IN THE SUPREME COURT OF PAKISTAN 
(Appellate Jurisdiction) 
 
 
 
 
 
 
PRESENT: 
 
 
 
 
MR. JUSTICE MIAN SAQIB NISAR 
 
 
 
 
MR. JUSTICE IQBAL HAMEEDUR RAHMAN 
 
 
 
 
MR. JUSTICE MAQBOOL BAQAR 
 
 
CIVIL APPEAL NO.167-Q OF 2005 
(On 
appeal 
against 
the 
judgment 
dated 
14.12.2004 of the High Court of Baluchistan, 
Quetta in RFA No.58 of 1999) 
 
 
M/s Summit Bank Limited through its 
Manager, M.A.Jinnah Road Branch, Quetta … 
Appellant 
 
 
 
 
 
Versus 
Muhammad Alam & another 
 
 
… 
Respondents 
 
For the appellant: 
Hadi Shakeel Ahmed, ASC. 
 
For the respondents: Syed Ayaz Zahoor, ASC.  
 
Date of hearing:  
07.4.2015 
 
 
 
 
JUDGMENT 
 
 
MAQBOOL BAQAR, J.- Through the instant appeal, 
the appellant-bank has impugned judgment dated 14.12.2004 of a 
learned Single Judge of the High Court of Balochsitan, whereby 
the respondents’ appeal was allowed and the judgment dated 
25.9.1999, of the learned Additional District Judge-II, Quetta, 
dismissing the respondents’ suit against the appellant-bank, was 
set-aside.  
2. 
 
The relevant facts of the case, in brief, are that on 
25.3.1992. Qasim Khan, the father of the respondents, opened an 
account, bearing No.251, with the appellant-bank in his name. 
However, in May 1992 he allowed respondent No.2 and thereafter 
also allowed respondent No.1 to operate the said account. Qasim 
CA 167-Q/05 
2 
Khan passed away on 28.6.1996 whereafter at the request of the 
respondents the title of the account was changed to “M/s Qasim 
and Company”.  
3. 
 
A 
contracting 
firm, 
namely, 
M/s 
Tameer-e-Nau 
Engineers and Contractors (hereinafter referred to as “Tameer-e-
Nau”), owned by one Mir Afzal was awarded a civil contract by 
Lahore Development Authority (LDA). On 01.11.1994, the 
appellant-bank furnished a performance guarantee in respect of 
the said project on behalf of Tameer-e-Nau. The said performance 
guarantee was, sometime after 04.9.1995, enforced and encashed 
by LDA. For the purposes of said payment a Running Finance 
facility was granted in favour of Tameer-e-Nau and the amount 
was thus debited in the running finance account of Tameer-e-Nau. 
As per the relevant sanction advice (page 105 of the paper book), the 
facility was secured by way of hypothecation of stock of 
construction material worth Rs.4.000 millions and also through 
equitable mortgage of a property bearing No.7-A, Model Town, 
Lahore, measuring 600 square yards, valuing Rs.5.215 millions. 
However, according to the appellant-bank, the re-payment of the 
facility was also guaranteed by Qasim Khan, the deceased father 
of the respondents, who according to the appellant-bank, executed 
a guarantee in that regard. According to the respondents, huge 
amounts were transacted by them through their afore-noted 
account bearing No.251. It was claimed that on 21.2.1998 an 
amount of Rs.55.50 millions was remitted by them through 
telegraphic transfer to the said account. However, subsequently 
some cheques including cheques dated 24.2.1998 and 17.3.1998 
drawn by them against the said account were dis-honoured, and 
CA 167-Q/05 
3 
upon inquiry they were informed by the appellant-bank that 
sufficient balance was not available in the respondents’ account 
as an amount of Rs.38,88,721.65 has been deducted by the 
appellant-bank towards liquidation of the liability of Qasim Khan 
(late) therefrom under the aforesaid guarantee. 
4. 
 
The plaintiffs/respondents through their counsel 
caused a legal notice to be served on the appellant-bank for 
refund of the amount but to no avail. The respondents, thus, filed 
the recovery suit. 
5. 
 
Mr.Shakeel Ahmed, learned counsel for the appellant-
bank submitted that in terms of section 7(4) of the Banking 
Companies (Recovery of Loans, Advances, Credit and Finances) 
Act XV of 1997 (hereinafter referred to as ‘the Act’), read with 
section 9 of the Act, it was only the Banking Court constituted 
under the Act, which had the jurisdiction to entertain the 
respondents’ suit and to proceed therewith, as the question 
involved therein was of the validity, extent, and encashment of the 
guarantee furnished by the late father of the respondents to 
secure re-payment of a finance facility within the meaning of 
section 9 of the Act and therefore, the learned High Court ought to 
have dismissed the respondents’ appeal. He submitted that not 
only the account bearing No.251 was established and maintained 
by Qasim Khan (late) but even after his death, though the present 
respondents changed the title of the account but such fresh title 
being “M/s Qasim and Company” also contained the name of the 
deceased and therefore, the appellant-bank was fully justified in 
exercising its lawful right of lien over the said account as 
envisaged by section 171 of the Contract Act, and has thus rightly 
CA 167-Q/05 
4 
appropriated the amount of the outstanding liability of the 
deceased from the said account.  
6. 
 
On the other hand, Mr.Ayaz Zahoor, the learned 
counsel for the respondents submitted that after the death of 
Qasim Khan and at the request of the respondents, the title of the 
account was changed from “Qasim Khan” to “M/s Qasim and 
Company”. He submitted that such account was being maintained 
and operated exclusively by the respondents. He further 
submitted that undisputedly heavy amounts were transacted in 
and out of the said account since after the death of Qasim Khan 
in June 1996 and upto 18.3.1998, when an amount of 
Rs.38,88,721.65 was debited/ appropriated by the appellant-bank 
purportedly towards the alleged liability of the deceased. Mr. 
Zahoor further submitted that admittedly on 21.2.1998 a sum of 
Rs.55.50 millions was remitted by the respondents from 
Islamabad to the aforesaid account. 
7. 
 
The learned counsel further submitted that neither the 
appellant-bank has had any lien over the amount lying in the 
aforesaid account nor could they exercise any such lien under 
section 171 of the Contract Act. He submitted that at the relevant 
time neither the account belonged to or was in the name of Qasim 
Khan (late), nor any amount lying in credit therein was deposited 
by Qasim Khan. However, the appellant-bank without any notice 
to the respondents, and without establishing their claim against 
the Tameer-e-Nau, the principal debtor and or even against the 
deceased, illegally and unlawfully mis-appropriated the amount 
from the respondents’ account under the grab of setting-off. 
CA 167-Q/05 
5 
8. 
 
The learned counsel for the respondents further 
submitted that neither the respondents who hold and operate the 
said account are/were customers of the appellant-bank in relation 
to the alleged transaction relating to Tameer-e-Nau, nor have they 
executed any document in relation thereto and that no lien was 
ever marked over the subject account and thus, there was no 
question of the appellant-bank exercising its lien over the said 
account. 
9. 
 
He further submitted that it is a settled principle of law 
that if any pecuniary obligation arises out of a contract by the 
deceased such would only bound the legal representatives to the 
extent of the estate left by the deceased and not otherwise. Mr. 
Zahoor further submitted that as can be seen from the sanction 
advice in relation to the Running finance facility in favour of 
Tameer-e-Nau, 
the 
said 
facility 
was 
secured 
by 
way 
of 
hypothecation and through equitable mortgage of a valuable 
property. However, neither the appellant-bank established its 
claim against Tameer-e-Nau nor have they sought enforcement of 
the such securities from the Court and instead found it 
convenient to surreptitiously mis-appropriate the respondents’ 
money lying in trust with them under the garb of liquidation of the 
purported undetermined liability of their deceased father and, 
therefore, the respondents rightly invoked the jurisdiction of the 
Court.  
10. 
 
The question that arose in this case was/is as to 
whether the deduction/withdrawal in dispute was lawful or not. 
The appellant-bank claims to have affected the deduction/ 
withdrawal by exercising its lien/right to set-off the liability of the 
CA 167-Q/05 
6 
deceased towards the appellant-bank. The concept of banker’s 
lien/right to set-off as embodied under section 171 of the Contract 
Act has been aptly explained in the case of Punjab National Bank 
Ltd. v. Arura Mal Durga Das (AIR 1960 Punjab 632) as under:- 
“(14). The rule of English Law that the Bank has a lien 
or more appropriately, a right to set-off against all 
monies of his customers in his hands has been 
accepted as the rule in India. According to this rule 
when the monies are held by the Bank in one account 
and the depositor owes the Bank on another account, 
the Banker by virtue of his lien has a charge on all 
monies of the depositor in his hands and is at liberty 
to transfer the monies to whatever account, the banker 
may like with a view to set-off or liquidate the debts….” 
 
 
It hardly need any emphasis to understand that a banker 
can exercise his right of lien or his right to set-off the liability of 
his customer against the securities and monies in his hand of that 
customer only and not of any body else. 
11. 
 
To elaborate the above mutuality, the judgment 
proceeds as follows:- 
“15. In order to create Banker’s lien on several 
accounts it is necessary that they must belong to the 
payer in one and in the same capacity. Where the 
person has two accounts, one a trustee account and 
another private account at a bank, deposits in the two 
accounts cannot be set-off, the one against the 
other…. 
16. 
Bankers have a right to combine one or more 
accounts of the same customer. But it cannot combine 
the account belonging to another or to himself along 
with another account which is the joint account with 
another…... 
17. 
Similarly, the Banks have no lien on the deposit 
of a partner, on his separate account, for a balance 
due to the Bank from the firm. Therefore, the banker is 
CA 167-Q/05 
7 
entitled to combine all accounts kept in the same right 
by the customer. It does not matter whether the 
accounts are current or deposit or whether they are in 
the same or different branches. ---- It is essence to the 
validity of a banker’s lien, that there should be a 
mutuality of claim between the Bank and the 
depositor. In order that it should be permissible to set-
off one demand against another both must mutually 
exist between the same parties.”  
 
12. 
 
Furthermore, as rightly commented by Sheldon and 
Fidler’s in their book on Practice and Law of Banking (Eleventh 
Edition, page 31) “The banker may exercise the right of set-off only 
when the money owned to him is a sum certain, which is due”. 
13. 
 
Here it may be relevant to note that even under the law 
which provides for recovery through coercive process such as land 
revenue, determination of the amount due is an essential pre-
requisite. The bank cannot be conferred with the judicial powers 
for 
determination 
of 
the 
amount 
due 
against 
its 
customer/borrower. The right/power to set-off would be available 
only where the amount claimed was due and is certain and 
determined by a competent judicial forum.  
14. 
 
However, in the present case, although the subject 
account was established by Qasim Khan in his name, however, 
undisputedly, he authorized the respondents to operate the 
account. After the death of Qasim Khan on 28.6.1996, the title of 
the account was, at the request of the respondents, changed to 
“M/s Qasim and Company”. Since after the death of Qasim Khan 
and upto 18.3.1998, when the appropriation/adjustment in 
question was made by the appellant-bank, heavy amounts were 
transacted in and out of the said account. Admittedly, on 
CA 167-Q/05 
8 
21.2.1998 an amount of Rs.55.50 millions was remitted by the 
respondents from Islamabad to the said account. The learned 
counsel for the appellant has not shown to us that any amount 
lying in the subject account, in fact belonged to the deceased and 
thus the very first pre-requisite for creation of a right to set-off did 
not exist in the present case.  
15. 
 
Even otherwise, neither the purported liability of the 
deceased has been proved nor has the same been quantified. The 
appellant-bank has not even filed any recovery suit, either against 
Tameer-e-Nau, or even against the deceased. Although the finance 
was primarily secured by way of mortgage over a valuable property 
and through hypothecation of stock valuing Rs.4 Millions, but no 
suit for enforcement of the securities was filed by the appellant-
bank. In the circumstances no right to set-off was available to the 
appellant-bank.  
16. 
 
It is a well settled principle of law that a pecuniary 
obligation undertaken by a deceased promisor would be binding 
on his legal representatives to the extent of the estate of the 
deceased promisor in their hand. This principle has been 
statutorily recognized in section 50 of the Civil Procedure Code  
which lays down the extent to which a decree passed against a 
judgment-debtor who dies before the decree has been fully 
satisfied, against his legal representative. Whereas, in the present 
case, as noted, neither has there been any adjudication of 
appellant’s claim against Tameer-e-Nau and/or Mir Afzal, the 
principle debtor, or against the deceased, nor has it been judicially 
determined as to whether the respondents h ave inherited any 
property from the deceased, there was/is thus no question of the 
CA 167-Q/05 
9 
appellant seeking to right-off the alleged liability and/or seeking 
any recovery from the respondents without adjudication of the 
above referred aspects of the matter. 
17. 
 
As regards the appellant’s contention that only the 
Banking Court, established under the Act had jurisdiction in the 
matter, it may be noted that, as is now clear from the above 
discussion, neither there was any question pertaining to “finance” 
as defined by Section 9 of the Act, nor the question as to whether 
the respondents were “customers” in the context of the Act 
involved in the matter and no documents were executed by the 
respondent securing re-payment of the alleged liability. The suit 
for recovery was filed by the respondents for the amount that was 
deducted out of their monies lying in their account illegally and 
unauthorizedly and thus the Banking Court had no jurisdiction in 
the matter as the same was constituted to adjudicate upon the 
matter pertaining to “finance” between bank and its customer, we 
therefore, did not find any jurisdictional error in the matter.  
18. 
 
It was in view of the foregoing that we dismissed the 
above appeal. 
 
 
 
 
 
 
 
 
 
 
Judge 
 
 
 
 
 
 
 
 
 
 
 
Judge 
 
 
 
 
 
 
 
 
 
 
 
Judge 
Islamabad the 
7th April 2015 
(Aamir Sh.) 
 
‘NOT APPROVED FOR REPORTING’