Muhammad Abid vs Js Bank Ltd

Stereo.HCJDA 38.

Judgment Sheet

LAHORE HIGH COURT

RAWALPINDI BENCH RAWALPINDI

JUDICIAL DEPARTMENT

REGULAR FIRST APPEAL NO. 187 OF 2021

MUHAMMAD ABID

Versus

JS Bank Ltd.

JUDGMENT

Date of hearing: 07.10.2026 Appellant by: Mr. Abdul Hameed Baloch, Advocate. Respondent by: Barrister Bilal Naseer.

MIRZA VIQAS RAUF, J. This appeal in terms of Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as “Ordinance, 2001”) assails the vires of judgment and decree dated 4th September, 2021, whereby learned Judge Banking Court, Rawalpindi proceeded to reject the plaint of the suit instituted by the appellant.

2.Facts, in brief, forming background for preferring this appeal are that the appellant instituted a suit for declaration and injunction, which was entertained by the Banking Court, who proceeded to issue summons in terms of Section 9(5) of the Ordinance, 2001. In response thereto, the respondent-Bank entered appearance and filed an application for leave to defend under Section 10 of the Ordinance, 2001. The said application, was, however, not adjudicated upon and instead, the learned Judge Banking Court

proceeded to reject the plaint through the impugned judgment and decree dated 4th September, 2021.

3.Learned counsel for the appellant contended that once the plaint had been entertained and summons had been issued under Section 9 of the Ordinance, 2001, the proceedings were required to be regulated by the special procedure prescribed under Sections 9 and 10 thereof. Learned counsel argued that the respondent-Bank, having been served with summons, had invoked its statutory right to seek leave to defend, and the learned Judge Banking Court was therefore legally obliged to decide the said application before proceeding further with the suit. Learned counsel submitted that the impugned judgment and decree was rendered in disregard of the mandatory provisions of the Ordinance, 2001 and thus, not tenable.

4.Conversely, learned counsel appearing on behalf of the respondent-Bank defended the impugned judgment.

5.Heard. Record perused.

6.We have noted that after institution of the suit, the learned Judge Banking Court entertained the plaint and issued summons in terms of Section 9(5) of the Ordinance, 2001. In response whereof, the respondent-Bank filed an application for leave to defend in terms of Section 10 of the Ordinance, 2001. The learned Judge Banking Court, was, therefore, obliged to examine the application for leave to defend in accordance with the parameters prescribed by Section 10 of the Ordinance, 2001, however, it proceeded to reject the plaint, which course is not tenable.

7.We are cognizant of the fact that the Ordinance, 2001 provides a special mechanism for the trial of the suits and Section 9 of the Ordinance, 2001 provides the procedure for Banking Courts for dealing with the suits instituted thereunder. Section 10 of the Ordinance, 2001, however, ordains that in any case in which the

summons have been served on the defendant as provided for in sub- section (5) of Section 9, he shall not be entitled to defend the suit unless he obtains leave from the Banking Court; and, in default of his doing so, the allegation of fact in the plaint shall be deemed to be admitted and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof or such other material as the Banking Court may require in the interests of justice.

8.We must note here that in terms of sub-Section 11 of Section 10 of the Ordinance, 2001, where the application for leave to defend is accepted, the Banking Court shall treat the application as a written statement, and in its order granting leave shall frame issues relating to the substantial questions of law or fact, and, subject to fulfilment of any conditions attached to grant of leave, fix a date for recording of evidence thereon and disposal of the suit. Whereas sub-Section 12 of Section 10 of the Ordinance, 2001 mandates that where the application for leave to defend is rejected or where a defendant fails to fulfill the conditions attached to the grant of leave to defend, the Banking Court is obliged to forthwith pass the judgment and decree in favour of the plaintiff against the defendant. This surely has not been done and as such, the learned Judge Banking Court clearly erred in law and proceeded in contravention of the mandatory provisions of law.

9.The proposition crept up before this Court is quite similar to the case of MUHAMMAD SALEEM and 3 others vs. PAK BRUNEI INVESTMENT COMPANY LTD. through Chief Manager/President (2022 CLD 84) wherein, it was held as under:

7.Needless to say that the Banking Court is empowered to examine the plaint to determine the breach of obligation by a financial institution or a borrower before it fixes a date of hearing to decide the leave application. The Banking Court is well within its legal right to reject or return a plaint by invoking any provision under the C.P.C. before summoning the defendant under section 9(5) of the FIO, 2001 or before fixing a specific date of hearing of the leave application. However, once the Banking Court, after examining the plaint, is satisfied that the

same is in order as per the requirements of section 9 and has proceeded to issue summons to the defendant under section 9(5) ibid, pursuant to which a defendant has filed the leave application and a date of hearing of the leave application has been fixed, it ceases to take any further step under the provisions of the C.P.C. without first deciding the leave application in accordance with the requirements of section 10 of the Ordinance. The Banking Court, in such circumstances, is duty bound to first grant or reject the leave application in terms of sections 10(9), 10(11) or 10(12) of the Ordinance before taking any other step towards the progress and continuation of the suit.

In this case, when the plaint was presented before learned Judge Banking Court, it issued summons to the defendant. In response thereto, the respondent filed the application for leave to appear and defend the suit. Admittedly the said application was not decided by the learned Banking Court, while it was obliged under the law to firstly decide respondent's applications for leave to defend the suit. Thus, we feel that the learned Judge Banking Court has, in fact, gone outside the scope of section 10(8) of the Ordinance, 2001. It has nowhere been provided in section 10 of the Ordinance that at the time of hearing the leave application, the Banking Court is competent to either reject or return the plaint. If the learned Banking Court was of the view that respondent has raised substantial questions of law and facts, then leave could have been granted but the plaint could not be returned or rejected at that point of time. Needless to add that the Banking Courts, which are the creature of the statute, are bound by the provisions and procedure provided under that statute. Reference is made to Messrs Waheed Corporation through Proprietor and another v. Allied Bank of Pakistan through Manager (2003 CLD 245), Sheikh Muhammad Kashif v. Askari Leasing Limited through Manager/Chief Executive of Branch/Recovery Officer (2004 CLD 1645), National Bank of Pakistan through Zonal Head and Constituted Attorney v. Messrs Suraj Ghee Industries Limited through Executive Director (2005 CLD 1201), Muhammad Azwar Siddiqui v. Chief Executive Union Leasing Ltd. and 21 others (2006 CLD 946), PASSCO v. Omer Bilal Traders (Pvt.) Limited (2007 CLD 492), Amanullah Khan v. Habib Bank Limited (2014 CLD 1181), Anees-Ur-Rehman v. Faysal Bank Limited through Manager (2019 CLD 1031), BRR GUARDIAN MODARABA through Authorized Representative/Manager v. ALTAS Insurance Company Limited (2020 CLD 1379) and Bank of Punjab through Attorney v. Manzoor Qadir and another (2021

CLD 1037).

10.Reliance in this respect can also be placed on the case of BANK OF PUNJAB through Attorney vs. MANZOOR QADIR and another (2021 CLD 1037), wherein it was held as under:

8.The plain and bare reading of the Section 10 of the Ordinance makes it unequivocally clear that a defendant does not have any right to defend the suit unless he obtains leave from the Banking Court to defend the suit. If the defendant is unable to obtain the leave, the allegations of fact in the plaint are deemed to be admitted and the Banking Court may proceed to pass a Decree in favour of the plaintiff to the satisfaction of the Court. The PLA is required to be in the form of written statement listing substantial questions of law and facts in respect of which the defendant opines that evidence is required to be recorded. Section 10(4) of the Ordinance also mandates that the PLA must contain specific statement with respect to the amount of 'Finance' availed, the amount paid by the defendant with the dates of payments, the amount of 'Finance' and other amounts payable by the defendant up to the date of institution of the suit and the amount which the defendant disputes to be payable to the financial institution. Importantly, the amount so disputed must be supported with tangible facts and should not be vague, general and superficial without any supporting facts and documents. If the PLA is found to be materially incorrect at any stage of the proceedings, the defendant losses the right to defend the suit and is also liable to pay penalty of not less than 5% of the claim, unless the defendant is able to establish that incorrect information was submitted as a result of a bona fide mistake. Further, the PLA must be accompanied by all the documents which in the opinion of the defendant, support the substantial questions of law or fact raised by the defendant. The Banking Court is empowered to reject the PLA where it does not comply with the requirements of sections 10(3), 10(4) (where applicable) and 10(5) of the Ordinance. Under section 10(9) of the Ordinance the Banking Court is empowered to grant leave to defend if in its opinion substantial law and fact have been raised in respect of which evidence is required to be recorded and in this behalf the Banking Court has to consider the plaint, the PLA and the reply along with the documents annexed thereto. While granting the leave to defend, the Banking Court has a discretion to impose such conditions keeping in view the facts and circumstances of the case which includes but are not limited to the deposit of cash or furnishing of security. Under section 10(11) of the Ordinance, the PLA can be accepted and in that case the PLA is by operation of law considered as a written statement and the Banking Court is empowered to straightaway frame issues relating to the question of law and facts and subject to fulfillment of conditions attached to the grant of leave and proceed to fix a date for recording of evidence. Similarly under section 10(12) of the Ordinance, the PLA can be rejected or accepted conditionally under section 10(9) of the Ordinance but if the defendant fails to fulfill any condition attached to the grant of the PLA, the Banking Court is fully authorized to forthwith proceed to pass a Judgment and Decree in favour of the plaintiff and against the defendant.

9.From the above analysis of the law, it is clear that the Banking Court is empowered to examine the plaint to determine the breach of obligation by a financial institution or a borrower before it fixes a date of hearing to decide the PLA. The Banking Court is well within its legal right to reject or return a plaint by invoking any provision under the C.P.C. before summoning the defendant under section 9(5) of the Ordinance or before fixing a specific date of hearing of the PLA. However, once the Banking Court has examined the plaint, is satisfied that the same is in

order as per the requirements of Section 9 and has proceeded to issue summons to the defendant under section 9(5) of the Ordinance, pursuant to which a defendant has filed the PLA and a date of hearing of the PLA has been fixed, it ceases to take any further step under the provisions of the C.P.C. without first deciding the PLA in accordance with the requirements of Section 10 of the Ordinance. The Banking Court is duty bound to first grant or reject the PLA in terms of section 10(9), 10(11) or 10(12) of the Ordinance before taking any other step towards the progress and continuation of the suit. After doing so, the provisions of the C.P.C. are again available to the Banking Court as the facts and circumstances of the case may warrant.

10.In support of the analysis and view given by us reliance is placed on the following reported cases:-

(i)Anees-Ur-Rehman v. Faysal Bank Limited through Manager, 2019 CLD 1031:

"Undoubtedly" after the grant of leave to defend and treating the leave application as written statement the respondents are within their right to have filed an application under Order VII, Rule 11, C.P.C. and if the Court reaches the conclusion that the case falls under any of the clauses of Order VII, Rule 11, C.P.C., the plaint could have been rejected but in no way before the grant of leave to defend the suit.

(ii)Amanullah Khan v. Habib Bank Limited, 2014 CLD 1181:

The banking court was under obligation to decide the application for leave to defend first in order to determine the locus standi of defendant, and in case the defendants failed to establish locus standi to defend the suit then he had no right to file any other application including under Order VII, rule 11, C.P.C.

(iii)Sh. Nazir Ahmed v. House Building Finance Corporation, 2002

CLD 1634:

It was held inter alia by a learned Division Bench of the Lahore High Court that rejection of plaint without deciding leave application was against the provisions of law; and, defendant as a matter of right could not defend the Suit unless leave is granted upon filing of proper leave application.

(iv)Waheed Corporation v. Allied Bank Limited, 2003 CLD 245:

It was held inter alia by a learned Division Bench of the Lahore High Court that the Banking Court had to first decide the leave application on merits in either way.

(v)Sheikh Muhammad Kashif v. Askari Leasing Ltd., 2004 CLD It was held inter alia by a learned Division Bench of the Lahore High Court that the defendants, after grant of leave, were within their right to file application under Order VII, Rule 11, C.P.C. for rejection of plaint, and if the Court reached

the conclusion that the case fell under any of the clauses of Order VII, Rule 11, C.P.C., only then the plaint could have been rejected; and, rejection of the plaint prior to the grant of leave was in conflict with the provisions of Ordinance.

(vi)Habib Bank Limited v. The English Engineering Co. and others, 2005 CLD 292:

The Banking Court rejected the plaint without deciding the leave application, for the reason that the plaintiff did not produce written finance agreement with the plaint. The order of rejection of the plaint was set aside by the learned Division Bench of the Lahore High Court.

(vii)Falcon Ventures (Pvt.) Ltd. v. Punjab Banking Court-II, 2004

CLD 726:

It was held by a learned single Judge of the Lahore High Court that the defendant could not even file interlocutory application in order to raise point of jurisdiction of Court till such time leave to defend was granted; and, defendant could not file application under Order VII, Rule 11, C.P.C., without securing leave to defend suit.

(viii)PASSCO v. Omer Bilal Traders (Pvt.) Limited, 2007 CLD 492: The impugned order was set aside by observing that the learned Judge Banking Court only received the leave petition and kept it pending. It was neither considered nor decided. But through the impugned order the plaint was returned.

(ix)National Bank of Pakistan through Zonal Head and Constituted Attorney v. Messrs Suraj Ghee Industries Limited through Executive Director and 5 others, 2005 CLD 1201: To our mind, at that point of time, the learned Banking Court, without deciding the leave application, was not empowered to reject the plaint or dismiss the suit.

(x)Gulistan Textile Mills Ltd. v. Askari Bank Ltd. and others, 2013

CLD 2005:

Inherent power of the Banking Court under O. VII, R. 11, C.P.C. preceded the statutory obligation of the Banking Court under section 10(8) of the Ordinance. Banking Court had a primary obligation to examine the plaint and reject it, inter alia, if the same did not disclose a cause of action and such power could be exercised at any stage of the suit and it did not matter if an application for leave to defend, or written statement had been filed by the Defendant. and cases titled, Sheikh Nazir Ahmed v. House Building Finance Corporation through General Manager and 4 others, 2002 CLD 1634; Messrs Waheed Corporation through Proprietor and another v. Allied Bank of Pakistan through Manager, 2003 CLD 245; Habib Bank Limited v. Messrs The English Engineering Company and 2 others, 2005 CLD 292; Muhammad Hussain v. SME Bank Limited and another, 2005 CLD 323; Messrs Malik Israr Salim and Brothers through Proprietor v. Allied Bank of Pakistan Ltd. and 2 others, 2005 CLD 1083; Muhammad Azwar Siddiqui v. Chief Executive Union Leasing Ltd. and 21 others, 2006 CLD 946; Messrs Sui Northern Gas

Pipelines Ltd. through Deputy Chief (Legal) v. Muslim Commercial Bank Ltd., Avari Hotel Branch, Lahore through Manager and another, 2006 CLD. 816 and Tharparkar Sugar Mills v. Masood Aziz Chaudhary, 2010 MLD 198.

Reference to the above effect can also be made to the cases of ANEES-UR-REHMAN vs. FAYSAL BANK LIMITED through Manager (2019 CLD 1031) and Sheikh MUHAMMAD KASHIF vs. ASKARI LEASING LIMITED through Manager/Chief Executive of Branch/ Recovery Officer

(2004 CLD 1645).

11.After having an overview of the principles laid down in aforenoted judgments, we are in agreement that the impugned judgment and decree is not sustainable. We are, thus, of the candid view that while passing the impugned judgment and decree dated 4th September, 2021, learned Judge Banking Court did not adhere the mandatory provisions of law. As a result thereof, we allow this appeal and set-aside the judgment and decree dated 4th September, 2021, passed by the learned Judge Banking Court, Rawalpindi. As a sequel whereof, the suit instituted by the appellant as well as the application for leave to defend, moved by the respondent-Bank, shall be deemed to be pending before the learned Judge Banking Court, Rawalpindi, who shall first decide the application for leave to defend, keeping in view the provisions of the Ordinance, 2001 and then advert to merits of the suit, strictly in accordance with law. Needless to observe that it is expected from the learned Judge Banking Court to conclude the proceedings swiftly. Parties to appear before the Banking Court, Rawalpindi on 11.11.2026 Office to transmit a copy of this judgment to the concerned court and remit the record as well.

(ANWAAR HUSSAIN) (MIRZA VIQAS RAUF)

JUDGE JUDGE

Approved for Reporting

(JUDGE) (JUDGE)

M.Sajid*