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Petitioner: Junaid Asad Khan and another VS Respondent: The State
Court Name: Sindh High Court Judge(s): Muhammad Karim Khan Agha, Zulfiqar Ali Sangi Title: Junaid Asad Khan and another vs The State Case No.: Criminal Accountability Appeal No. 22 of 2017 Date of Judgment:2020-10-07 Reported As: PLD 2021 Sindh 152 Result: Appeal dismissed
JUDGMENT
JUDGMENT MOHAMMAD KARIM KHAN AGHA, J.---Appellants Junaid Asad Khan son of Asad Abbas Khan and Asad Abbas Khan son of Muhammad Ramzan Khan were convicted by the learned Accountability Court No.II, Karachi in Reference No.20/2016 vide judgment dated 23.10.2017 whereby the appellants were convicted under section 10(a) of the National Accountability Ordin ance, 1999 (NAO) and sentenced to suffer R.I. for ten (10) years and to pay fine of Rs.54.306 million in terms of section 11 of the NAO. In case of default in payment of fine, the appellants were ordered to undergo R.I. for a further period of two (02) years each. The appellants were also disqualified for a period of 10 years under section 15(b) of the NAO to be reckoned from the date of release after serving the sentence for seeking or from being elected, chosen, appointed or nominated as a member or representative of any public body or any statutory or local authority or in service of Pakistan or of any Province and obtain any financial facility in the form of loan or advance from any financial institutions controlled by Government for the period of 10 years. 2. The brief facts relevant for the purpose of disposal of these appeals are that a reference was forwarded by the Governor State Bank of Pakistan under section 31-D of NAO, 1999 wherein it was alleged that Proprietor and Guarantor of Messrs Kohinoor Flour Mills (appellants) committed the offence of wilful default of loan obtained from KASB Bank (now Bank Islami) and did not repay the same to Messrs Bank Islami. Subsequently inquiry was initiated and thereafter investigation was authorized by the D.G. NAB on 22.09.2015. 3. During investigation, it was revealed that Messrs Kohinoor Flour Mills located at Plot Nos. 429-441 and 442, Main Korangi Creek Road, Karachi was incorporated on 09.07.2009 as a proprietorship firm which was dealing in grinding and milling of wheat and producing the flour , maida and its bi products. 4. It is alleged that accused Junaid Asad Khan, Proprietor of Messrs Flour Mills had applied for financial facility in the month of March 2010 to KASB Bank (now Bank Islami), Khalid Bin Waleed Road, Karachi. Accordingly a
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running finance facility of Rs.40 million was sanctioned vide KASB Bank on 03.06.2010 repayable on 31.03.201 1. Accused No.2, Asad Abbas Khan was guarantor in respect of the said loan. The facility was disbursed on 20.09.2010 through pay order dated 20.09.2010 issued in favour of NIB Bank Ltd. for the sum of Rs.41,265,363/ 65. Intimation of swap transaction dated 20.09.2010 was also received by KASB Bank from NIB Bank Ltd. 5. During investigation it was also revealed that numerous securities were produced to KASB Bank (now Bank Islami) against numerous finance facilities. 6. It is further alleged that the terms and conditions were accepted by the borrower company through its proprietor , accused No.1 Juanid Asad Khan and thereafter the loan was accordingly sanctioned but accused Junaid Asad Khan and Asad Abbas Khan being proprietor and guarantor respectively , failed to repay the financing facility/loan availed from KASB Bank, therefore, KASB bank approached to the Banking Cour t No.II, Karachi and accordingly the Court passed decree dated 28.10.2014 for Rs.39,996,646/ - along with cost of funds from the date of default i.e. 12.10.201 1 till realization of entire decretal amount in favor of KASB Bank. It is further alleged that despite the final decree passed by the Banking Court No.II, Karachi accused persons did not repay the decreed amount i.e. 39,996,649/-. 7. That investigation revealed that accused No.1 Juanid Asad Khan and accused No.2 Asad Abbas Khan being proprietor and guarantor of Messrs Kohin oor Flour Mills failed to repay the loan amount and thereafter KASB Bank approached to the Governor State Bank of Pakistan who after completion of all legal requirements of the law forwarded the Reference under section 31-D to Chairman NAB for recovery of defaulted amount of approximately Rs.54.306 million. 8. On 09.03.2016 this reference was transferred to the Accountability Court No.II, Karachi for disposal in accordance with law. As per Reference, accused Junaid Asad Khan and Asad Abbas Khan were shown on pre- arrest bail and accordingly notices were issued for their appearance. On 05.04.2016 accused persons joined trial and copies under section 265-C, Cr.P.C. were supplied to them on the same date. Thereafter , a formal charge against both accused persons was framed on 22.04.2016 to which both the accused persons pleaded not guilty and claimed trial. 9. In order to prove its cases, the prosecution examined 07 witnesses who exhibite d various documents in support of the prosecution case where after the prosecution closed its side. The appellants/accused recorded their statements under section 342, Cr.P.C. denying the allegations against them. Neither of the appellants gave evidence on oath nor called any DW in support of his defence case. 10. The trial court, after hearing the parties and assessing the evidence, convicted and sentenced the appellants through the impugned judgment dated 23.10.2017, against which the appellants have filed the instant appeal against their convictions. 11. The facts of the case as well as evidence produced before the trial court find an elaborate mention in the impugned judgment, therefore, the same are not reproduced here so as to avoid duplication and unnecessary repetition. 12. Learned counsel for the appellants contended that the appellants were completely innocent; that there was no evidence against them; that the prosecut ion had not been able to prove that this was a case of wilful default as defined under the NAO and that this was a case of simple default for which the appellants were prepared to pay the amount decreed against them by the concerned Banking Court and for any or all the above reasons the appellants should be acquitted of the charge by extending to them the benefit of the doubt. In support of his arguments, the learned counsel relied upon the cases of The State through Chairman NAB and others v. Muhammad Asif Saigol and others (PLD 2016 Supreme Court 62), Syed Mushahid Shah and others v. Federal Investment Agency and others (2017 SCMR 1218 ) and Alamdar Hussain v. National Accountability Bureau through Chairman and others (PLD 2017 Lahore 479 ). 13. On the other hand learned Special Prosecutor NAB has fully supported the impugned judgment and contended that the prosecution has proved its case of wilful default as defined in section 5(r) of the NAO after the case was referred to the NAB under section 31(D) of the NAO by the Governor of the SBP against the appellants beyond a
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reasonable doubt through reliable and trust worthy oral and documentary evidence and that as such the appeals be dismissed. 14. We have heard the arguments of the learned counsel for the parties, gone through the entire evidence which has been read out by learned counsel for the appellants and the impugned judgment with their able assistance and have considered the relevant law including that cited at the bar . 15. At the outset it should be mentioned that both of the appellants are on bail granted by this court. 16. After our reassessment of the evidence we find that the prosecution has proved its case beyond a reasonable doubt against the appellants and as such the appeals are dismissed for the reasons mentioned herein after . 17. Interestingly , it appears that the appellants have never disputed the monies which they owe the KASB bank which repayment KASB bank was demanding. Even after the passing of the decree against them the appellants still however did not pay the amount decreed which has now obtained finality and now the execution application is only pending on account of this appeal. 18. The key issue in our mind in deciding this appeal is what actually amounts to wilful default and the date when the alleged wilful default occurred and whether the appellants are guilty of wilful default under the NAO. 19. Prior to amendments made to the NAO by Ordinance (IV) of 2002 dated 3rd February 2000 the definition of wilful default had not been clearly defined under the NAO which lead to the addition of section 5(r) NAO in the definition section. of the NAO through the aforesaid amendment. There were also no safe guards in the NAO to assist in distinguishing what amounted to simple default which could be dealt with by the banking courts through banking recovery legislation and wilful default which would fall under the purview of the NAO. Such safeguards in the form of section 31(D) were added to the NAO after the case of Khan Asfandyar Wali v. Federation of Pakistan (PLD 2001 SC 607) which considered the constitutionality of the NRO in its entirety on 5th July 2000 vide NAO (second amendment) Ordinance 2000.These amendments however were-not expressly stated to be retrospective and as such only applied from the day that the amendment Ordinances were promulgated as was held in the case of Muhammed Asif Saigol (Supra). 20. Thus, up to July 2000 whether a case of wilful default was one which fell within the ambit of the NAO had to be determined by reference to the case law existing at that time. 21. Thus, as pointed out in the case of Muhammed Asif Saigol (Supra) a case would only meet the requirement of wilful default if it met the requirements as set out as under at P .636 para 16; "The offence of wilful default in these cases was required to be considered in the light of the law at the time, which was before the insertion of clause (r) into section 5 of the NAB Ordinance. At that juncture to constitute the offence of wilful default the prosecution, in addition to establishing the subsistence of a default, had to also prove that the default was wilful. The aforesaid case law confirms that in order to constitute a wilful default, there must be a deliberate and calculated refusal to pay, i.e. a conscious and intentional act. The mere inability to pay did not constitute the offence of wilful default. The prosecution however made no attempt to establish that the default was wilful. "(bold added) 22. Thus, this was the standard/ test to be applied to cases of wilful default under the NAO before the 2000 Amendment Ordinances referred to above. Since the default in this case was reported to the SBP by letter dated 10.01.2014 the authorities before 2000 in respect of wilful default will not be applicable in determining whether the appellants had committed wilful default under the NAO. Instead the new added provisions to the NAO as mentioned earlier would take effect in determining whether the default was wilful or not which provided protections to the defaulter in determining whethe r his default was wilful or not which were not present before the aforementioned amendments to the NAO as mentioned earlier as was recognized in the case of Muhammed Asif Saigol (Supra) in the following terms at P:628 as under; "The requirement to obtain a report from the Governor of the State Bank acted as a safeguard against the misuse by financial institutions of the NAB Ordinance to seek recovery of their outstanding amount and also acted as a check on overzealous officers of the NAB. However , the benefit of this important safeguard was not available to MAS as the effect of this provision was not made retrospective ". (bold added)
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23. Under the amended scheme of the NAO dealing with potential cases of wilful default a bank or other financial institution could make a complaint to the State Bank of Pakistan (SBP) under section 31(D) that one of its customers has committed wilful default by defaulting on its loans or other financial facilities and thereafter the SBP would investigate the matter and after giving the customer a show cause notice and considering the customers defense it would determine whether in the opinion of the SBP the customer's case was one of wilful default or simple default. If it was a case of wilful default the matter would be forwarded to the NAB by the Governor SBP to be proceeded with under the NAO. If it was a case of simple default the case would be returned to the complainant bank informing it of its decision. There is no bar in law from recovery proceedings and proceedings for wilful default under the NAO proceeding in parallel. 24. For ease of reference sections 5(r) and 31(D) of the NAO are set out below; "5. (r) "Wilful default "; a person or holder of public office is said to commit an offence of wilful default under this Ordinance if he does not pay, or continu es 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 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 of Pakistan, statutory body or an authority 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 wilful 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 wilful breach of agreement or obligation or failure to perform statutory duty on the part of any bank, .financial institution, cooperative society , Government department, vtatutory body or an authority established or controlled by a 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 pend ing trial at the time of promulgation of the National Accountability Bureau (Amendment) Ordinance, 2001". "S. 31-D. Inquiry , investigation or proc eedings 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 re-scheduled 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". 25. With regard to proving wilful default under section 5(r) NAO in the case of Mian Munir Ahmed v. State (2004 PCr.LJ 2012 ) it was held that the following ingredients must be proved at P .2018 Para 14 as are listed below; "14. For attracting the above provisions of law, it is essential that the prosecu tion should prove the following ingredients: - (i) There should be a person within the meaning of Ordinance, 1999. (ii) There should be a Bank, Financial Institution, Cooperative Society , Governmen t Department, Statutory Body or an Authority established or controlled by a Government. (iii) There should be an amount taken by the person mentioned at S. No. (i) from any institution as mentioned at S. No. (ii). (iv) There should be dues. (v) That such persons did not pay, or continues not to pay, or return or repay such dues on the date it became due as per agreement containing an obligation to pay, return or repay the same according to law, rules, regulations or instructions issued or notified by the State Bank of Pakistan and other abovementioned institutions. (vi) That a period of 30 days has expired thereafter .
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15. If the above ingredients are proved, then the person will be held guilty of wilful default . (bold added) 26. We have seen a letter on record dated 10.01.2014 where by the KASB bank made a complaint to the SBP that the appellants had committed wilful defau lt and explaining the reasons why this was a case of wilful default falling under the purview of the NAB. This letter is reproduced below for ease of reference. PR/KASB/ 15/2014 E.D.(DF AND BPRD) January 10, 2014 Diary No.2884 Date: 15.1.2016 The Governor , State Bank of Pakistan, Chundrigar Road, Karachi. Dear Sir , SUBJECT : KOHINOOR FLOUR MILLS-FORMAL REQUEST FOR ISSUANCE OF 7 DAYS NOTICE FOR PAYMENT OF OUTST ANDING LIABIL ITIES TOWARDS KASB BANK LTD. AND IN CASE OF FAILURE FOR WARDING REFERENCE T O NAB UNDER SECTION 5(R) OF THE NAB ORDINANCE, 1999. We are formally reporting commission of offence of wilful default, which is committed by the accused mentioned herein below and requesting you to issue 7 days' notice to the accused for payme nt of all outstanding liabilities to the bank and in case of their failure to forward reference to NAB for initiation of proceedings against the accused under NAB Ordinance, 1999. Total amount payment by the accused to the Bank is Rs. 54,305, 976.00 (Principal of Rs. 39, 996, 649.00 and mark-up/cost of fund of Rs.14,309,328.00 calculated up. to 31.12.2013). The brief facts of the case are enumerated below:- 1) That the Bank is a financial institution under the meaning of Section 2(a) of the Financial Institution (Recovery of Finance) Ordinance 2001, having its principal office at Business and Finance Centre, I. I. Chundrigar Road, Karachi and doing business of banking under your supervision. 2) That the accused are 1) Mr. Junaid Asad Khan proprietor/ mortgagor of Kohinour Flour Mills, a proprietorship firm under whose name the facility had been allowed and 2) Mr. Asad Abbas Khan, who is the guarantor of the liability . Their office and residential addre sses have been given in the notice issued to them on 11.10.2013. The copy of the notice is enclosed as Annexure A. The notices were received by the accused. 3) That at the request of the accused, the outstanding liability of Rs.4I,265,363.65 was swapped from NIB Bank after the competent authority of the Bank had approved the limit of Rs.55.0 M (RF Rs.40.0 M, CF Rs.10.0 M, LG Rs.5.0 M) on 11.05.2010. Letter was issued to the accused on 02.06.2010, which was duly accepted by the accused on 09.06.2010. Copies of BBFS, Sanction, offer and acceptance, copy of PO and acknowledgement from NIB are enclosed as Annexure B. 4) That the facilities were swapped and enhanced against the mortgage of industrial properties bearing reference Nos. 429, 441 and 442 situated at Main Korangi Creek Road, Near PARCO, Karachi, valued at Rs.84.724 M as per valuation carried out by Oriental Engineering Services on 14.04.2010. The copies of valuation along with vetting by lawyers are enclosed as Annexure C. 5) That the accused signed the following documents as evidence towards their repayment obligations: a. Agreement for Financing for Short/ Medium/ Long Terms on Mark-up Basis (Running Finance) executed on 09.06.2010. b. Demand Promissory Note dated 09.06.2010. c. Letter of hypothecation on movables, book debts and receivables dated 09.06.2010. d. Letter of pledge of goods dated 09.06.2010. e. Personal guarantees signed by both the accused dated 09.06.2010. (Copies of these documents are enclosed with the relevant Annexure 6). 6) That the accused also provided the Bank with the following original documents of property through NIB Bank in order to secure the facilities:-
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a. Three Sale Deeds of properties along with mutation and search certificates bearing plot Nos. 429, 441 and 442, situated at Main Korangi Creek Road, Near P ARCO, Karachi. b. Memorandum of Deposit of T itle Deeds (Copies of these documents are attached with the relevant Annexure 6). 7) That the accused failed to complete the registered mortgage formalities after the liability was taken over and the Bank issued a notice to the accused on 23.12.2010 to settle the liability . Another notice was issued by the Bank on 22.08.201 1 against demanding the settlement of liability . On 27.08.201 1, our lawyers informed us that extracts and NOCs given to the Bank seemed fake/ bogus. On 03.10.201 1 the accused were served with another notice advising them of dishonor of cheques given for mark-up adjustment and informing them of certain bogus documents given to the Bank. On 03.11.201 1 yet another notice was served on the accused. In reply the accused on 19.11.201 1 informed the Bank that they were in the process of swapping the liability with another Bank. On 24.11.201 1 a legal notice was served on the accused. In reply the accused on 03.12.201 1 reconfirmed that the liability would be swapped with another Bank. When no progress took place, the accused were given another opportunity to submit a suitable proposal for settlement vide our letter dated 29.05.2012. On 05.07.2012 the Bank demanded adjustment of overdue mark-up. Another legal notice was issued to the accused on 27.07.201 1 by our advocate. The copies of all above documents are enclosed as Annexure D. 8) That the Bank initiated legal proceedings by filing a recovery suit on 27.11.2012 in the Banking Court. Copies of plaint, L TD Application and Replication are enclosed as Annexure-E. 9) That considering the wilful default and non-cooperative behavior , our lawyer also filed an application under Section 16 of the Recovery of Finances Act for attachment of property before judgment on 24.04.2013. The copy of the application is enclosed as Annexure F . 10) That the cases are still at the stage of L TD hearing and rehearing of application. 11) That no positive response has come from the accused in reply to our notice of 1 1.10.2013. 12) That it is evident that the accused are wilful defaulters based on the following grounds: I. The accused have acted from the incep tion with mala fide intentions and have not been able to pay the amount which were taken over from NIB Bank. II. The accused in their defence application have admitted certain liability but failed to come forward with any settlement. III. The accused have deliberately failed to create registered mortgage, although they had accepted the condition in the letter of offer that the formalities would be completed within 30 days. IV. The accused have also been involved in submitting the incorrect documents pertaining to the properties. V. The accused are still in business and operating the mill as visit report from our officials discloses as per Annexure G. VI. The accused have not responded positively to our requests to settle the account amicably . 13) That the Bank has obtained a legal opinion in terms of BPD Circular Letter No.36 of 2004, which is enclosed as Annexure H. In the light of the above facts; total disregard to the return of bank's money; taking undue advantage of lengthy judicial process, withholding sizeable public funds and using them for the purpose other than the intended and declared purposes all clearly demonstrate that the accused have intentionally , willfully defrauded the Bank and have deliberately failed to pay the outstanding liability . We, therefore, request you to serve 7 days' notice on the accused for payment of total outstanding liabilities to the Bank and in case of no response, forward the reference to the NAB for initiation of proceeding under the provision of NAB Ordinance. (bold added) Yours faithfully , Sd/ - Bilal Mustafa
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President and CEO. 27. Thereafter vide letter dated 7th February 2014 the SBP sent a show cause notice to the appellants under section 31 (D) in respect of will full default under section 5(r) NAO which is set out below for ease of reference. State Bank of Pakistan Karachi. ASHRAF M. W ATHRA GOVERNOR (Acting) No.BPRD/BLD/NAB-31D/KASB-Kohinoor/2014/2069 07th February , 2014 Mr. Junaid Asad Khan Proprietor of Kohinoor Flour Mills Mortgagor (i) Plot Nos. 429, 441 and 442, , Main Korangi Creek Road, Karachi. (ii) House No.B-54, Street No.18, Khayaban-e-Badban Phase 1, DHA, Karachi. (iii) House No.B-54, Street No.18, Khayaban-e-Badban Phase 1, DHA, Karachi. SHOW CAUSE NOTICE UNDER SECTION 31-D OF THE NATIONAL ACCOUN TABILITY ORDINANCE, 1999 M/S. KONINOOR FLOUR MILLS. In terms of sections 5(r) and 31-D of the National Accountability Ordinance, 1999, M/ s. KASWB Bank Ltd (KASB) has filed a complaint, alleging that you have willfully defaulted on the repayment of around Rs.54.306 million (Rupees Fifty Four Million, Three Hundred Sixty…
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