2006 CLD 244

HABIB BANK LIMITED --- Plaintiff

Versus

MESSRS SABCOS (PVT.) --- Defendants

Facts of the Case:

1. Under Section 9, Suit for recovery of loan amount filled by Plaintiff with regard to an agreement
in pursuance of BPD Circular 29 dated 12- 12- 2003 of State Bank of Pakistan. Under said
agreement, some concessions were given to the defendants and amount was settled at Rs.
22.00 Million. The schedules of payments was also settled and it was further settled between
parties allowing concession to defendant subject to the condition that in case of his failure to
make two agreed quarterly payments during a year, such package would stand withdrawn along
with all concessions in mark-up and Bank would be entitled to claim entire outstanding amount
including penal interest etc.
2. Habib Bank (plaintiff) filled suit of recovery of Rs. 13, 07, 30,560 on 6-6-2000 under repealed Act
XV of 1997. The defendants were served. In meantime the Act XV was repealed. By virtue of
Section 10(13) of FIO, 2001 the defendants has to filled the application in form of written
statement to grant leave to defend the suit on 17-10-2001.
3. As per the provision’s requirement, defendants were required to file such application between
21 days from the date of coming into force of an Ordinance (which came into force on 30-08-
2001) or the said 21 days can be calculated from the first hearing thereafter whichever is later
in both the periods. The defendants failed to file the application within the prescribed time.
4. Nevertheless, no consequence for not filing the written statement within the above mentioned
period has been provided in the Ordinance but sub-clause 3, 4, 5 are mandatory provisions and
non-compliance of said provisions entails the rejection of leave to defend application as
mention in sub-clause 6 of section 10 of FIO, 2001 unless the defendant discloses the sufficient
cause for his inability to comply with such requirement.
5. The Learned Advocate of the defendants frankly conceded that the application does not fulfil
the mandatory requirements of sub-section 3, 4. Therefore, leave to defend is liable to be
dismissed. Consequently invoking the provisions of sub-section 6, the Court dismissed the said
application (application of leave to defend from defendants).
6. By virtue of sub-section 11 of Section 10 of FIO, 2001 the suit of the plaintiff is to be decreed if
the application for leave to defend is rejected. The court already rejected such application,
therefore, the suit is liable to be decreed. Hence, the suit of plaintiff is decreed in sum of Rs. 10,
63, 48, 475.80 as prayed with costs.

Principles laid down in said Case

 Objective of “THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES) ORDINANCE, 2001”;

The scheme of FIO is that suits involving financial matters between financial institutions and
customers with regard to finance should be decided expeditiously in summary manner within
shortest possible time.
 Difference between mandatory and directory provisions;
 Mandatory Provisions
If the non-compliance of the provision entails
a penal consequence then it is mandatory.
If the Act or the provision is mandatory,
disobedience entails serious legal
consequences.
Example: sub-clause 3, 4, 5 of Section 10 of
FIO.
Directory Provision
Otherwise it is directory.
As a general rule, a statute is understood to
be directory when it contains matter merely
of direction but not when directions are
followed up by an express provision that, in
default of following them, the facts shall be
null & void.
To put it differently, if the Act is directory, its
disobedience does not entail any invalidity.
Example: sub-clause 13 of Section 10 of FIO,
2001.

 Requirements of sub-clause 3, 4, 5 of Section 10 of FIO, 2001;

Leave to
defend should
be in the form
of written
statement Non-
(which was compliance of
It would help
not the sub-section 3
the Court in
requirement entails the
immediately
of Act XV of rejection of
framing issues
Sub-clause 3 1997). the leave to
& then matter
defend
W.S should is required to
application
contain a be fixed for
under sub-
summary of evidence.
clause 6 of
substantial
Section 10.
questions of
law as well as
fact.
 Requirements under Sub-Clause 4 of Section 10
If suit is for recovery of amount instituted by
financial institution, then the defendant is required
to;
Specifically mention the amount of finance availed by him from
financial institution.
Amounts paid by him to the financial institution & dates of such
payments (this provision would help the court in immediately
arriving at exact figures of dues involved in the suit).
amounts of finance & other amounts relating to the finance payble
by the defendant to the financial institution up to the date of filing of
the suit.
Specify the amount of dispute & should also file proof in support of
such facts.
Thus all the requirements are very essential which will go to the root
of the cause & would give a clear picture to the Court in case.
Sub-Clause 5 Requirem ents

Defendant required to produce all documents along with the

application for leave to defend.

Such documents support the substantial questions of law & fact raised
by him in sub-section 3.

Non-Compliance of said sub-section also entails the rejection of

leave to defend application under Sub-Section 6.

Under the sub-clause 6 the application of leave to defend shall be rejected if the defendant fails to
comply with the requirements provided in sub-clause 3, 4, 5 of Section 10 unless the defendant discloses
the sufficient cause for his inability to comply with such requirement.