Intikhab Alam Vs M/S Meezan Bank Limited

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

(Judicial Department)

F.A.B No. 18-P/2024 Intikhab Alam s/o Farman Ali Khan r/o Malik Fahad Nazir Town, Ring Road, Tehsil and District Peshawar —Versus—

M/S Meezan Bank Limited, through its Manager, 6 Saddar Road, Peshawar Cantt. Branch, Peshawar

PRESENT:

Mr. Naqeeb Ahmad Takkar, Advocate for appellant.

Mr. Abdullah Shah, Advocate for respondent.

Date of hearing: 18.03.2026

JUDGMENT

QAZI JAWAD EHSANULLAH, J.- Through the instant banking appeal, the appellant Intikhab Alam has called in question the judgment and order dated 01.10.2024 passed by the learned Banking Court-II, Peshawar, whereby an application filed by the appellant for setting aside ex parte judgment and decree dated 13.03.2022 was dismissed.

2.Briefly stated, Suit No. 19/10 was filed by the respondent-bank against the appellant for recovery of an amount of Rs. 3,791,930/- inclusive of profit / mark-up, cost of fund etc. In this suit, summons and notices through ordinary mode as well as through registered post and advertisement in two dailies were simultaneously issued as prescribed in D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah

section 9(5) of the Financial Institution (Recovery of Finance) Ordinance, 2001 (the Ordinance). On the first date of hearing after issuance of notice(s) as aforesaid, the appellant statedly appeared through clerk of Mr.

Waqas Aziz, Advocate and sought time for submission of Wakalatnama etc. Since, the appellant did not file leave to defend application thereafter within the prescribed period of limitation, therefore, an ex parte decree was passed against him on 10.03.2022. Later on, an application for setting aside of the aforesaid ex parte decree was filed by the appellant which was dismissed by the court below for having been filed beyond the prescribed period of limitation.

3.Arguments of learned counsel for both sides have been heard and record was also gone through.

4.No doubt that the application filed by the appellant was apparently filed beyond the prescribed period of 30 days but it is equally true that personal service was never effected upon the appellant through any of the modes prescribed in section 9(5) ibid. In this context, reports of bailiff of court on all summons and notices available on record were gone through, which clearly show that appellant was never served as he was not found available on the given address. Rather it was reported by the bailiff that appellant had shifted his abode from the given address few months back. Thus, it is an admitted position on record and so is discernible from the impugned judgment as well that appellant was only served through publication in newspapers and so the leaned Banking Judge, in view of D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah

clear text of proviso to section 10(2) of the Ordinance, was vested with powers to grant further time to the appellant for filing representation and leave application at pre-decree stages. Mere fact that clerk of Mr. Waqas Aziz Advocate appeared and sought time too could not be adversely taken against the appellant, because on record there is no power of attorney / wakalatnama filed so as to authorize the counsel to appear on behalf of appellant and represent him. So, rejection of application for setting aside ex parte decree is found to be too cursory and slipshod in the given circumstances of the case and could not therefore be subscribed to.

5.Another striking feature of the case in hand is that accounts position briefly delineated in paragraph 6 of the plaint contains certain unclarified entries like those relating to Takaful and Charity etc. which did require some sort of explanation to be furnished by the respondent-bank.

The banking court did not inquire the plaintiff-bank about the origin and legalities of those entries and it appears to have passed a decree mechanically without applying its independent mind. There is nothing on record to show as to whether vehicle forming subject matter of suit finance was ensured by way of Takaful and, if yes, how much insurance was paid to the Takaful company. No receipts of payment of Takaful have been placed on the file of the trial court. Besides, no evidence of any charitable payment made by the plaintiff-bank was brought on record, nor has it been shown how such charity was attributable to the appellant. We note that Banking Court was just not a post office to endorse and convert the plaint D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah

into a decree. Even in cases where defendant was to be proceeded against ex parte, the court was supposed to pass informed decisions and decrees after examination of documents submitted in the suit file by the plaintiff- bank. The ex parte decree dated 10.03.2022 is prima facie at loss to carry out such exercise. It appears that, once it was found that the leave had not been filed within the prescribed period of limitation and the appellant was found absent, the Banking Court mechanically decreed the plaint and stamped it without much scrutiny.

6.It is noteworthy that the learned Banking Court also awarded cost of fund from a retrospective date, i.e., 15.05.2021, which is clearly inconsistent with the mandate of section 3 of the Ordinance ibid. A plain reading of section 3 makes it evident that liability to pay cost of fund arises only upon the occurrence of “default” by the customer, and such default, for the purposes of this provision, is to be construed in the manner explicitly defined under subsection (3) thereof. In terms of section 3(3), a “default” is deemed to occur only when a judgment is passed against the customer under the Ordinance, meaning thereby that the adjudication of default is a judicial determination and not a mere factual or contractual occurrence prior thereto. For facility of reference, section 3 of the Ordinance is reproduced herein below:

3.Duty of 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 D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah

the date of his default till realization of the cost 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 enforce.

(3)For purpose of this section a judgment against customer under this Ordinance shall mean that he is in default of his duty under sub-section (1) and the ensuing decree shall provide for payment of the cost of funds as determined under sub-section (2).

[emphasis added] A careful reading of subsection (3) leaves no manner of doubt that the starting point for computation of cost of fund is the date on which default is judicially determined through a decree, and not any anterior date.

The expression “default” as employed in section 9(1) of the Ordinance, in its general sense, cannot be conflated with the specific and statutorily defined default under section 3. The latter governs exclusively the accrual of cost of fund and is triggered only upon adjudication by the Court.

Consequently, cost of fund cannot be awarded for any period prior to the passing of decree. The underlying rationale is also evident: cost of fund is a statutory compensation intended to indemnify the financial institution for the period beyond the contractual tenure of the finance facility. In the absence of such statutory provision, no mark-up or profit would ordinarily be recoverable for the post-contractual period. However, where the finance agreement is still subsisting, as in the present case (executed on 10.01.2020 for a term of five years expiring around 10.01.2025), there is no legal basis to award cost of fund during the currency of the agreement.

Therefore, the grant of cost of fund from 15.05.2021, well within the D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah

subsistence of the finance agreement, is patently contrary to law and cannot be sustained.

7.In view of the foregoing infirmities, both procedural and substantive, manifest on the face of the impugned judgment and the proceedings conducted before the learned Banking Court, we are persuaded to hold that the same is unsustainable in law. The impugned order, having been passed without proper appreciation of statutory requirements and without due application of judicial mind, is liable to be set aside. Consequently, the instant appeal is allowed; the ex parte judgment and decree dated 10.03.2022 is hereby set aside, and the suit filed by the respondent-bank is restored to its original position. The appellant/defendant is granted a period of 30 days from the date of preparation and delivery of this judgment to file an application for leave to defend. Upon filing, the learned Court below shall decide the same strictly on merits, in accordance with law, after providing adequate opportunity of hearing to both parties. The appeal stands disposed of in the above terms, with no order as to costs.

Announced Dt:17.03.2026 -Sd-

JUDGE

-Sd-

JUDGE

D.B Hon’ble Mr. Justice Syed Arshad Ali Hon’ble Mr. Justice Qazi Jawad Ehsanullah