M/s Shah Jewana Textile Mills Limited (Petitioner) VS State Bank of Pakistan, Policy officer Ghulam Hassan & Others (Respondent)

Mr

IN

THE HIGH COURT OF SINDH AT KARACHI

C. P. No. D-1150 of 2005

Present:

Mr.

Justice Ghulam Rabbani

Mr.

Justice Munib Ahmed Khan

Date of hearing 1 3.

Date of Judgment . 0 3. 2 0 0 6 .

Petitioner : M/s Shah Jewana Textile Mills Limited through Mr. Anwar Mansoor Khan, Advocate.

Respondent

No. 1: State Bank of Pakistan, Policy officer Ghulam Hassan.

Respondent

No.2: M/s United Bank Limited, through Mr. S. Kazim Hassan, Advocate.

J U D G M E N T

MUNIB AHMED KHAN. J, Through this Petition filed on 06.09.2005, the grievance which has been brought to this court by the petitioner is that there is outstanding loan of Defendant No.2 (U.B.L.) and although it has applied on 3rd March 2003, for settlement of its liability in terms of BPD Circular No. 29 but its case has not been processed and outstanding liability has not been settled according to relief provided under the said Circular. On the other hand, according to Defendant No.1, State Bank of Pakistan, the petitioner is not entitled to relief as BPD Circular No. 29 issued on 15.10.2002 to facilitate the borrowers to settle their outstanding and certain parameters were provided therein. The said circular lived its life till 30.06.2003, while the SBP committee, for resolution of dispute, constituted under the said circular, ceased to be effective from 31.01.2005 and since there is no committee, therefore, the dispute of the petitioner cannot be resolved. It has also been stated that the petitioner approached SBP Committee on 31.12.2003 which could not be considered as it was filed after expiry of date and that the petitioner was also not entitled to the benefits under BPD Circular No. 29 as it was a loan defaulter and a case in this respect was referred to the National Accountability Bureau (NAB) and admittedly it made an application under section 25-A of the National Accountability Bureau Ordinance 1999, therefore, the petitioner’s case had already been referred to NAB, therefore, this Petition could not be considered on this point, too.

Respondent No.2 (UBL) has also opposed the Petition on the ground that by way of this Petition, the petitioner wanted to nullify the judgment of Accountability Court, Lahore and that petitioner itself has admitted it involvement in the NAB case i.e. Accountability Reference No. 7 of 2000 in which a judgment dated 12.04.2005 was passed and the relevant paragraph is relied upon, which is as follows:

“An application has been moved on behalf of the accused persons under section 25-A of the National Accountability Ordinance 1999 and section 265-K, Cr.P.C for their release and acquittal in consequent of Reconciliation of their liability by the order of Governor, State Bank of Pakistan on the basis of Recommendations of the Conciliation Committee. The learned Prosecutor General Accountability filed a reply to the application whereby contents of the application were admitted as correct and it was requested on behalf of the prosecution that the application of the accused in terms of the prayer made therein, be allowed as per law”.

It has also been contended that making of application under section 25-A of the NAB Ordinance 1999, itself proves that the petitioner wanted to settle their matter according to that Ordinance. It has also been contended that to recover the amount from the petitioner, UBL filed a Suit for recovery in Lahore High Court and consent decree dated 08.02.2000 was passed but even that decree was not satisfied nor the decree was ever challenged and since the petitioner has disobeyed the decree of the Court, therefore, it falls within the meaning of willful defaulter and are not entitled to any relief under BPD Circular No. 29. It has also been stated that the said Circular does not bar the Banks from continuing or adopting other modes of recovery. The Defendant No. 2 has also filed an application enclosing therewith several documents pertaining to the petitioner.

Mr. Anwar Mansoor Khan, learned counsel for the petitioner has argued that the circulars are issued by State Bank of Pakistan under section 33-B of the Banking Companies Ordinance, 1962 and they have legal force behind them and it is obligatory on the Banks to follow. He has relied upon the case of Tristar Industries (Pvt) Ltd v. State Bank of Pakistan and another, 2004 C.L.D. 257, in which it has been observed as follows:

“Indeed the circular / scheme under the Banking companies Ordinance, 1962, in view of section 33-B has force of law as already held in case of United Bank Limited”.

Mr. Anwar Mansoor Khan, learned counsel for the petitioner has contended that it was obligatory on the part of respondent No.2 to follow direction of State Bank of Pakistan and despite fact that the petitioner approached the Bank on 03.04.2003, within time, prescribed under the scheme for BPD Circular No. 29, therefore, its case would been processed. The learned counsel has also argued that approach of the petitioner under section 25-A of the NAB Ordinance 1999, was for a limited purpose to settle the criminal issue and that it does not affect petitioner’s right to approach under BPD Circular No.29.

To support his contention, learned counsel for the petitioner has relied upon the case of Asim Textile Mills Limited v. NAB, P.L.D. 2004 KAR 638 and Abdul Shakoor Kloodi v. The State, 2003 P.Cr.L.J 626. In the case of Asim Textile Mills, it was held that ‘liability of borrower is to be decided first through Civil or Banking Court and thereafter in borrower’s failure to follow, NAB proceedings to be initiated’. In the case of Kaloodi, it has stated that ‘section 25-A of the National Accountability Bureau Ordinance 1999 served only a limited purpose and the rights and liabilities between the Bankers and borrowers could only be determined by the Banking Court and that the request of the accused for reference to Conciliation Committee was only made for the limited purpose of securing their release or avoiding prosecution under the NAB Ordinance and did not in any manner affect the power of the competent Banking Court to determine the rights and liabilities of the parties to the suit and that when a bona fide dispute as to the existence of liability was pending before a competent Court, it would not be proper to treat a party as willful defaulter.

On the other hand Mr. Kazim Hassan, learned counsel for UBL has given chronological events in the matter of petitioner, which are reproduced as follows:

May 1998: Recovery suits filed by UBL against Shah Jewani Textile Mills Limited in Lahore

November 1999. Out of court settlement proposed by borrower.

Settlement Agreement executed between Shah Jewani Textile Mills Limited and

UBL

Compromise vide consent decree by Lahore High Court. Settlement not honoured by borrower, thus becoming a willful defaulter.

10.03.2000: Reference under NAB Ordinance filed on Complaint of UBL

Application under State Bank Circular No.BPD 29 of 15.10.2002 Application under section 25-A of the NAB Ordinance 1999.

Order by NAB Conciliation Committee constituted by SBP.

Judgment by Accountability Court No.1, Lahore

Petition filed.

From the above factual position it comes to light that there was a settlement between UBL and the petitioner on 19.11.1999 and compromise decree was obtained from Lahore High Court on 08.02.2000 and since the compromise decree was not followed therefore, NAB Reference was filed on 10.03.2000. It has further been argued by Mr. Kazim Hassan that the application of the petitioner dated 03.04.2003 could not be entertained as the petitioner, being willful defaulter, was not entitled to the benefit and, secondly, the decree of Lahore High Court could not be upset by any further compromise. As far as criminal liability and prosecution of the petitioner is concerned, it made an application on 11.11.2003 and on the said application Governor State Bank of Pakistan passed order, of which the petitioner took benefit and that order has been acted upon. It is contended that although there is a Reference in the said application to another application made on 30.04.2003 for benefit under BPD Circular No. 29 but that was not considered and ignored. Had the petitioner wanted to have a proper order, in respect to its entitlement, on its application dated 03.04.2003 made to UBL then it would have filed a Complaint before SBP Committee which remained operative till 31st January 2005 but no such exercise was done, as the petitioner was aware that it was not entitled after committing serious default by not obeying the decree of Lahore High Court. Mr. Kazim Hassan, has also invited our attention to the documents which have been filed by him with the application under section 151 CPC, including the letter dated 22nd April 2003 issued by State Bank of Pakistan to NAB of which, two relevant paragraphs are reproduced as under:

“It is advised in this respect that the cases that have already been referred to National Accountability Bureau by the Governor SBP under section 31-D of the NAB Ordinance, 1999 do not fall within ambit of BPD Circular No. 29 dated 15.10.2002, hereinafter referred to as “the said circular”. The proceedings under the NAB Ordinance, 1999 must not be suspended on the ground that the borrower intends to settle its loan in terms of the said Circular in that it does not take away the rights of the financial institutions to resort to the course provided under the Financial Institution (Recovery of Finances) Ordinance, 2001 as well as under the NAB Ordinance 1999.

It has been expressly been stated in paragraph 2 of the said Circular that the instructions / guidelines (of the said Circular)do not effect in any way the legal right of financial institutions to recover the written-off loans if they still wish to pursue them legally. The said Circular presuppose the willingness of both the parties i.e. the financial institution and the borrower, to settle the dispute in terms of the guidelines provided under the Circular. The borrower cannot claim the benefit of the said Circular as of right. The spirit of the said Circular is to provide only an alternate dispute resolution mechanism without encroaching upon the rights of financial institutions envisaged under the already existing recovery laws”.

The representative of State Bank of Pakistan Ghulam Mohammad Policy Officer has also supported the arguments of Mr. S Kazim Hassan and has further added that non-filing of any Complaint to the Resolution Committee against UBL on the ground of its inaction on the petitioner’s application dated 03.04.2002 proves that there was no serious grievance and that acceptance of the Governor of State Bank of Pakistan’s order on petitioner’s application dated 11.11.2003 availing of the benefit thereunder further proves that the petitioner wanted to follow the decree of Lahore High Court which is / was binding and that has been further confirmed by the judgment of Accountability Court No.1 Lahore by its order dated 12.04.2005.

In the above situation as well as after going through the provisions of relevant section, We have come to conclusion that although Circular / Scheme issued by the State Bank of Pakistan under section 33-B of the Banking companies Ordinance, 1962 are binding but it cannot be said that borrowers must be admitted to the scheme, in any event under the said scheme which is in the shape of advice. The bank has also been advised that if they wanted to continue other remedy they can avail. It has also been observed that BPD Circular No. 29 has been issued for bad or irrecoverable loan from sick industrial units for the settlement of long outstanding loans. In the instant case, the petitioner has admittedly been subjected to recovery case in Lahore and decree has been passed on 08.02.2000 but the said decree was not followed and bank was forced to take up the matter with the NAB Authority for punitive action as the decree of the Lahore High Court was not honoured. Since there was start of criminal proceedings providing punishment therefore to get themselves released, the Petitioner availed the benefit under section 25-A of the NAB Ordinance 1999 which were provided to them but as far as the quantum of amount determined under the decree of Lahore High Court is concerned it stands confirmed and cannot be rectified by any Committee. Although the petitioner has made application on 03.04.2003 to Defendant No.2 for its admission into scheme under BPD Circular No.29 but in presence of above factual position, it was not obligatory upon the bank to take up the issue and grant benefit contrary to the decree of Lahore High Court nor the petitioner was entitled under the law.

In the circumstances, we find the Petition without legal force and is dismissed.

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Samie