Faysal Bank Limited initiated a suit under Section 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, seeking to recover Rs. 620,900,897.39 from Tahir Omer Industries Limited and associated defendants. This amount was claimed due to the defendant company’s default on various finance facilities extended by the bank. These facilities included Finance Against Trust Receipt (FATR) and Local Bill Discounting/Working Capital Loan (WCL).
The Arguments of the Defendants (M/s Tahir Omer Industries Limited, etc.):
The defendants raised several objections to Faysal Bank, including:
- Incompetent Person: They argued the suit was filed by an unauthorized individual.
- Statement of Account: They claimed the bank’s statement of account was not properly verified.
- Non-Availment of Facilities: They disputed having availed the FATR and WCL facilities (except for a smaller portion of the FATR).
- Mark-up Disputes: They contested the claimed mark-up amounts.
- Lack of Supporting Documents: They alleged the FATR claim lacked necessary “Trust Receipts.”
- Different LCs: They claimed the Letters of Credit (LCs) mentioned by the bank were different from those actually retired.
- Engineered Documents: They suggested the bank had fabricated documents showing their liability.
- Interest vs. Mark-up: They argued that the term “interest” was not part of the finance agreements.
The Central Legal Question:
The court had to determine whether the defendants had presented sufficient grounds to be granted “leave to defend” the suit. Under the Financial Institutions (Recovery of Finances) Ordinance, 2001, defendants in such cases must demonstrate a valid reason why a judgment should not be issued against them summarily. This involves addressing specific aspects of the bank’s claim and providing evidence to support their counter-arguments.
The Court’s Decision:
The Lahore High Court ruled in favor of Faysal Bank Limited and dismissed the defendants’ application for leave to defend. The court found that the defendants had failed to provide adequate evidence or legal basis to support their objections. Key points of the court’s reasoning:
- Competent Person: The court found the suit was properly initiated by an authorized representative of the bank.
- Statement of Account: Faysal Bank’s statement of account was deemed duly certified according to legal requirements. The defendants did not provide a counter-statement.
- Non-Availment of Facilities: The court noted the defendants’ financial statement acknowledged a significant outstanding amount.
- Mark-up Disputes: The defendants failed to identify specific errors in the mark-up calculation.
- Trust Receipt: The court found a Trust Receipt clearly established the FATR facility.
- Other Objections: The court rejected the remaining objections due to lack of supporting evidence or legal basis.
The court also emphasized that the defendants had failed to comply with specific procedural requirements of the Ordinance, 2001, regarding a clear response to Faysal Bank’s statement and providing details of their own accounts.
Outcome:
The court decreed the suit in favor of Faysal Bank Limited, ordering the defendants to pay Rs. 620,900,897.39 ($2.2 million), along with costs and cost of funds. The amount is to be recovered through the sale of mortgaged, pledged, and hypothecated properties.
Faysal Bank Limited demonstrates strong financial health with a robust advance to deposit ratio (ADR) of 57.8% and a solid capital adequacy ratio (CAR) at 16.6%, well above regulatory mandates. This performance highlights the Faysal Bank’s sound business principles, careful risk management, and commitment to innovation. Consequently, Faysal Bank strengthens its standing as a significant industry player focused on long-term growth and stakeholder value.
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