Special Report

January 7, 2013

Kenlubes International defaults Rs 26.88 million to KASB Bank

KASB Bank Limited has filed a suit against M/s: Kenlubes International, a partnership concern, in the Banking Court Karachi for recovery of Rs26,888,859.06. The Bank prayed to pass judgment and decree against the defendants with future cost of fund from the date of default at the prescribed rate by State Bank of Pakistan, payable by the defendants to plaintiff till its final payments by defendants.

The defendants be restrained from transferring, alienating, parting, with possession or otherwise encumbering, charging, disposing or dealing with the mortgage property in respect of immovable property bearing No.29, Square No.108, Khasra No.16 & 25/1, Khatuni No.134, situated in Chak No.191, R.B. Tehsil & District Faisalabad, measuring 16 Kanals 7 Marlas along with present and future constructions.

A decree passed for sale of mortgage property and the sale proceeds be applied towards satisfaction of decretal amount. The decretal amount be ordered to be realized both by execution of personal decree against the defendants or through attachment and sale of personal assets (movable and immovable) of the defendants and if required against the person of the defendants through their arrest/detention in civil prison.

According to detail of the suit the defendants M/s Kenlubes International, carrying business at Plot No.11, Sector-23, Korangi Industrial Area, Karachi and Plot No.35, Sector-28, near Murtaza Chowrangi, Korangi Industrial Area, availed the finance facility from the KASB Bank. Its partners Mian Zahid Hussain (Partner), Mian Zia-ul-Hassan (Partner), Danish Ayub S/o Mian Zahid Hussain (Partner of M/s Kenlubes International) individually in their respective personal capacity guaranteed the repayment obligations of their partnership concern towards the plaintiff Bank.

The defendant No.5, M/s Ashraf Lubricants Company (Pvt.) Limited (ALCO) through its Chief Executive, Jhumra Road, near DryPort, Opp Gatti Railway Station, Faisalabad, registered owner of the mortgage property also executed personal guarantee in favor of the plaintiff Bank. Mian Zahid Hussain is also former chairman of Korangi Association of Trade & Industry (KATI).

The plaintiff Bank at the request of the defendants, granted, sanctioned, approved and renewed finance facility of Running Finance (Renewal) of PKR 26 million, to cater for working capital requirements with 3 months KIBOR + 3.5% Floor 14% p.a. payable on quarterly basis. The said sanction advice was accepted and agreed by the defendants endorsing the signatures and stamp thereon.

As per request of the defendants the plaintiff sanctioned and approved running finance facility in favor of defendants. In order to secure the interest of the plaintiff, as per arrangements/understanding between the plaintiff and the defendants, amongst other usual security documents, the defendant Nos. 2, 3 & 4 also executed personal guarantees. In consideration of the said facility by the defendants, the following documents were executed by the defendants:

  • Demand Promissory Note for Rs31,200,000/- dated 15-02-2012.
  • Agreement for Financing for short/medium long term on mark-up basis, for Rs31,200,000 dated 15-02-2012.
  • Letter of Hypothecation on movables & Book debts/receivables dated 15-02-2012.
  • Certificate of Partnership & Authorization to sign dated 12-10-2009.
  • Undertaking to appropriate utilization of funds dated 12-10-2009.

The finance facility was secured by creation of a registered/legal/equitable mortgage under Section 58(f) of the Transfer of Property Act 1882 over the property of defendant No.5, through its Chief Executive, being mortgager executed Memorandum Confirming Deposit of Title Deeds & Documents, dated 03-10-2006 in respect of their immovable property and Charge Certificate of Registration of Mortgage, along with Form-10 from Securities & Exchange Commission of Pakistan (SECP), Deputy Registrar of Companies, Faisalabad Region, Faisalabad.

Upon failure of repayment as per offer letter and agreement by defendants the plaintiff/Bank made personal contacts with them, who made promises for repayment but failed to honor their commitments in this regard. The plaintiff/Bank sent letters/reminder/demands calling them to repay the outstanding amount/markup of the plaintiff/bank, which again despite received by the defendants, failed to discharge his legal and contractual obligations to make payments. As per the terms and conditions of the offer letter and agreements they had committed breach of terms & conditions of finance agreements.

On the defendant’s above-referred default, the plaintiff/bank served legal notice through advocate to the defendants under Financial Institution (Recovery of Finances) Ordinance 2001, dated 18 June 2012, calling upon him to repay the outstanding amount of Rs26,888,859/- but they also neglected/ avoided and failed to reply the legal notice as well as payment of outstanding amount.

On numerous occasions, the defendant had also promised in his meetings and conversations over telephone with the officials of the plaintiff/bank that they would pay back all their liabilities, but the above acts were only to further linger on their obligations and liabilities towards the plaintiff/bank.

Due to defendants’ deliberate, utter negligence and default in liquidation of the said outstanding facility/limit with markup a sum of Rs26,888,859.06 is outstanding against the defendants and payable to the plaintiff/bank. The details as required by Section 9(3) of the Financial Institution (Recovery of Finances) Ordinance 2001 are as under:-

  • Amount of finance availed by the defendants from the financial institution (Principal) Rs25,999,999.63
  • Total liability (principal plus markup) Rs32,413,643.49
  • Amount paid by the defendants to the financial institution Rs5,524,784.43
  • Amount of finance and other amounts relating to the finance payable by the defendants to the financial institution up to the date of institution of suit Rs26,888,859.06 till 30-06-2010.

The plaintiff/bank suffers losses at the hands of the defendants due to his non-fulfillment of contractual obligations according to the agreed terms and conditions. Therefore, the plaintiff/bank is entitled to claim the markup, charges, cost incurred thereof and cost of funds, the plaintiff concluded.

Mr. Zahid Hussain, in his parawise comments denied that defendant No.5 (M/s Ashraf Lubricants Co. (Pvt.) Ltd.) had secured the whole facility through mortgage but in fact the defendant No.5 secured the repayment of amount only Rs23 million. He also submitted that defendant was regular in payments and never committed default before dispute arisen between him and plaintiff bank over the charging of extra markup and other illegal charges, which the defendant is not liable to pay. The plaintiff bank did not resolve the dispute and continued to levy these charges and illegal markup and filed the instant suit wherein they once again claiming these illegal unwarranted charges and illegal, compound markup of which they are not entitled under any law or agreement.

He claimed that amount availed by the defendant was Rs38,588,126/- and amount paid by the defendant was Rs28,000,348/- , while amount payable by the defendant is Rs10,587,778/-. However, the amount disputed was the amount claimed by the plaintiff, he added.

-Published on pages# 20 & 21 in December-2012 issue of MOBILE WORLD Magazine

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