2024 C L D 965
[Balochistan (Sibi Bench)]
Before Muhammad Ejaz Swati and Abdullah Baloch, JJ
GHOUSIA RICE MILLS through Proprietor ---Appellant
Versus
NATIONAL BANK OF PAKISTAN through Manager and 2 others ---Respondents
High Courts Appeals No.(S) 01 of 2011 and 02 of 2013, decided on 21st September, 2017.
Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001) ---
----Ss. 9 (a) & 22--- Specific Relief Act (I of 1877), Ss. 21 & 42--- Arbitration Act (X of
1940), Ss. 32 & 33---Suit for recovery of finance and declaration ---Contractual liability ---
Arbitration clause, non -invoking of ---Effect ---Appellant / customer filed suit to recover
finance amount from insurance company on account of damages caused to pledged goods
due to flood whereas respondent / bank filed suit for recovery of finance facility---Trial Court decreed suit filed by respondent / bank while dismissed that of appellant / customer ---
Validity ---As per insurance policy if any difference had arisen as to amount of loss or
damage, such difference was to be referred to decision of an arbitrator to be appointed in writing by parties in difference---Appellant / customer instead of invoking arbitration clause
filed suit which was otherwise barred under S.12 of Specific Relief Act, 1877 and Ss. 32 & 33 of Arbitration Act, 1940---Suit filed by respondent / bank was verified on oath and supported by all necessary documents including statements of account, loan application, agreement of loan, undertaking by appellant / customer, power of attorney, mutation for mortgage property and other relevant documents which were duly signed / attested as required under the law ---Suit was covered within the definition of S. 9(1) of Financial
Institutions (Recovery of Finances) Ordinance, 2001--- Respondent / bank complied with the
requirements of Ss. 9(2) & (3) of Financial Institutions (Recovery of Finances) Ordinance, 2001--- High Court declined to interfere in judgments and decrees passed by Banking Court
as there was no misreading or non -reading of evidence nor there were glaring illegalities or
irregularities ---Appeal was dismissed, in circumstances.
Talat Waheed for Appellant.
Syed Akram Shah for Respondents.
Date of hearing: 6th September, 2017.
JUDGMENT
MUHAMMAD EJAZ SWATI, J. ---The appellant in High Court Appeal No(s).01 of
2011 has challenged the judgment and decree dated 30th June 2011 (hereinafter referred to as "the impugned judgment and decree") passed by the learned Judge, Banking Court Balochistan, Quetta (hereinafter referred to as "the trial Court") whereby, suit under Sections 2 and 7 read with Section 9 of the Financial Institution (Recovery of Finances) Ordinance 2001 (hereinafter referred to as "the Ordinance, 2001"), was dismissed. The appellant has also challenged the judgment and decree dated 11th December, 2012 (hereinafter referred to as "the impugned judgment and decree") passed by the learned Judge, Banking Court of Balochistan, Quetta (hereinafter referred to as "the trial Court") whereby suit filed by the respondent (bank) was decreed and the same impugned judgment and decree has been challenged by way of filing High Court Appeal No(s).02 of 2013.
Since both the appeals arising out of the finance sanctioned in favour of the appellant
and common question of law and fact is involved, therefore, are being disposed of through this common judgment.
2. The facts of the case arising out of the High Court Appeal No.01 of 2011 are that the
appellant filed a suit against respondent (bank) including M/s. Reliance Insurance Company
with the averments that appellant / plaintiff was maintaining CD account No.5658- 2 and
Cash Finance A/c No.090025- 1 in the name of Ghousia Rice Mills Usta Muhammad with
respondent No.1 (defendant) and had obtained cash finance limit of 15.000 Million against mortgage of property and pledge on stock of rice and paddy. It was the case of the Ghousia
Rice Mill (plaintiff) that the pledged property was insured while the stocks stored and lying
in Godown of the insured's was under the control (lock and key) of respondent No.1, who
had deployed two persons holding charge of pledged stock and the respondent No.1 was also charging salaries of the staff deployed thereon.
3. In respect of respondent No.2 (M/s. Reliance Insurance Company Ltd.) the appellant /
plaintiff averred that insurance was effected from defendants Nos.2 and 3, whereby, valid insurance policy for sum of ensured Rs. 1,80,00,000/ - was issued from 5th December 2009
and in this respect the appellant had paid Rs.120,000/ - as insurance premium. In lieu thereof
Insurance Policy No.113825 on 11th December 2009 with receipt No.3687 dated 11th December 2009 was issued. The appellant further averred that in recent flood occurred in the year 2010, the people of the area including appellant has sustained loss of their houses, property, agriculture, stock and other material and the Government of Balochistan,
compensated such effected citizens and it was required by the respondent No.1 to have
register the name of the appellant with the concerned administration or National / Provincial
Disaster Cell, so that his loss would have been protected / accommodated. It was further
averred that despite above, the appellant also reported the matter to Police Station, City Usta
Muhammad, District Jaffarabad on 28th August 2010, narrating aforesaid facts and also gave detail of loss related to stock pledge lying with the respondent No.1. The appellant sought relief for declaration that due to recent flood disaster at Dera Allah Yar, the management
stock / pledge of the appellant had been destroyed and further sought declaration that claim
of insurance from respondent No.4 also be awarded.
4. After notice, the respondents / defendants filed application for leave to defend the suit
and appellant / plaintiff has also filed rejoinder of the same.
5. The learned trial Court, keeping in view the documents relied upon and filed along
with the suit, dismissed the suit, vide impugned judgment and decree.
6. The facts arising out of High Court Appeal No.02 of 2013 are that the respondent
(bank) filed a suit for recovery of Rs. 1,59,77,850/ - along with cost of fund against the
appellant and Bakhsh Ali with the averments that the appellant / defendant No.1 (i) and (ii)
are owners of Mills, whereas, the defendant No.2 was duly appointed attorney through proper registered power of attorney, had applied for cash finance paddy (pledge) proposal for sanction of limit of Rs.15.000/ - million, which was processed and consequently vide sanction
advice dated 6th March 2011, cash finance liability with the date of expiry i.e. 3181 August 2008, was approved, as a result whereof, appellant / defendant again applied for renewal of sanction of finance facility under seasonal policy for Session 2008- 09 for cash finance
(pledge) limit Rs.15.000/ - million, which request was again entertained and through sanction
advice dated 6th May 2009 has approved the said cash. It is further averred that through another sanction advice dated 9th December 2009, the facilities availed by the appellant were renewed and the final adjustment / repayment was 31st August 2010.
7. The respondent (bank) executed required documents in respect of Cash Finance
facility, mentioned in the plaint and it was the case of the respondent (bank) that the appellant did not abide by the terms and conditions of the agreement and failed to clear the liabilities, and thus, violated the terms and conditions of the agreement and the amount mentioned in the plaint was outstanding against him.
8. After receiving notice by the appellant, he filed application for leave to defend and
written statement on 6th September 2011 to contest the suit of the appellant (defendant). It is relevant to mention here that when the respondent (bank) filed suit against the appellant, the
suit of the appellant against respondent (bank) was also pending. He reiterated the stance as
mentioned in the suit.
9. The learned Judge, Banking Court Balochistan, Quetta vide judgment and decree
dated 11th December 2012 decreed the suit in favour of the respondent No.! (plaintiff) and
against the appellant (defendant) severally and jointly for an amount of Rs. 1,59,77,850/ -
along with cost of fund at the rate of Rs.7.07% as per circular of the State Bank of Pakistan,
from the date of default i.e. 31st August 2010, while suit of the petitioner was dismissed.
10. Learned counsel for the appellant contended that in a suit filed by the appellant, an
application for leave to defend the suit was filed by the respondent after stipulated period of limitation, said application was barred by time, but the trial Court has failed to consider the point of limitation; that after allowing the respondent to contest the suit, it was mandatory for the trial Court to frame issue and after affording opportunity to the parties of producing evidence, to decide the matter, but the impugned judgment and decree clearly reflect that no such opportunity was provided; that the appellant specifically alleged that he was flood affectee and due to disaster occurred, his pledge stock including Mill had been damaged. The matter in issue in the suit, as pleaded by the appellant, was based on factual aspects, but the trial Court merely after hearing arguments, dismissed the suit on the basis of presumptions, which lack the reasons; that issue related to Finance Policy had also not been decided in accordance with law and in this respect the documents relied upon and filed alongwith the plaint, had altogether been ignored; that the stock was pledged and the respondent appointed a Muqadam for its due administration and their salaries were also deducted from the account;
that the appellant lodged report in respect of theft / damage of the stock with the concerned
Police Station, but the matter related to pledge had also not properly been maintained by
respondent No.1 in accordance with law, and thus, caused a huge loss to the appellant; that
the learned trial Judge, has failed to give any finding on this material issue, and thus, caused
grave prejudice to the appellant; that the findings of the learned trial Court in respect of entitlement of the appellant with regard to insurance claimed, has also been unattended and rejected without assigning any reason; that the suit filed by the respondent (bank) was time
barred and the statements of account were on markup basis, wherein, markup had been
calculated beyond the period of finance; that all the aforesaid aspects of the matter indicate
that impugned judgments and decrees in both cases, passed by the trial Court are merely based on presumption, therefore, liable to be set aside.
11. Learned counsel for the respondents in rebuttal contended that the appellant though
filed a suit against the respondent (bank) and M/s. Reliance Insurance Company Ltd. for seeking his claim with regard to 16000 rice bags, but he had failed to mention in the suit or annexed any authentic document to substantiate the same; that in absence of any document relied upon or filed by the appellant, the case cannot be proceeded on merits and the trial Court after hearing the arguments and considering the assertion of the appellant, passed the impugned judgment and decree with regard to suit filed by the appellant, which is based on proper appreciation of evidence; that at the time of filing suit the Insurance Policy was not alive, even otherwise, the insurance was not covered the ground taken in the suit; that the appellant has neither relied upon any document indicating that the area where the rise Mill was located, was declared un -affected area of flood by the concerned Government. Had it
been, the appellant would have applied for the same; that not a single document / certificate was produced by the appellant to show that he was flood affectee.
12. In respect of suit filed by the respondent (bank), learned counsel for the "bank"
contended that the suit was based on admissible evidence annexed along with the plaint; that the appellant in his application for leave to defend had failed to disclose sufficient reason a prima facie case to contest; that the appellant he merely reiterated his previous stance taken in his suit, which was based on verbal assertions, therefore, the impugned judgment and decree arising out of High Court Appeal No(s).02 of 2011 is also based on proper appreciation of evidence.
13. We have heard the learned counsel for the parties and perused the evidence available
on record. The suit filed by the appellant was based on the averments that in the recent flood, occurred in the year 2010, the people of the area including plaintiff had sustained loss of their houses, properties, agriculture, stock and other material. The plaintiff in this respect had not relied upon or filed any certificate issued by the concerned Government / Administration to enable the Court to observe that the Ric e Mill of the appellant was situated within the
affected area and he in due course of time had approached the concerned authorities either for information, or to include him in the list of flood affectees. In absence of any such document the mere contention that the rise Mill of the appellant was situated at Usta Muhammad, was in the affected area. It appears that the appellant had filed his suit on 14th
March 2011 and merely relied upon and filed photocopy of statements of account and
reference letter dated 11th December 2009 with regard to Insurance Policy No.113825, dated 12th December 2009, and a premium of Rs.1,20,000/ - was acknowledged. The appellant has
also not filed any admitted or authentic document to indicate that his Rice Mill was situated in the affected area. The Roznamcha dated 27128th August 2009, registered with Police
Station Usta Muhammad, wherein, it is mentioned that in Ghousia Rise Mill 16000 Rice bags
were stocked and due to flood they left the area and when they came back, they came to
know that 5000 bags were lost, while 11000 bags were stolen has no weight, as in respect of above Roznamcha no inquiry has been initiated, nor authenticity of this report has been supported through any evidence. No documentary evidence related to detail of stock was provided and in the report the date and time of the flood has also not been mentioned, even otherwise, it was filed after considerable time, therefore, on the basis of said averments, there was no possibility to proceed the matter, unless, the matter related to complaint had been substantiated through authentic document / evidence. It is also noted that during said period not a single information has been provided either to the respondent (bank) or to the Insurance
Company with regard to claim of the appellant. The only document relied upon by the
appellant is the letter dated 20th September 2010, issued by the counsel for the appellant to
the Manager Reliance Insurance Company Ltd. but in the said letter too, no facts related to complaint with regard to damages or theft had been mentioned on account of flood and disaster. The relevant is reproduced herein below:
Under instructions of my client Bakhsh Ali son of Muhammad Yousaf Caste Umrani
resident of Aliabad Road, Usta Muhammad maintaining accounts Nos. 5658- 2 and
090025- 1 in the name of Ghousia Rice Mills Usta Muhammad (hereinafter referred to
as "My Client') has requested me to ask place before their case: -
1. That my client is maintaining CD account No.5658- 2 and Cash Finance A/c
No.090025- 1 in the name of Ghousia Rice Mills Usta Muhammad with you and have
obtained Cash Finance Limit of Rs. 15.000 Million against Mortgage of Property and pledge of Paddy/Rice and your company has insured the same.
You are requested to please lodge claim of the same and reimburse the amount to
NBP Usta Muhammad for credit of CD accounts No.5658- 2 and Cash Finance A/c
NO.090025- 1 under intimation to me.
Please treat the matter as most urgent."
14. The other application annexed along with the plaint is Annexure D -3 relied upon by
the appellant allegedly submitted to Deputy Commissioner Dera Allah Yar, District Jaffarabad, was filed on 24th February 2011, but there is no application or document indicating that appellant was affectee of purported flood and he ever approached to the concerns within such period, therefore, on the face of aforesaid documents no substantial evidence / document was filed attracting the claim of the appellant. In absence of any document with regard to the fact that appellant suffered loss due to alleged flood in the disaster, the matter related to his claim had rightly been declined by the trial Court. The argument of the learned counsel for the appellant that as per schedule of Insurance Policy, the case of the appellant falls within the category mentioned in the Policy, but the Policy as annexed along with High Court Appeal No(s).01 of 2011, at page 45, clause (6) clearly demonstrate as under:
"This ensured does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly of any of the following occurrences namely:
(a) Earthquake, volcanic eruption or other convulsion of nature.
(b) Typhoon, hurricane tornado, cyclone or other atmospheric disturbance.
(c) War, invasion, act of foreign enemy, hostilities or warlike operation (whether war be declared or not), civil war.
(d) Mutiny, riot, military or popularizing insurrection, rebellion, revolution military or usurped powers, Martial Law or state of siege or any of the events or causes which determine the proclamation or maintenance of martial law or stage of siege.
(e) Act of terrorism.
Any loss or damage happening during the existence of abnormal conditions (whether
physical or otherwise) which are occasioned by or through or in consequence, directly
or indirectly, of any of the said occurrence shall be deemed to be loss or damage
which is not covered by this insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal condition."
15. Besides above that the matter related to insurance, as claimed by the appellant was
not covered as per clauses mentioned hereinabove of the insurance policy. It was also provided in clause (18) of the insurance policy of Reliance Insurance Company Ltd. that if any difference arises as to the amount of any loss or damage, such difference shall refer to
the decision of an arbitrator, to be appointed in writing by the parties in difference, but the
appellant instead of invoking the arbitration clause has filed suit, which was otherwise barred
under Section 21 of the Specific Relief Act, and under Sections 32 and 33 of the Arbitration Act, 1940.
16. The argument of the learned counsel for the appellant that consequent to agreement of
finance in question, a Letter of Pledge was also executed, which provides that the pledged goods must be kept under the administration and security of respondent (bank), therefore, in case of loss, the respondent (bank) was responsible, is also not tenable. The Letter of Pledge, clause (9) clearly demonstrates that as per terms and conditions, possession of pledged goods remain with the appellant. The relevant is reproduced herein below:
3. I/We shall keep or cause to be kept a register of the goods from the time being and
from time to time pledged with you wherein I/We shall duly and punctually/enter or
cause to be enter or cause to be entered particulars of all pledged goods and of all
goods and merchandise consumed there from and I/We shall, weekly or as after as
you may require, furnish to you a certified statement or copy of all entries which shall have been made in the said register since the last statement or copy was furnished and
shall, as often as may be required, produce to you, your nominees or agents, the said
register all account and other books, invoices, bills, vouchers instruments and papers
in any way relating to the pledged goods or any part thereof and shall permit you, your nominees and agents to inspect and take copies of or extracts from the same and shall furnish to you, your nominees and agents all such other particulars of or information concerning the pledged goods as you may require."
17. The appellant raised ground that pledged goods went missing under the control of
respondent (bank) in its capacity as pledgee, therefore, the responsibility to count for them entirely falls on respondent No.1. We have examined the "Letter of Pledge" which was executed by the appellant on 10th day of December, 2009 in favour of respondent (bank) from aforesaid paragraph of Pledged Letter it appears that the appellant admitted itself that he will maintain a register with regard to the pledged goods, wherein, all particulars of the goods and the quantity consumed therefrom, from time to time shall be recoded and will furnish the detail from time to time. The relevant is reproduced herein below:
"9. In default of payment/repayment of any moneys hereby secured or in the performance of any obligations hereunder, you shall be entitled to sell the pledge goods or any part thereof either by public auction or private treaty including the right to acquire the
same yourself"
18. From the above it appears that only constructive possession of the pledged goods was
delivered to the respondent (bank) and possession was with the appellant. Under the Contract Act, a pledge is ordinarily construed to mean delivery of any article to the pledgee by the pledgor as a security for a debt or for carrying out some other purposes mentioned therein, which had been committed by the pledgor with the pledgee. An article owned by the pledgor is physically delivered to be kept by the pledgee as security until the commitment of the pledgor with the pledgee is honored. In the instant case instead of delivering physical possession, only constructive possession of the pledged goods was handed over. In this manner, the pledgor was allowed to utilize the pledged goods, in his ordinary course of business, which fact also reflects from clause (9) of the Letter of Pledge.
19. In the aforesaid circumstances, it was the pledgor (appellant) to prepare the inventory
and in case of any breach of the contract, the right is to be exercised. The aforesaid Letter of Pledge reveals that it was the appellant to maintain a register with regard to particulars of the
pledged goods and their time to time utilization and communicate to the pledgee on weekly
or fortnightly or monthly basis. To maintain the value of the entire inventory of the pledged goods was to be maintained to a stander, which meets the value of security provided under the Contract of pledge. It is the mandate of law that if the actual possession of the goods under pledge is entrusted to the pledgor, the standard of care in relation to pledged goods, as
envisaged under Sections 151 and 152 of the Contract Act, purely falls on the pledgor and if
under the Contract Act, the pledged goods is not made available to the pledgor and physical
possession is retained by the pledgee, the purpose of obtaining finance under pledge would then stands frustrated. In the instant case, the appellant as per Letter of Pledge was permitted by the respondent (bank) to deal with the pledged goods in its ordinary course of business and as per clause (3) the pledgor was required to maintain a register for recording change in the inventory of pledged goods from time to time and it appears that possession of the goods was not given to the respondent (bank) and actual possession of the pledged goods was with the appellant, therefore, it was for the appellant to substantiate all the responsibility with regard to Letter of Pledge. In absence of proper steps, as per terms and conditions of Letter
of Pledge, the appellant cannot take any benefit in case of any eventuality or loss.
20. Whereas, the objection of the appellant with regard to the suit filed by the respondent
(bank) that all the documents related to finance were neither proved, nor substantiated and
suit was not required to be decreed in summarily manner, is also not tenable. The documents
of finance were secured under the provisions of the Financial Institutions (Recovery of
Finances) Ordinance 2001, and in this respect learned counsel for the appellant has failed to
point out any inadmissible document considered by the trial Court, while passing the impugned judgment and decree. The suit filed by the respondent (bank) was verified on oath and supported by all necessary documents including statements of account, loan application,
agreement of loan, undertaking by the appellant, power of attorney, mutation for mortgage
property and other relevant documents, which were duly signed / attested as required under
the law and suit was covered within the definition of Section 9(1) of the Financial Institutions (Recovery of Finances) Ordinance 2001, which further indicates that requirements of subsection (2)(3) of Section 9 were complied with. The appellant in the application for leave to defend had merely raised objection, which was reiteration of his stance with regard to his suit filed against respondent (bank) arising out of High Court Appeal No(s).01 of 2011, but pursuant to said objections, no documents were annexed to show sufficient cause, enabling the appellant to seek leave to defend. In absence of any document in support of his plea or contention, there was no occasion to permit the appellant to defend the suit. The findings rendered by the Court below arising out of the judgments and decrees of High Court Appeal No(s).01 of 2011 and High Court Appeal No(s).02 of 2013 neither reflect any misreading or non- reading of evidence, nor there is any glaring illegalities
or irregularity, to warrant interference in the impugned judgments and decrees.
In view of the above, High Court Appeal No(s).01 of 2011 and High Court Appeal
No.02 of 2013 are dismissed. Parties are left to bear their own cost.
Decree sheet be drawn.
MH/84/Bal. Appeals dismissed.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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