Babar Badshah and others Vs National Bank of Pakistan, Parao road DIKhan

JUDGEMENT SHEET

IN THE PESHAWAR HIGH COURT, D.I.KHAN BENCH

(Judicial Department)

PRESENT

F.A.B No. 02-D/2023 with C.M No. 06-D/2023

Babar Badshah son of Nasrullah Khan caste Miankhel resident of Al-Babar House, West Circular Road, district D.I.Khan and others Appellants

Versus National Bank of Pakistan, Parao Road Branch, D.I.Khan

Respondent

For Appellants Muhammad Aslam Khan, Advocate For respondent Mr. Ehsan-ul-Haq Malik, Advocate Date of hearing 02.10.2025

JUDGMENT

Inam Ullah Khan, J.-

This judgment aims at disposing of the instant appeal and F.A.B No. 03-D/2023. The reason is that both involve the same question of law and fact.

2.Through F.A.B. No. 02-D/2023, filed under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance,

2001, the appellants have called in question the validity of the impugned judgment and decree dated 17.05.2023 passed by the learned Banking Court-II, Peshawar (hereinafter referred to as “the Banking Court”), whereby the suit filed by the respondent Bank was decreed to the extent of Rs.15,000,000/- along with markup amounting to Rs.2,450,496/-, together with cost of funds from 22.09.2022 till realization.

Likewise, through F.A.B. No. 03-D/2023, the appellants have also assailed the judgment and decree of even date (17.05.2023) passed by the learned Banking Court, whereby another suit filed by the respondent-Bank was decreed for Rs.10,000,000/- along with markup amounting to Rs.1,985,502/-, together with cost of funds from 22.09.2022 till realization.

3.Facts, essential for the purposes of adjudication of subject matter petitions, are that appellant No.1 availed a finance facility amounting to Rs.15,000,000/- and Rs.10,000,000/- alongwith costs of funds from the respondent- Bank (hereinafter referred to as “the Bank”) under the Agri (Production) Non-Farm Credit Revolving Scheme on 23.12.2020. The agricultural property owned by appellants No.1 and 4 was mortgaged as security, whereas appellants No.2 and 3 stood as sureties. Under the terms of the facility, the appellants were obliged to repay the finance amount along with markup within three years, subject to mandatory annual/biannual cleanup. Owing to their default, the Bank instituted a suit for recovery of the outstanding amount of

Rs.17,068,211/- & Rs.10,110,496/- on 05.10.2022. The appellants were duly summoned in accordance with law, whereupon they appeared and filed an application for leave to defend the suit, which was duly contested. After hearing the parties, the banking Court decreed the Bank’s suit on 17.05.2023. Aggrieved thereof, the appellants have preferred the instant appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance,

4.Learned counsel for the appellants contended that the plaint does not fulfill the mandatory requirements of Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. It was further argued that the statement of account annexed with the plaint is not verified in accordance with the provisions of Section 4 of the Bankers’ Books Evidence Act, 1891. The learned counsel candidly admitted that the application for leave to defend the suit was not filed within the stipulated period of thirty (30) days; however, the delay was attributed to the fault of the Court.

Consequently, an application under Section 5 of the Limitation Act, 1908 was filed seeking condonation of delay. He further submitted that the learned banking Court failed to consider the stance of the appellants in its true perspective, erroneously rejected both applications, and proceeded to decree the suit in favour of the respondent-Bank.

5.Conversely, learned counsel for the respondent Bank controverted the arguments advanced on behalf of the appellants and submitted that the plaint fully complies with the requirements

of Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. He contended that the statement of account was duly certified in the prescribed manner under Section 4 of the Bankers’ Books Evidence Act, 1891, and therefore carries full evidentiary value. It was further argued that the appellants admittedly failed to file their application for leave to defend within the statutory period of thirty (30) days, which rendered them disentitled to contest the suit. He maintained that the application for leave to defend did not fulfill the statutory requirements, as it could not be treated as a written statement and was, in any case, barred by limitation. He argued that, being a special law, the provisions of the Limitation Act, 1908 are inapplicable to proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001. He further submitted that the grounds now urged in appeal were never raised in the appellants’ application for leave to defend and, therefore, cannot be entertained at this appellate stage. Learned counsel emphasized that the availing of the finance facility by the appellants stands admitted; hence, the learned trial Court rightly decreed the suit in accordance with law.

6.Arguments heard. Record perused carefully.

7.Admittedly, the appellants had availed the finance facility from the Bank and were legally bound to repay the same in accordance with the agreed terms. However, they failed to fulfill their repayment obligations, compelling the Bank to institute a suit under Section 9 of the Financial Institutions (Recovery of

Finances) Ordinance, 2001. For proper appreciation of the legal position, it is appropriate to refer to Section 10 of the Ordinance, which governs the grant of leave to defend. The said provision is reproduced below for ready reference and better understanding:

Section 10–Leave to defend.

Section 9 – Procedure of Banking Court in suits.

A bare perusal of the above provision reveals that the distinction between mandatory and directory provisions lies in the nature and consequences of compliance. A directory provision serves as a guideline or procedural direction, the non-observance of which may be treated as an irregularity curable by subsequent compliance, provided no prejudice is caused. In contrast, a mandatory provision embodies a rule of strict compliance, the violation of which renders the act or proceeding invalid and without legal effect. The decisive test is whether the legislature intended strict adherence to the provision as a condition precedent for the validity of the act. Ordinarily, a mandatory provision carries penal or disabling consequences for non-compliance, whereas a directory provision does not.

8.The law has laid down clear and mandatory directions for a defendant seeking to contest a suit filed under the Ordinance.

These requirements are as follows:

9.The law further prescribes penal consequences for non-compliance with these mandatory requirements, whereby failure to adhere to them results in the rejection of the application for leave to defend, and the allegations contained in the plaint are deemed to have been admitted.

10.In the present case, the record reveals that the appellant No.1 appeared before the learned Banking Court on 11.11.2022, whereas the application for leave to defend was filed on 17.03.2023. Evidently, the said application was hopelessly barred by time. As the Financial Institutions (Recovery of Finances) Ordinance, 2001 is a special law, the provisions of the Limitation Act, 1908 have no applicability thereto. Consequently, the application filed by the appellants under Section 5 of the Limitation Act, 1908 for condonation of delay was a nullity in the eyes of law.

Perusal of the record further shows that the appellants’ application for leave to defend was not in the prescribed form of a written statement. The requirement of filing the same in the shape of a written statement is intended to ensure the expeditious disposal of banking suits under the special mechanism of the Ordinance. It is also well-settled that before the decision of the application for leave to defend, the defendant/appellant is not entitled to seek amendment therein, as the statutory framework

emphasizes procedural strictness to achieve the objective of speedy recovery.

In the present case, the appellants have also admitted availing the finance facility. The statement of account annexed with the plaint bears a proper certification in accordance with Section 4 of the Bankers’ Books Evidence Act, 1891. Moreover, keeping in view the advancement of technology, the Electronic Transactions Ordinance, 2002 has been promulgated to protect and recognize electronically generated documents and to ensure their authenticity. Hence, the statement of account, being an electronically generated document, carries a presumption of truth under the said Ordinance.

It further appears that the appellants have not agitated before this Court the same grounds that were raised in their application for leave to defend. The new pleas taken at the appellate stage are, therefore, beyond the scope of the original proceedings and cannot be entertained. The appellants appear to have deliberately deviated from their initial stance, which is impermissible under settled principles of law. Guidance in this regard can be sought from the authoritative pronouncement of the Hon’ble Supreme Court of Pakistan reported as 2012 CLD 337, wherein it was held as follows:

The Hon’ble Supreme Court thus categorically declared the provisions of Section 10 to be mandatory in nature, leaving no room for relaxation in case of non-compliance. This principle was subsequently reaffirmed in 2023 CLD 1021 [Lahore (Multan Bench)], titled Messrs S.M. Nisar and Company through Managing Partner and others v. Askari Bank Limited, Branch High Street, Sahiwal. Similar views were expressed in 2021 CLD 732 [Lahore (Multan Bench)], titled Ghulam Muhammad and others v. National Bank of Pakistan and others, and 2022 CLD 1494 [Lahore (Multan Bench)], titled Messrs S.G. Polypropylene (Private) Limited through Directors/Chief Executive and others v.

Allied Bank Limited through Principal Officer/General Attorney and others, wherein it was consistently held that non-compliance with the mandatory provisions of Sections 9 and 10 of the Ordinance entails penal consequences and leaves no discretion with the Banking Court to condone the delay or regularize the defect.

11.In view of the afore-stated legal analysis and discussion, this Court finds that the learned Banking Court has committed no illegality, irregularity, or material error in decreeing the suit filed by the respondent-Bank. The appellants failed to comply with the mandatory requirements of Sections 9 and 10 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, and their application for leave to defend, being hopelessly

time-barred and not in the prescribed form, was rightly rejected.

The subsequent attempt to raise new grounds at the appellate stage is equally misconceived and untenable. The decree passed by the learned Banking Court is well-reasoned and in accordance with law, and therefore calls for no interference by this Court in the exercise of its appellate jurisdiction.

12.Resultantly, this appeal (FAB No.02-D/2023) and FAB No. 03-D/2023 being devoid of merit stand dismissed with no order as to costs.

Announced October 02, 2025

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JUDGE

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JUDGE

(D.B)

Hon’ble Ms. Justice Farah Jamshed Hon’ble Mr. Justice Inam Ullah Khan