HABIB BANK LIMITED through Authorized Attorneys VS PAK POLY PRODUCTS (PVT.) LTD. and 3 other

2013 C L D 1661

[Lahore]

Before Mrs. Ayesha A. Malik and Abid Aziz Sheikh, JJ

HABIB BANK LIMITED through Authorized Attorneys---Appellant

Versus

PAK POLY PRODUCTS (PVT.) LTD. and 3 others---Respondents

E.F.A. No.449 of 2011, heard on 7th May, 2013.

(a)Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)--- ----Ss. 3, 17 & 22--- Civil Procedure Code (V of 1908), S.47---Suit for recovery of loan---Grant of costs of funds---Cost of funds in the decree were allowed under Ss. 3 & 17 of the Financial Institutions (Recovery of Finances) Ordinance, 2001---Determination of cost of funds by the Executing Court---Executing Court granted cost of funds from the date of institution of suit--- Bank had impugned the order of the Banking Court whereby the cost of funds had been determined from the date of institution of the suit and not from the date of default till realization of amount, as claimed by the Bank---Contentions of the Bank were that under Ss. 3 & 17 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the Bank was entitled to the grant of cost of funds from the date of default till its realization and not from the date of institution of suit and that the date of default was to be considered as the date beyond which the mark-up was not allowed by the Banking Court---Respondents contended that the cost of funds could only be recovered from the respondents from the date of institution of suit and that no date of default was determined by the Banking Court while passing the decree---Validity---Under the provisions of Ss.3 & 17 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the customer was liable to pay cost of funds from the date of default till realization of the cost of funds as certified by the State Bank of Pakistan---Banking Court while passing the decree in favour of the Bank had granted cost of funds under Ss. 3 & 17 of the Ordinance---Although specific date of default was not mentioned in the decree, however, the date of default was defined in a manner that the claim of the Bank of an amount of mark-up charged after the date of default was declined by the Banking Court while passing the decree---Banking Court was mindful of the date of default at the time of passing the decree, after which date no mark-up was allowed to the Bank---Statement of account showed the relevant date of default beyond which the mark-up was not allowed in the decree by the Banking Court, and this date was to be taken as the date of default for the purposes of S.3 of the Ordinance---Argument of the respondents that cost of funds should be from the date of institution of suit was not tenable for two reasons, firstly, that under S.3 of the Ordinance, the cost of funds were to be granted from the date of default, and secondly, that the date of default was already determined in the decree---Executing Court could determine the date of default under S. 47, C.P.C., if no such date was defined in the decree but, in the present case, date of default was defined and could be ascertained from the decree---Impugned order was not sustainable in view of the settled principle of law that an Executing Court could not go behind the decree and was obliged to execute the decree as it was---Impugned order of the

Banking Court was set aside and the appeal was allowed by the High Court, in the circumstances.

Habib Bank Limited v. Tauqeer Ahmed Siddiqui and another 2009 CLD 312; Allied Bank of Pakistan Limited v. Northern Polyethylene Limited and others 2006 CLD 565; Bank of Punjab through Authorized Officer v. Messrs KNK Infrastructure (Pvt.) Ltd. through Chief Executive Officer and 2 others 2012 CLD 961; Messrs Emen Textile through Sole Proprietor and another v. Habib Bank Limited 2010 CLC 547; Industrial Development Bank of Pakistan v. Pakistan Belting (Pvt.) Limited through Chief Executive and 5 others 2006 CLD 808; Zarai Taraqiati Bank Limited through Branch Manager v. Hassan Aftab Fatiana 2009 CLD 36 and Crescent Commercial Bank Now Samba Bank Ltd. v. Genertech Pakistan Ltd. 2011 CLD 37 ref. Zahid Industries v. Habib Bank 2007 CLD 618; Muhammad Ali v. Zakir Hussain PLD 2005 Lah. 331; Ayesha Bibi v. National Logistic Cell 2002 CLC 747; Hassan Masood Malik v. Additional District Judge and others 1994 MLD 1877 and Messrs Dawood Cotton Mills Ltd. v. KF Development Corporation Ltd. 2004 CLC 671 rel.

(b)Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)--- ----Ss. 3 & 17---Cost of funds---Grant of---Under the provisions of Ss.3 & 17 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the customer was liable to pay cost of funds from the date of default till realization of, the cost of funds as certified by the State Bank of Pakistan.

(c)Civil Procedure Code (V of 1908)--- ----S. 47---Powers of Executing Court---Date of default, determination of---Executing Court could determine the date of default under S.47, C.P.C. if no such date was defined in the decree by the Court.

(d)Civil Procedure Code (V of 1908)--- ----S. 47---Execution of decree---Executing Court cannot go behind the decree and is obliged to execute the decree as it is---Principle.

Zahid Industries v. Habib Bank 2007 CLD 618; Muhammad Ali v. Zakir Hussain PLD 2005 Lah. 331; Ayesha Bibi v. National Logistic Cell 2002 CLC 747; Hassan Masood Malik v. Additional District Judge and others 1994 MLD 1877 and Messrs Dawood Cotton Mills Ltd. v. KF Development Corporation Ltd. 2004 CLC 671 rel.

Majid Ali Wajid for Appellant.

Asif Mehmood Cheema for Respondents.

Date of hearing: 7th May, 2013.

JUDGMENT

ABID AZIZ SHEIKH, J.---This EFA has been filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance 2001 ("FIO 2001") against the impugned order dated 13-5-2011 passed by the Banking Court No.III, Lahore in execution, whereby the cost of funds under sections 3 and 17 of the ("FIO 2001") has been determined from the date of institution of the suit and not from the date of default till realization of amount, as claimed by the appellant.

2.Brief facts are that the appellant filed a suit on 31-8-2010 for recovery of Rs.11974413.88 along with costs and cost of funds against the respondents before the Banking Court Lahore. The suit was decreed on 7-3-2011 for Rs.11974413.88 in favour of the appellant bank along with costs and cost of funds under sections 3 and 17 of FIO, 2001. During execution the respondents deposited the decretal amount and moved an application before the executing Court to determine the cost of funds. The executing Court vide impugned order dated 13-5-2011 held that cost of funds will be from the date of institution of the suit till 13-4-2011 which comes to Rs.4,65,326. The appellant Bank being aggrieved filed this EFA against the aforesaid impugned order.

3.The learned counsel for the appellant argued that under sections 3 and 17 of the FIO 2001, the appellant bank is entitled to the grant of cost of funds from the date of default till its realization and not from the date of institution of the suit as held in the impugned order. It is further argued that according to the appellant bank the date of default should be 10th of July, 2009 as the Banking Court allowed markup only upto the aforesaid date. Reliance is placed on Habib Bank Limited v. Tauqeer Ahmed Siddiqui and another (2009 CLD 312), Allied Bank of Pakistan Limited v. Northern Polyethylene Limited and others (2006 CLD 565) and Bank of Punjab through Authorized Officer v. Messrs KNK Infrastructure (Pvt.) Ltd. through Chief Executive Officer and 2 others (2012 CLD 961), Messrs Emen Textile through Sole Proprietor and another v. Habib Bank Limited (2010 CLD 547).

4.Conversely, the learned counsel for the respondents argued that the cost of funds could only be recovered from the respondents from the date of institution of the suit which was 31-8- 2010 till 13-4-2011. He further argued that as no date of default was determined in the decree the impugned order is not illegal and in pursuance to the said order respondents have already deposited Rs.4,65,326. In this context reliance is placed on Industrial Development Bank of Pakistan v. Pakistan Belting (Pvt.) Limited through Chief Executive and 5 others (2006 CLD 808), Zarai Taraqiati Bank Limited through Branch Manager v. Hassan Aftab Fatiana (2009 CLD 36) and Crescent Commercial Bank Now Samba Bank Ltd. v. Genertech Pakistan Ltd.

(2011 CLD 37).

5.We have given anxious consideration to the arguments advanced by the learned counsel for the parties and perused the record with their able assistance.

6.The provisions of sections 3 and 17 of the FIO 2001 deals with cost of funds. It is expedient to reproduce section 3 and section 17 of FIO, 2001 which reads as under:-- "3. Duty of a customer:---(1) It shall be the duty of a customer to fulfill his obligations to the financial institution.

(2)Where the customer defaults in the discharge of his obligation, he shall be liable to pay for the period from the date of his default till realization of costs of funds of the financial institution as certified by the State Bank of Pakistan from time to time, apart from such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force.

(3)For purposes of this section a judgment against a customer under this Ordinance shall mean that he is in default of his duty under subsection (1) and the ensuing decree shall provide for payment of the costs of funds as determined under subsection (2) and said section 17. "17. Final Decree.---(1) The final decree passed by a Banking Court shall provide for

payment from the date of default of the amounts found to be payable on account of the default in fulfillment of the obligation, and for costs including, in the case of a suit filed by a financial institution cost of funds determined under section 3.

(2)The Banking Court may, at the time of passing a final decree, also pass an order of the nature contemplated by subsection (1) of section 16 to the extent of the decretal amount".

7.From the plain reading of the above noted provisions, it is conspicuously clear that the, customer will liable to pay cost of funds from the date of his default till realization of cost of funds as certifier by State Bank of Pakistan.

8.In the present case, the Banking Court while passing the decree dated 7-3-2011 granted cost of funds under sections 3 and 17 of FIO 2001. Although the specific date of default is not mentioned in the decree, however, the date of default has been defined therein. The relevant para of the decree dated 7-3-2011 is reproduced hereunder:-- "Claim of the plaintiff to the tune of Rs.589,071 in respect of markup charged after the date of default is declined."

9.From the above finding in the decree dated 7-3-2011, it is evident that the Banking Court was mindful of the date of default at the time of passing the decree, after which date no markup was allowed to the appellant. The statement of account shows that the relevant date of default after which markup of Rs.589,071 was not allowed in the decree by the Banking Court was 10-7- 2009, which is to be taken as date of default for the purpose of section 3 of FIO 2001.

10.The arguments of learned counsel for the respondents that cost of fund should be from the date of institution of the suit is not tenable for two reasons, firstly that under section 3 of IFO 2001, the cost of fund will be from the date of default and secondly the date of default is already determined in the decree dated 7-3-2011. No doubt the executing Court could determine the date of default under section 47, C.P.C. if no such date was defined in the decree but in the present case date of default is defined and can be ascertainable from the decree. The impugned order is not sustainable in view of the settled principle of law that an Executing Court could not go behind the decree and it is obliged to execute the decree as it is. In this context reliance is placed on Zahid Industries v. Habib Bank (2007 CLD 618), Muhammad Ali v. Zakir Hussain (PLD 2005 Lah 331), Ayesha Bibi v. National Logistic Cell (2002 CLC 747), Hassan Masood Malik v. Additional District Judge and others (1994 MLD 1877) and Messrs Dawood Cotton Mills Ltd. v. KF Development Corporation Ltd. (2004 CLC 671).

11.For the foregoing, this appeal is allowed and the impugned order dated 13-5-2011 is set aside.

C.M. Nos. 1 and 5/C-2011 As the main appeal has been finally disposed of today, these applications have become infructuous. C.Ms. stands disposed of.

MAW/H-12/L Appeal allowed.