The Clear Evidence is Mandatory to establish a Relationship between Parties in Financial Disputes --- Lahore High Court, Lahore

Islamabad 16-09-2024: The Lahore High Court, Rawalpindi Bench, has set aside an ex-parte judgment and decree issued by the Additional District Judge of Mianwali in a case involving a substantial financial dispute between Muhammad Waseem and Maple Leaf Cement Factory Limited. The Court ordered a re-trial of the case, directing the lower Court to hear the case afresh after recording evidence from both parties. The appeal was filed by Muhammad Waseem under Section 96 of the Code of Civil Procedure (CPC), 1908, against the judgment and decree passed on November 8, 2023.

Maple Leaf Cement Factory Limited had filed a suit under Order XXXVII of the CPC (which deals with summary suits) for the recovery of Rs. 70,000,000. The company alleged that Waseem, who was employed by the company, misappropriated Rs. 79,617,591. A criminal case was registered against him under Section 406 of the Pakistan Penal Code (PPC), following which an amicable settlement was reached, and Waseem issued a cheque for the remaining amount after writing off Rs. 9,617,591. However, the cheque was dishonored when presented to the bank, leading Maple Leaf Cement to file a recovery suit.

Waseem was proceeded against ex-parte after he failed to submit the surety bond required by the trial Court. Consequently, the suit was decreed in favor of Maple Leaf Cement on November 8, 2023.

Counsel for the appellant argued that the ex-parte judgment was not tenable under the law, as Waseem had not been given a fair opportunity to defend himself. Despite the ex-parte proceedings, the respondent was still required to present convincing evidence, which, according to the appellant, was deficient.

The bench, comprising Mr. Justice Muhammad Sajid Mehmood Sethi and Mr. Justice Jawad Hassan, observed that the suit was filed under Order XXXVII of the CPC, which allows for expedited proceedings based on negotiable instruments, such as cheques. The Court noted that while Waseem had applied for leave to defend the suit, the trial Court had rejected his application after he failed to provide the surety bond.

The Court further highlighted that the respondent had only presented three documents as evidence the company board resolution, a copy of the FIR, and a copy of the dishonored cheque. No additional evidence was provided to establish the relationship between the appellant and the respondent, which was a key issue raised during the proceedings.

The Court referenced several legal precedents, including:

• Mehr Noor Muhammad Vs. Nazir Ahmed (PLD 2024 Supreme Court 45), which held that there must be a relationship, either personal or business-related, between the parties when a substantial loan or financial claim is involved.
• Telenor Microfinance Bank Limited Vs. Shamim Bano and others (2023 SCMR 1560), which stressed the importance of determining the true relationship between parties in cases involving negotiable instruments like cheques.

The Lahore High Court set aside the ex-parte judgment and decree and allowed the appeal on the condition that the appellant furnishes a surety bond backed by immovable property equivalent to 50% of the dishonored cheque’s value. The trial Court has been directed to re-hear the case, allowing both parties to present further evidence. The case has been remanded to the trial Court for re-trial within four months. Both parties are expected to appear before the trial Court on September 25, 2024 for further proceedings.

The Court’s decision emphasizes the importance of procedural fairness, especially in summary suits filed under Order XXXVII of the CPC. It also underscores the need for presenting clear evidence to establish a relationship between the parties, particularly in cases involving negotiable instruments such as cheques. This judgment will be closely watched for its implications on summary suits and the conditions under which ex-parte decrees can be set aside.

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