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Official Citation: 2025 IHC 241171
Court / Jurisdiction: Islamabad High Court
Parties: KASB Corporation Limited vs Federation of Pakistan etc.
Ruling Summary: This decision was rendered by the Islamabad High Court, officially reported as 2025 IHC 241171. In this matter between KASB Corporation Limited and Federation of Pakistan etc., the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
COURT: Islamabad High Court (Honourable Mr. Justice Inaam Ameen Minhas) AUTHOR JUDGE: Honourable Mr. Justice Inaam Ameen Minhas DECISION DATE: 30-OCT-2025 CASE NO: Writ Petition-4249-2017 CITATION: 2025 IHC 241171 PARTIES: KASB Corporation Limited VS Federation of Pakistan etc. LAW / SECTION: under section 47 of the Banking Companies Ordinance, 1962 | under Section 70 of the Contract Act, 1872 | under Article 199 of the Constitution SUBJECT: Miscelleneous, Other REMARKS: Misc. Matter, Seeking direction for discharging the liability of shares onwed by the Bank after its marger. ============================================================ JUDGMENT SHEET ISLAMABAD HIGH COURT, ISLAMABAD JUDICIAL DEPARTMENT
Writ Petition No. 4249 of 2017
KASB Corporation Limited Versus Federation of Pakistan and others
Petitioner by: Mr. Asfandyar Khan, Advocate.
Respondent No. 1 by: Mr. Muhammad Fahad Khan Tareen, AAG.
Respondent No. 2 by: Malik Ghulam Sabir, Advocate. Respondent No. 3 by: Mr. Aasim Shafi, Advocate. Respondent No. 4 by: Mekhdoom Ali Hamza, SPP SECP.
Assisted by: Muhammad Yahya Khan Niazi, Judicial Law Clerk.
Date of Hearing: 08.10.2025
INAAM AMEEN MINHAS, J.- Through the instant writ petition, the petitioner has sought a declaration that the Advance for the purpose of issuance of right shares is a liability owed to the petitioner in terms of the Scheme of Amalgamation (“Scheme”) duly proposed by respondent No. 2 i.e. State Bank of Pakistan (“SBP”) and sanctioned by respondent No. 1 i.e. Federation of Pakistan. The petitioner has also sought directions (i) to respondents No. 1 and 2 to issue appropriate instructions to respondent No. 3 i.e. Bank Islami Pakistan Limited (“BIPL”) to recognize, acknowledge, and reflect the Advance as a liability due to the petitioner and (ii) to BIPL to treat and recognize the Advance as a liability in terms of the Scheme and accordingly discharge the same either by issuing shares to the petitioner in lieu thereof or, in the alternative, by returning the Advance along with an appropriate return thereon from the date of payment until its discharge.
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2. The facts, in brief, are that the KASB Bank faced financial distress in meeting the SBP’s Minimum Capital Requirement and Capital Adequacy Ratio, for which SBP, vide its conditional approval dated 04.12.2012, permitted KASB Finance Limited to advance USD 30 Million to KASB Bank Limited as an “advance against issue of right shares” (“Advance”) intended to strengthen its capital base. Consequent upon this approval, KASB Finance Limited, through letter dated 27.12.2012, authorized the transfer of USD 30 Million to the petitioner’s share subscription account and between 10.04.2013 and 20.06.2013, a sum of USD 10 Million was remitted and duly reflected in the petitioner’s balance sheet for the year ending in December 2013 under the equity section as an Advance against issue of future right shares. Thereafter, respondent No. 1 upon an application moved by the SBP, vide order dated 14.11.2014, imposed a moratorium on the petitioner, in exercise of powers conferred under section 47 of the Banking Companies Ordinance, 1962 (“BCO, 1962”). By virtue of the said moratorium, the operational activities of the petitioner stood virtually suspended, restraining it from making any payment exceeding Rs.300,000/- per depositor, while further empowering the SBP to determine and authorize any payment or recovery of KASB Bank as it deemed fit. The moratorium order also authorized the SBP to prepare a scheme for the reconstruction or amalgamation of the KASB Bank with any other financial institution, in the interest of depositors and creditors. Pursuant thereto, respondent No. 1 sanctioned the Scheme on 07.05.2015 under section 47 of the BCO, 1962, whereby KASB Bank Limited was amalgamated with and into BIPL and from the effective date of sanction all assets and liabilities of KASB Bank stood vested in and assumed by BIPL. Importantly, the KASB Bank had failed to issue right shares to the petitioner against the Advance and, BIPL, being the successor entity under the Scheme, refused to acknowledge the said Advance as a liability. BIPL vide its letter dated 31.12.2014 to the Karachi Stock Exchange, disclosed its fifth right share issue and on 07.05.2015, announced that Rs.14,767,663/- right shares had remained unsubscribed. The petitioner, vide letter dated 30.05.2015, requested BIPL to allot the unsubscribed right shares against the said Advance but no response ensued. Subsequently the petitioner approached respondent No. 4 i.e. SECP, seeking
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acknowledgment of the Advance as an un-discharged liability to be assumed under the Scheme, which remained unheeded. 3. The learned counsel for the petitioner contended that the Advance furnished by the petitioner created a corresponding obligation entitling the petitioner to obtain KASB Bank’s right shares in the future, thereby imposing an obligation upon KASB Bank to deliver such shares, which constituted financial assets of the petitioner. He submitted that in accordance with International Accounting Standard 32 (“IAS”), this obligation squarely qualifies as a “financial liability” and KASB Bank failed to discharge this liability, which, by virtue of Article 2.04 read with Article 1.15 of the Scheme, stood transferred to and assumed by BIPL, and the same also falls under the statutory framework of Section 47(10) of the BCO, 1962, which stipulates that all liabilities of a transferor banking company shall, to the extent provided in the scheme, stand transferred to the transferee bank. Learned counsel submitted that the Advance cannot be treated as equity since it involves a contractual obligation to deliver a financial asset, and the classification of any financial instrument, whether as equity or liability, is to be determined by its substance rather than its form, as the principle dictates that the economic reality of the transaction prevails over its nomenclature. He further submitted that; the correspondence between KASB Bank and the SBP, particularly letters dated 16.11.2012 and 04.12.2012, unequivocally describe the Advance as an “advance against future issue of right shares” confirming its contractual and liability-based nature, the SBP itself acknowledged the Advance as a liability, stating that it was subordinate to “all other liabilities,” and its subsequent approval for temporary equity treatment was merely regulatory accommodation for capital adequacy, not reclassification in substance. 4. Learned counsel for the petitioner further argued that such retention amounts to unjust enrichment, prohibited by law, as held in Sui Northern Gas Pipelines Ltd. v. DC Inland Revenue, (2014 PTD 1939) and Pfizer Laboratories Ltd. v. Federation of Pakistan, (PLD 1998 SC 64), which preclude any party from retaining benefits inequitably obtained at another’s expense. He argued that BIPL’s reliance on Article 5.04 of the Scheme is misconceived, for even if it extinguishes “issued and subscribed shares,” it cannot extend to unissued
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rights shares, nor can it nullify a liability expressly assumed under Article 2.03 and any such interpretation would defeat the principle of harmonious construction and result in impermissible unjust enrichment. Alternatively, the learned counsel submitted that if the issuance of the shares is rendered impossible, the petitioner remains entitled to reimbursement of the Advance on the settled doctrine of non-gratuitous benefit under Section 70 of the Contract Act, 1872, as recognized in Sarah Jewellery (Pvt.) Ltd. vs. Federation of Pakistan, (2007 CLD 1198) and BIPL’s obligation to discharge the liability either by issuance of the right shares or refund of the Advance remains absolute and enforceable. 5. Conversely, the learned counsels for respondents raised a preliminary objection regarding the maintainability of writ. They contended that the petitioner’s claim arises from an alleged liability owed by BIPL under a private contractual arrangement concerning the issuance of right shares or refund of an Advance which essentially is an issue presently sub judice before the learned District Court at Karachi in Civil Suit No. 1102 of 2015 and thus falls squarely within the sphere of civil adjudication. Learned counsels submitted that the existence of an alternate and efficacious remedy before the civil court, which the petitioner has already pursued, renders this petition barred by settled principles of res sub judice and doctrine of election. 6. The learned counsel for the petitioner on maintainability contended that the instant petition is maintainable on account of SBP’s failure to perform its statutory and regulatory duties under the BCO, 1962 and the Scheme framed thereunder. He submitted that the refusal to ensure the discharge of this liability, coupled with BIPL’s retention of the Advance, constitutes an abdication of statutory responsibility and a violation of the petitioner’s proprietary rights under Article 24 of the Constitution. Learned counsel argued that the petitioner seeks no relief of a private or contractual nature; rather, it invokes this Court’s constitutional jurisdiction under Article 199 of the Constitution to compel the exercise of statutory powers vested in the respondents. He submitted that section 47(11) of the BCO, 1962 empowers the Federal Government to issue necessary directions to give full effect to a scheme of amalgamation, while Article 9.02 of the Scheme similarly authorizes the
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SBP to pass requisite orders for the enforcement of its objectives. The failure of SBP and the Federal Government to exercise such authority has resulted in a regulatory vacuum, adversely affecting the petitioner’s property interests as a creditor. Learned counsel further submitted that the pendency of civil suit No. 1102/2015 before the learned District Court at Karachi does not constitute an adequate or efficacious alternate remedy, as neither the Federal Government nor the SBP are parties thereto, and the District Court lacks jurisdiction to adjudicate upon their statutory failures. He submitted that a remedy must be “not less convenient, beneficial, and effective” to bar writ jurisdiction and it was submitted that the pending civil suit fails to meet these standards as evident from a decade of inconclusive proceedings before the learned District Court at Karachi. 7. I have given anxious consideration to the arguments of the learned counsel for the parties and perused the record with their able assistance. 8. The facts have been set out above in sufficient detail and need not be recapitulated. The Constitution mandates, as a condition precedent for invoking this Court’s extraordinary jurisdiction, that the Court must first be satisfied that the aggrieved party possesses no other alternate or adequate remedy available under the law for redress of the grievance, and only upon such satisfaction may the Court proceed to exercise its constitutional jurisdiction. Therefore, this Court deems it is necessary to first address the objection raised as to maintainability of the instant petition before entering upon the merits of the matter. 9. It is reflected from the record that the petitioner instituted a civil suit No. 1102 of 2015 against BIPL for the purposes of declaration and injunction. The Petitioner, among other things, sought a direction for BIPL to issue the right shares in question, and in the alternative, to return the amount in question along with mark-up. For ease the prayer of Civil Suit No. 1102 of 2015 is reproduced below:- “In view of the above circumstances, it is prayed that this Hon'ble Court may be pleased to pass following judgment and decree in favor of the Plaintiff No.1 and against the Defendant as under:
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I. Direct the Defendant to acknowledge the liability owed to the Plaintiff No.1 in respect of the Advance in its accounts. II. Restrain the Defendant from using or transferring the amount of the Advance (ie. Rs. 981,410,000) given or forwarded by the Plaintiff No.1 for any purpose whatsoever during the pendency of the instant proceedings. III. Declare that the Plaintiff No.1 is entitled to rights shares of the Defendant equivalent to the Advance; and direct the Defendant to issue rights shares equivalent to the Advance to the Plaintiff No.1. IV. In the alternative, declare that the Plaintiff No.1 is entitled to ordinary shares of the Defendant equivalent to the Advance; and direct the Defendant to allot ordinary shares equivalent to the Advance to the Plaintiff No.1. V. As a second alternative, declare that the Plaintiff No.1 is entitled to recover the Advance (ie. Rs. 981,410,000) with markup from the Defendant; and direct the Defendant to pay the same to the Plaintiff No.1 within 30 days of decree in this Suit. VI. To grant any other reliefs) the Hon'ble Court may think fit.” 10. The primary question that arises now is whether the instant writ petition, impugning the alleged inaction of the SBP in giving effect to Scheme, is maintainable in the face of the pending civil suit between the petitioner and BIPL arising from disputes over rights and liabilities under the said Scheme. It is well settled principle of law that if a civil suit is pending between the parties, neither party is legally competent to invoke the constitutional jurisdiction of the High Court during the pendency of such proceedings since if the civil suit and writ petition are heard simultaneously, it is likely to result in contradictory findings by the Courts. The Honourable Supreme Court in the case of Muhammad Yousaf vs. Lahore Development Authority, (2001 PLD 393 SC) while dealing with the question of filing of Constitutional petition during pendency of civil suit held that where suits were pending adjudication between the parties before the Civil Court, bypassing the remedy provided under the plenary jurisdiction of the Civil Courts would not be justified. The Apex Court deprecated pressing into service the Constitutional jurisdiction of High Court since such act could not be justified in view of the civil litigation. 11. Despite the petitioner’s characterization, it is manifest from the record that the ultimate relief sought in the instant petition is a declaration that the
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Advance is a liability owed to the petitioner in terms of the Scheme and a direction to the SBP to enforce the Scheme by ensuring that the Advance is treated as a liability. This Court observes that where the matter appears to be a collateral attempt to bypass the ordinary legal process and invoke a secondary jurisdiction to obtain indirectly what is essentially sought for in the pending civil proceedings, the jurisdiction of a High Court under Article 199 of the Constitution will be barred and cannot be invoked for adjudication of the same matter by recharacterizing the financial obligation as a regulatory failure. The issues sought to be re-agitated here are substantially connected with those pending before the District Court and entertaining this petition in parallel would risk inconsistent findings and amount to encroachment upon the jurisdiction of the District Court in Karachi. 12. Moreover, it is trite law that the existence of an adequate alternate remedy ordinarily dissuades the exercise of constitutional jurisdiction, particularly if the remedy sought for, is in substance a remedy, which is available under the ordinary law, and when the same subject-matter is sub judice before a competent civil court then a suit would be the appropriate remedy instead of the extraordinary remedy under Article 199. In the present matter, admittedly, the petitioner has already availed the alternate remedy in the form of civil suit and the principle of res sub judice is attracted. The argument that the civil suit in Karachi is not efficacious is devoid of merit. A litigant cannot keep one proceeding alive while seeking parallel constitutional intervention merely because the progress in the former is unsatisfactory. 13. Even otherwise, according to the rule of jurisdictive prudence a party cannot at its sweet will switch over to constitutional jurisdiction of the High Court in the mid of the proceedings in the absence of any compelling and justifiable reasons. Once an election is made and an adequate remedy is chosen, a litigant is precluded from initiating subsequent proceedings to seek relief or remedy that could have been pursued through the initial legal action. This principle is known in jurisprudence as the doctrine of election. The Honourable Supreme Court of Pakistan in the case of Trading Corporation of Pakistan vs. Devan Sugar Mills Limited and others, (PLD 2018 SC 828) has held:-
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“The moment suitor intends to commence any legal action to enforce any right and or invoke a remedy to set right a wrong or to vindicate an injury, he has to elect and or choose from amongst host of actions or remedies available under the law. The choice to initiate and pursue one out of host of available concurrent or co- existent proceeding/ actions or remedy from a forum of competent jurisdiction vest with the suitor. Once choice is exercised and election is made then a suitor is prohibited from launching another proceeding to seek a relief or remedy contrary to what could be claimed and or achieved by adopting other proceeding/action and or remedy, which in legal parlance is recognized as doctrine of election, which doctrine is culled by the courts of law from the well-recognized principles of waiver and or abandonment of a known right, claim, privilege or relief as contained in Order II, rule (2) C.P.C., principles of estoppel as embodied in Article 114 of the Qanun-e-Shahadat Order 1984 and principles of res-judicata as articulated in section 11, C.P.C. and its explanations.” 14. The petitioner’s argument that the District Court does not possess jurisdiction to issue directions to the regulator/SBP is misconceived and does not exempt the petitioner from the consequences of having already elected to pursue civil remedies arising from the same transaction. The instant petition and the civil suit are both rooted in the same substratum i.e. the alleged deprivation of USD 10 million furnished as Advance and therefore overlap substantially in the factual foundation and the relief sought. The petitioner cannot bifurcate what is essentially a singular dispute into regulatory and contractual components merely to sustain parallel proceedings. 15. The Court is mindful, however, that where any regulator acts mala fide, arbitrarily, or in disregard of a statutory command, the constitutional jurisdiction may indeed be invoked. The supervisory jurisdiction of this Court extends to ensuring that statutory bodies discharge their obligations within the four corners of law. Yet, in the present case, no independent statutory breach by the regulator/SBP has been demonstrated. The failure complained of is contingent upon the outcome of the civil dispute i.e. whether the Advance is a liability owed to the petitioner. The Honourable Supreme Court in the case of Lt. Col. Nawabzada Muhammad Amir Khan vs. The Controller of Estate Duty, (PLD 1961 Supreme Court 119) has held that availability of the other appropriate remedy to a party is not a rule of law barring the jurisdiction of the
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Court, it is a rule by which the Court regulates the exercise of its own discretion. One of the well-recognized exceptions to this general rule arises when an order is challenged on the ground that it was issued wholly without authority. Reliance is placed on Tariq Transport Co. vs. Sargodha-Bhera Bus Service, (PLD 1958 SC 437), and S. A. Haroon vs. Collector of Customs, (PLD 1959 SC 177). However, the present case does not fall within that exception. The petitioner, through the instant writ petition, has raised issues pertaining to the alleged non-compliance by BIPL with the Scheme sanctioned by Respondent No. 1 under Section 47 of the Banking Companies Ordinance, 1962, as well as the alleged mala fides of the State Bank of Pakistan in failing to exercise its jurisdiction to enforce the Scheme and to protect the petitioner’s interests. However, it is a settled principle of law that general allegation of mala fide carry no weight in the eyes of the law. Reliance is placed on Federation of Pakistan vs. Saeed Ahmed Khan, (PLD 1974 SC 151). 16. The petitioners contention that section 47(11) of the BCO, 1962 imposes a statutory duty on the SBP as regulator to enforce a sanctioned Scheme in the context of issuing appropriate instructions to BIPL to acknowledge and reflect the Advance as a liability due to the petitioner is misconceived. For ease the then section 47 is reproduced hereunder:- “47. Powers of State Bank to apply to Federal Government for suspension of business by a banking company and to prepare scheme of reconstruction or amalgamation. (11) If any difficulty arises in giving effect to the provisions of the scheme, the Federal Government may by order do anything not inconsistent with such provisions which appears to it necessary or expedient for the purpose of removing the difficulty.” The upshot of the above provision is that it confers a discretionary, facilitative power upon the Federal Government and SBP to issue directions for giving effect to an approved scheme but does not by its language, impose a mandatory duty. Sub-section (11) supplements an already binding scheme, ensuring smooth execution. It does not itself confer an enforcement obligation but rather permits executive intervention if obstacles arise. Its purpose is to remove administrative or procedural impediments, not to create a new enforcement mandate. The petitioner has not brought on record sufficient material to show that the action of SBP was tainted with mala fide or with ulterior motive and
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no exception as such is made out as general allegation of mala fide have no force in eyes of law. 17. The discretion vested in the High Court under writ jurisdiction is a judicial discretion and has to be exercised on an examination of the facts and circumstances of each case. Therefore, this Court holds that the writ petition, being premised upon issues that are already the subject of a pending civil suit, is not maintainable in its present form. The prudential principle of judicial restraint therefore demands that the petitioner pursue its civil remedy to its reasonable conclusion. 18. Consequently, the instant writ petition is dismissed.
(INAAM AMEEN MINHAS) JUDGE
Announced in open Court on 30.10.2025
JUDGE
APPROVED FOR REPORTING.
M. Yahya Khan Niazi, L.C