O R D E R    S H E E T

IN THE HIGH COURT OF SINDH, KARACHI

Ist Appeal No. 126 of 2010

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ORDER WITH SIGNATURE OF JUDGE

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 Presented:                      Mohammad Ather Saeed-J

                                      Irfan Saadat Khan-J

Appellant:                       Trustees of the Port of Karachi through Mr. Syed Yousuf Ali, Advocate

 

Respondent No.1:           M/s. Standard Chartered Bank (Pak) Ltd. through Ms. Naheed A. Shahid, Advocate.

 

Respondent No.2            M/s. Hashwani Hotels Ltd., through Mr. Arif Khan, Advocate.

 

Dates of hearing:             26.11.2010, 25.03.2011, 08.04.2011 and 02.06.2011

 

Mohammad Ather Saeed-J : This First Appeal has been filed against the order of the learned Banking Court No.V, Karachi dated 17th July 2010 passed in Suit No.1295/2009, whereby the learned Banking Court had dismissed the Suit filed by the Appellant allegedly for the reason that no cause of action accrued to the present Appellant.

 

2.       Brief facts as narrated by the learned Counsel for the Appellant are that by means of the order dated 17.07.2010, whereby the Banking Suit filed by the Appellant being Suit No.1295/2009 in Banking Court No.V at Karachi the plaint was dismissed under Order VII Rule 11 C.P.C. on the ground that no cause of action has as yet accrued in favour of the Appellant against the Respondent. In the application it was stated that the Appellant’s case in the Suit was that the Respondent No.1, a Banking Company had issued certain bank guarantees in its favour in respect of demurrage and other claims of the Appellant in respect of the certain goods which had been imported by the Respondent No.2. The said guarantees were given in C.P. No.3255 of 1993, which had been filed by the Respondent No.2 in respect of the imported goods and by means of order dated 10.02.1994 made in the same petition the Appellant had been joined as party thereto and it had been ordered that the goods of the Petitioners shall be released to them in case they furnish a bank guarantee to the satisfaction of the Respondents and it was also further ordered by consent that the bank guarantee shall not be encahsed by the Respondents without permission of this Court.

 

3.       It appears that subsequently the aforesaid petition was disposed off by means of order dated 31.10.2008, in which no direction as such was made in respect of the bank guarantee that had been given in favour of the Appellant by means of earlier order dated 10.02.1994. The learned Banking Court had concluded in these circumstances that the said order was still in the field and, therefore, unless this Court grants permission for the encashment of the bank guarantee the same cannot be encashed and hence the Suit was prematurely filed as no cause of action accrued to the Plaintiff and, therefore, liable to be rejected.

 

4.       We have heard Mr. Yousuf Ali, learned Counsel for the Appellant, Ms. Naheed A. Shahid, learned Counsel for Respondent No.1 and Mr. Arif Khan, learned Counsel for the Respondent No.2.

 

5.       The learned Counsel for the Appellant submitted that the learned Banking Court had materially held that since the petition in which the order dated 10.02.1994 had been finally disposed of and as such that order had come to an end and the bank guarantess should be encashed and therefore, the respondent no.1 had acted in breach of its obligation to encash the same.

 

6.       All the learned Counsel are directed to satisfy us as to whether in view of the facts that the bank guarantee was furnished to the satisfaction of the present Appellant by the order of this Court and no further order was passed at the time of disposal of the petition as to the effect of order on the said bank guarantees, therefore we would like to first understand whether an application had to be filed before this Court for encashment of the bank guarantee or the application had rightly been filed before the learned Banking Court.

 

7.       Mr. Yousuf Ali has filed a statement of his arguments in compliance of the order dated 25.03.2011, which is taken on record. Learned counsel rejected the suggestion of the Court and Mr. Mushtaq A. Memon Advocate, from whom the Court sought the opinion, that either he file a petition before this Court or file a review application against the judgment of this Court and submitted that he falls under the definition of customer and therefore was entitled to file a banking suit before the Banking Court. In support of his contention he relied on a judgment of Single Judge of this Court, reported in 2000 CLC 1450, whereby the learned Single Judge had, in similar circumstances, held that the banking suit filed against the refusal to encash a bank guarantee is maintainable as a banking suit. Learned counsel further submitted that the bank guarantee could only be refused to be encashed if 1) it is based on fraudulent intention and 2) it leads to irretrievable injustice and submits that the bank guarantee, which he wanted to encash did not fall within any of the above conditions. In this connection he relied on a judgment of the Hon’ble Supreme Court in the case of Shipyard K. Damen International Vs. Karachi Shipyard and Engineering Works Ltd. reported in 2003 CLD 1. Learned counsel in support of his contention that the matter could not have been decided by filing an application for review before this Court read out the relevant portion from the judgment of this Court by which petition was disposed off and submitted that in that judgment no order had been passed against him and therefore he was free to seek encashment of bank guarantee from the Banking Court and when the Bank did not respond to the various requests made by him for encashing the bank guarantee, he filed the suit before the Banking Court. He therefore, submitted that no order was required from this Court for the encashment of bank guarantee as the order dated 10.02.1994 had ceased to exist once the petition was disposed off by a final judgment. Learned counsel therefore, prayed that the order of the Banking Court may be set aside and respondent No.1 may be directed to encash the bank guarantee.

 

8.       Ms. Naheed A. Shahid, learned counsel for respondent No.1 submitted that they had not refused to reply to the requests of the appellant for encashing the bank guarantee but had only requested them to supply a copy of the judgment of this Court and according to her that judgment was not supplied till today. She further submitted that in a number of judgment the definition of customer has been dealt with and it has been held in these judgments that customer does not include any person who has been indemnified and only includes a person who have either taken loan or any other financial benefit from the Bank and banking suit is only competent when either the customer or the Bank files a suit and no other person can file such suit. In this regard she relied on the judgments of the Lahore High Court reported in 2005 CLD 50 and 2008 CLD 1326 and a judgment of the Peshawar High Court reported in 2002 CLD 658. She again stressed that the banking suit was not maintainable and without prejudice to the above contentions she states that unless this Court specifically withdraws/modifies the order dated 10.02.1994, wherein it was specifically held that the bank guarantee will not be encashed without permission of this Court, they will not be in a position to get encashed the bank guarantee without such permission being accorded or such order being withdrawn or modified. She therefore, prayed that the order of the Banking Court being in accordance with law should be upheld and the appeal be dismissed.

 

9.       Mr. Arif Khan, learned counsel for respondent No.2 had initiated his arguments and relied on a judgment in the case of National Motors Limited Vs. Muslim Commercial Bank reported in 1982 CLD 236. It is a D.B. judgment of this Court, which is binding on this Bench. A perusal of the said judgment reveals that this D.B. had held in almost identical facts that since the appellant before them was neither a borrower nor a Banking Company therefore he did not fall u/s 6(1)(a) of the relevant law at that time and therefore his suit filed in the nature of banking suit was not maintainable but he was entitled to file an ordinary suit in this respect. When confronted with this judgment, which is binding on this Bench, Mr. Yousuf Ali, learned counsel for the appellant, sought date to either distinguish this judgment or research and try to find out any judgment of the Hon’ble Supreme Court or a D.B. of this Court which are contrary this judgment.

 

10.     Mr. Yousuf Ali, learned Counsel for the Appellant has filed a further statement in compliance of the order dated 08.04.2011 of this Court. A perusal of the said order reveals that Mr. Arif Khan, the learned Counsel for Respondent No.2 on that day relied on a judgment of this Court in the case of Messrs NATIONAL MOTORS LIMITED Vs MUSLIM COMMERCIAL BANK LIMITED (1982 CLC 236), wherein this Court had held that a person for whose benefit a bank guarantee has been issued is neither a Borrower nor a Customer nor a Banking Company and therefore any Suit filed by the Appellant in the position of a Creditor against the Respondent Banking Company for encashment of bank guarantee cannot be deemed to be covered under the relevant provisions of the Banking Law and, therefore, the Banking Court had no jurisdiction to entertain the Suit. Mr. Yousuf Ali has tried to distinguish this case on the basis that basically he was a Benami and ostensible claimant to the finances in respect of which the bank guarantee was executed in his favour and, therefore, for this particular purpose had stepped in the shoes of Customer of the Bank and was entitled to file a Suit. In support of his contention he relied on the following judgments:-

1.       HARAL TEXTILE LIMITED VERSUS BANQUE INDOSUEZ BELGIUM (1999 SCMR 561)

2.       PAK CONSULTING AND ENGINEERING (PVT.) LIMITED VS PAKISTAN STEEL MILLS CORP. (PVT) LIMITED (2003 CLD 251 Karachi)

3.       QATAR AIRWAYS PLC VERSUS ANZ GRINDLAYS BANK (2000 CLC 1455 KARACHI)

 

11.     Besides the judgments on which he had relied on 08.04.2011, which have already been reproduced in the order of that date, we have seen and examined the judgments relied on by the learned Counsel for the Appellant and are of the view that the Judgment of the Honourable Supreme Court in the case of HARAL TEXTILE LIMITED and a Division Bench of this Court in the case of PAK CONSULTING AND ENGINEERING (PVT.) LIMITED, quoted supra, are distinguishable as they do not apply to the jurisdiction of a Banking Court and the jurisdiction has not been discussed, whereas the QATAR AIRWAYS PLC judgment is a judgment of a learned Single Judge of this Court who had held that where bank guarantee was duly executed by the Bank in favour of the Plaintiff, who was real beneficiary of such finance,  such Plaintiff was a customers and the suit filed by such customer was maintainable in the Banking Court. We could have examined this case for its persuasive value but unfortunately in view of the fact that a learned D.B. has decided this issue directly and the same is binding on us in view of the judgment of the Honourable Supreme Court in the case of Multi Line Associates Vs. ARDESHIR COWASJEE and two others (1995 PLD SC 423) therefore, unless and  until the learned Counsel produced before us a judgment of the Honourable Supreme Court, which is binding on us under Article 189 of the Constitution of Islamic Republic of Pakistan, 1973 or a judgment of the Division Bench of this Court so that in view of the conflicting judgment we may refer the matter to the Honourable Chief Justice for constituting a larger bench to resolve the conflict or he could prove the judgment of the National Motors Limited is per incurium and the Court was not properly assisted, we will have no option but to follow the Judgment of the NATIONAL MOTORS LIMITED. When confronted to this position Mr. Yousuf Ali submitted that the interim order passed by this Court dated 10.02.1994, which has been reproduced by the learned Banking Court in the impugned judgment, had ceased to exist on the date when  the petition was disposed off by this Court i.e. 31.10.2008 and, therefore, is no longer in the field. He relied on Article 199(4)(a) that interim order ceases to exist after passing of six months in view of the provisions of sub-Article (4)(a) of Article 199 of the Constitution of Pakistan and also that the goods could not have been released on credit in accordance with the provisions of Section 43 and 46 of the KPT Act. We asked him to produce before us any judgment or order in which we had held that the interim order passed on 10.02.1994 has ceased to exist. The facts of the case are that on the date of judgment dated 31.10.2008 was passed Mr. Yousuf Ali was present in Court on behalf of KPT and the judgment was neither reserved nor a decision given for reasons to follow but that the judgment was dictated in the Court in front of Mr. Yousuf Ali and neither he had pointed out that his bank guarantees were pending nor any informed us that the Court had directed him that they will not be encashed without the permission of the Court because if this fact had been pointed out to us at that stage then perhaps we would have passed relevant order after hearing the learned Counsel for the Petitioner and the learned Counsel for the Respondent who were present on that day. Even otherwise since the Court is not considering an application filed before it by the present Appellant but is considering an Appeal filed against the order of the Banking Court, therefore, the first thing to be seen is whether the Banking Court had the jurisdiction to entertain the suit filed before it and in view of the Judgment of this Court in the case of NATIONAL MOTORS case, quoted supra, we have no option but to hold that the suit could not have been entertained by the Banking Court. Although this point has not been taken by the Banking Court but the point of jurisdiction is a question of law going to the root of the matter and in accordance with the settled law can be raised at any stage of the proceedings. As far as Mr. Yousuf’s claim that the interim order has ceased to exist and that he was not required to approach this Court for encashment of bank guarantees is concerned and also his arguments on the applicability of sub Article (4)(a) of Article 199 of the Constitution is concerned, we can only say that these points could have been considered in detail if there was an application filed before this Court for review or modification or clarification of the order dated 31.10.2008 and since there is no such application before us, therefore, we are of the view that these points cannot be considered in the present appeal.

 

12.     For the reasons stated above, we do not find any merit in this appeal, which is dismissed in limine. However, if Mr. Yousuf Ali now opts to file an application before this Court the same will be considered on its own merits.

                                                         

     JUDGE

 

        JUDGE

Gulsher