5/17/24, 8:31 AM 2015 C L D 1188

2015 C L D 1188

[Sindh]

Before Aqeel Ahmed Abbasi and Syed Saeed-ud-Din Nasir, JJ

COMBINE PRODUCTS and 3 others---Appellants

versus

Messrs SME LEASING LIMITED---Respondent

First Appeal No. 19 of 2012, decided on 31st March, 2015.

(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

----Ss. 10(2) & 9(5)---Limitation Act (IX of 1908) S. 5---Procedure of Banking Court--
-Service of notices on the defendants---Effective service in terms of S. 9(5) of
Financial Institutions (Recovery of Finances) Ordinance, 2001---Filing of application
for leave to defend suit---Limitation---Interpretation, object and scope of S. 10(2) of
the Financial Institutions (Recovery of Finances) Ordinance, 2001---Suit for recovery
was decreed ex parte against defendant---Application of defendant for leave to defend
along with application for condonation of delay in filing said application for leave to
defend, was dismissed on ground that service upon the defendant was held good
through publication in newspaper---Contention of defendant was that admittedly
summonses were not served upon defendant through any other mode therefore, the
Banking Court ought to have exercised discretion vested upon it vide proviso to S.
10(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 to extend
time in filing application for leave to defend---Held, where service had been affected
only through publication in newspaper; then the Banking Court was authorized in
terms of proviso to S. 10(2) of the Financial Institutions (Recovery of Finances)
Ordinance, 2001 to extend time for filing an application for leave to defend; upon
being satisfied that defendant requesting condonation of delay in filing leave to defend
application did not have any knowledge about pendency of proceedings against him in
the Banking Court---Banking Court in the present case, while dismissing application of
defendant for condonation of delay treated the same as an application under S. 5 of the
Limitation Act, 1908 whereas said application was also to be read with S. 10(2) of the
Financial Institutions (Recovery of Finances) Ordinance, 2001 and the possibility of
concession contained therein was ignored by the Banking Court--- Object and intention
of Legislature behind proviso to S. 10(2) of the Financial Institutions (Recovery of
Finances) Ordinance, 2001 was that a concession with respect to limitation be provided
inasmuch as there was a possibility that an aggrieved party might not have read such
publication in the newspaper and would have genuinely acquired knowledge through
some other source after publication, when period of limitation for filing application for
leave to defend had expired---Provisions of Ss. 9(5) & 10(2) of the Financial
Institutions (Recovery of Finances) Ordinance, 2001 with regard to service on the

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defendant were not to be read as disjunctively from the rule of the natural justice "audi
alterm partem"; which was to be read into every statute regardless of whether or not
the same was contemplated in the statute---Article 10-A of the Constitution provided
that every individual was entitled to a fair trial and due process and under Art. 4 of the
Constitution, every individual of the State was entitled to be dealt in accordance with
law---Impugned order was set aside and case was remanded to the Banking Court with
the direction to decide the same on merits after providing opportunity of hearing to the
defendant---Appeal was allowed, accordingly.

Simnwa Polypropylene (Pvt.) Ltd. v. National Bank of Pakistan 2002 SCMR 476 ref.

Khuda Bux v. Banking Court No.2, Multan 2000 CLC 1013 rel.

(b) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---

----Ss. 9(5) & 10(2)---Constitution of Pakistan, Art. 10-A---Service of notice on the

defendant in a suit---Procedure of Banking Court---Substitute service---Obligations of
Banking Court---Fair Trial and due process---Natural justice--- Scope--- Banking
Court must always endeavor to exhaust all possibilities of service on the defendant
through first three modes of service while resorting to substitute mode of service
through publication so that service through other modes should not totally become
redundant and it shall as a last resort, publish the citation in the newspaper, if service
could not be effected on the defendant by the first three modes; and such procedure
would not only reduce the multiplicity of litigation and delay in disposal of cases but
also meet the requirements of natural justice and rights of fair trial under the
Constitution.

(c) Natural justice, principle of---

----Scope---Principle of "audi alterm partem"---Principle of "audi alterm partem" was

to be read into every statute regardless of whether the same was contemplated in the
statute.

(d) Interpretation of statutes---

----Courts were required to interpret every provision in a statute in such a manner that
it should suppress mischief and advance remedy; and not the other way around.

Khuda Bux v. Banking Court No.2, Multan 2000 CLC 1013 rel.

Muhammad Idrees Sukhera for Appellants.

Abdul Shakoor for Respondent.

Date of hearing: 4th March, 2015.

JUDGMENT

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SYED SAEED-UD-DIN NASIR, J.---The appellants have filed the instant appeal
under section 22(1) of the Financial Institutions (Recovery of Finances) Ordinance,
2001 impugning the validity of ex parte Order dated 2-5-2009, Judgment dated 14-12-
2010 and Decree dated 15-6-2011 passed by the learned Banking Court No.III, Karachi
in Suit No.392 of 2008.

1. Brief facts of the case are that the respondent at the request of the appellants Nos.2
and 3 granted lease facilities via (A) Lease Facility 1 to the tune of Rs.1,125,000 in
respect of Tofee Machine, Cooling Table, Karhai, Gas Burner and other equipments
vide sanction letter No.SMEBLtd/Leasing/IM/02 dated 9-3-2002 on purchase price of
Rs.1,639,082 repayable in 36 monthly lease rentals at the rate of Rs.37,628 per month
and subsequently was restructured for 4 years under Codicil to Lease Agreement
No.048 dated 12-12-2003 repayable in agreed monthly installments. (B) Lease Facility
2 to the tune of Rs.1,500,000 in respect of Bazooka Machine vide sanction letter
No.SMEBLtd/Leasing/IM/-02 dated 18-3-2002 on purchase price of Rs.2,415,910
repayable in 36 monthly lease rentals at the rate of Rs.50,171 per month and
subsequently was restructured for 4 years under the Codicil to Lease Agreement
No.049 dated 12-12-2003 repayable in agreed monthly installments. The appellants in
lieu of the said facilities executed various documents vide Lease Agreement No.048
dated 25-3-2002, Codicil to Lease Agreement/Account No.048 dated 12-12-2003,
Lease Agreement No.049 dated 8-4-2002, Codicil to Lease Agreement/Account
No.049 dated 12-12-2003, Amendment in Lease Agreement dated 25-3-2002
Amendment in Lease Agreement dated 8-4-2002 letter of revival dated 25-3-2002
letter of revival dated 8-4-2002 demand promissory note dated 25-3-2002 demand
promissory note dated 8-4-2002 personal guarantees dated 25-3-2002 personal
guarantees dated 8-4-2002 and sale agreement dated 8-4-2002.

2. The respondent filed the suit for recovery of Rs.2,498,899 with following prayers:-

(a) "Recovery of the sum of Rs.3,498,899 (Rupees three million four hundred ninety
eight thousand eight hundred ninety nine only) from the appellants.

(b) Cost of finds in terms of section 3 Financial Institutions (Recovery of Finances)

Ordinance, 2001 on the decretal amount from the date of default.

(c) Delivery of leased assets to the respondent for sale in market.

(d) Attachment and sale of the personal properties and assets of the appellants for the
recovery of the decretal amount.

(e) Cost of the suit.

(f) Such other or further relief(s) that this honorable court may consider just and proper
in the circumstances."

3. The summonses were issued through all four prescribed modes for service against
the appellants at the address given by the respondent in the title of the plaint, however,
the service of summons through publication in two daily newspapers namely Dawn

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dated 6-1-2009 and Jang dated 6-12-2008 was held good and the suit was ordered to
proceed ex parte against the appellants by the learned Banking Court No.III vide order
dated 14-1-2009 and the respondent herein was directed to file affidavit- in-ex parte
proof along with detailed breakup of amount due and payable by the appellants herein
and original documents. Thereafter the appellants appeared before the learned Banking
Court No.III and filed an application under section 10 of the Financial Institutions
(Recovery of Finances) Ordinance, 2001 for the grant of unconditional leave to defend
the suit on 26-1-2009. The appellants also filed an application under section 5 of the
Limitation Act read with section 10(2) of the Financial Institutions (Recovery of
Finances) Ordinance, 2001, praying therein that the delay in filing the application for
leave to defend the suit may be condoned as the same could not be filed in time as the
appellants were never served with Court Notices and had no knowledge of the
institution of the suit, therefore, they could not appear before the learned Banking
Court No.III at Karachi to obtain leave within prescribed time.

4. The reason as stated in the aforesaid application by the appellants was that they
came to know about the filing of the recovery suit before the Banking Court No.III
only when the Recovery Officer called the appellant No.2 on his cell phone on 24th
January, 2009 at about 0910 PST and asked for the monthly recovery as it was due on
24th of every month.

5. Learned counsel appearing for the appellants has drawn attention of the Court to the
Order Sheet of the Banking Court No.III at Karachi dated 14-1-2009, which reads as
under:-

"Case called. Counsel for the plaintiff is present. Summons were issued by all four
prescribed modes for service against the defendants. Summons were served upon
defendants through publication in two daily newspapers "Dawn" dated 6-12-2008 and
"Jang" dated 6-12-2008. However, summons were not served through personal service
by Bailiff as well as Registered Post/Courier Service. 30 days statutory period for
filing of leave to defend application has been expired. No leave to defend application
filed on behalf of the defendant. Therefore, suit shall proceed ex parte against the
defendant. The plaintiff bank is directed to file complete statement of breakup on next
date of hearing. Case put off to 18-2-2009"

6. Perusal of the aforesaid Order Sheet reveals that service of summons was held good
upon the appellants only through publication in two daily newspapers namely Dawn
dated 6-12-2009 and Jang dated 6-12-2008. However, admittedly, summons were not
served upon the appellants through any one of the other modes i.e. through personal
service by bailiff, registered post/courier service or by way of pasting on the given
address. Thereafter, the learned Banking Court No.III, Karachi, after expiry of 30 days
of publication ordered that 30 days statutory period for filing of leave to defend
application has expired, therefore, the suit shall proceed ex parte against the
defendants. Learned Banking Court No.III also directed the plaintiff bank to file
complete statement of breakup of the amount due and payable by the defendants to the
plaintiff on the next date of hearing.

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7. On 26-1-2009 Mr. Idrees Sukhera, Advocate filed the application for leave to appear
and defend the suit, an application under section 10 of the Financial Institutions
(Recovery of Finances) Ordinance, 2001 along with an application for condonation of
delay under section 5 of the Limitation Act, 1908 read with section 10(2) of the
Financial Institutions (Recovery of Finances), Ordinance, 2001 along with
Vakalatnama, which was heard and dismissed by the learned Banking Court No.III,
Karachi vide order dated 2-5-2009.

8. Mr. Idrees Sukhera, Advocate has inter alia argued that since service of summons
was held to be good on the defendants/appellants only through publication in
Newspapers, whereas no notice was served upon the appellant through any other mode
of service, the learned Banking Court had ample discretion to extend the time for filing
an application for leave to appear and defend the suit if satisfied that the defendants did
not have knowledge of filing of the suit by the plaintiff. It has further been submitted
by learned counsel that the appellant had a prima facie case for grant of leave to defend
application, however, through impugned order, has been deprived of a right of fair trial
and to defend the case on merits. For the sake of convenience section 10(2) and
proviso of the same are reproduced as under:-

10(2) The defendant shall file the application for leave to defend within thirty days of
the date of first service by any one of the modes laid down in sub section (5) of section
9:

Provided that where service has been validly effected only through publication in the
newspapers, the Banking Court may extend the time for filing an application for leave
to defend if satisfied that the defendant did not have knowledge thereof"

9. The learned counsel appearing for the respondent, while contradicting the arguments
advanced by the learned counsel for the appellants has inter alia argued that despite the
fact that the summons was ordered through all four prescribed modes for service
against the defendants, however, the service was held good upon the defendants only
through publication, which is good service under the law i.e. under section 9(5) of the
Financial Institutions (Recovery of Finances), Ordinance, 2001 and if the defendants
failed to file application for leave to appear and defend the suit under section 10 of the
Financial Institutions (Recovery of Finances) Ordinance, 2001 within 30 days, his
defence is liable to be struck of and the suit is liable to be decreed against the
defendants. At the end of his arguments the learned counsel for the respondents
submitted that the defence of the appellants was rightly struck off by the learned
Banking Court No. III and the suit was rightly decreed. He further submitted that the
appeal is liable to be dismissed. While concluding his arguments, he placed reliance on
2002 SCMR 476 (Simnwa Polypropylene (Pvt.) Ltd. v. National Bank of Pakistan)
wherein it is held that service on the defendant in any one of the modes prescribed in
section 9(3) of the Banking Companies (Recovery of Loans, Advances, Credits and
Finances), Act 1997, the similar provision in the earlier statute which was in pari
materia with section 9(5) of the Financial Institutions (Recovery of Finances),
Ordinance, 2001 shall be deemed to be valid for the purpose of service.

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10. We have heard the arguments of the learned counsel for the parties, perused the
material available on the record of the case and have come to the conclusion that
admittedly the service of summons was validly affected only through publication
through the aforesaid two newspapers on the present appellants on 6-12-2008 though
summons were issued by all four prescribed modes against the present appellants. The
Banking Court No.III, Karachi vide order dated 14-1-2009 held the service good on the
appellants and after passing ex parte orders against them upon expiry of 30 days
statutory period for filing of leave to defend application, ordered that the suit should
proceed ex parte against the appellants. Therefore, the aforesaid case-law cited by the
learned counsel for the respondent will lend no support to his case inasmuch as the
same is silent as far as concession contemplated by proviso to section 10(2) of the
Financial Institutions (Recovery of Finances), Ordinance, 2001 is concerned.

11. The appellants filed their leave to defend application under section 10 of the
Financial Institutions (Recovery of Finances), Ordinance, 2001 along with application
for condonation of delay under section 5 of the Limitation Act, 1908 read with section
10(2) of the Financial Institutions (Recovery of Finances), Ordinance, 2001 on 26-1-
2009 i.e. 21 days after the period of limitation had expired according to the learned
Banking Judge, after holding the service good on the appellant only through
publication. In these circumstances we are of the view that the Banking Court No.III,
Karachi though rightly held service good on the appellants under section 9(5) of the
Financial institutions (Recovery of Finances), Ordinance, 2001, however it should
have taken lenient view while deciding the application for condonation of delay filed
by the present appellant under section 5 of the Limitation Act, 1908 read with section
10(2) of the Financial Institutions (Recovery of Finances), Ordinance, 2001 as the
summons were not served through normal mode of service upon the appellants and
were got served only through publication, whereas, the proviso of section 10(2) confers
ample powers on the Banking Court to condone the delay in filing the application for
leave to appear and defend the suit when the service is made through publication in the
Newspapers.

12. Under the Financial Institutions (Recovery of Finances) Ordinance, 2001, where
service upon a party has been effected through normal modes of service, except
substitute service through publication in the Newspaper, it is incumbent upon such
party to make an application under section 10(2) of the Financial Institutions
(Recovery of Finances), Ordinance, 2001 within a period of 30 days from the date of
service to the Banking Court asking for leave to defend the suit. However, such
application shall contain valid reason for seeking condonation of delay, and the matter
shall contain substantial triable issues which may provide a plausible defence in favour
of such party. However, where service is effected only through publication on such
party in the Newspaper, the Banking Court has been authorized in terms of proviso to
section 10(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, to
extend time for filing an application for leave to defend the suit upon being satisfied
that the defendant requesting for condonation of delay in filing leave to defend
application, did not have any knowledge about the pendency of proceedings against
him before the Banking Court.

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13. We have also observed that the learned Banking Judge while dismissing the
application of the appellant for condonation of delay vide; impugned order dated 2-5-
2009 has treated the same only as an application under section 5 of the Limitation Act,
1908 whereas the said application was also read with section 10(2) of the Financial
Institutions (Recovery of Finances) Ordinance, 2001. However, the learned Banking
Judge has totally ignored the possibility of giving concession to the appellant as
contemplated by proviso to section 10(2) of the Financial Institutions (Recovery of
Finances), Ordinance, 2001 and has stated in the said order that "The explanation put
forth by the defendant is not confidence inspiring to invoke the jurisdiction under
section 5 of the Limitation Act as each day's inability to come to the Court has not been
set forth - - - - -". We see no reason as to why the concession of proviso to section
10(2) supra was not taken into consideration while deciding this application.

14. The object and intention of the legislature by insertion of proviso to section 10(2)
of the Financial Institutions (Recovery of Finances), Ordinance, 2001 is that a
concession with respect to limitation be provided inasmuch as there is a possibility that
an aggrieved party might not have read such publication in the Newspaper and would
have genuinely acquired knowledge through some other source, after the publication of
the notice, when the period of limitation for filing an application under section 10(2) of
the Financial Institutions (Recovery of Finances), Ordinance, 2001 had already
elapsed.

15. These provisions with regard to service upon the defendant as contemplated by
sections 9(5) and 10(2) of the Financial Institutions (Recovery of Finances) Ordinance,
2001 are not to be read disjunctively from the rule of natural justice "audi alterm
partem" which is to be read into every statute regardless of whether or not the same is
contemplated in the statute. The Courts are required to interpret every provision of a
statute in such a manner that it should suppress mischief and advance remedy and not
the other way around. A similar view has been taken by the learned Single Judge of the
Hon'ble High Court in the case of Khuda Bux v. Banking Court No.2 Multan reported
in 2000 CLC 1013 in a case of Banking jurisdiction.

16. Having given anxious consideration to the facts and circumstances of the case we
are of the considered view that the findings of the learned Judge of the Banking Court
are erroneous and against the spirit of section 9 and proviso to section 10(2) of the
Financial Institutions (Recovery of Finances) Ordinance, 2001. The application for
leave to defend the suit was dismissed by the Banking Court without any proof of
service upon the defendant and as such the learned Judge of the Banking Court acted in
a haste while dismissing the same and decreeing the suit.

17. Moreover, after insertion of Article 10-A into the Constitution of the Islamic
Republic of Pakistan by 18th Amendment to the Constitution and which is to be read
into every law of the land, every individual of the state is entitled to fair trial and due
process. Under Article 4 of the Constitution, every individual of state is entitled to be
dealt with in accordance with law as well.

18. We have come across similar situation, as prevailing in the instant case, when the
Banking Court without making an effort to get the defendant(s),served through

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ordinary modes of service as provided even in the Banking Law, in a haste, or at the
instance of the plaintiff directly resort to substitute mode of service through publication
and also hold such service as valid and good service upon defendant, once the citation
is published in the Newspaper, and if no leave to defend application is filed within
prescribed period of limitation starting from the date of publication, it proceeds to
decree the suit. We may observe that the learned Banking Courts shall always
endeavour to first exhaust all possibilities of service on the defendant through first
three modes of service while resorting to substitute mode of service through
publication so that service through other modes should not totally become redundant,
and shall as a last resort, publish the citation in the Newspaper, if service could not be
effected on the defendant by first three modes. This will not only reduce multiplicity of
litigation and delay in disposal of case(s), but will also meet the requirements of
principle of natural justice and right of fair trial as enshrined under the Constitution of
Islamic Republic of Pakistan.

19. The learned Banking Court, in the instant case, while dismissing the application
through mechanical process, had itself caused multiplicity of proceedings, which
should be avoided at any cost, whereas it also caused delay in disposal of the case,
which is against the spirit of special law with regard to recovery of loans advanced by
the financial institutions and as such the order was perverse.

20. In view of facts and circumstances of this case and the legal position as stated
hereinabove by consent of learned counsel for the parties, instant appeal was heard and
disposed of at Katcha Peshi stage, and vide our short order dated 4th March, 2015, we
allowed the appeal and set aside the impugned ex parte order dated 2-5-2009 passed on
the leave to defend application, set aside the Judgment and Decree dated 14-12-2010,
and 15-6-2011 respectively and remanded the case to the learned Banking Court No.
III to decide the same on merits afresh, after providing opportunity of hearing to the
appellants in accordance with law, and above are the reasons of our short order dated
4-3-2015.

KMZ/C-5/Sindh Case remanded.

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