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Petitioner: HAIDERI INTERNATIONAL FINANCE LTD. VS Respondent: THE STATE BANK
Court Name: Lahore High Court Judge(s): Muhammad Afzal Lone Title: HAIDERI INTERNATIONAL FINANCE LTD. vs THE STATE BANK Case No.: Writ Petition No. 4883 of 1981 Date of Judgment:1985-07-08 Reported As: 1986 CLC 2197 Result: Petition dismissed
JUDGMENT
JUDGMENT This writ petition has been dismissed, for the reasons to be recorded separately. The reasons which led me to pass the dismissal order and the fact from which these reasons emanate are as under: 2. The writ petition calls in question the validity of the declaration dated 30th July 1981, made by the State Bank o&., Pakistan, published in the Daily Pakistan Times, Lahore, dated 9th August, 1981, under section 43-B of the Banking Companies Ordinance, 1962, and the three notices, dated 17th November, 1979, 6th January, 1980 and 6th January, 1981, served on the petitioner on the basis whereof the Governor State Bank held an inquiry, followed by the declaration aforesaid. Further, the Governor State Bank is sought to be restrained from taking all consequential steps against the petitioner under Part II-A of the Banking Companies Ordinance, 1962. 3. Briefly put, the necessary facts giving rise to the controversial issue falling for adjudication, in this case, are, that on 8th October, 1979 by means of the Banking Companies (Amendment) Ordinance, 1979 the Banking Companies Ordinance, 1962, was amended and Part II-A, added therein. This part amongst others includes sections 43-A and 43-B, Under section 43-A, if it appears to the State Bank, that any Company or person is transacting business in contravention of section 27(1) of the Banking Companies Ordinance, 1962, it can requisition from such company or person, the requisite information and documents, in this behalf. If the State Bank after making such inquiry as deemed fit by it, comes to the conclusion that a company or person from whom requisition has been made under section 43-A is transacting business in contravention of section 27 ibid, it can issue a declaration to that effect, after giving such Company or person, an opportunity of showing cause against the proposed action.
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4. The State Bank proceeded under section 43-A and by a letter, dated 13-10-1979 (Annexures 'F and G) requisitioned from the petitioner company, certain record mentioned therein. This was followed by notice, dated 17-11-1979 (Annexure 'H') to the effect that after perusal of the necessary material, the State Bank prima facie, was of the view that the petitioner was doing banking business in violation of section 27(1) and that a declaration under section 43-B was proposed to be issued. The petitioner was asked to show cause as to why such declaration be not issued. The notice was accompanied by an enclosure in which a number of documents such as account opening forms, statement of accounts and vouchers showing acceptance and withdrawals of deposit etc. Were mentioned. The petitioner replied this notice on 25-11-1979 (Annexure 'I') and simultaneously brought it under challenge, through Writ Petition No. 7618 of 1979. During its pendency the State Bank issued another notice, dated 6-1-1980 (Annexure 'L'), whereby the petitioner, was informed:- "Since the issuance of the show-cause notice, dated 17-11-1979 to you further material appearing on your own record, and having a bearing on the question, has been brought to notice which is detailed in the Schedule appended hereto. This has already been brought to your notice by the State Bank of Pakistan through its written statement filed in the aforesaid case in the Lahore High Court, Lahore, to which you have filed a re-joinder." and given as opportunity to file its reply to the additional material described in the Schedule appended to the said notice. 5. In order to throw a challenge to the second notice as well, the petitioner filed an amended writ petition. It was dismissed by a learned Single Judge on 14-5-1980, inter alia on the ground that the State Bank was well within its powers to determine as to whether or not the petitioner was carrying on the business of banking in contravention of law. The petitioners Intra-Court Appeal No. 314 of 1980, against this dismissal failed and the leave to appeal was also refused by the Supreme Court. 6. After the dismissal of the writ petition, the Governor State Bank, issued another notice, dated 6-1- 1981 (Annexure 'P') purportedly in continuation of the two earlier notices, dated 17-11-1979 and 6-1- 1980. The petitioner was informed that since the issuance of the two notices, further material forming part of the Company's record came to the notice of the State Bank and that it might file reply thereto, if so desired. The material referred to in the notice, was detailed in the Annexures thereto. In its reply, dated 20-1-1981 (Annexure 'R-7'), the petitioner sought permission to inspect the original Annexures appended to the notice and also prayed for enlargement of time to answer the same. In response, the State Bank, intimated the petitioner Annexure 'R/8' that the originals of. The Annexure were available in its Karachi office which might be inspected on 5-1-1981. Seemingly, the record was inspected by the Company. It is so disclosed in the letter, dated 16-2-1981 Annexure 'R/9' addressed to the State Bank by Kh. Akhtar Ali, Advocate, who represents the petitioner. It appears that notwithstanding the inspection of the record, the petitioner again approached the Governor for grant of time to procure the record from its Peshawar Zone and also asked for an opportunity of personal hearing Annexure 'R/12'. The State Bank vide its communication, dated 21-3-1981. Extended the time by 30 days for filing the reply to the notice and further by its letter dated 7-6-1981 fixed 18- 6-1981 as the date for personal hearing. It is evident from the record that thereafter Kh. Akhtar Ali, sent letter dated 15-6-1981 Annexure 'R/15' to the Governor State Bank praying for an adjournment on the plea that the Company's Senior Counsel had gone abroad. This request was acceded to and the date of hearing changed to 11th July, 1981. This opportunity was availed of by the petitioner. However, 5 days before this date of hearing, the petitioner moved an application Annexure 'R/17' before the Governor for summoning 13 witnesses for 11-7-1981; who were the Account Holders of the Company. The reasons assigned for their examination, was that the company wanted to verify the genuineness o1 the documents and the signatures.
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7. It is discernible from the order of the Governor that during the course of personal hearing and in its earlier communication to the State Bank, the petitioner raised number of contentions, to assail the validity of the proposed action. But upon the material before him, the Governor by a detailed order dated 30-7-1981 rejected all the points urged by the petitioner, signed the declaration and ordered its publication. 8. One of the contentions raised before the Governor, was, that the Company did not transact any business after the promulgation Q1 the amending Ordinance; as the Ordinance is not retrospective it operation, whatever may be the nature of its business, before the enforcement of this Ordinance, it could not be proceeded against under sections 43-A and 43-B ibid. This argument was rejected by the Governor. In his opinion the Ordinance applied to the Companies which held deposits before the enactment of the Ordinance but as regard: the petitioner be specifically found that it accepted deposits even after the enactment. In arriving at this conclusion, as is manifest from hi. Order,, dated 30-7-1981, the Governor kept in view the legal opinion; dated 10-11-1979 and 13-11-1979 tendered by Messrs Fazeel & Co. Advocates Karachi, and the Director legal department of the State Bank of Pakistan, respectively. It also transpires that the petitioners reques~ to summon the witnesses was turned down by the Governor on the advice of the legal department of the Bank. 9. Mr. Noor-ul-Arifin, has very seriously questioned the propriety of the Governors reliance on the legal opinions. He argued that the point urged before the Governor, was, that the Company did not transact any banking business and thus, there was, no violation of any banking law, particularly, when the Ordinance was not enforced retrospectively. But he failed to exercise his personal judgment and instead of disposing of this issue with an open and independent mind, he relied upon the advice of outside counsel which was never disclosed to the petitioner Likewise, it was submitted, that in rejecting the application for summoning the witnesses he acted upon the noting of the legal department /director legal of the State Bank, who was again an outsider. In these circumstances, the learned counsel argued, the Governor did not act conscientiously and thus, his order stood vitiated. He then drew my attention to certain passages from S.A. De Smith's "Judcial Review Administrative Action" to point out that if any Authority is entrusted to exercise discretionary powers, it must not surrender its power to decide, to others and act under the dictates of an external authority. 10. In his endeavour to emphasise, that the Governor could not have the latitude to take upon himself the consultation of legal advice, not disclosed to the petitioner, the learned counsel equated the inquiry under section 43-B, with the proceedings before an arbitrator and referred to me an Indian decision in the case of Skalee (P) Ltd. v. The State of West Bengal AIR 1974 Cal. 306, which provides that seeking of independent legal advice, by an arbitrator, behind the back of the parties, is mi~wonduct. To argument the proposition that where a Tribunal empowered to take a decision, fails to apply its mind, to the matter brought before it for adjudication, its order is rendered liable to be removed through judicial review, the learned counsel cited Ghulam Mohy- ud-Din v. Chief Settlement Commissioner and others PLD 1964 SC 829. In this case, the Chief Settlement Commissioner rejected a second revision merely by counter-signing the noting of the Settlement Commissioner (Policy) without recording any reasons of his own. The Supreme Court maintained that he should have applied his independent mind to the questions raised before him. Reliance was also placed on Fazal Dad and others v. Member Board of Revenue PLD 1977 Lah. 264 wherein, in passing a resumption order the collector simply affixed his signatures on an office noting. It was held that there was no conscientious application of mind and he failed to dispose of the case properly. 11. It was next submitted that the legal opinions constituted a vital material relevant to the controversy debated before the Governor, who was a judicial Tribunal; if not certainly he acted as quasi-judicial Tribunal. On the authority of Madiyal Prem Chandra v. Commercial Tax Officer AIR
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1958 SC 67 and S.B. Industries v. The District Registrar Trade Marks PLD 1969 Dacca 451, it was submitted that the Governor should not have allowed himself to be influenced by such legal opinions, which were never communicated to the petitioner- These precedents simply lay down that where a statute confers certain duty on an officer, then he has to exercise his discretion in accordance with law, uninfluenced by the opinion given by his superior. 12. As a corollary to the reasoning aforesaid it was stated that the collection of legal opinions behind the back of the Company amounted to receiving evidence in the petitioner's absence. The course adopted by the Governor, was said to be analogous to a case in which a Tribunal rests its order on the material mustered in the absence of the affected party. In such an eventuality, the counsel argued, that the Tribunal acts without lawful authority and its order becomes wholly void. In this respect he placed reliance on two decisions from English jurisdiction, reported as R.V. New Market Assessm ent Committee (1945) 2 All E.R. 370 and R.V. Deputy Industrial Enquires Commission 1962 (2) All E R 430. In the first judgment, certiorari was issued to quash the decision of an Assessm ent Committee, founded upon the evidence heard in the absence of the interested party. As regards the second precedent, a Deputy Commissioner in disposing of the appeal of an Insurance Officer, from a Local Appellate Tribunal under the National Insurance (Industrial) Injuries Act, found against the applicant. But in doing so, he procured the aid of a specialist on the controversial issue arising in the case. Lord Parker, C.J. Observed that a quasi-judicial Tribunal in deciding a case, for the parties, is not entitled to obtain evidence, without passing on them the information, so obtained so that they may have an opportunity of commenting upon it. 13. Connected with his these submissions, Mr. Noor-ul-Arifin next urged, that under section 43-B before issuing the declaration, the Governor was under a statutory obligation to allow an opportunity to the petitioner of showing cause against the proposed action so that I might establish that it did not indulge in any illegal banking activity. This, in the estimation of the learned counsel, conferred on the petitioner a right of fair hearing. He argued that where a party does not know the case, it has to meet or is not confronted with the material used against him or denied adequate opportunity to correct and controvert the same, a fair opportunity to defend himself cannot be said to have been afforded. The learned counsel then reverted to the facts of the case and, stated that had the opinion of the outside counsel and the Director Legal of the State Bank, revealed to the petitioner, it would have succeeded in persuading the Governor that the views expressed therein i---., re incorrect. 14. The petitioner's other grievance, is, that the Company closed its business before the promulgation of the amending Ordinance, which is not retrospective, therefore, the documents reacting transactions before 8-10-1979 have no bearing on the issue, that banking business, in contravention of the banking laws, was carried on. As regards the entries, dated 8-10-1979 and those pertaining to the period thereafter discussed in the Governor's order, the learned counsel disputed their genuineness and complained that the petitioner was not given opportunity to examine the witnesses and establish its defence. In nutshell his contention, was, that a fair opportunity, as required by law and ordained by the principles of natural justice, was not extended to the petitioner. He brought to my notice the rule enunciated in Haji Rehman-ud-Din v. Government of West Pakistan PLD 1958 Lah. 86 to the effect that if charges involving questions of facts are levied against a person, which he challenges, it becomes the bounded duty of the concerned authority to hold an inquiry into such charges and give a fair opportunity to the affected person to defend himsef. In the other precedent Abdul Saboor Khan v. Karachi University and another PLD 1966 SC 537 cited for the petitioner, on the rectitude of the., enunciation made in University of Dacca v. Zakir Ahmad PLD 1965 SC 90, it has been observed that whenever a decision is taken against a person after investigation of facts, affecting his right, then in the absence of express words in the enactment, excluding the application of the principles of natural justice, the
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Courts have got to proceed on the assumption that the exercise of powers is coupled wit the duty to set in accordance with the rules of natural justice. 15. The legal opinions which gave rise to these controversial issues, were not placed by the respondent on this file, but following the dictum laid down in Lahore Improvement Trust v. Custodian of Evacuee Property PLD 1971 SC 811, that before striking down the orders of a public authority, the Court must find out every field of the powers granted to such authority and in this direction also examine the record and the proceedings conducted, concerning the impugned order, I requisitioned the relevant files from the State Bank of Pakistan. Those opinions have been shown to the learned counsel for the petitioner and photostat copies thereof placed on this file. First I shall take up the opinions, dated 10-11-1979 and 13-11-1979. Mr. M.A. Rehman forcefully controverted the petitioners contention that these opinions were procured by the Governor, in the course of the enquiry commenced against the petitioner on the disputed question that the company conducted banking business, and with the object of facilitating the passing of the order on which the impugned declaration is rested. He submitted, that there was a lot of criticism in the Press against the Finance Companies, which were set up in fairly a large number, almost all over the country and people were allured to make their deposits with them, without any safeguard. After the enforcement of the amending Ordinance, the State Bank though it fit to obtain advice from Messrs Fazeel & Co., on the scope of the amending provisions inter alia on the point whether action under it, could be taken against the Finance Companies, in relation to their business of banking, carried on either wholly before the commencement of the Ordinance, or partly after its commencement, or wholly after its enactment. The Director Legal who is a functionary of the State Bank of Pakistan, was also asked to look into this issue. The advice sought, was merely, general in character confined to abstract legal propositions, having no nexus with any particular case and certainly, not the case of the petitioner Company. That the opinion of the Director Legal was merely a contribution by the internal working of the State Bank and not an aid from an outside agency. It was emphatically asserted, that after the issuance of the first notice to the petitioner, its case was never referred to by the Governor for advice to any one. 16. The petitioners argument that the Governor made his order wholly and solely on the strength of the legal opinions, was vehemently refuted and it was urged that he simply noticed these opinions but formulated his own views and recorded independent findings after assimilation of the record of the company placed before him. The learned counsel for State Bank invited my attention to various documents on the file of this case as well W.P. No. 7618 of 1979 to controvert to the petitioner's argument that a fair opportunity was denied to it and vigorously asserted that the Company was given enough opportunity to project its views and defend itself; rather in his anxiety to do substantial justice, despite the petitioners delaying tactics the Governor showed indulgence to the petitioner. 17. In order to evaluate the conflicting contentions of the parties, I have perused both the opinions. It is discernible from the advice tendered by Messrs Fazeel & Co that the question referred to them for their opinion, were:- "Is it permissible for State Bank to exercise powers available to it under section 43-A and section 43-B of the Banking Companies Ordinance, 1962 as amended by Ordinance No. LVI of 1979 against a company or any other person on the basis of business of banking carried on by it or him as the case may be, either wholly before' the commencement of Ordinance No. LVI of 1979 or partly before and partly after the commencement of the said Ordinance or only after the commencement of the said Ordinance? In theevent of the opinion that the aforesaid powers can be exercised only if the business of banking is carried on after the commencement of the said Ordinance "(a) is it essential that the said business as carried on upto (i.e. Including) the date of declaration.
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(b) how should the said Ordinance be amended to permit the exercise of the aforesaid powers on the basis of business of banking partly or wholly carried on before the commencement of the Ordinance by the competent authority without any risk of the amendment to be' so suggested by the learned Advocate being struck down by any Court? (c) if a Company or any other person has received deposits from the members of the public before the commencement of the said Ordinance and after the commencement of the Ordinance. (i) continues to retain it, or (ii) retains it wholly or partly, or (iii) receives amounts in liquidation wholly or partly, of loans, made out of such deposits, will such acts amount to the carrying on of the business of banking by such Company or other and be hit by the provisions of section 43-A and section 43-B(1)?" The advice is entirely confined to the legal issues, aforesaid and there is not even a far-fetched reference in it to the case of the petitioner and possibly it could not be as by then the inquiry under section 43-B had not been commenced. From the narration of the facts already given it is obvious that though on 13-10-1979 certain information was demanded from the petitioner, but the actual show-cause notice under section 43-B for the first time was issued on 17-11-1979. It may be added that it is only after the perusal of material requisitioned under section 43-A that the State Bank, has to make up its mind tentatively as to whether or not action under section 43-B is called for. In point of time, therefore, it can well be claimed that the proceedings regarding the declaration, are commenced on the issue of a show-cause notice envisaged by section 43-B. Evidently, the opinion of Messrs Fazeel & Co. Is of a date prior to the first notice. But, to my mind it is wholly idle to determine the precise time when the proceedings could be said to have been started against the petitioner, for, as already noticed the advice deals with l the question of law only and does not at all refer to the petitioner's case. Similarly in the opinion dated 10-11-1979 of the Chief Legal Division of the State Bank of Pakistan, there is no mention of the petitioner anywhere and is entirely aimed at construing certain provisions of the Banking Companies Ordinance, 1962 and the amending Ordinance, 1979. 18. It needs to be seen as to whether the Governor's reliance on these opinions, renders his order as without lawful authority. My answer is in the negative. The reasons being that these opinions are purely on questions of law, making no reference to the case of the petitioner. It is just the same way as if on a disputed legal, issue under its consideration, a Tribunal may consult the views of the some jurist or an author on the subject. If the inquiry under section 43-B can undoubtedly be compared, with the proceedings before an Arbitrator or an Umpire, as the petitioners learned counsel himself canvassed, the utilization of the legal opinion by the Governor, would not legitimately be, open to any valid objection. Reference in this connection may be made to the following observations of Lord Tomlin in Louis Dreyfus Co. v. R.A. Arunchala Ayya AIR 1931 P C 389:- "... The language of the award does no more than indicate that the umpire took advice upon the general rules of law bearing upon the case and does not mean that he left to an outsider the burden of deciding any issue in the case instead of exercising his own judgment thereon ...." 18-A. After perusal of the well-reasoned order of the Governor it becomes difficult to accept that he did not act with a conscientious mind. It is quite clear to me, that he properly weighed the material on the record and exercised his independent judgment. Neither the two opinions embodying the interpretation of the provisions of the Banking Companies Ordinance supported by certain legal principles, by the authors thereof, can be treated as an evidence, nor their non-revelation to the petitioner, is visited by any illegality, nor by their consideration, the Governor fettered his discretion or surrendered his power to decide, in favour of any-one else. It shall be indeed, a travesty of facts t hold that the Governor acted under the dictates of some external authority. The cases cited at the
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Bar, on behalf of the petitioner turn on their peculiar facts. There can hardly be any quarrel with the propositions of law enunciated therein but these have no application to the instant case. 20. I shall now address myself to the arguments that a fair opportunity to place its case before the Governor, as ordained by rules of natural justice, was denied, to the petitioner. In the same equal, falls the question as to whether the Governor, acted as administrative body or as a quasi-judicial Tribunal and whether the application for summoning the witnesses was justifiably rejected by the Governor on the footing of office noting. It may be observed that the rules of natural justice guarantee only a minimum standard of hearing and are not fettered by any rigidity but vary with the circumstances of each case. In Zakir Ahmad's case the Supreme Court quoted with approval the…
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