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Petitioner: Mian AYAZ ANWAR and others VS Respondent: STATE BANK OF PAKISTAN and others
Court Name: Lahore High Court Judge(s): Ayesha A. Malik Title: Mian AYAZ ANWAR and others vs STATE BANK OF PAKISTAN and others Case No.: W.P. No, 14172 of 2012 Date of Judgment:2018-12-24 Reported As: 2019 CLD 375 Result: Order accordingly
JUDGMENT
JUDGMENT AYESHA A. MALIK, J.---This common judgment decides upon the issues raised in the Writ Petitions detailed in Schedule "A", appended with the judgment, as all petitions raise common questions of law and facts. 2. The Petitioners are all customers of different financial institutions who have availed some form of finance from the Respondent Banks. Respondent No,1 is the State Bank of Pakistan which is arrayed in all the Petitions. The other Banks are the Bank of Punjab, Askari Bank Limited, J$ Bank, MCB Bank Limited, National Bank of Pakistan, Punjab Provincial Cooperative Bank Limited, Saudi Pak Industrial Company, NIB Bank, Summit Bank and Habib Metropolitan Bank Limited ("the Banks"). The Banks allege that the Petitioners owe money to the Banks for which, in some cases suit for recovery of finance have been filed before the competent court. During the pendency of the aforementioned suits the Banks also filed complaint before the State Bank of Pakistan, which then filed reference under section 31D of the National Accountability Ordinance, 1999 ("NAB Ordinance") before the National Accountability Bureau ("NAB") calling for an inquiry into the matter of willful default by the Petitioners. In some cases direct notices were issued to the Petitioners alleging willful default calling for immediate payment under the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("FIO"). 3. Consequently, the Petitioners have challenged; (a) notices issued under section 5(r) of the NAB Ordinance which called upon the Petitioners to show cause within seven days as to why they should not be proceeded against as willful defaulters under the NAB Ordinance; notices under section 2(g) of the FIO calling upon the Petitioners to pay their liability within thirty days failing which the Bank shall approach the investigating agency nominated by the Federal Government in
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terms of sections 20(7) and 20(8) of the FIO to proceed against the act of willful default as defined under section 2(g) of the FIO; and notices under section 19 read with section 31D of the NAB Ordinance which calls upon the Petitioners to provide information for the investigation with reference to the amounts owed to the Banks. The notices call upon the Petitioners to provide documentation and details for the benefit of the combined investigation team, which is inquiring into the matter of willful default and in some cases called upon the Petitioners to show cause as to why proceedings should not be initiated against them under the NAB Ordinance for willful default. The Petitions also challenged the vires of sections 5(r), 9, 19, 23, 27 and 31D of the NAB Ordinance seeking declaration that these provisions are ultra vires of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution") and are in direct conflict with the provisions of the subsequently promulgated special law, the FIO. Some Petitioners have challenged the vires of sections 2(g) and 20(8) of the FIO for being ultra vires the Constitution giving unguided and excessive power to the Government appointed agency to investigate into the matter of willful default. 4. All the Petitioners before the Court are therefore aggrieved by various actions taken by NAB at the behest of the State Bank of Pakistan and the Banks who for the purposes of recovering amounts stated to be due from the Petitioners have alleged willful default in order to enable NAB or the Federal Investigating Agency ("FIA") to recover and settle the debt of the Banks. The Petitioners' case is that the act of initiating inquiry or investigation or calling upon them to show cause on allegations of willful default is illegal and contrary to the mandate of the FIO. It is their case that the question whether there is default by a customer of a financial obligation to a financial institution in such cases, jurisdiction vests with the Banking Court established under the FIO. It is for the Banking Court to determine whether there is default in the repayment of financial obligations and if the Banking Court makes a determination on the issue of default then the question whether the default was willful be decided. In support of their arguments, learned counsel have relied upon "Syed Mushahid Shah and others v. Federal Investment Agency and others" (2017 SCM R 1218) where the issue of parallel jurisdiction has been decided by the august Supreme Court of Pakistan with specific reference to the FIO and the Banking Courts established thereunder. It is also their case that NAB and the FIA's inquiry and interference is an infringement of their fundamental right to fair trial under Article 10A of the Constitution. With respect to the provisions of the FIA under section 20(8), the case of the Petitioners is that the FIA has no jurisdiction in such matters and the impugned provision grants immense discretionary powers to the FIA or any nominated Government agency so as to prejudice the basic rights of the customer. Their argument is the same as that for NAB, that parallel action by the FIA or any Government Agency, for pursuing criminal charges before the conclusion of the civil proceedings will seriously prejudice the rights of the Petitioners. It was argued that this power amounts to unfettered discretion at the hands of the government agency allowing them to harass and coerce the customer into paying amounts which are not due to the Banks. 5. On behalf of the State Bank of Pakistan, the Bank of Punjab being the Respondents in most of the cases, along with other Banks, report and parawise comments have been filed. Learned counsel stated that the Governor State Bank of Pakistan can issue show cause notice under section 5(r) of the NAB Ordinance alleging therein the offence of willful default and subsequently, can make recommendations to the Chairman NAB for proceedings against a willful defaulter in order to ensure recovery of defaulted amounts. As per the NAB Ordinance, the Governor State Bank of Pakistan makes a tentative assessm ent of the liability and issues notices under section 31D of the NAB Ordinance. Due process is followed and a decision with respect to the willful default is made under the NAB Ordinance. Hence there is no violation of Article 10A of the Constitution. Furthermore, it is their case that the NAB has concurrent jurisdiction with the Banking Court which jurisdiction has been rightly exercised by the Respondents. Even otherwise they argued that civil and criminal
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proceedings can be conducted at the same time. Hence there is no merit in these petitions which are liable to be dismissed. 6. Notice in terms of Section XXVII-A of the Civil Procedure Code, 1908 has been issued to the Federation of Pakistan. On behalf of Federation, learned DAG stated that the Ministry of Law and Justice is not involved in these issues and no relief is claimed against the Federation. The issues raised in these petitions relate directly to the recovery of outstanding loans, which is a matter inter se the customer and the financial institutions and the State Bank of Pakistan. As to the vires of the law challenged, the learned DAG argued that the laws are in consonance with the Constitution and the august Supreme Court of Pakistan has settled the issues related to the challenge against the vires of the NAB Ordinance in Khan Asfandyar Wall and others v. Federation of Pakistan through Cabinet Division, Islamabad and others (PLD 2001 SC 607). 7. On behalf of Respondent No,3 NAB, report and parawise comments have also been filed. So far as the vires of the offence of willful default are concerned, these have been upheld by the august Supreme Court of Pakistan in PLD 2001 SC 607 (supra). It was argued. that in terms of the judgment certain recommendations were made with reference to amending the NAB Ordinance which recommendations were duly implemented and the NAB (Amendment) Ordinance, 2001 and 2002 were promulgated on 10.8.2001 and 13.11.2002 respectively; that the purpose of the NAB Ordinance and the FIO is totally separate and distinct and each will work within the ambit of its own objective. It is their case that no harassm ent is made out to the Petitioners and that NAB had acted strictly in accordance with law. Further these cases relate to misappropriation and criminal breach of trust along with corruption and loss of amounts due to financial institutions, which falls within the ambit of the jurisdiction vested with NAB. Moreover the State Bank of Pakistan upon a request by the Bank of Punjab and the Respondents Banks probed into the matter of willful default by the Petitioners who were not paying the amounts due to the Banks. A joint investigation team was formed to calculate the outstanding liability of the Petitioners and after a determination was made by the investigation team, notices were issued to the Petitioners giving them a fair chance to respond and explain why action should not be taken against them under the NAB Ordinance for willful default. 8. On the basis of what has been argued, the issues before the Court are the vires of sections 5(r), 19 and 31D of the NAB Ordinance and whether NAB can conduct an inquiry or investigation into willful default by a customer of a financial institution especially if a suit for recovery of defaulted amount is pending before the competent Banking Court. The question of jurisdiction is also involved that is whether the NAB Ordinance and the FIO have parallel jurisdiction to determine the issue of willful default or whether FIO's jurisdiction takes precedence over NAB Ordinance. With respect to the FIO, the vires of sections 2(g) and 20(8) are under challenge and whether sections 20(7) and (8) give unfettered discretion to the government agency nominated to investigate the offence of willful default. Relevant Law 9. The basic law under challenge before this court is the NAB Ordinance specifically the powers contained in sections 5(r), 19 and 31D. For ease of reference, these provisions are reproduced hereunder:- 5(r) Willful default a person [or a holder of public office] is said to commit an offence of willful default under this Ordinance if he does not pay [or continues not to pay] or return or repay the amount [due from him] to any bank, financial institution, cooperative society, Government department statutory body or an authority established or controlled by a Government on the date that it became due [as per agreement containing the obligation to pay, return or repay or] according to the laws, rules, regulations, instructions, issued or notified by [the State Bank of Pakistan, or the bank,] financial institution, cooperative society, Government Department, statutory body or an authority
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established or controlled by a Government, as the case may be, and a [thirty days' notice has been given to] [such person or holder of public office] Provided that it is not willful default under this Ordinance if [such person or holder of public office] was unable to pay return or repay the amount as aforesaid on account of any willful breach of agreement or obligation or failure to perform statutory duty on the part of any bank financial institution, cooperative society, government department, statutory body or an authority established or controlled by Government: Provided further that in the case of default concerning a bank or a financial institution a seven days notice has also been given to [such person or holder of public office] by the Governor, State Bank of Pakistan: Provided further that [the] aforesaid thirty days or seven days notice shall not apply to cases pending trial at the time of promulgation of the National Accountability Bureau (Amendment) Ordinance, 2001. 19 Power to call for information The Chairman NAB or an officer of the NAB duly authorized by him may, during the course of an inquiry or investigation of an offence under this Ordinance:- (a) call for information from any person for the purpose of satisfying himself whether there has been any contravention of the provisions of this Ordinance or any rule or order made thereunder. (b) require any person to produce or deliver any document or thing useful or relevant to the inquiry or investigation; (c) examine any person acquainted with the facts and circumstances of the case; (d) require any bank or financial institution, notwithstanding anything contained in any other law for the time being in force, to provide any information relating to any person whosoever, including copies of entries made in a bank's or a financial institution's books such as ledgers, day books, cash books and all other books including record of information and transactions saved in electronic or digital form, and the keepers of such books or records shall be obliged to certify the copies in accordance with law and (e) where there is reasonable suspicion that any person is involved in or is privy to an offence under this Ordinance, the Chairman NAB may, with the prior approval in writing of the High Court concerned, direct that surveillance of that person may be carried out through such means as may be necessary in the facts and circumstances of the case and the Chairman NAB may in this regard seeks the aid and assistance of any Government agency and the information so collected may be used as evidence in the trial under this Ordinance. Provided that the copies obtained or information received or evidence collected under classes (d) and (e) shall be kept confidential and shall not be used for any purpose other than for legal proceedings under this Ordinance. 31D Inquiry, investigation or proceedings in respect of imprudent bank loans, etc. Notwithstanding anything contained in this Ordinance or any other law for the time being in force, no inquiry, investigation or proceedings in respect of imprudent loans, defaulted loans or rescheduled loans shall be initiated or conducted by the National Accountability Bureau against any person, company or financial institution without reference from the Governor, State Bank of Pakistan: Provided that cases pending before any Accountability Court before coming into force of the National Accountability Bureau (Second Amendment) Ordinance, 2000, shall continue to be prosecuted and conducted without reference from the Governor, State Bank of Pakistan. 10. The NAB Ordinance is a special law, promulgated in 1999 to eradicate corruption and corrupt practices and to hold people accused of such practices accountable. The objective of the law is to protect public money and ensure its recovery. The nature of investigation and inquiry under the
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NAB Ordinance is therefore a kind of special dealing with offences which are deemed necessary in order to protect public money A and ensure that thed public exchequer is not deprived of amounts due to it. It also ensures that cases of corruption and corrupt practices are duly investigated in order to hold accountable persons involved in the abuse of authority and office. At various different times, the provisions of the NAB Ordinance have been challenged for being ultra vires the Constitution and the fundamental rights enshrined thereunder. However, the august Supreme Court of Pakistan in PLD 2001 SC 607 (supra) has upheld the provisions of the NAB Ordinance stating therein that they are not ultra vires the fundamental rights or the Constitution. 11. The FIO is also a special law promulgated in 2001 to provide effective remedy for the recovery of finances extended by Banks and for the fulfillment of obligation defined in section 2(e) of the FIO in favour of the financial institution. The FIO prescribe the procedure to be adopted for the purposes of invoking the jurisdiction of the Banking Court for recovery of amounts due to The financial institution or breach of any obligation as defined under the FIO. The law prescribes for a special procedure to be followed when filing a suit under the FIO and also prescribes, for certain offences which are triable before the Banking Court. Hence the Banking Court is a specialized court where the issue of `default' can be contested which established for the purposes which pass judgment and decree for recovery of outstanding amounts in cases of default. Opinion of the Court 12. So far as the question of vires of the various provisions of the NAB Ordinance are concerned, in particular section 5(r) and section 31D of the NAB Ordinance, the matter in issue has already been decided by the august Supreme Court of Pakistan in the case of PLD 2001 SC 607 (supra). The petition before the august Supreme Court of Pakistan sought to challenge the vires of the NAB Ordinance, as amended from time to time, on the ground that the NAB Ordinance is ultra vires of the Constitution and is in violation of the fundamental rights guaranteed under the Constitution. The Court considered several questions, of which two of the questions have again been raised in the Petitions before this Court that is whether there is parallel judicial system created under the NAB Ordinance for recovery of amounts due in disregard to the provision of the Constitution and whether section 5(r) of the NAB Ordinance which defines "willful default" is ultra vires the constitutional provisions. The august Supreme Court of Pakistan examined the law in great detail on the question of parallel jurisdiction, holding therein that there is no bar under the Constitution to investigate and criminalize or prosecute the conduct of those who are guilty of not discharging their contractual obligation in repayment of loans. The Court while relying on Syed Zafar Ali Shah and others v. General Pervez Musharraf, Chief Executive of Pakistan and others (PLD 2000 SC 869) held that there is no bar to promulgate legislation to make such conduct an offence, which should be duly investigated and prosecuted through fair trial. The Court also found that the provisions of the NAB Ordinance, in particular with reference to the creation of the offence of willful default and the punishment given thereunder did not offend Article 12 of the Constitution. With specific reference to section 5(r) of the NAB Ordinance guidelines were provided so as to ensure that due process was followed and those accused of willful default get a fair trial. Consequently section 31D of the NAB Ordinance was inserted whereby calling for a report from the Governor State Bank of Pakistan was made necessary before any inquiry or investigation under the NAB Ordinance. The august Supreme Court of Pakistan concluded that by adopting the given guidelines an investigation may reach a logical conclusion and it will ensure that in cases of willful default due process is followed for the purposes of the investigation. Therefore we find that the issue of the vires of the NAB Ordinance is settled on the basis of the judgment cited at PLD 2001 SC 607 (supra). 13. On the issue of concurrent jurisdiction of the FIO and the NAB Ordinance, in a case before the august Supreme Court of Pakistan, the trying of offences under a special law as opposed to the general law was considered in 2017 SCM R 1218 (supra). The question before the Court was whether
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the Banking Courts constituted under the FIO have exclusive jurisdiction to try offences mentioned therein, to the exclusion of the special courts constituted under the Offences in Respect of Banks (Special Courts) Ordinance, 1984 ("ORBO"), the courts of ordinary criminal jurisdiction under the Code of Criminal Procedure, 1898 ("Cr.P.C.") read with Pakistan Penal Code, 1860 ("P.P.C.") and the inquiry and investigation by the FIA under the Federal Investigation Agency Act, 1974 ("FIA Act"). In these cases financial institutions filed complaints before the Special Courts constituted under the ORBO and the FIA Act as well as registered FIRs under the P.P.C. with respect to cheques that had been dishonoured. The customers approached the High Court challenging the exercise of jurisdiction under ORBO, P.P.C. and FIA Act on the ground that the Banking Courts established under the FIO have exclusive jurisdiction in such cases. The august Supreme Court of Pakistan considered the case at length and held that as a consequence of section 4 of the FIO, the Banking Courts have exclusive jurisdiction to determine whether an offence has been committed by a customer in terms of section 20 of the FIO. The Court also held that the FIO shall have an overriding effect on all those cases which are covered by it, concomitantly the offences not covered by the FIO would be triable under the ORBO. The reasons explained by the Court in para 16 of the judgment are as follows:- Were both laws to apply concurrently and permit of parallel platforms for the adjudication of offences under both laws then banks/financial institutions would always choose to initiate proceedings under the more onerous law, in this case the ORBO. Such an interpretation would give banks/financial institutions unbridled power to choose the forum before which trial of offences should take place, and they would obviously choose the Special Courts under the ORBO being more burdensome and prejudicial to the accused (as demonstrated above). A natural corollary is that in such circumstances the Ordinance, 2001 would, in effect, be rendered redundant. This is not permissible under any principle of interpretation of law when the Courts are trying to reconcile two potenially conflicting laws; our duty is to bridge the gap between what is and what was intended to be. We are not willing to attribute redundancy to the legislature. We do not wish to give financial institutions the unrestricted power to choose, when there has been an alleged dishonor of a cheque, between section 20(4) of the Ordinance, 2001 and section 489-F of the P.P.C., as they would of a certainty opt to initiate proceedings under the latter which offence carries a greater punishment than the former. Hence in the opinion of the august Supreme Court of Pakistan financial institution cannot choose whether to initiate proceedings under ORBO, P.P.C. or FIA Act or whether to proceed under the FIO as the ability to make such a choice means giving unfettered power to the financial institution enabling them to exert unfair power over the customer. The Court also opined that to allow ORBO, P.P.C. or the FIA Act to operate concurrently with FIO would offend the provision of Article 25 of the Constitution which guarantees that all citizens are equal before the law and are entitled to equal protection of law. The august Supreme Court of Pakistan also relied on Article 4 of the Constitution holding that customers cannot be left to speculate on which offence they will be charged with, under which law and before which forum. That the rule of law requires law to be intelligible, clear and predictable for it to be accessible to citizens. Hence the court held that FIO would have an overriding effect over ORBO and P.P.C. and the FIA Act. 14. On this premise we now set out to examine the question of 'willful default' and whether the offence of willful default is to be decided under the FIO or can it be decided, in parallel proceedings under the NAB Ordinance. Section 5(r) was inserted in the NAB Ordinance on 3.2.2000 by Ordinance IV of 2000 and the 3 provisos were inserted in the NAB Ordinance vide the National Accountability Bureau (Amendment) Ordinance, 2001 promulgated on 10.8.2001. This definition in section 5(r) of the FIO has been interpreted in The State through Chairman NAB and others v. 'Muhammad Asif Saigol and others (PLD 2016 SC 620) by the august Supreme Court of Pakistan to mean a deliberate and calculated refusal to pay. The august Supreme Court of Pakistan held that to
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constitute the offence of "willful default" the prosecution, in addition to establishing default, has to prove that the default was willful, that is an intentional and conscious act. Consequently mere inability to pay will not constitute the offence of "willful default" meaning thereby that the element of willfulness must be present where there is a default. 'Willful default' is also defined in Section 2(g) of the FIO as follows: 2(g) willful default (i) deliberate or international failure to repay any finance, loan, advance or any financial assistance received by any person from financial institution after such payment has become due under the terms of any law or an agreement, rules or regulations issued by the State Bank of Pakistan; (ii) Utilization of finance, loan advance or financial assistance or a substantial part thereof, obtained by any person from a financial institution for a purpose other than that for which such…
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