, hence the above listed C.M.A. No.11321 of 2008 is dismissed. The case laws
cited by the learned counsel for defendant No.6 are distinguishable and not attracted to
the facts of the instant case.

The plaint is verified on oath, therefore, the allegations made therein shall be deemed to
be admitted. The plaintiff has produced photocopies of all the documents on the basis of
which the present suit has' been filed, execution of whereof has been admitted by the
defendants in their applications for leave to defend the suit. Moreover, the statement of
accounts are duly verified/certified under the Banker's Books Evidence Act, 1891, to
which the presumption of correctness is attached. There is no rebuttal of the aforesaid
documents on record. Consequently the suit of plaintiff is decreed against the defendants
jointly and severally in the sum of Rs.25,910,650.25 with cost of funds at the prevailing
rate of the State Bank of Pakistan from the date of filing the suit till realization of
deceetal amount. Further the suit is decreed against the defendants jointly and severally in
sum of US$ 575,751.00 with interest thereon at agreed rate of 11.25% from the date of
filing the suit till realization of the decretal amount. The prayer for attachment and sale of
the mortgaged property bearing Plot No.B-13, Block A, measuring 400 square yards,
K.D.A. Officers Cooperative Housing Society Ltd, Karachi with construction thereon,
attachment and sale of all the hypothecated goods, merchandise, products, stocks, stocks-
in-trade, raw materials, work-in-progress, finished and unfinished goods, plant,
machinery, equipment, tools and receivables belonging to defendants Nos. 1 and 2 along
with cost of suit is also allowed.

M.H./H-24/K Suit decreed.

Page No. 7 of 7
2006 S C M R 1347

[Supreme Court of Pakistan]

Present: Javed Iqbal and Ch. Ijaz Ahmed, JJ

MUHAMMAD ARSHAD and another----Petitioners

Versus

CITIBANK N.A., LAHORE----Respondent

Civil Petition No.1207-L of 2005, decided on 16th February, 2006.

(On appeal from the judgment, dated 30-3-2005 of the Lahore High Court, Lahore,
passed in R.F.A. No.923 of 2001).

(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

----S. 9---Negotiable Instruments Act (XXVI of 1881), Ss.20 & 118---Constitution of

Pakistan (1973), Art.185(3)---Recovery of bank loan---Financing agreement-;-
Authenticity---Blank columns---Re-scheduling of loan---Banking Court as well as
Appellate Court decreed the suit in favour of bank and dismissed the appeal
respectively---Plea raised by defendants was that at the time of signing of financing
agreement many columns were left blank and bank created a fictitious rescheduling
agreement just to enhance its claim---Validity---Re-scheduling agreement was not
only signed but defendants also affixed their thumb-impressions on its which were
never denied---Contention of defendants that the genuineness and authenticity of re-
scheduling agreement was not above board as relevant columns were left blank and
filled in subsequently by the bank was repelled with observation by the Supreme
Court that even if it was admitted, then why the re-scheduling agreement was acted
upon and pursuant thereof ten instalments had been paid and outstanding liability was
reduced---In fact, instalments were made as per re-payment schedule which was
inseparable part of re-scheduling agreement---Main object to get the renewed
agreement was restructuring of finance facility and not liquidation of the liability---
Re-scheduling agreement was authentic, genuine and executed between the parties
and acted upon---No benefit could be given to defendants in view of the provisions of
Ss. 20 and 118 of Negotiable Instruments Act, 1881, on the ground that the agreement
was not completely filled in which executed as it would have no substantial bearing
on the validity of the agreement---Signatures on various documents annexed with the
plaint were not disputed by defendants which led the Supreme Court to draw the only
unescapable conclusion that claim of bank was genuine and based on authentic
documents---No illegality or infirmity could be pointed out by defendants in the
judgment and decree passed by High Court, which being well based did not warrant
interference--Leave to appeal was refused.

Muhammad Sarfraz Khan Rana v. Government of the Punjab PLD 1990 Lah. 88; M.P.
R.M. Irulandi Mudaliar v. Syed Ibrahim AIR 1962 Mad. 326; National Bank of
Pakistan v. Azizullah Hassan 1984 MLD 1035; Messrs Mach Knitters (Pvt.) Ltd. v.
A.B.P. 2004 CLD 535; Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation
PLD 1971 SC 550; United Bank v. Business investment Ltd. 1982 CLC 1101; Karim
v. Zikar Abdullah 1973 SCMR 100; National Commercial Bank Ltd. v. Muhammad
Younus Butt 1980' CLC 90; Chandan Lal v. Messrs Amin Chand Mohal Lal AIR 1960
Punjab 500 and Sundar Singh v. Khushi Ram AIR 1927 Lah,. 864 ref.

(b) Negotiable Instruments Act (XXVI of 1881)---

----S.20---Inchoate stamp instruments---Where one person signs and delivers to

another, paper stamped in accordance with law, either wholly blank or having written
thereon, incomplete negotiable instrument, in order that it may be made, or completed
into negotiable instrument, he thereby gives prima facie authority to person who
received that paper to make or complete it, as case may be, into negotiable instrument
for any amount.
Page No. 1 of 4
(c) Negotiable Instruments Act (XXVI of 1881)----

---S.118---Presumptions as to negotiable instruments---Section 118 of the Negotiable

Instruments Act, 1881 provides that presumptions are attached to negotiable
instruments, which, inter alia included that negotiable instrument was made or drawn
on such date.

Mahmood A. Sheikh, Advocate Supreme Court for Petitioners.

Nemo for Respondent.

Date of hearing: 16th February, 2006.

JUDGMENT

JAVED IQBAL, J.---This petition for leave to appeal is directed against the
judgment, dated 30-3-2005 passed by learned Lahore High Court, Lahore, whereby
the R.F.A. preferred on behalf of petitioners has been dismissed and the
judgment/decree dated 22-10-2001 passed by the learned Banking Court has been
kept intact.

2. "Precisely stated the facts of the case are that the respondent-Bank filed the suit for
recovery of Rs.17,95,176 together with liquidated damages, against the appellants,
inter alia pleading that the appellants obtained financial facility to the tune of
Rs.13,12,000; the appellant No.2 mortgaged his property; both the appellants
executed all the relevant documents; subsequently, facility was converted into
instalment facility by restructuring/renewing the original finance facility; the
appellants acknowledged the new facility and executed agreement dated 26-6-1999;
the appellants committed default and their failure to liquidate the outstanding
liabilities, necessitated the filing of the suit. The appellants filed the application for
leave to defend the suit, which was succeeded by another application, submitted after
promulgation of Financial Institutions (Recovery of Finances') Ordinance, 2001. The
said application was resisted by the respondent-Bank and ultimately the learned Judge
Banking Court, dismissed the said application and thereupon passed the decree for the
recovery of Rs.17,95,176 together with costs and mark-up, however, declined to
award the amount of liquidated damages, vide impugned judgment and decree, dated
22-10-2001, hence the present appeal". Being aggrieved an appeal was preferred
which has been rejected vide judgment impugned, hence this petition.

3. Mr. Mahmood A. Sheikh, learned Advocate Supreme Court entered appearance on

behalf of petitioners and contended with vehemence that the legal and factual aspects
of the controversy have not been appreciated in its true perspective by the learned
Courts below which resulted in serious miscarriage of justice by ignoring the fact that
claim of the respondent/Bank is based upon compounding of mark and the same being
against law ought not to have been allowed. It is next contended that the bank created
a fictitious rescheduling agreement just to enhance its claim against the petitioners
which could not have been done and the failure and omission of the Courts below to
examine the above aspect has caused serious prejudice to the petitioners. It is argued
that as per agreement executed between the parties, mark-up was to be charged at
Rs.0.525 per thousand per day on daily product basis which on the contrary was
charged on monthly product basis which resulted in huge loss to the petitioners. It is
also argued that it was bounden duty of the Court to have scrutinized the case of the
petitioners before accepting the claim of bank which could not be done by the learned
trial Court and the judgment/decree passed in a casual and cursory manner without
examining the evidence which has come on record. It is urged with vehemence that
the rescheduling agreement was not a genuine agreement as petitioners were made to
sign blank documents which were later filled in by the Bank which cannot be taken
into consideration being inadmissible in evidence. It is stressed time and again by the
learned Advocate Supreme Court on behalf of petitioners that under the guise of
rescheduling a Bank cannot be allowed to charge mark-up over mark-up.

Page No. 2 of 4
4. We have carefully examined all the contentions canvassed at bar on behalf of the
petitioners, scanned the entire record and perused the judgment and decree, dated 22-
10-2001 passed by learned Banking Court as well as the judgment impugned. In our
considered view the entire controversy revolves around the question as to whether the
agreement, dated 26-6-1999 was executed between the parties or otherwise? A careful
scrutiny of the entire record would reveal that agreement, dated 26-6-1999 was
executed between the parties. The agreement, dated 26-6-1999 was not only signed
but the petitioners also affixed their thumb-impressions on it which were never
denied. We are not at all impressed by the contention raised on behalf of the
petitioners that the genuineness and authenticity of the agreement, dated 26-6-1999 is
not above board as the relevant columns were left blank and filled in subsequently by
the Bank. For the sake of argument even if it is admitted A then why the agreement
dated 26-6-1999 was acted upon and pursuant whereof ten instalments had been paid
and the outstanding liability was reduced from Rs.21,05,280 (mark-up price) to
Rs.17,95,176. In fact the above instalments were made as per repayment schedule
which was inseparable part of the agreement dated 26-6-1999. It must not be lost sight
of that the main object to get the renewed agreement was restructuring of the finance
facility and not liquidation of the liability. We have no hesitation in our mind to hold
that agreement dated 26-6-1999 was authentic, genuine and executed between the
parties and acted upon. A careful perusal of the agreement dated 26-6-1999 would
reveal that mark-up was charged in accordance with the terms and conditions and
stipulated therein. It is to be noted that in the agreement dated 26-6-1999 it has been
stipulated in a categoric manner that the petitioners had also entered into mark-up
agreement which was executed on 21-6-1995 and thus, it stood admitted by the
petitioners. It would not be out of place to mention here that an amount of
Rs.21,05,280 was mentioned as mark-up in the last agreement. It would be too late in
the day to challenge its authenticity on the pretext of certain blank columns. The
question which arises here at this juncture would be that as to why certain columns
were left blank and if it was so done why the incomplete agreement was signed by the
petitioners? No answer could be given by the learned Advocate Supreme Court on
behalf of the petitioners. In our considered view the plea of "blank columns" would
hardly renders any assistance to the case of petitioners. In view of the provisions as
contained in section 20 read with section 118 of the Negotiable Instruments Act, 1881
no benefit could be given to the petitioner on the ground that the agreement was not
completely filled in when executed as it would have no substantial bearing on the
validity of the agreement. In this regard reference can be made to case Muhammad
Sarfraz Khan Rana v. Government of the Punjab PLD 1990 Lah. 88. It is well-settled
by now that "Negotiable Instruments Act provides that where one person signs and
delivers to another paper stamped in accordance with law, either wholly blank or
having written thereon incomplete negotiable instrument, in order that it may be
made, or completed into negotiable instrument, he thereby gives prima facie authority
to person who C receives that paper to make or complete it as case may be into
negotiable instrument for any amount. Furthermore, section 118 of Negotiable.
Instrument Act, provides that presumptions are attached to negotiable instruments,
which, inter alia includes that negotiable instrument was made or drawn for
consideration and that every instrument bearing date was made or drawn on such date.
Held: Documents were given blank as canvassed by appellants even then appellants
are estopped to challenge legality, validity and genuineness of said documents. M.P.
R.M. Irulandi Mudaliar v. Syed Ibrahim AIR 1962 Mad. 326; National Bank of
Pakistan v. Azizullah Hassan 1984 MLD 1035; Messrs Mach Knitters (Pvt.) Ltd. v.
A.B.P. 2004 CLD 535; Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation
PLD 1971 SC 550; United Bank v. Business Investment Ltd. 1982 CLC 1101; Karim
v. Zikar Abdullah 1973 SCMR 100. The learned Advocate Supreme Court on behalf
of petitioners has ignored the fact that "person signing and delivering to another a
paper stamped in accordance with law relating to stamp duty chargeable on negotiable
instruments either wholly blank or having written thereon and incomplete negotiable
instrument so that it may be made or completed into a negotiable instrument, prima
facie authorises recipient of such negotiable instrument to fill in required particulars.
Presumption, held, would arise under section 188(b) regarding a negotiable
instrument bearing a data as having been made or drawn on such date". National
Commercial Bank Ltd. v. Muhammad Younus Butt 1980 CLC 90. We are conscious of
the fact that "party to proceedings could discharge burden of proof placed upon him
under provisions of section 118 of Negotiable Instruments Act either by producing
Page No. 3 of 4
definite evidence showing that consideration had not been passed or by relying upon
facts and circumstances of case and also by referring to flaws in evidence of plaintiff
and then contending that presumption had been rebutted". Chandan Lal v. Messrs
Amin Chand Mohan Lal AIR 1960 Punjab 500; Sundar Singh v. Khushi Ram AIR
1927 Lah,. 864 which could not be done.

5. We have also observed with curiosity that signatures on various documents annexed
with the plaint were not disputed by the petitioners which leads us to draw the only an
unescapable conclusion that claim of the petitioners was genuine and based on
authentic documents.

No illegality or infirmity could be pointed out by the learned Advocate Supreme

Court on behalf of petitioners in the judgment impugned which being well-based does
not warrant inference. The petition being meritless is dismissed and leave refused.

M.H./M-93/SC Petition dismissed.

Page No. 4 of 4
 S. Amount Principal Principal Mark-up Mark- Mark-up Total
Facility
No. Disbursed repaid outstanding accrued up paid outstanding outstanding
1. Running 1,500,000.00 275,000.25 1,224,999.75 1,345,789.47 1,758.25 1,344,031.22 2,689,820.69
Finance
2.
3.
4.
5.
6.
7.

S. Running Principal Mark-up Mark- Mark-up Total

Particulars Balance
No. Finance outstanding accrued up paid outstanding outstanding
1. Amount 1,500,000.00 1,224,999.75 1,345,789.47 1,758.25 1,344,031.22 2,689,820.69
Disbursed
2. Principal 789,789.45 710,210.55
repaid
3. Mark-up 789,458.42
accrued
4. Mark-up 12,567.89 776,890.53
paid
5.
6.
7.
8.
9.
10.

Page No. 1 of 1