Lahore High Court Judgment Favors Faysal Bank in Dispute over Finances
In this article, we discusses a recent judgment by the Lahore High Court in a case defaulted loans between Faysal Bank Limited and M/s Dynasel Limited and others (COS No.28 of 2014). The case centered around the bank’s claim to recover dues from unpaid financial facilities extended to the defendants.
Faysal Bank Limited Seeks Recovery for Defaulted Loans
Faysal Bank Limited filed a suit under the Financial Institutions (Recovery of Finances) Ordinance, 2001, seeking recovery of Rs.522,894,646/- from the defendants. This amount stemmed from alleged unpaid dues on two financing facilities:
- Finance Against Trust Receipt (FATR) A short-term loan secured by depositing goods as security.
- Running Finance (RF) A long-term loan for business purposes.
Defenses Raised by the Defendants
Several defendants contested the lawsuit. They received partial leave to defend on November 2nd, 2017. This meant the court allowed them to challenge parts of the bank’s claim. Here’s a breakdown of the contested points:
- FATR Facility Amount The defendants disputed the entire amount claimed for the FATR facility.
- Mark-up on RF Facility The defendants challenged the interest (mark-up) charged on the outstanding balance of the RF facility after its expiry.
One defendant (No.9) was granted permission to defend the entire claim against them.
Key Points Addressed in the Court’s Decision
The court’s decision hinged on two crucial aspects highlighted in the leave order’s paragraphs 10 and 12:
- Unclear Bank Statements The court found the bank’s account statements unclear, particularly regarding the mark-up charged on the RF facility after its expiry. This raised concerns about potentially excessive charges.
- Inconsistencies in FATR Statements The court identified inconsistencies in the transaction entries within the FATR account statements. These inconsistencies cast doubt on the statements’ credibility and warranted further investigation.
Court’s Observations
While the defendants broadly denied using the financing facilities, the court’s interim decree on the principal amount of the RF facility suggested a different stance. The court believed the defendants might have accepted the principal amount but challenged other aspects due to unclear documentation rather than substantial disputes.
Issues Identified for Determination
Following these observations, the court identified the following key issues that required a verdict:
- Right to Recover FATR Amount Did the bank have the legal right to recover the claimed amount under the FATR facility?
- Mark-up on RF Facility Was the bank entitled to recover the mark-up charged on the RF facility?
- Jurisdiction over Defendant No.9 Could the court hear the case against defendant No.9?
- Relief Sought What specific remedies (financial or otherwise) was the bank seeking?
Evidence Presented
The bank submitted additional documents related to the FATR facility for consideration during the final arguments. These documents were accepted by the court as evidence.
- Plaintiff’s Witness Shahryar Tiwana, representing the bank, presented exhibits (Exh.P-1 to Exh.P-29) to support the bank’s claims.
- Defenses Defendants No.1 to 8 did not present any counter-evidence. Defendant No.9’s evidence solely addressed the court’s jurisdiction over them, not the validity of the corporate guarantee they provided.
Court Hearings and Judgment Announcement
The case of defaulted loans went through extensive hearings from June 10th, 2021, to May 27th, 2022. However, the judgment announcement was delayed.
Court’s Findings
After reviewing the evidence and considering the lack of counter-arguments from the defendants, the court delivered the following verdicts on the identified issues:
- FATR Facility Amount The court concluded that the bank had successfully proven the validity of the documents related to the FATR facility. This solidified their claim for the amount owed.
- Mark-up on RF Facility As the defendants did not challenge the evidence presented by the bank regarding the mark-up on the RF facility, the court upheld the bank’s claim of Rs.12,600,335.37 in mark-up charges.
- Jurisdiction over Defendant No.9 The court asserted its jurisdiction over defendant No.9. The judge ruled that the corporate guarantee provided by this defendant was part of the same legal cause of action. Therefore, the court could hold them liable as per the terms of the guarantee.
The PDF for the Full citation is below for reference.
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