2019 C L D 395
2019 C L D 395
2019 C L D 395
2019 C L D 395
[Sindh (Larkana Bench)]
Before Zafar Ahmed Rajput and Agha Faisal, JJ
SOOFI RICE MILLS through Proprietor and 2 others---Appellants
Versus
NATIONAL BANK OF PAKISTAN through Manager and 2 others---
Respondents
First Civil Appeal No. D-3 of 2013, decided on 3rd October, 2018.
(a) Civil Procedure Code (V of 1908)---
----O. VIII, R. 6---Suit for recovery of money---Set-off against plaintiff's demands-
--Essentials---Set-off must be where a suit was one for recovery of money and
amount in regard to such set off must be an ascertained sum of money, which must
be legally recoverable by defendant(s)---Such amount must be recoverable by
defendant from plaintiff(s) and must not exceed pecuniary limits of jurisdiction of
the court in which the suit was brought---Both parties must fill, in the defendants
claim to set off, the same character they fill in the plaintiff's suit---Set off claim
must be pleaded in the manner prescribed in law and within period of limitation
prescribed in law.
Civil Aviation Authority v. JAPAK International (Pvt.) Ltd. 2009 SCMR 666;
Ahmad Hassan v. Haji Ajab Khan and others 1985 CLC 1575; Lassoo & Sons v.
Krishna Bahadur Nepali AIR 1932 Bom. 617; Jitendra Nath Ray v. Jananda Kanta
Das Gupta AIR 1936 Cal. 277; Bai Harendra Nath Chaudhury v. Bai Sourindra
Nath AIR 1942 Cal. 559; Sarawwathiswani v. Sridhora Siverama Moorthy AIR
1949 Mad. 630; Abdul Majid v. Abdul Rashid and others AIR 1950 All. 201;
Shoebanchan Pandey and another v. Madho Sarah Chowbay and others AIR 1952
Pat. 73; Sarangdhar Singh and another v. Lakshmi Narayan Wahi AIR 1955 Pat.
320; Syed Naimat Ali and others v . Dewan Jairam Dass PLD 1983 SC 5; Har
Prasad and another v. Firm Ram Sarup Radha Kishen AIR 1924 All 87, 2;
Bhikanrao v. Shridhar AIR 1931 Nag. 12; Girdharilal Chaturbhuj v. Surajmal
Chauthmal Agarwal AIR 1940 Nag. 177; Sankara Pillai v. Parameswaran Pillai AIR
1959 Ker. 352; AIR 1964 Mad. 108; Syed Ahmad Saeed Kirmani v. Messrs Muslim
Commercial Bank Ltd., Islamabad 1993 SCMR 441; Khurshid Ahmed and another
v. Khair Din PLD 1962 (W.P.) Lahore 313; Rai Harendra Nath Chaudhury v. Rai
Sourindra Nath Choudhury and others AIR (29) 1942 Calcutta 559; (1881) 5 QBD
5691; (1878) 3 QBD 324 and Apollo Textile Mills Ltd. v. Soneri Bank Limited
2011 CLD 1655 rel.
(b) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---
----Ss. 15 & 19---Execution of decree of Banking Court---Sale of mortgaged
property---Rights of auction-purchaser---Scope---Once a sale had been effected,
third party interest intervenes and the same may not be whittled away by resort to
procedural incongruities---Auction purchaser acquired valuable rights in a property
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which could not be easily disturbed and such rights were created upon acceptance
of an offer and subsequent confirmation of sale.
United Bank Limited v. Consolidated Exports Limited and others 1996 MLD
1727; Nanhelal and another v. Umrao Singh AIR 1931 Privy Council 33; Hudaybia
Textile Mills Ltd. and others v. Allied Bank of Pakistan Ltd. and others PLD 1987
SC 512; United Bank Limited v. Messrs A.Z. Hashmi (Pvt.) Limited and 8 others
2000 CLC 1438; Muhammad Attique v. Jami Limited and others PLD 2010 SC 993
and Mumtaz ud Din Feroze v. Sheikh Iftikhar Adil and others PLD 2009 SC 207
rel.
Syed Zahir Hussain Chishti for Appellants.
Bashir Ahmed Dargahi for Respondents.
Date of hearing: 26th September, 2018.
JUDGMENT
AGHA FAISAL, J.---Through this appeal, the appellants have assailed the
judgment dated 28.08.2013 delivered in Suit No. 22 of 2011 by the learned Banking
Court No. I, at Larkana ("Impugned Judgment").
2. The relevant facts culminating in the Impugned Judgment are delineated in
seriatim herein below:
i. The respondent No.1 herein, National Bank of Pakistan ("NBP"), had filed a
suit for recovery, inter alia against the present appellants, which was decreed
ex parte vide judgment and decree dated 15.12.2001 and 20.12.2001
respectively.
ii. Execution proceedings were initiated subsequent thereto and immoveable
property, mortgaged to secure the financial obligations, was auctioned and
purchased by the respondent No.2 herein. The auction proceeds were
conveyed to NBP and the auctioned property was handed over to the
respondent No.2 after issuance of confirmation and sale certificate.
iii. The appellant No.2 herein moved an application before the learned Banking
Court under section XII of Financial Institutions (Recovery of Finances)
2001 ("Ordinance") which was dismissed vide order dated 01.03.2005. The
aforesaid order was challenged before the High Court in appeal, which
appeal was allowed and the matter was remanded back to the learned
Banking Court for deciding the same afresh. In due compliance of the orders
of High Court, permission was given to the defendants therein to defend the
suit and after an exchange of pleadings, issues were framed.
iv. A complete trial was held and in conclusion thereof the suit was allowed,
once again, vide the Impugned Judgment and the decree pursuant thereto
was issued on 4th September, 2013, hence, the present appeal.
3. Mr. Zahir Ahmed Chishti, learned counsel for the appellants argued that while
the claim of NBP, as decreed there-against, was not disputed however, the Bank
was required to set off the same against the stock of paddy and rice pledged
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therewith. It was next contended that the value of the claim sought was in excess of
the claim of NBP hence the remaining amount was required to be refunded to the
appellants. Per learned counsel, the auction, sale certificate, registration of sale
deed and delivery of possession of the auctioned property, in favour of the
respondent No.2, was unmerited and unlawful and hence it was incumbent upon
this Court to declare the same as void ab initio.
4. Mr. Bashir Ahmed Dargahi, learned counsel for NBP controverted the
arguments of the appellants and stated that there was no counter claim filed and
hence the issue of set off is frivolous. The learned counsel demonstrated from the
Impugned Judgment that the issue of the purportedly pledged stock was discussed
at length therein and that it was prima facie manifest that no such stock was
available with the NBP and therefore the question of adjusting the same against the
liabilities of the appellants does not arise. The learned counsel stated that the
present appeal, filed in the year 2013, was frivolous and devoid of merit, hence,
was required to be dismissed forthwith.
5. We have given careful consideration to the arguments of the learned counsel
and have had the opportunity to review the record placed before us. The appellants
have already admitted the liability, adjudged there against vide the Impugned
Judgment, and therefore, no deliberation is merited in respect thereof. The primary
issue placed before this Court in the present appeal is whether the appellants were
entitled to a set off as claimed and also whether sufficient grounds exist to interfere
in the concluded transaction in respect of the auctioned immoveable property.
6. The statutory provisions pertaining to set off are contained in Order VIII, Rule
6, C.P.C. and a treatise upon the essentials thereof is contained in the judgment of
the honorable Supreme Court titled Civil Aviation Authority v. JAPAK
International (Pvt.) Ltd. (reported as 2009 SCMR 666) wherein it has been
observed as follows:
"The essential conditions of legal set-off are as follows:
(i) The suit must be one for the recovery of money.
(ii) As regards the amount claimed to be set-off---
(a) it must be an ascertained sum of money;
(b) such sum must be legally recoverable;
(c) it must be recoverable by defendant or by all the defendants if more than
one;
(d) it must be recoverable by the defendant from the plaintiff or all the plaintiffs
if more than one;
(e) it must not exceed the pecuniary limits of the jurisdiction of the court in
which the suit is brought; and
(f) both parties must fill, in the defendants claim to set-off, the same character as
they fill in the plaintiffs' suit."
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(i) Lassoo & Sons v. Krishna Bahadur Nepali AIR 1932 Bom. 617.
"In this respect however the distinction between a set off and a counter-claim
must be borne in mind. In one sense both are cross-actions but a set off is
also a ground of defence. If established it affords an answer to the plaintiff's
claim either wholly or pro-tanto for a set off is really a debt claimed by a
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(ii) Jitendra Nath Ray v. Jananda Kanta Das Gupta AIR 1936 Cal. 277.
"As set off may be purely defensive, that is, it may amount to an adjustment or
satisfaction of the plaintiff's claim or it may be a counter-claim under which
the defendant claims a decree for the surplus amount due to him. In a
defensive set off, the set off claimed must be recoverable at the date of the
plaintiff's suit. In a counter-claim the sum claimed by the defendant should
be legally recoverable at the date when he makes the claim i.e. at the date
when he files written statement. The words "legally recoverable in Order
VIII, Rule 6, mean legally recoverable at the date of the institution of the
suit in one case and mean legally recoverable at the date when the counter-
claim is made in the other case. Although in Order VIII, Rule 6 and Order
XX, Rule 19, there is no clear distinction between a mere set off, i.e. a
defensive set off and a counter claim, a distinction has been made in Indian
Courts in accordance with the law of England, as it is based on a sound
principle."
(iii) Bai Harendra Nath Chaudhury v. Bai Sourindra Nath AIR 1942 Cal.
559.
"Although the word set-off only is used in Order VIII, Rule 6 and not the word
counter-claim also, the claim to the ascertained sum of money which the
Code permits the defendant to set up in the plaintiff's action for money may
not only be what is strictly termed set off but what is also a counter-claim. If
the claim set up by the defendant is in respect of a debt which is less than or
equal to the plaintiffs claim in the suit it is a plea of set off pure and simple,
but if it exceeds the plaintiff's claim it is to the extent of the excess of a
cross-claim for the excess he is to be given a decree against the plaintiff in
the same action".
(iv) Sarawwathiswani v. Sridhora Siverama Moorthy AIR 1949 Mad. 630.
"A counter claim may be set up only in respect of claims as to which the party
could bring an independent action in the Court in which the counter-claim is
brought. Because the plaintiff has brought an action which he was entitled to
do, it does not mean that the defendant's right to put forward a counter-claim
became limitless e.g. to put forward a claim which nobody else could put
forward as a plaintiff."
(v) Abdul Majid v. Abdul Rashid and others AIR 1950 All. 201.
"The essence of a counter-claim is that the defendant should have a cause of
action against the plaintiff. The counter-claim is in the nature of a cross-
action; and not merely a defence to the plaintiffs claim."
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(vi) Shoebanchan Pandey and another v. Madho Sarah Chowbay and others
AIR 1952 Pat. 73.
"In P.S. Moideen Baba v. Chettyar Firm AIR 1934 Rang. 190; it has been held
that for either to be able to sue for specific performance there must be
mutuality. Once there is that mutuality that one party can sue the other for
specific performance, there is no reason why the other party also cannot
enforce specific performance. In Carangdhar Singh and another v. Lakshmi
Narayan Wahi AIR 1955 Pat. 320 it has been held that 'A counter-claim is
substantially a cross-action and need not be an action of the same nature as
the original action or even analogous thereto. Though there is no provision
in the Code of making a counter-claim, a Court has got the power to treat
the counter-claim as a plaint in the cross-suit and hear them together if the
counter-claim is properly stamped."
(vii) Sarangdhar Singh and another v. Lakshmi Narayan Wahi AIR 1955
Pat. 320.
"A counter-claim is substantially a cross-action and need not be an action of the
same nature as the original action or even analogous thereto. Though there
is no provision in the Code of making a counter-claim a Court has got the
power to treat the counter-claim as a plaint in the cross-suit and hear them
together, if the counter-claim is properly stamped."
(viii) Syed Naimat Ali and others v . Dewan Jairam Dass PLD 1983 SC 5.
"However, there is a well-recognized distinction between a set off and a counter-
claim. Although in one sense both are identical inasmuch as they are cross-
actions on the part of the defendant but a set off is essentially a weapon of
defence if the defendant succeeds in establishing it, it serves the purpose of
answering to the plaintiff's claim either wholly or pro-tanto because a set off
is really a debt claimed by the defendant against the plaintiff to counter
balance a debt claimed by the plaintiff against the defendant: A counter-
claim on the other hand, is essentially a weapon of offence and is not really
relevant as a plea in defence to the claim of the plaintiff. It enables a
defendant to enforce a claim against the plaintiff as effectually as in an
independent action. Its essential nature is that of a cross suit pleaded
through the means of the written statement in the same suit. Having regard
to these essential features of the character of a counter-claim, it is plain that
a right to make a counter-claim is not admissible if it does not fall within the
ambit of Order VIII, Rule 6, C.P.C. or qualify as an equitable set off. The
right to make a counter-claim has been always held to be a statutory right
and as already observed there is nothing in the Code of Civil Procedure
conferring the right, to plead such counter-claim, upon a defendant. Thus, it
has been held in certain decisions of the Privy Council and of the High
Courts that a counter-claim was not admissible in the Muffasil Courts."
There is yet another aspect which has considerable importance for determining
contentions raised on behalf of the parties in this matter. Order VIII, Rule 6,
C.P.C. clearly suggests that set off can be in respect of "ascertained sum"
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On this analogy thus claim for money which is not conclusively and
definitely identifiable and otherwise is not legally recoverable cannot
constitute basis of set off or counterclaim.
For the foregoing reasons I do not find any justification to interfere with
impugned judgment. However, petitioner is not precluded from separately
approaching Court of competent jurisdiction in respect of claim set up by
him in written statement, if otherwise law so permits."
8. It is apparent from the record that there has been no ascertainment of whether
the amounts claimed by the appellants were legally recoverable. Notwithstanding
the foregoing, it is apparent from a bare perusal of the pleadings of the appellants
that the set off or counter claim was never pleaded in the manner prescribed under
the law. An illuminating judgment determining the manner in which set off/counter
claim was required to be pleaded is the case of Syed Ahmad Saeed Kirmani v.
Messrs Muslim Commercial Bank Ltd., Islamabad (reported as 1993 SCMR 441),
wherein it was held by the honorable Supreme Court as follows:
" ..Where a party claims a set-off he has to comply with the rules of pleading
contained in the Code of Civil Procedure. By claiming set-off in an amount
which exceeds the claim of the plaintiff, the defendant in effect pleads to
write off the plaintiffs claim and claims a decree for the balance amount. It
is therefore in the nature of written statement as well as a plaint/counter-
claim for purposes of claiming the balance amount. Therefore, the rules of
pleading should be followed in all cases including cases where damages are
claimed. The claimant must state the particulars and basis of the claim and if
it is quantified the basis of such quantification as well. It would not be a
proper pleading in such cases to merely state that due to breach committed
by the defendant the claimant is entitled to damages.
In the present case on analysis and close scrutiny of the pleadings and evidence
it is clear that the appellant had been vague and unspecific so far his claim
for damages is concerned."
9. In addition to the alleged set off / counter claim not having been pleaded in
accordance with the law, it is also an admitted fact that no Court Fee was ever paid
by the appellants with respect to their purported counter claim. The law in such
regard is meticulously encapsulated in the judgment titled Khurshid Ahmed and
another v. Khair Din (reported as PLD 1962 (W.P.) Lahore 313), wherein it has
been laid down as follows:
" Section 4 of the Court-fees Act prohibits filing, exhibiting or recording in of
any document of any kind specified in the First or Second Schedule to the
Act unless the fee prescribed for such a document was paid. A written
statement pleading a set-off is such a document. It would, therefore, be clear
that such a written statement cannot be accepted unless the fee prescribed is
paid. The provisions relating to the proceedings which can be conducted in
the forma pauperis have been clearly mentioned in the Statute. They cannot
be extended by any analogy on the basis of what has been remarked in Order
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VIII, Rule 6. Order VIII, Rule 6, simply lays down the time at which a set-
off can be claimed. It lays down as follows:-
"(1) Where in a suit for the recovery of money the defendant claims to set-off
against the plaintiff's demand any ascertained sum of money legally
recoverable by him from the plaintiff, not exceeding the pecuniary limits of
the jurisdiction of the Court, and both parties fill the same character as they
fill in the plaintiff's suit, the defendant may, at the first hearing of the suit,
but not afterwards unless permitted by the Court, present a written statement
containing the particulars of the debt sought to be set-off.
(2) The written statement shall have the same effect as a plaint in a cross-suit so
as to enable the Court to pronounce a final judgment in respect both of the
original claim and of the set-off but this shall not affect the lien, upon the
amount decreed, of any pleader in respect of the costs payable to him under
the decree.
(3) The rules relating to a written statement by a defendant apply to a written
statement in answer to a claim of set-off."
The mere fact that it has been described that a person claiming a set-off will
have the same character as a plaintiff in a suit, would not mean that his
written statement could be treated as a plaint and he could be regarded as a
plaintiff making a claim. There is no doubt that 54 P R 1905 was decided
before the present Civil Procedure Code came into operation, but the ratio
decidendi of that authority would hold good even now, because it has been
laid down that when there is specific provision relating to a matter in a
Statute the Court cannot exercise its discretion to extend the operation of
such a provision. Although the question of a written statement claiming set-
off was not directly in issue In re: U. Ananthakrishna Baliga, but the
question was incidentally considered in that case and the remarks in that
judgment which were given by Mr. Justice Abdur Rehman (Judge of the
Supreme Court) when his Lordship was a Judge of the Madras High Court,
are very pertinent and lend support to the view that has been taken by the
Administrative Civil Judge. I, therefore, find no force in this petition which
is dismissed with costs. The case will be sent back to the lower Court for
decision on merits."
10. The appellants demonstrate knowledge of the loss of their pledged stocks as
far back as 2001, whereas the first purported claim in respect thereof was contained
in the pleadings filed in the banking suit ostensibly in 2010. The law requires
adherence to the limitation prescribed and it is manifest that no claim was ever
preferred by the appellants within the applicable period of limitation. An early
authority in such regard is the pronouncement in the case of Rai Harendra Nath
Chaudhury v. Rai Sourindra Nath Choudhury and others (reported as AIR (29) 1942
Calcutta 559), wherein it was delineated as follows:
" . The question is what date, the date of the presentation of the plaint or the date
of the written statement in which set-off was pleaded, would be the material
date. Order VIII, Rule 6, Civil P.C., does not deal with this point. By
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enacting in sub-rule (1) that the money claimed by the defendant must be
"legally recoverable" the Legislature indicated among others the question of
limitation. The claim of the defendant which is sought to be set-off must not
be a dead claim. Sub-rule (2) enacts that the written statement shall have the
effect to a plaint in a cross suit, the object being, as is expressed in the sub-
rule itself and in Order XX, Rule 19, to confer power on the Court to
adjudicate also upon the claim to the sum of money made by the defendant
in his written statement and to pass a decree in his favour in case the balance
turned in his favour. There being thus no clear indication on the point in the
rule itself we will have to decide the question in accordance with principles
and precedents. We have already stated that in its origin set-off was purely a
weapon of defence and not of attack. Both set-off and counter-claim are
creatures of statute. They are, however, essentially different. In (1881) 5
Q.B.D. 5691 Cockburn C.J. dealing with set-off in its original sense thus
observed:
"In my opinion it is altogether a mistake to treat a counter-claim and set off as
standing on the same footing, or a counter-claim as equivalent only to a set-
off. Set-off and counter-claim may be, and commonly are, essentially
different; and it becomes necessary, therefore, to see in each case whether a
counter-claim amounts in effect to no more than a set-off, or whether it is in
effect a cross action .. The plea (of set-off) can only be used in the way of
defence to the plaintiff's action, as a shield, not as a sword. Though the
defendant succeeded in proving a debt exceeding the plaintiff's demand, he
was not entitled to recover the excess; the effect was only to defeat the
plaintiff's action, the same as though the debt proved had been equal to the
amount of the claim established by the plaintiff and no more."
The learned Chief Justice after quoting with approval the following observations of
Brett, L.J. made in (1878) 3 Q.B.D. 324;
"A counter-claim is sometimes a mere set-off, sometimes it is the nature of a
cross action; sometimes it is in respect of a wholly independent transaction,"
finally observed thus:
"I am therefore of opinion that, while under the special enactment of the statutes
relating to set-off a plaintiff recovers no more than the amount of his claim
as reduced by the set-off, the effect of a counter-claim is altogether
different, and where such a claim is set up as a cross action, each party
recovers the amount of his claim, although by a wise and salutary provision
the party establishing his claim for the larger amount, whether plaintiff or
defendant, obtains judgment for the excess only of his claim over that of the
other."
In this passage the learned Chief Justice was obviously referring to Order XIX,
Rule 3 of the Supreme Court Rules which runs thus:
"A defendant in an action may set off, or set up by way of counter claim against
the claims of the plaintiff, any right or claim, whether such set off or counter
claim sound in damages or not, and such set-off or counter-claim shall have
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in that manner, the Court will place him in the same position in which he ought to
have placed himself. The view we are adopting is supported by a long series of
decisions of all the High Courts, 7 All.284 at p. 287, 56 All. 821 48 Cal. 817 at
pp.823, 824. AIR 1936 Cal. 277, AIR 1923 Bom. 113 and AIR 1920 Mad. 819 = 42
Mad. 873. Where, however, the defendant pleads for a sum of money which is in
excess of the plaintiff's claim he occupied to the extent of the excess the position of
a plaintiff in a cross suit and in such a case and for the excess amount time is to be
reckoned not from the date of the plaintiff's suit but from the date when he filed his
written statement. On the facts of this case, we hold that the claim of the defendant
for the rent of 1341 also can be set off against the plaintiff's demand."
11. The judgment of a Division Bench of this Court titled Apollo Textile Mills
Ltd. v. Soneri Bank Limited (reported as 2011 CLD 1655) is within our
contemplation wherein the very issue of set off in banking matters has been
deprecated and it has been observed as follows:
"17. The appellants have claimed set off on account of damages as allegedly
suffered by the appellants on account of actions/non-actions on the part of
the respondent Bank. By placing reliance on the case-law referred to in para
6 hereinabove, the learned counsel for the appellants has argued that in
appropriate cases the claim of damages can be treated as set off. Learned
Single Judge while responding to such objection has held that "the question
is not as to whether a claim of damages can be treated as set off but as to
whether a claim of set off can be set up by a Borrower in a suit instituted by
a Financial Institution under section 9 of Ordinance, 2001 and the short
answer to my mind appears to be "No". The reason being that if a Borrower
is permitted to set up counter claims it would amount to frustrate the very
intend of Ordinance 2001 as in every case where damages by way of counter
claim or set off are asserted the provisions of subsection (8) of section 10 of
Ordinance, 2001 would become redundant and the Borrower would
automatically become entitle to Leave to Defend for the simple reason that a
claim of damages cannot be rejected outrightly unless the claimant is
permitted to lead evidence." The learned Single Judge has placed reliance on
the judgment of a Division Bench of Lahore High Court in the case of
Messrs Ansari Cotton, Ginning and Pressing Factory (Pvt.) Ltd. through
Directors and 5 others v. Habib Bank Limited (2006 CLD 1220). The
learned Single Judge has also placed reliance on the case of Siddique
Woollen Mills and others v. Allied Bank of Pakistan (2003 SCMR 1156 =
2003 CLD 1033), wherein the Hon'ble Supreme Court refused to interfere in
a case where the plea of the Borrowers regarding unauthorized detention of
Borrowers' goods were rejected on the ground that it did not give rise to
bona fide dispute between the parties.
We are persuaded to agree with the finding of the learned Single Judge, which is
otherwise based on the judgment of Hon'ble Supreme Court and a DB
judgment of Lahore High Court. Further reliance can also be made to the
cases, American Express Bank Ltd. v. Adamjee Industries Limited (1995
CLC 880), Messrs Razzaq and Company v. Messrs Riazeda (Pvt.) Ltd; and
International. Finance Corporation v. Sarah Textiles Ltd. and 3 others (2009
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CLD 761). The case-law referred in this regard by the learned counsel for
the appellant is based on distinguishable facts and proceedings hence not
attracted in the instant case.
18. Learned counsel for the appellants has mainly argued on the ground of
alleged illegal removal of pledged articles from the godowns by the
respondents and stated that it is the bailee's duty to take care of the goods
entrusted upon him, and in case of any loss, it is responsibility of the bank
and their employees to make goods loss. Learned counsel further stated that
the essence of bailment is the possession of the articles, which per learned
counsel for the appellants was given to the respondent bank. Learned
counsel further argued that the amount pledged is more than the amount
decreed, hence the same could be adjusted by the respondent under the
circumstances.
Learned Single Judge while responding to such objection has held as under:--
"Regarding pledge goods and their removal the plaintiff in para-11 of the plaint
has pleaded as under:--
"11. That in consideration of and as security for the financial facilities
allowed/agreed to be allowed to the defendant No.1 by the plaintiff the
defendant No.1 initially created a pledge over its stocks of Raw Cotton
Bales and/or Yarn by executing a letter of Pledge dated 14-3-2007 for the
amount of Rs.385.00 Million."
(sic.) and have placed on record Letter of Pledge (Annexure 'H'-Page-97). A
minute perusal of Letter of Pledge reflects that the physical possession of
the goods against the concept of ordinary pledge as envisaged under section
172 of the Contract Act perhaps was never transferred by the defendants and
the Bank has only posted a Muqqadam to supervise unauthorized removal.
This appears to be for more than one reasons: firstly, clauses 2 and 3 of the
Letter of Pledge provides:-
2. You will be at liberty to have the pledged goods surveyed/valued from time to
time by an appraiser to be appointed by you and the fees and expenses of
every such survey/appraisement/valuation shall be paid by us on demand
and in the event of our failure to do so we undertake to pay to you
additionally twenty percent thereof as and by way of liquidated damages and
you will have at all times a right to debit the same to any of our accounts
maintained with you.
3. We shall keep or cause to be kept a register of goods for the time being and
from time to time pledged with you wherein I/We shall duly and punctually
enter or cause to be entered particulars of all pledged goods for the time
being remaining under your pledge hereunder and I/We shall, weekly or as
often 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 since the copy was furnished and shall, as often as you may
require, produce to you or your nominees or agents, the said register, all
accounts and other books, invoices, bills, vouchers, instruments and papers
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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
particulars of or information concerning the pledged goods as you may
require.
and secondly, the Letter of Pledge does not provide the weight or quantity of
goods pledged in its schedule except "Pledge of Imported/Local Raw Cotton
Bales and Yarn" and further the defendants almost every month provided
Stocks Report to the Plaintiffs. Notwithstanding since the defendants have
already filed a suit seeking recovery of damages against the plaintiff
therefore, on this count they are not found entitle to leave of this Court to
defend the suit."
We are of the view that above finding of the learned Single Judge, under the
facts and circumstances of this case, appears to be reasonable and does not
require any interference by this Court. We, therefore, hold that the suit for
recovery of the amount was competently filed by the respondent after
complying with the provisions of section 9 of the Ordinance, 2001."
12. The Impugned Judgment duly considered the issue of set off/counter claim
and adjudicated it, upon appraisal of the evidence, in the following manner:
"Issues Nos. 1 and 2.
These issues being interconnected are being decided together. It is admitted
position that loan of Rs.30,00,000/= was sanctioned by the plaintiff and
same was obtained by the Defendants Nos.1 to 3. Though stock of the
defendant was mortgaged but originally the security was property i.e. Rice
Mill therefore in the Objections/Written Statement the Defendants Nos.1 to
3 have taken plea that Paddy Crop worth Rs.58,41,250/= was stored in the
Godown and under the guard and control of Plaintiff. In this connection I
have considered the arguments and relevant Law on which the parties
counsel have relied upon. It is admitted position that Defendant Jan
Mohammad has filed Suit No.143/2001 wherein he himself admitted that
stock was being sold but no proper offer was received. In this Connection I
have also read the contents of documents produced as Exhibit 4-C. For
ready reference the Paras Nos.3 and 4 of the same are reproduced here
under:-
Para No.3. I/We shall keep or cause to be kept at register of the goods for the
time being and from time to time pledged with you and wherein I/We shall
duly and punctually enter or cause to be entered particulars of all pledged
goods and merchandise consumed there from and I/We shall weekly or as
you may require furnish to you 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 pad thereof and shall permit you, your nominees and
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agents to inspect and take copies of or extract from the same and shall
furnish to you, your nominees and agents shall other particulars of or
information concerning the pledged good as you may require.
Para No.4. I/We shall hold you, your nominees and agents harmless and
indemnified against all loss of injury, damaged or deterioration that may be
caused to the pledged goods as a consequence or result, however, remote of
any cause whatever, including fire, storm; tempest earth quake, rain floods,
riots, civil commotion, rebellion insurrection and acts of God, or the
enemies of the State strikes lockouts, political or labour disturbances, theft
misappropriation or embezzlement, notwithstanding the fact of your
possession of the same or otherwise and if the pledged goods shall at any
time suffer any reduction or diminution in their market value as
consequence on result of any such cause as aforesaid, I/We shall forthwith,
upon demand made by the deposit with your further securities in the manner
and to the extent of short fall in the value of the same.
From the perusal of above paragraph it is clear that stock was lying in the Mill
which were in custody of the Defendants Nos.1 to 3. It is also admitted
position that Mill was adjoining to the houses of Defendants, though
Nominee/Chowkidar was deputed by the Bank authorities but he was
working at the Mill under the control of Defendants Nos.1 to 3, therefore,
contention of the Defendants Nos.1 to 3 that stock was responsibility of
plaintiff is without force. Moreover specific pleas was taken by the
Defendants Nos.1 to 3 in their Objections/Written Statement therefore
burden was upon them to prove Issue No.2 but in my opinion they have
failed to prove the same hence Issue No.1 is decided in Affirmative while
Issue No.2 is decided with the observations that Defendants Nos.1 to 3 were
responsible for any loss to the stock and as mentioned above in the Plaint of
Suit No.143/2001 Defendant Jan Mohammad himself has not alleged that
stock was taken by the plaintiff but was lying with him. Issues answered
accordingly.
ISSUE NO.3.
In view of the findings of Issue No.2 I am of the opinion that Defendants have
failed to prove that Bank is liable to pay the remaining amount of value of
stock or adjust the same from stock available there."
13. The Impugned Judgment has delved at length upon the issue of set off and
determined that the appellants are not entitled to the same. There is no
substantiation of NBP being culpable for any loss of stocks and hence no liability
or obligation could be attributed thereto in respect thereof. Reliance is placed in
such regard upon the judgment titled United Bank Limited v. Consolidated Exports
Limited and others (reported as 1996 MLD 1727). It is thus maintained that the
determination with respect to the appellants' assertion of set off/counterclaim was
validly addressed in the Impugned Judgment and we see no reason to interfere
therewith.
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14. This brings us to the final issue for determination, i.e. whether any grounds
exist to merit interference in the concluded transaction in respect of the auctioned
immoveable property.
15. A pioneering judgment of the Privy Council, dating back almost a century, in
the case of Nanhelal and another v. Umrao Singh reported as AIR 1931 Privy
Council 33, maintained that once a sale has been effected a third party's interest
intervenes. The honorable Supreme Court maintained, in the case of Hudaybia
Textile Mills Ltd. and others v. Allied Bank of Pakistan Ltd. and others reported as
PLD 1987 Supreme Court 512, that once an auction purchaser acquires an interest
in a property, the same may not be whittled away by resort to procedural
incongruities. A Division Bench of this Court deliberated upon the sanctity of a
confirmation of sale, in the case of United Bank Limited v. Messrs A. Z. Hashmi
(Pvt.) Limited and 8 others reported as 2000 CLC 1438, and held that when a sale
was confirmed, an auction purchaser acquired valuable rights in the property which
could not be disturbed. The ratio expounded by the honorable Supreme Court, in
Muhammad Attique v. Jami Limited and others reported as PLD 2010 Supreme
Court 993 and Mumtaz ud Din Feroze v. Sheikh Iftikhar Adil and others reported as
PLD 2009 Supreme Court 207, delved into the nature of rights that are created upon
the acceptance of an offer and the subsequent confirmation of sale. The cited
pronouncements afford sanction and protection to a duly determined bona fide
auction purchaser.
16. The appellants have failed to demonstrate any infirmity with respect to the
auction proceedings. The appellants have also eschewed their right to challenge the
auction proceedings, and/or any constituent thereof before the fori of appropriate
jurisdiction. Hence, could not be permitted to interfere in the peaceful title and
possession with respect to the auctioned immovable property bestowed by the
Court upon the auction purchaser.
17. In view of the foregoing we are of the considered opinion that the auction
proceedings in respect of the auctioned immovable property have attained finality
and that no grounds have been made out to merit any interference in the bona fide
rights of the auction purchaser.
18. We have carefully considered the Impugned Judgment and no apparent
irregularity or illegality has been found therein. The Impugned Judgment is found
to be in due consonance with the law and as a consequence thereof the same is
hereby maintained and upheld.
19. In view of the reasoning and rationale delineation herein below it is the
considered opinion of this Court that this appeal is devoid of merit, hence, the same
was dismissed vide our short order dated 26.09.2018. These are the reasons for the
said short order.
KMZ/S-16/Sindh Appeal dismissed.
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