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Petitioner: Air Marshal (Retd.) WAQAR AZIM and 3 others VS Respondent: THE STATE
Court Name: Lahore High Court Judge(s): Mian Muhammad Najum-uz-Zaman, Mian Nazir Akhtar Title: Air Marshal (Retd.) WAQAR AZIM and 3 others vs THE STATE Case No.: Criminal Appeals Nos.1682, 1683, 1624, 1628 and 1643 of 2000 Date of Judgment:2002-08-08 Reported As: 2002 YLR 1811 Result: Order accordingly
JUDGMENT
JUDGMENT ' MIAN NAZIR AKHTAR, J.---By this judgment we propose to decide Criminal Appeals Nos.1682, 1683 as well as Criminal Appeals Nos.1624, 1628 and 1643 of 2000 in which common questions of law and fact are involved. 2. The appellants in Criminal Appeals Nos.1682 and 1683 of 2000 have been convicted for an offence under section 9(a)(viii) read with section 10 of the N.A.B. Ordinance for having committed the offence of wilful default, by the learned Judge Accountability Court No,1, Rawalpindi in Reference No,4 of 2000. They have been sentenced as under. (i) Air Marshal (Retd.) Waqar Azeem appellant No,1 to undergo R.I. For 7 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years. (ii) Sajjad Azeem --- appellant No,2 to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years. (iii) Nusrat Azeem -- appellant No,3 to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I for 2 years. (iv) Shaukat Azeem -- appellant No,4: to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years. (v) Sardar Imtiaz Ali Qazilibash --- (appellant in Criminal Appeal No,1683 of 2000 -- accused No,7): fine of Rs,2 million and in default of payment to undergo R.I. For 2 years. ' The appellants in Criminal Appeals Nos-.1643, 1624 and , 1628 of 2000 were convicted and sentenced as, under;- (i) Khalid Lateef (appellant in Criminal Appeal No,1643 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year.
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(ii) Hafiz Nazir Ahmad (appellant No,1 in Criminal Appeal No,1628): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year. (iii) Saleem Hassan (appellant No,2 in Criminal Appeal No,1628 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year. (iv) Malik Muhammad Hameed (appellant in Criminal Appeal 1624 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year. ' The appellants were also given benefit of section 382-B of the Cr.P.C. ' Begum Surrayya Waqar Azeem (accused No,5) was acquitted under both the charges. Saulat Azeem (accused No,6) and Abu Saeed Islahi (accused No,9) were declared as proclaimed absconders and were ordered to be tried as and when brought before the Court. 3. The trial Court framed a charge against the appellants on 5-8-2000 which was subsequently amended on 22-8-2000. The amended charge is reproduced below. "I Rustam Ali Malik, Judge Accountability Court, Rawalpindi/ Islamabad, constituted under National Accountability Bureau Ordinance, 1999, as amended to date, do hereby charge you, (1) Air Marshal (Retd) Wiqar Azim, Managing Director, (2) Sajjad Azim, Director, (3) Nusrat Azeem, Director, (4) Shaukat Azeem, Director, and (5) Begum Surriya Wiqar Azeem w/o Air Marshal (Retd.) Wiqar Azeem, all Directors of Electronic Information and Energy System Limited, and residents of 3rd Gizri Street, Karachi, (6) Mr. Khalid Latif, the then Provincial Chief, (Pb) NBP, (7) Saleem Hassan, Regional Head, NBP, Islamabad, (8) Malik Muhammad Hameed, now Regional Chief Executive, NBP, RHQ, Islamabad and (9) Hafiz Nazir Ahmed, the then AVP, Audit Office, Melody, NBP, Islamabad. ' Firstly, that on 13th, March, 1990, you accused ,Nos.1 to 5 the. Managing Director and Directors of the Company along with accused Nos.6 and 7 (since absconding) applied to National Bank of Pakistan, for availing Export Refinance Facility, in the name of your Company i,e, Electronic Information and Energy System Limited, (EIES) under the State Bank of "Pakistan Refinancing Scheme, although the Company was still in the process of setting up an Electronics Manufacturing Factory; and was not" in production nor did it qualify' for applying for the facility, which was got approved dishonestly and fraudulently, in conspiracy with your co-accused i,e,, the Bank officials, and in a hasty and illegal manner, against inadequate and already encumbered securities, and the facility was hurriedly got sanctioned by corrupt, dishonest and illegal means, and you obtained for yourself a pecuniary advantage to the tune of Rs,18 million and you also furnished fake Letter of Credit and since no exports were actually made, the State sank imposed penalties which had to be paid by the National Bank, and thereafter you committed wilful and intentional default in repayment of outstanding dues and hence you caused wrongful loss to the National Bank of Pakistan to the tune of Rs,29,709,619 and thus you accused Nos.1 to 5 i,e, the Managing Director and Directors of the Company jointly and severally; with common dishonest intent, and in conspiracy with each other and in conspiracy with your other co-accused committed offences of corruption/corrupt practices under sections 9(a)(iv) and (9) (a) (viii) of the N.A.B. Ordinance, punishable under section 10 of the Ordinance aforesaid, within cognizance of this Court. ' Secondly, that in March, 1990 you, Hafiz Nazir Ahmad, accused No,12 were posted as Manager, Model Branch, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though not its account. Holders, for grant of Export Re-finance Facility,' under the State Bank of Pakistan Refinancing Scheme, although the Company was still in the process of setting up Electronics Manufacturing Factory and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and with dishonest intention, entertained by you, while your branch did not have jurisdiction/competence to entertain such applications and you then processed the application and prepared proposal for financial facility of Rs,18 millions and
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dishonestly forwarded the same. The Letter of Credit provided by EIES from a German Bank was not valid and the paid up capital was inflated by you with dishonest intention and you thus misused your powers/authority to obtain illegal pecuniary benefits for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal act, conduct and conspiracy and thus you Hafiz Nazir Ahmed accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption and corrupt practices under sections 9(a)(iv) and 9 (a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court. ' Thirdly, that in March, 1990, you Saleem Hassan, accused No,10 were posted as Regional Head, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though- not its account holders, for the grant of Export Refinance Facility, under the State Bank of Pakistan Refinancing Scheme, although the company was still in the process of setting up an Electronics Manufacturing Ffactory, and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and with dishonest intention, entertained and processed by accused No,12, and forwarded to accused No,11, who enhanced the recommended amount and forwarded to you but you also acted dishonestly and forwarded the same to the Credit Committee, without examining it as per Banking Rules, practice and State Bank instructions and without scrutinizing the documents, in particular the Letter of Credit furnished by EIES. The proposal could not be forwarded if scrutinized properly and if you had exercised your authority bona fide. You thus misused your authority to gain illegal pecuniary benefits for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal act, conduct and conspiracy and thus you Saleem Hassan accused, with dishonest intent in conspiracy with your co-accused committed offences of corruption/ corrupt practices under sections 9(a)(iv) and (a)(vi) of the NAB Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court. ' Fourthly, that in March, 1990, you Malik Muhammad Hameed, accused No,11 were posted as Zonal Head, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of. Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though not its account holders, for grant of Export Refinance Facility under the State Bank of Pakistan Refinancing Scheme, although the Company was still in the process of setting up an Electronics Manufacturing Factory and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and 'with dishonest intention, entertained 'and processed by accused No,12, 'and forwarded to you and without appraising or scrutinizing and without any spot verification and without evaluating net finacial worth /Of EIES, you recommended amount of facility as Rs,33 millions, though the assets valuation of the Resident Engineer was Rs,13.8 millions only. Thus you Malik Muhammad Hameed accused misused your authority to gain illegal pecuniary benefit for. Accused Nos.1 to 7, in fraudulent conspiracy with your co-accused and which caused Ioss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal .Act, conducted and conspiracy and thus you Malik Muhammad Hameed accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption/corrupt practices under sections 9(a)(iv) and 9(a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court. ' Fifthly, that in March, 1990, when you Khalid Lateef accused were Chairman Credit Committee, National Bank of Pakistan, accused Nos.1 to 7. The Managing Directors and Directors of Electronic
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Information and Energy System Limited (EIES), applied to National Bank of Pakistan, for grant of Export Re-finance Facility, under the State Bank of Pakistan Refinancing Scheme, though not eligible to apply under the Scheme, which was nevertheless illegally and with dishonest intention, and in conspiracy with accused Nos.1 to 7, entertained, processed and approved by accused No,12, further enhanced by accused No,11 and forwarded with recommendations by accused No,10, to the Credit Committee, and you sanctioned the facility, acting dishonestly and in misuse of authority as its Chairman and converted the parri passu charge of National Bank of Pakistan on the fixed assets of EIES into second charge on the behest of EIES and Mr. Abu Saeed Islahi, accused No,9 (since absconding) and you Khalid Lateef accused thus misused your authority to gain illegal pecuniary benefit for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent dishonest and illegal act, conduct and conspiracy and thus you Khalid Lateef accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption/corrupt practices under sections 9(a)(iv) and 9(a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court. ' And I hereby direct you to be tried , by me on the aforesaid charges." 4. The appellants pleaded not guilty to the charge and claimed to be tried. In support of its case the prosecution produced as many as five witnesses. The accused were examined under section 342 of the Cr.P.C. In their defence, the appellants produced documents. Exhs.D.A. To DZ and DAA to DKK. 5. The appellants' learned counsel (in Criminal Appeals Nos.1682 and 1683 of 2000) urged that so far as the irregularities in applying for the financial facility and the alleged collusion with the bank officials is concerned, the appellants have been exonerated under section 9(a)(iv) of the Ordinance; that the State did not challenge their acquittal under the said offence and now it cannot be urged that the appellants had, in any manner, misused their authority and thus managed to obtain the financial facility; that now the appellants are merely answerable for a charge under section 9(a)(vii) of the Ordinance relating to the offence of wilful default; that the evidence on the record does not make out the necessary ingredients of the offence of wilful default; that there was neither any mens rea on the part of the appellants nor any element of deliberate or wilful default in paying the amount; that the facts at the most show the appellants' inability or failure to return the amount but the facts and circumstances of the case show that this was due to the failure of the bank to honour its commitment or obligation under the L.C. Opened for import of raw-material; He places reliance on the judgment in the case of Khan Asfand Yar Wali v. Federation of Pakistan and others (PLD 2001 SC 607) to urge that only that default is wilful which is contumacious and the defaulter does not intend to pay back dues and that if the default occurs due to circumstances beyond the control of the borrower, then he cannot be held guilty of wilful default; that the appellants had every intention to return the loan by generating funds through their export business but the company floated by the appellants could not go into production to the default of the batik in the matter of providing funds under the import L.C. Lawfully opened with the bank; that the appellants never got their liability waived or written off and are even now ready to pay back the amount through the sale of their property/machinery; that the prosecution had failed to show that the appellants had misappropriated the loan facility and utilized it for the purposes other than those for which it was obtained. He explains that against the appellants' L. C. Nos. 854-40-021 and 854-40-022, the raw-material was imported and the had to arrange finance for the same; that the bank was holding the cash margin of Rs,1.098 (M) and to meet the demand, it was to be raised to Rs,3.7 million; that for this purpose, letter dated 4-6-1999 (at page 135) was written by Muhammad Hafeez Mirza, P.W. For approval of the Head Office; that the consideration
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which heavily weighed with the trial Court in convicting appellants is the decree passed by the Banking which at the relevant time held the field but it has now been set aside by the High Court in Regular Firgt Appeal No,929 of 1993 vide judgment, dated 6-12-2001 and the case has been remanded to the Banking Court for fresh trial; that the prosecution was bound to prove that despite having the sources to pay back the amount, the appellants did not deliberately do so with the mens rea to commit the offence; that the appellants had started a High Tech. Industry and imported technology from Denmark; that the appellants had a confirmed order valid upto January, 1991 from a German customer, who had agreed to purchase 3 years' production; that the appellants' industry could not go into production due to default of the bank in providing funds for the raw-material imported from abroad, therefore, the amount of loan financial facility could not be returned; that there was an inbuilt arrangement in clause 6 of Exh.PF/12 and clause 4 of Exh.PF/13 for recovery of the amount through sale of the mortgaged property; that in case of default, the process contemplated in the above-referred clauses should have been resorted to and if the entire amount is not recovered then appellants. Could be called upon to pay the remaining amount and in case of their deliberate failure to return 'the amount they could be held guilty of the offence of wilful default; that in the present case, neither this procedure was adopted nor the amount was correctly determined_ or demanded from the appellants through a written notice. Refers to the agreement Exh.PF/17 which provides as under: (i) The customer has. Agreed to sell to the bank raw-materials/finished goods/spares/machinery etc. Hereinafter referred to as goods upto a sum of Rs,1,80,00,000 (Rupees eighteen millions only). (ii) The customer has agreed to purchase the same from the bank on the basis of mark-up on, terms and conditions hereinafter appearing." ' Thus appellants had agreed to sell the goods to the bank for a sum of Rs,18 millions and had to purchase it at the rate of Rs,19 millions plus mark-up; that on the appellants' failure to purchase back the goods the provisions of section 54 subsection (2) of the Sales of Goods Act were attracted; that it provides that the unpaid seller will give a notice to the purchaser to pay the amount, failing which he is entitled to sell the goods and recover the price. If he fails to recover the same then the purchaser is entitled to get the excess amount; that the provisions of section 73 (Explanation) and section 176 of the Contract Act are applicable in this case; that had the bank fulfilled its duty under the agreement, then, there might have been mitigated liability of the appellants, which they might have been able to discharge; that from the material on the record, no offence is made out against the appellants and that they are entitled to acquittal. 6. Raja Muhammad Akram, learned counsel for the appellant in Criminal Appeal No,1624 of 2000 urged that the case was registered on the basis of complaint Exh.PA filed on 22-5-1997 by P.W.2 Shah Nawaz Jafri; that Malik Muhammad Hameed appellant and Hafiz Nazir Ahmad did not figure in Exh.PA; that they had only forwarded the application submitted on behalf of the Electronic Information and Energy System Limited. The application was forwarded to the Regional Chief Mr. Saleem Hassan (appellant in Criminal Appeal No,1628 of 2000); that the Regional Chief re- modelled the proposals and then sent the same to the Provincial Chief; that the competent Authority for sanctioning the loan facility was the Provincial Credit Committee which held its first meeting on 5-4-1990 and after examining the matter thoroughly decided to convert the pari passu/equitable mortgage into second mortgage/charge; that this fact is admitted by P.W.3 Mirza Abdul Hafeez, who stated that in the second meeting of the P.C.C., pari passu charge was changed into second mortgage/charge. He further contends that the appellant had merely recommended the case with certain remarks for securing the bank interest but the sanctioning authority i,e, Provincial Credit Committee accepted the second mortgage in favour of the National Bank instead of pari passu mortgage and then the appellant was directed by a Telex message to accept the second mortgage. He explains that in case of pari passu mortgage the assets of a defaulting
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company are proportionally divided between the creditors but in case of second mortgage the first mortgagee may take the entire amount and no assets be left for payment to the second mortgagee. The learned counsel urged that the charge framed against the appellants and the other, bank officials suffers from a number of factual errors. Firstly it was wrongly mentioned herein-that the company had no account in the bank; that P.W.3 Muhammad Hafeez Mirza admitted in his cross-examination that the company had its account in the Model Branch Islamabad since the year 1988. Secondly the appellant had made a recommendation qua loan facility of Rs,18 millions and not 33 millions as mentioned in the charge and the excess amount of Rs,14 millions is not relatable to the appellant; that the recommendations made by the Manager as well as the appellant were wholly favourable to the bank, which were arbitrarily changed by the P.C.C.; that under the export refinance Scheme announced by the State Bank of Pakistan application could be entertained by any branch of Scheduled Bank and the case could be sent to the designated Branch at the time of sanctioning of the loan; that the application was accompanied by a confirmed export order and a lawful irrevocable Letter of Credit (Exh.DG); that originally the Consortium of Banks known as the Bankers Equity agreed to advance loan facility to the company; that the Asian Development Bank was also a share holder of the company; that the loan facility availed of by the company was a project loan; that the Export Refinance Scheme was introduced by the State Bank of Pakistan to encourage and promote commercial activities under which commercial banks could advance the commercial lons, which was reimbursed by the State Bank; that after constructing the building and installing the machinery, the company applied for loan facility for import of raw-material needed for production; at that time, the company had in its credit an amount of Rs,70 lacs; that on his part the appellant had recommended the following three securities; (i) A registered mortgage of all the assets of the company pari passu with other creditors; (ii) Hypothecation of all the stock and finished goods; and (iii) Personal - guarantees of all the Directors. ' All the three conditions were changed by the Provincial Credit Committee (P.P.C.) as follows:-- (i) The pari passu mortgage was replaced by a second mortage; (ii) Hypothecation of only some of the goods was ordered and (iii) Personal guarantees of the sponsor Director were required. ' He further submits that the appellant had recommended loan amount of Rs,18 millions only but another amount of Rs,15 million was recommended by the Regional Head through letter` Exh.PF/8 and the P.C.C. Sanctioned loan facility of Rs,33 millions. He submits that the Irrevocable. Letter of Credit dated 22-3-1990 was found to be satisfactory by the State Bank of Pakistan; that the appellant had recommended the case against 25% cash margin which was reduced to 15% cash margin by P.W.3 Muhammad Hafeez Mirza the then Regional Chief; that under the Export Refinance Scheme, it is provided in part-I that export finance will be provided on the basis of confirmed Irrevocable Letter of Credit or firm export order; that the company had fulfilled both the conditions whereupon the case was recommended and processed; that any branch of a scheduled bank could entertain the application for grant of facility under the Export Refinance Scheme and ultimately the case was to be forwarded to the designated branch; that the State Bank of Pakistan had designated four branches, one in each. Province, for the said purpose; that under para. 8 of the scheme, accounting procedure has been laid down which provides that all branches will open in their general ledger an account styled as "borrowing from the State Bank of Pakistan under Export Finance Scheme"; that under para.8 (iii) again a reference has been made to all branches including designated branches; that the crux of the allegation against the appellant is that the value of the assets of the company reported by the Engineer is less than Rs,18 millions, which is incorrect for the following reasons;
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(i) The value given by the Engineer is only of land and building but does not cover the value of the machinery and other assets installed therein; that the total assets have been valued at Rs,7 crores and 70 lacs; that it was for this reason that the appellant had recommended a pari passu mortgage, (ii) That for a loan of Rs,18 millions the assets of Rs,77.68 millions were available as security on behalf of the company; that the trial Court had given a finding to the effect that the appellant did not get any benefit by making his recommendation for grant of loan to the company; that P.W. Hafeez Mirza admitted "during the course of inquiry no evidence had been produced before him that the bank officers in this case had ever received any commission or kickback, relating to this facility." ' Further, the learned counsel refers to the following part from para.48 of the judgment of the trial Court; " It is correct _ that in this case they were not the beneficiaries. It is' also correct that no allegation of receiving bribe, commission or kickbacks have been levelled against them." ' The learned counsel further…
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