legal terrain of cost of funds |

Cost of funds

Title: Understanding the Legal Implications of Cost of Funds: A Case Analysis

In the complex world of legal proceedings, cases often involve the careful interpretation of statutes, precedents and legal principles. One such case that highlights the complexities of financial disputes and legal provisions is United Bank Limited v. Muhammad Amjad Hayat Khan. This case highlights the concept of "cost of funds" and its legal implications within the framework of financial institutions and financial recovery.

The dispute arose when the defendant Muhammad Amjad Hayat Khan filed a suit against United Bank Limited (the appellant) for recovery of a sum of Rs.10,000. 4,73,945.21. Initially, the bank's case for recovery against Khan was dismissed, but Khan later took legal action to claim the money, arguing that he was entitled to profits on the funds held by the bank.

The main point of contention in this case revolves around the concept of "cost of funds". Cost of funds refers to the costs incurred by a financial institution due to non-availability of funds that should have been in its custody but were with the customer after default. Section 3(2) of the Financial Institutions (Recovery of Fees) Ordinance, 2001 states that the defaulting customer is liable to pay the amount of funds certified by the State Bank of Pakistan.

The appellant, United Bank Limited, challenged the award of cost of funds to the respondent stating that it was against the law and precedents laid down by the High Courts. The appellant argued that the financial institution, not the consumer, is entitled to recover the cost of funds because it is deprived of the funds to be placed elsewhere for financial gain, which is fundamental to its business operations.

The judgment delivered by the Lahore High Court, Multan Bench critically analyzed the legal provisions, precedents and principles relating to cost of funds. He emphasized that cost of funds is a privilege granted to financial institutions to compensate for the loss of use of funds for financial gain. Additionally, the Court drew on Latin legal sources and legal doctrines such as casus omissus, which highlight the limits of courts in interpreting statutes beyond their express provisions.

Ultimately, the court concluded that the award of costs of funds to the defendant was void and to that extent set aside the impugned order and decree. The judgment emphasized the importance of following legal provisions and legal principles while adjudicating financial disputes, ensuring transparency and fairness in legal proceedings.

This case serves as an apt example of how legal complexities intersect with financial matters, emphasizing the need for careful analysis and interpretation of laws to maintain fairness and justice in legal proceedings. Is. It also highlights the importance of legal precedents and principles in guiding judicial decisions, thereby ensuring consistency and coherence in the application of the law.

کیس میں یونائیٹڈ بینک لمیٹڈ کی جانب سے محمد امجد حیات خان کو فنڈز کی لاگت سے متعلق فیصلے کے خلاف اپیل شامل ہے۔ ابتدائی طور پر، ریکوری کے لیے بینک کا مقدمہ خارج کر دیا گیا تھا، لیکن بعد میں خان نے اسی رقم کی وصولی کے لیے مقدمہ دائر کیا، جس میں بینک کے پاس موجود فنڈز پر منافع کے حقدار ہونے کی دلیل تھی۔ خان کے حق میں فیصلے میں فنڈز کی قیمت کا ایوارڈ بھی شامل تھا۔ اپیل قانونی دفعات اور قانونی اصولوں کا حوالہ دیتے ہوئے اس ایوارڈ کی قانونی حیثیت کا مقابلہ کرتی ہے۔ عدالت نے نتیجہ اخذ کیا کہ فنڈز کی لاگت کا ایوارڈ کالعدم ہے، اس حد تک غیر قانونی حکم اور حکم نامے کو ایک طرف رکھنا۔ یہ اس بات پر زور دیتا ہے کہ عمل درآمد کرنے والی عدالت کسی حکمنامے پر عمل درآمد پر سوال اٹھا سکتی ہے اگر یہ کالعدم، کالعدم یا دائرہ اختیار کے بغیر بنایا گیا ہو۔ اس فیصلے میں مختلف قانونی اصولوں اور نظیروں پر روشنی ڈالی گئی ہے جو اس کے فیصلے کی حمایت کرتے ہیں۔

عنوان: فنڈز کی لاگت کے قانونی مضمرات کو سمجھنا: ایک کیس کا تجزیہ

قانونی کارروائیوں کی پیچیدہ دنیا میں، مقدمات میں اکثر قوانین، نظیروں اور قانونی اصولوں کی باریک بینی کی تشریح شامل ہوتی ہے۔ ایسا ہی ایک کیس جو مالیاتی تنازعات اور قانونی دفعات کی پیچیدگیوں پر روشنی ڈالتا ہے وہ ہے یونائیٹڈ بینک لمیٹڈ بمقابلہ محمد امجد حیات خان۔ یہ کیس "فنڈز کی لاگت" کے تصور اور مالیاتی اداروں کے فریم ورک اور مالیات کی بازیابی کے اندر اس کے قانونی مضمرات پر روشنی ڈالتا ہے۔

تنازعہ اس وقت پیدا ہوا جب مدعا علیہ محمد امجد حیات خان نے یونائیٹڈ بینک لمیٹڈ (اپیل کنندہ) کے خلاف 10000 روپے کی خطیر رقم کی وصولی کے لیے مقدمہ دائر کیا۔ 4,73,945.21۔ ابتدائی طور پر، خان کے خلاف ریکوری کے لیے بینک کا مقدمہ خارج کر دیا گیا تھا، لیکن خان نے بعد میں بینک کے پاس رکھے گئے فنڈز پر منافع کے حقدار ہونے کی دلیل دیتے ہوئے رقم کا دعویٰ کرنے کے لیے قانونی کارروائی کی۔

اس معاملے میں تنازعہ کا اہم پہلو "فنڈز کی لاگت" کے تصور کے گرد گھومتا ہے۔ فنڈز کی لاگت سے مراد وہ اخراجات ہیں جو کسی مالیاتی ادارے کی جانب سے فنڈز کی عدم دستیابی کی وجہ سے کیے گئے ہیں جو کہ اس کی تحویل میں ہونا چاہیے تھے لیکن ڈیفالٹ کے بعد صارف کے پاس تھے۔ مالیاتی ادارے (مالیات کی وصولی) آرڈیننس، 2001 کے سیکشن 3(2) میں کہا گیا ہے کہ نادہندہ صارف اسٹیٹ بینک آف پاکستان کے ذریعے تصدیق شدہ فنڈز کی قیمت ادا کرنے کا ذمہ دار ہے۔

اپیل کنندہ، یونائیٹڈ بینک لمیٹڈ، نے مدعا علیہ کو فنڈز کی لاگت کے ایوارڈ کو چیلنج کرتے ہوئے کہا کہ یہ اعلیٰ عدالتوں کے قائم کردہ قانون اور نظیروں کے خلاف ہے۔ اپیل کنندہ نے دلیل دی کہ مالیاتی ادارہ، صارف نہیں، فنڈز کی لاگت کی وصولی کا حقدار ہے کیونکہ وہ مالی فائدے کے لیے فنڈز کو کسی اور جگہ رکھنے سے محروم ہے، جو اس کے کاروباری آپریشنز کے لیے بنیادی ہے۔

لاہور ہائی کورٹ، ملتان بنچ کے ذریعے سنائے گئے فیصلے میں فنڈز کی لاگت سے متعلق قانونی دفعات، نظیروں اور اصولوں کا تنقیدی تجزیہ کیا گیا۔ اس نے اس بات پر زور دیا کہ فنڈز کی لاگت ایک ایسا استحقاق ہے جو مالیاتی اداروں کو دیا جاتا ہے تاکہ مالی فائدے کے لیے فنڈز کے استعمال سے محرومی کی تلافی کی جا سکے۔ مزید برآں، عدالت نے لاطینی قانونی ماخذوں اور قانونی عقائد جیسے casus omissus پر روشنی ڈالی، جو ان کی واضح دفعات سے ہٹ کر قوانین کی تشریح کرنے میں عدالتوں کی حدود کو نمایاں کرتی ہیں۔

بالآخر، عدالت نے نتیجہ اخذ کیا کہ مدعا علیہ کو فنڈز کی لاگت کا ایوارڈ کالعدم تھا اور اس حد تک غیر قانونی حکم اور حکم نامے کو ایک طرف رکھ دیا۔ فیصلے میں مالیاتی تنازعات کا فیصلہ کرتے ہوئے قانونی دفعات اور قانونی اصولوں پر عمل پیرا ہونے کی اہمیت پر زور دیا گیا، قانونی کارروائی میں شفافیت اور انصاف کو یقینی بنایا گیا۔

یہ مقدمہ اس بات کی ایک مناسب مثال کے طور پر کام کرتا ہے کہ کس طرح قانونی پیچیدگیاں مالی معاملات کے ساتھ ملتی ہیں، قانونی کارروائیوں میں انصاف اور انصاف کو برقرار رکھنے کے لیے قوانین کے باریک بینی سے تجزیہ اور تشریح کی ضرورت پر زور دیتا ہے۔ یہ عدالتی فیصلوں کی رہنمائی میں قانونی نظیروں اور اصولوں کی اہمیت کو بھی اجاگر کرتا ہے، اس طرح قانون کے اطلاق میں مستقل مزاجی اور ہم آہنگی کو یقینی بنایا جاتا ہے۔

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, MULTAN BENCH, 

MULTAN

JUDICIAL DEPARTMENT

EFA No.41 of 2023

United Bank Ltd. 

Versus

Muhammad Amjad Hayat Khan

J U D G M E N T

Date of hearing: 18.04.2024.

Appellant by:

Ch. Saleem Akhtar Warraich, Advocate. 

Respondent by:

Syed Tariq-ur-Rehman Hashmi, Advocate. 

MUHAMMAD SAJID MEHMOOD SETHI, J.- Through 

instant appeal, appellant has assailed vires of order dated 

02.08.2023, passed by learned Judge Banking Court-I, Multan, 

Camp at Vehari, whereby appellant’s application under Section 47 

read with Sections 151/152 CPC and Section 19(7) of the Financial 

Institutions (Recovery of Finances) Ordinance (“FIO”), 2001, 

praying for revisiting of judgment & decree dated 03.03.2020, was 

dismissed. 

2.

Brief facts of the case are that respondent instituted a suit for 

recovery of Rs. 4,73,945.21 against appellant-bank, which was 

decreed vide judgment & decree dated 03.03.2020 and respondent 

was held entitled to get Rs. 4,73,945.21 from appellant-bank with 

costs along with cost of funds from the date of default till 

realization, in the following manner:-

“13.

In view of my findings on above issues, the suit for 

recovery is decreed in favour of plaintiff with the direction to 

the defendant bank to return the amount of Rs. 4,73,945.21 

with costs. Plaintiff is further held entitled to realization of 

cost of funds as certified by State Bank of Pakistan from the 

period of date of default till realization. Decree sheet be 

drawn accordingly

EFA No.41 of 2023

2

During execution proceedings, appellant moved application 

under Section 47 read with Sections 151/152 CPC and Section 

19(7) of the FIO, 2001, for revisiting the judgment & decree dated 

03.03.2020, to the extent of award of cost of funds to the 

respondent / customer. Learned Judge Banking Court, after hearing 

arguments of learned counsel for the parties, proceeded to dismiss 

the aforesaid application vide order dated 02.08.2023. Hence, 

instant appeal. 

3.

Learned counsel for appellant-bank submits that impugned 

order regarding award of cost of funds is against facts, law and 

judgments of Hon’ble superior Courts on the subject. He adds that 

learned Executing Court did not take into consideration the 

objections raised by the appellant in the objection petition, 

therefore, impugned order is unsustainable in the eye of law. In 

support, he has relied upon Ahmad Abbas v. Additional District 

Judge and others (2022 CLC 1296). 

4.

Contrarily, learned counsel for respondent defends the 

impugned order by contending that learned counsel for appellantbank failed to pinpoint any illegality therein. He adds that the 

judgment & decree dated 03.03.2020, passed in respondent’s favour 

has also attained finality, therefore, same is executable. 

5.

Arguments heard. Available record perused. 

6.

Record shows that initially appellant-bank instituted suit for 

recovery against respondent, which was dismissed vide order dated 

07.11.2012 for the reason that excess amount of Rs. 4,73,945.21 

belonging to respondent was lying with appellant, which order 

attained finality. Later on, respondent filed suit for recovery of said 

amount i.e. Rs. 4,73,945.21 with the contention that since the 

appellant-bank itself received mark-up of more than 13.50% from 

respondent, therefore, he is also entitled to receive profit on the 

aforesaid amount lying with appellant-bank. Ultimately, decree for 

recovery of aforesaid amount along with costs and cost of funds 

was passed in favour of respondent. 

EFA No.41 of 2023

3

7.

Cost of funds is basically the cost that a financial 

institution is entitled to recover from the borrower on account of 

funds which as per the terms of the ‘Finance’ or the law ought to 

have been in the custody of a financial institution but happened to 

be in the custody of the customer after default on the rationale 

that the financial institution has been deprived from placing the 

funds somewhere else for its financial benefit which is the core 

business of a financial institution. Section 3(2) of the Ordinance 

stipulates that where a customer defaults in the discharge of his 

obligation, he is liable to pay for the period from the date of his 

default till realization of the cost of funds of the financial 

institution as certified by the State Bank of Pakistan from time to 

time. Section 3(3) of the Ordinance further states that a judgment 

against the customer under this Ordinance shall mean that he is in 

default of his duty to fulfill his obligation and the ensuing decree 

shall provide for payment of the cost of funds. Since cost of 

funds is attached to the provisions of funds, therefore, cost of 

funds is not awarded to a customer even where a customer 

establishes a breach of obligation on the part of the financial 

institution. Cost of funds is granted only to a financial institution 

on the principle that funds are only provided by a financial 

institution and not by a customer. Section 17 of the Ordinance 

provides that the final decree shall be passed by the Banking 

Court with respect to payment from the date of default of the 

amounts determined to be payable on account of default in 

fulfillment of the obligation and for costs including in the case of 

a suit filed by a financial institution cost of funds determined 

under section 3 of the Ordinance. Banking Court under the 

provisions of Section 3(2) of the FIO, 2001 is empowered to 

award cost of funds in favour of financial institutions and such 

privilege or benefit had not been conferred by statute to the 

customer. This interpretation is also supported by the Latin Legal 

Maxims used in legal interpretation (i) Expressio unius personae 

EFA No.41 of 2023

4

vel rei, est exclusio alterius – The express mention of one person or 

thing is the exclusion of another and (ii) Expressum facit cessare 

tacitum – What is expressed makes what is silent to cease. This 

view is further supported by the principle of Casus Omissus. In 

Deputy Director Finance and Administration Fata through 

Additional Chief Secretary FATA, Peshawar and others v. Dr. 

Lal Marjan and others (2022 SCMR 566), the Supreme Court 

while discussing the scope of principle of Casus Omissus held 

that the said principle provides that, where the legislature has not 

provided something in the language of the law, the Court cannot 

travel beyond its jurisdiction and read something into the law as 

the same would be ultra vires the powers available to the Court 

under the Constitution and would constitute an order without 

jurisdiction.

8.

In Reference No.01 of 2012 (PLD 2013 Supreme Court 

279) = Nadeem Ahmed Advocate v. Federation of Pakistan (2013 

SCMR 1062), the Supreme Court of Pakistan while explaining the 

principle of Casus Omissus held as follows:-

“A Casus Omissus can, in no case, be supplied by the 

Court of law as that would amount to altering the provision. 

"It is not our function, as was held by Mr. Justice Walsh, in 

the case of "Attorney General v. Bihari, re Australia Factors 

Limited (1966) 67 S.R. (N.S.W.) 150; to repair the blunders 

that are to be found in the legislation". They must be 

corrected by the legislator". A Court of law is not entitled to 

read words into the Constitution or an Act of Parliament 

unless clear reason is found within the four corners of either 

of them.”

In Abdul Haq Khan and others v. Haji Ameerzada and others

(PLD 2017 Supreme Court 105), the Supreme Court while 

discussing the doctrine of Casus Omissus observed that the Courts 

generally abstained from providing ‘casus omissus’ or omissions in 

a statute, through construction of interpretation. The Court observed 

that the exception to such rule was, when there was a self-evident 

omission in a provision and the purpose of the law as intended by 

the legislature could not otherwise be achieved, or if the literal 

EFA No.41 of 2023

5

construction of a particular provision led to manifestly absurd or 

anomalous results, which could not have been intended by the 

legislature. The Court further held that such power, however, was to 

be exercised cautiously, rarely and only in exceptional 

circumstances. In The Collector of Sales Tax, Gujranwala and 

others v. Messrs Super Asia Mohammad Din and Sons and others

(2017 SCMR 1427), the Supreme Court held that principle of 

reading in or ‘casus omissus’ was not to be invoked lightly, rather it 

was to be used sparingly and only when the situation demanded it. 

The Court held that the Courts should refrain from supplying an 

omission in the statute because to do so steered the courts from the 

realms of interpretation or construction into those of legislation.

9.

In view of the above, it is concluded that the Banking 

Court has committed gross illegality in dismissing appellant’s 

application filed under Section 47 read with Sections 151/152 CPC 

and Section 19(7) of the FIO, 2001. Further reliance in this regard 

is also placed upon Messrs Long Term Venture Capital 

Modaraba v. Messrs State Life Insurance Corporation of 

Pakistan (2005 CLD 122) and Bank of Punjab through Attorney 

v. Manzoor Qadir and another (2021 CLD 1037). 

10. So far as respondent’s argument that judgment & decree 

dated 03.03.2020 has attained finality, is concerned, it suffices to 

say that there is no doubt about the fact that said decree has 

attained finality, but if the Court is satisfied that the decree is 

nullity / void in the eyes of law, or the same has been passed by 

the Court having no jurisdiction or the rights of the decree-holder 

would not be infringed if the decree is refused to be executed or 

the decree has been passed in violation of any provision of law, 

Executing Court under the provisions of Section 47 CPC can 

question executability of decree. There is no cavil to the 

proposition that questions relating to the executability of an order 

or decree can be raised even in execution proceedings and it is 

open to the party against whom it is sought to be executed to 

EFA No.41 of 2023

6

show that it is null and void or had been made without 

jurisdiction or that it is incapable of execution. Reliance is placed 

upon Islamic Republic of Pakistan v. Muhammad Saeed (PLD 

1961 Supreme Court 192) and Fakir Abdullah and others v. 

Government of Sindh through Secretary to Government of Sindh, 

Revenue Department, Sindh Secretariat, Karachi and others

(PLD 2001 Supreme Court 131). 

11. Needless to observe that it is not for the Executing Court to 

decide whether the decree passed is legal or illegal or whether it 

is erroneous or not, but it is open to the Executing Court to 

consider whether the decree sought to be executed is void or not. 

Any decree passed by any Court or forum is void if the Court or 

the forum which passed it has no jurisdiction over the subject 

matter. Reference can be made to V. Chinna Lakshmaiah v. 

Samurla Ramaiah and others (AIR 1991 AP 177). 

12. In view of the above, instant appeal is allowed. 

Consequently, impugned order dated 02.08.2023 is set aside 

being illegal and without lawful authority. As a result, judgment 

& decree dated 03.03.2020 shall not be executed to the extent of 

award of cost of funds, which stands set aside to this extent. 

(Raheel Kamran)

(Muhammad Sajid Mehmood Sethi)

 Judge

 Judge

Approved for Reporting

 

Judge

 Judge

For more information call us 0092-324-4010279 Whatsapp Dear readers if u like this post plz comments and follow us. Thanks for reading .as you know our goal is to aware people of their rights and how can get their rights. we will answer every question, so we need your help to achieve our goal. plz tell people about this blog and subscribe to our youtube channel and follow us at the end of this post.