Law:

Section:

(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)--- ----Ss. 9, 10 & 22---Contract Act (IX of 1872), Ss. 73 & 74---Banking Companies Ordinance (LVII of 1962), Ss. 3A, 25 & 41---State Bank of Pakistan BCD Circular No.13 of 1984 dated June 20, 1984---State Bank of Pakistan BCD Circular No.32 of 1984 dated November 26, 1984--- Mark-up beyond original contractual period/additional sum/penalty for delay in payment by customer--- Principles---Car/automobile finance facility--- Plaintiff filed suit seeking redemption/clearance of vehicle from defendant Bank, on the ground that finance facility availed by plaintiff for the said vehicle was re-paid completely but defendant Bank refused to issue the NOC---Suit was dismissed by Banking Court on the ground that plaintiff was under contractual obligation to pay late payment charges---Held, that with introduction of State Bank of Pakistan BCD Circular Nos.13 of 1984 dated June 20, 1984 and BCD Circular No.32 of 1984 dated November 26, 1984, all Financial Institutions in Pakistan had been prohibited from charging any additional sum on account of delay caused by the customer in re-payment of its obligation created under an agreement based on mark-up and such obligation under a mark-up based agreement, once fixed could not be enhanced, so as to entitle a Financial Institutions charge any sum over and above original contractual amount---Mark-up beyond the original contractual period or any late payment charged, claimed by the Financial Institution was in violation of the restrictions contained in the said State Bank of Pakistan Circulars and any clause incorporated in a finance agreement for charging any additional mark-up or penalty would violate the said Circulars and was therefore, void ab initio---Penalty or damages at fixed rate was opposed to the provisions contained in Ss.73 & 74 of the Contract Act, 1872 and general principles for granting compensation when beneficiary alleged breach of contract were regulated by Ss.73 & 74 of the Contract Act, 1872 and without proving the actual loan, even a fixed amount, if stipulated for liquidated damages, did not become automatically…

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