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Petitioner: United Bank Limited VS Respondent: Federation of Pakistan and others
Court Name: Lahore High Court Judge(s): Shams Mehmood Mirza Title: United Bank Limited vs Federation of Pakistan and others Case No.: W.P. No.37394 of 2015 Date of Judgment:2017-12-29 Reported As: 2017 LHC 4506 Result: petiton allowed
Judgment Shams Mehmood Mirza, J. Aggrieved by the assumption of jurisdiction by the Banking Mohtasib and the consequential order passed by him, the petitioner bank has challenged the said order as also the vires of Federal Ombudsman Institutional Reforms Act, 2013 (FOIRA). In some of the connected petitions, only the orders passed by the Banking Mohtasib have been impugned whereas in some of the petitions the orders of the President of Pakistan passed on representation filed under the provisions of FOIRA have also been challenged. This judgment shall also decide the writ petitions mentioned in Schedule A hereto as common questions of law have arisen, which are required to be adjudicated by this Court. 2. The broader issue involved in this writ petition pertains to the separation of powers between the executive and judicial branches of the Government. More particularly , the question that requir es determination is whether an administrative tribunal can exercise and be vested with judicial power in determining the rights and obligations of the parties. 3. It is neither desirable nor practicable to give details of the facts of individual cases. The disputes raised by the parties before the Banking Mohtasib and orders passed thereon, can be classified into the following categories for the purposes of shining light on the power s being exercised by the Banking Mohtasib, which are under challenge in these writ petitions. a. The bank officials allegedly committed fraud with the account holders and on complaints filed before the Banking Mohtasib, the bank was held to be vicariously liable and was thus directed to pay the alleged defrauded amounts together with profit to the account holders (writ petition No. 1702/12, writ petition No. 2143/12, writ petition No.18160 of 2016, writ petition No.13371 of 2016, writ petition No.51751 of 2017, writ petition No.4479 of 2017 & writ petition No.2142 of 2012). b. Assumption of jurisdiction by the Banking Mohtasib in a complaint filed in respect of unauthorized electronic transfer of funds in a Visa Debit Card although the bank had already approach ed the relevant court under the
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provisions of Payment System and Funds Transfer Act 2007 (writ petition No. 50/14). c. Assumption of jurisdiction by the Banking Mohtasib on a complaint filed by defaulters although the bank has already referred the matter for arbitration under section 54 of the Cooperative Societies Act, 1925. The Banking Mohtasib decided the matter by himself comparing the signatures of the complainants with those appearing on the disputed documents (writ petition No.33732 of 2016). d. The bank made payment of premium to the Insurance company under an insurance policy obtained by the consumer against which a complaint was lodged by the consumer and the Banking Mohtasih ordered the bank to refund the amount to the consumer. The order was upheld by the President on a representation filed by the bank (writ petition No.26426 of 2017). e. Dispute in respect of transfer of funds under Visa Debit Card was brought before the Banking Mohtasib who without recording of evidence held that the consumer was not the user of MCB Mobile Banking Service. The order was challenged by the bank by filing its representation before the President which representation was dismissed (writ petition No.28631 of 2016). f. The Banking Mohtasib on a complaint filed by the consumers with regard to the dispute for non-credit of amounts in the account of the consumer passed orders directing the bank to reimburse the amounts to the consumers with up to date profit (writ petition No.37338 of 2016, writ petition No.4102 of 2017, writ petition No.4103 of 2017) g. The Banking Mohtasib on a complaint filed by the consumer regarding blocking of account to the extent of credit of a disputed entry directed the bank to unblock the account, which order was upheld by the President of Pakistan (writ petition No.37339 of 2016) h. The President of Pakistan overturned the decision of the Banking Mohtasib and directed the bank to reimburse the amount to the consumer although the dispute was purely of a factual nature (writ petition No.10599 of 2017). i. The consumer filed the complaint that cheque book was unauthorizedly issued by the bank and that amounts were withdrawn through cheques. The Banking Mohtasib compared the signatures of the consumer with those appearing on the disputed cheques and held that the same to be forged and accordingly held that the bank was grossly negligent and ordered it to repay the amount thereof together with opportunity loss and profit. The representation filed by the bank was also dismissed by the President (writ petition No.7185 of 2015, writ petition No.7179 of 2015 and writ petition No.37394 of 2015). j. The consumer filed the complaint alleging the bank responsible for the loss of Rs.2,034,000/- on account of theft in her locker . The Banking Mohtasib directed the bank to pay to her Rs.1,500,000/- together with opportunity loss and profit based on State Bank of Pakistan' s BPD Circular No.27 which advised the banks to arrange group insurance for their lockers even though the said circular was issued after the incident of theft. In the process, the Banking Mohtasib also declared clause 6 of the agreement between the parties to be void and against the public policy in terms of section 23 of the Contract Act (writ petition No.16989 of 2010). k. The complaint involved the allegation that funds were withdrawn fraudulently through fake ATM Debit Card transactions. The Banking Mohtasib without recording evidence allowed the complaint and ordered the bank to refund the amount together with profit. The representation filed by the bank before the President was also dismissed (writ petition No.3469 of 2017). Needless to point out that in all the cases, the parties were at issue over the material factual aspects of the case. Regardless of the dispute on facts inter se the parties, the Banking Mohtasib procee ded to pass decisions on the complaints filed against the banks. 4. In writ petition No.37394 of 2015, writ petition No.4103 of 2017, writ petition No.37339 of 2016, writ petition No.4102 of 2017 and writ petition No.37338 of 2016, a challenge has been made to the constitutionality of sections 10, 11, 12 and 15 of FIORA which lays down the powers of the Banking Mohtas ib to, inter alia, grant temporary injunctions and the punish a person for contempt. The rest of the petitions simply challenge the orders passed by the Banking Mohtasib whereby disputes of the customers with the banks were adjudicated upon and in some instances the banks were directed to repay the amounts together with compensation. In other cases the decisions by the President of Pakistan on representations filed in terms of section 14 of FIORA have also been challenged.
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5. The counsels for the petitioners emphasized that the exercise of judicial power and function is the sole domain of courts and tribunals constituted under Articles 175 and 212 of the Constitution of the Islamic Republic of Pakistan, 1973 (the Constitution ). It is contended that the office of Banking Mohtasib which has been created through a statute cannot exercise judicial functions and powers by determining the rights of the private parties as it is not a court constituted under Article 175 of the Constitution. It was submitted that in passing decisions on the complaints filed by the customers of the bank, the Banking Mohtasib adjudicated upon disputed questions of fact which is the sole prerogative of courts. It is furthermore contended that the exercise of judicial powers and functions conferred on the Banking Mohtasib through Sections 10, 11, 12, 18 and 24 of the FIORA are in violation of the provisions of the Constitution. It was also stated that the jurisdiction of the Banking Mohtasib in respect of matters covered by Sections 82A and 82B of the Banking Companies Ordinance, 1962 (the Ordinance ) was ousted after the promulgation of the Payment System and Funds Transfer Act 2007 that pertains to Electronic Funds Transfer and all the matters are now to be decided by the court of competent jurisdiction under section 55 thereof. The vires of section 15 of the FIORA was challenged as it denied personal hearing to the parties 6. The learned counsels appearing on behalf of Banking Mohtasib as well as private respondents, on the contrary , supported the orders challenged in these writ petitions. It was contended that the office of the Banking Mohtasib acted strictly within the confines of law in passing the orders impugned before this Court to which no exception can be taken. It was also pointed out that jurisdiction was not exceeded by the Banking Mohtasib in exercising power under sections 82A, 82B and 82C of the Ordinance, which power in any case is not judicial power . It was also stated that the petitioners had alternate remedy of filing a representation available to them and as such the writ petitions were not maintainable. 7. Since the vires of sections 10 to 12 and 15 of FIORA were under challenge, notice under section 27-A CPC was issued to the learned Attorney General of Pakistan. The learned Deputy Attorney General adopted the arguments of the co-counsels. 8. Before proceeding to any appreciable length, it would be expedient to set out the legal provisions with which we are dealing with. Section 82A of the Ordinance deals with the appointment of Banking Mohtasib and the matters over which it can take cognizance. The relevant portions of the said provision read as under 82A. Appointment of Mohtasib .--There shall be a Banking Mohtasib who shall be appointed by the President in consultation with the Governor of the State Bank of Pakistan. (2) ..................................................................... (3) The jurisdiction of the Banking Mohtasib in relation to banking transactions shall be to-- (a) enquire into complaints of banking malpractices; (b) perverse, arbitrary or discriminatory actions; (c) violations of banking laws, rules, regulations or guidelines; (d) inordinate delays or inefficiency; and (e) corruption, nepotism or other forms of maladministration. (4) The Banking Mohtasib shall hold office a period of three years and shall not be eligible for any extension of tenure or for reappointment under any circumstances whatsoever. (5) .. Similarly , 82B sets out the power and authority of the Banking Mohtasib. Its operative part reads as under 82B.T erms and conditions of the Banking Mohtasib .-- (1) ..................................................................... (2) ..................................................................... (3) ..................................................................... (4) The Banking Mohtasib shall have the power and responsibility-- (a) to entertain complaints from customers, borrowers, banks or from any concerned body or organization; (b) to facilitate the amicable resolution of complaints after giving hearings to the complainant and the concerned bank; (c) to receive evidence on affidavit;
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(d) to issue commission for the examination of witnesses; and (e) in the event that complaints cannot be resolved by consent, to give finding which shall be acted upon in the manner set out herein. (5) The Banking Mohtasib shall exercise his powers and authority in the following manner:- (a) In relation to all banks operating in Pakistan:- The Banking Mohtasib shall be authorised to entertain complaints of the nature set out herein below:- (i) failure to act in accordance with banking laws and regulations including policy directives or guidelines issued by the State bank from time to time. Provided that if there is a dispute as to the proper interpretation of any regulations, directions or guidelines, the same shall be referred to the State Bank for clarification. (ii) delays or fraud in relation to the payment or collection of cheques, drafts or other banking instruments or the transfer of funds; (iii) fraudulent or unauthorised withdrawals or debit entries in accounts; (iv) complaints from exporters or importers relating to banking services and obligations including letter of credits; (v) complaints from holders of foreign currency accounts, whether maintained by residents or non-residents; (vi) complaints relating to remittances to or from abroad; (vii) complaints relating to mark-up or interest rates based on the ground of a violation of an agreement or of State Bank directives; and (viii) complaints relating to the payment of utility bills. (b) In relation to banks in the public sector .-- The Banking Mohtasib shall be authorized to entertain complaints against such banks on the following additional grounds as well-- (i) corrupt or malafide practices by bank officers; (ii) gross dereliction of duty in dealing with customers; and (iii) inordinate delays in taking decisions; and (c) The Banking Mohtasib shall not entertain any complaint or application which has already been disposed of by the State Bank, or any court in Pakistan. The cursory perusal of section 82A shows that the jurisdiction conferred on the Banking Mohtasib relates primarily to enquire into the complaints filed by the customers on the mal-practice and mal-administration of the banks/financial institutions and their officials with regard to the banking laws and regulations and policy directives issued by the State Bank of Pakistan. Section 82B, however , significantly expands the area of jurisdiction of Banking Mohtasib and allows him to exercise power and authority to entertain and adjudicate upon complaints filed, inter alia, regarding cases of fraud or delay in relation to banking instruments and/or transfer of funds, fraudulent/unauthorized entries or withdrawals from accounts etc. 9. The actions that Banking Mohtasib can take on the complaints filed before it against the banks are stipulated in section 82E of the Ordinance, which provision reads as under: 82E. Recommendations for implementation.-- (1) In the event the Banking Mohtasib comes to the conclusion that the complaint is justified, in part or in whole, he shall try and facilitate an amicable resolution or settlement by resort to mediation and failing that communicate his findings to the concerned bank with the direction -- (a) to reconsider the matter; (b) to modify or cancel the earlier decision, action or failure to take the appropriate action; (c) to pay reasonable compensation to the complainant as fixed by the Banking Mohtasib; (d) to take the requisite steps to improve the functioning or ef ficiency of the bank; and (e) to take such other remedial steps or actions as may be specified by the Banking Mohtasib. (2) The Banking Mohtasib may, in any case, he deems fit or proper , forward a report to the State Bank recommending-- (a) an inquiry, or the taking of the requisite steps or legal proceedings against a bank which has acted in violation of banking laws, procedure, regulations or directives of the State Bank; and
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(b) in the case of a bank in the public sector in cases of banking malpractices or corruption, nepotism or gross and flagrant dereliction by bank officers of their duties and responsibilities, the initiation of such action including a criminal prosecution or disciplinary proceedings as the State Bank may deem fit, either by itself, or through filing a report with the Government of Pakistan. (3) In no case whatsoever shall be Banking Mohtasib have the power to direct that loans, advances or finances be given to a complainant. (4) Any bank, or official of a bank, or a complainant aggrieved by any order passed by the Banking Mohtasib may, within thirty days of the order, prefer an appeal to the Governor State Bank, who shall decide the appeal within sixty days. (5) The findings of Banking Mohtasib shall be implemented by the concerned bank or financial institution within forty days and compliance thereof shall be submitted accordingly . In case an appeal against the decision of the Banking Mohtasib is preferred to the Governor State Bank the aforesaid period of forty days shall be reckoned from the date of decision of appeal. (6) Any order passed by the Banking Mohtasib which has not been appealed against within a period of thirty days from the date of order, or any order passed by the State Bank in appeal, as the case may be, shall become final and operative and if not implemented shall render the bank concerned to such action including the imposition of a fine or penalty as the State bank may deem fit, and in relation to a bank officer, to the appropriate disciplinary or other proceedings. (7) Nothing contained herein shall preven t a complainant from filing a suit against a bank in the event his complaint is rejected. 10. The afore-mentioned provisions make it evident that the Banking Mohtashib in the discharge of his functions has been vested with powers by the statute, which powers by definition are normally exercised by the courts. It is also clear that that is the purpose of the afore mentioned provisions when the Banking Mohtashib adjudicates upon a dispute between a bank and its customer. But if this is not enough, one only has to look at section 10 to 12 of FIORA which, in addition to sections 82B and 82E of the Ordinance, further augment the powers of the Banking Mohtashib. The relevant provisions of FIORA are reproduced hereunder: (c) "relevant legislation" means, the Office of Wafaqi Mohtasib (Ombudsman) Order, 1983 (P.O. No.l of 1983), the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (XXXV of 2000), the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000), the Banking Companies Ordinance, 1962 (LVII of 1962), and the Protection against Harassment of Women at the Workplace Act, 2010 (IV of 2010). 10. Powers of Ombudsman.--In addition to powers exercised by Ombudsman under the relevant legislation, he shall also have following powers of a civil Court, namely:-- (i) granting temporary injunctions; and (ii) implementation of the recommendations, orders or decisions. 11. Temporary Injunction.-- The Ombudsman may stay operation of the impugned order or decision for a period not exceeding sixty days. 12. Power to punish for contempt.-- An Ombudsman shall have power to punish for contempt as provided in the Contempt of Court Ordinance, 2003 (V of 2003). 15. Personal hearing.-- It shall not be necessary for the President or the Ombudsman to give personal hearing to the parties and the matter may be decided on the basis of available record and written comments filed by the Agency. No other provision is required to be mentioned as it becomes clear that just as administrative, arbitral and executive powers and functions are vested in the Banking Mohtasib so also is judicial power vested in the said office even to the extent of rendering decisions against banks and also finding their officials to be in contempt and depriving them of their liberty . Furthermore, the Banking Mohtasib under the FIORA has been granted the power of the civil court to implement its orders/decisions and recommendations. 11. In the context of the afore-mentioned provisions, the question that arises is whether Banking Mohtasib is a court and can perform judicial functions by determining rights and obligations of parties before it and to award
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compensation/profit to the customers of the banks. The next question that would arise and which is of fundamental importance is whether the office of Banking Mohtasib can be termed as a "court" and if it is an administrative tribunal, can it be conferred judicial powers to be exercised in adjudicating disputes between private individuals. 12. Article 175 of the Constitution relates to the establishment of courts and provides the jurisdiction that can be exercised by them. It reads as under 175. Establishment and Jurisdiction of Courts. (1) There shall be a Supreme Court of Pakistan, a High Court for each Province and a High Court for the Islamabad Capital Territory , and such other courts as may be established by law . Explanation:-- Unless the context otherwise, the words "High Court" wherever occurring in the constitution shall include "Islamabad High Court (2) No court shall have any jurisdiction save as is or may be conferred on it by the Constitution or by or under any law. (3) The Judiciary shall be separated progressively from the Executive within fourteen years from the commencing day. 13. It is clear that a court can be constituted through legislation, which legislation would also determine its contours as also the limitations on the exercise of such jurisdiction. Before proceeding further in the matter , it would be expedient and indeed necessary to understand and elaborate the interaction between jurisdiction and judicial power as these expressions often times are used as a synonymous. The term jurisdiction is often termed as the power and capacity of a court to enterta in, hear, determine and decide upon the subject matter in controversy between parties to a suit (see United States v. Arrendondo 6 Pet. (31 U.S.) 691 (1832). Similarly , in General Investment Co. v. New York Central R. Co., 271 U.S.228 (1926), jurisdiction has been held as the "power to entertain the suit, consider the merits and render a binding decision thereon ". 14. Judicial power is referred to as all the consequent things which a court may do after assuming jurisdiction. Judicial power is thus the totality of powers the court exercises when it adjudicates upon a case [see William v. United States 289 U.S.553 (1933) and Yakus v. United States 321 U.S.414 (1944)]. In the constitution of United States of America, the term "judicial power" has been used to denote the sovereign power of the state that is "....vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. " 15. In R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361, the concept of judicial power was described in the following terms: [J]udicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons. In other words, the process to be followed must generally be an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined; and the end to be reached must be an act which, so long as it stands, entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist. The expression "judicial power" has often posed difficulties for the Court to articulate it precisely and exhaustively . One way the Courts have approached this topic is by taking into account the traditional functions of a court which encompass within its fold adjudication and settlement of disputes between parties in accordance with law. The following passage from Huddart, Parker & Co Ptv Ltd v Moorehead (1909) 8 CLR 330, 357, which is often repeated in the judgments, shines some light on the concept of judicial power: I am of opinion that the words 'judicial power' as used in sec. 71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does and authoritative decision (whether subject to appeal or not) is called upon to take action.
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16. Jurisdiction, on the other hand, has much wider connotation than judicial power at least in the context of our Constitution. One area where the distinction is brought into sharp focus is the right to appeal, which is the creation of statute. The jurisdiction to entertain and adjudicate upon an appeal does not exist unless it is conferred by statute. Likewise the scope and ambit of the right to appeal can only be conferred by statute. Before the Supreme Court, in certain instances, leave to appeal is required to be obtained. Similarly, the right to appeal may be restricted on the questions of law and not on errors of fact or where the order or judgment does not finally disposes of the matter etc. There are certain other aspects of jurisdiction that may briefly be touched upon. The parties are not allowed to re-litigate issues that have already been decided by…
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