1994 PLP 2165 (MLD)

This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, has been filed by the Bank of Punjab, a Bank established by the Government of the Punjab under the Bank of Punjab Act, 1989.

2. According to the facts stated in this petition, on 29-11-1990, the petitioner-Bank granted a running finance facility of Rs.13.50 million to Ch. Nayyar Hussain, Chief Executive, Nayyar Sugar Mills Limited respondent No.7 herein, against the security of pledge of Khas Deposit Certificates of the value of Rs.15 million issued by the Deutsche Bank, respondent No.5, in the name of Shahid Mahmood, respondent No.6. While handing over these certificates to the petitioner-Bank, respondent No.6 also executed necessary letter of transfers, copies of which are available as Annexures II and III to this petition.

3. On 24-11-1990, the petitioner called upon the Deutshe Bank to encash the Khas Deposit Certificates. By its letter, dated 25-11-1991, the Deutsche Bank regretted its inability to do so in view of the instructions of the State Bank of Pakistan conveyed to it vide letter dated 24-11-1991 a copy of which was enclosed. The petitioner thereupon took up the matter with the State Bank of Pakistan by filing a representation on 11-5-1992 to which a reply was sent by the State Bank of Pakistan on 14-6-1992, in which it was stated that no section was given by the State Bank of Pakistan to the Deutsche Bank for not eQCashing the Khas Deposit Certificates and the instructions issued by the Lahore Office have since been amended. The petitioner once again approached the Deutsche Bank to encash the. Khas Deposit Certificates and this time it showed its inability to do so in view dl the memorandum dated 29-7-1992 of the Joint Registrar, Cooperative Societies and order, dated 25-114991 passed by the Registrar, Cooperative Societies, Punjab, under section 44-E of the Cooperative Societies Act, 1925, restraining respondent No,6 from alienating, transferring, selling, assigning or disposing of any of his properties. The petitioner has come to this Court by filing this Constitutional petition praying that the orders passed by respondents Nos.1 to 3, who are functionaries of the Cooperative Department be declared to be without lawful authority and of no legal effect.

4. In their parawise comments, respondents Nos.1 to 3 have stated that the Khas Deposit Certificates were in fact the property of National Industrial Cooperative Finance Corporation Limited, of which respondent No.6 was an employee and as such, respondent No.6 was not entitled to pledge the same with the petitioner-Bank which is not entitled to encash the certificates.

5. In support of this petition, learned counsel for the petitioner has contended that by pledge of the certificates with the petitioner-Bank, the petitioner-Bank had become the owner of the Khas Deposit Certificate as far back as 29-11-1990 under rule 11 of the Khas Deposit Certificates Rules, 1973 and as such, no order in respect of these certificates could be passed by the Registrar, Cooperative Societies, treating it to be the property of respondent No.6.

6. On the other hand, learned counsel for respondents Nos.1 to 3 has reiterated that the Khas Deposit Certificates though held in the name of Shahid Mahmood, in fact, belonged to National Industrial Finance Corporation, which has since been declared as undesirable Cooperative Society under the Punjab Undesirable Cooperative Societies (Dissolution) Ordinance, 1992, and the property belonging to the said Society or for that matter to Shahid Mahmood cannot be disposed of. It has also been argued that the Procedure prescribed by the Defence Savings Certificates Rules, 1966, which aPplies to Khas Deposit Certificates by virtue of rule 13 of the Khas Deposit Certificates Rules, 1973, having not been followed, the petitioner-Bank cannot claim any right in the certificates.

7. It is evident from the record that the Khas Deposit Certificates stood the name of Shahid Mahmood and were issued to him by the Deutsche Bank as an agent of the State Bank of Pakistan. By executing letter of transfers (Annexures II & III), Shahid Mahmood pledged these certificates with the Petitioner-Bank as security for repayment of loan granted to respondent No.7. As the petitioner is Banking Company set up by the Government of the Punjab under the Bank of Punjab Act, 1989, these certificates cannot be pledged wit it under rule 11 of the Khas Deposit Certificates Rules, 1973, which reads under:

"

11. Certificates can be transferred for the purpose of being treated security to a gazetted Government Officer, to an officer of the State Bank of Pakistan as mentioned in Rule 4(14) of the Defence Saving Certificates Rules, 1966 or to an executive officer of a local authority as defined in the General Clauses Act, 1897 (X of 1897), or to such officer of any Government-sponsored corporation or to officer of a scheduled bank, in his official capacity. After transfer - of the certificates, the transfer relinquishes all claims to receive the value of the certificates including the profit accruing thereon and the officer to whom the certificates have been transferred can (i) encash them at any time, (ii) exchange them for new certificates on their maturity or (iii) retransfer under rule 61(4) of Defence Savings Certificates Rules, 1966."

8. As is obvious from a bare reading of this rule, all rights which vested in Shahid Mahmood, stood transferred to the petitioner-Bank, which was entitled to receive the value of the certificates alongwith profit.

9. As regards the contention of learned counsel for respondents Nos.1 to 3 that as the procedure prescribed by Chapter XII of the Defence Savings Certificates Rules, 1966, has not been followed no pledge can be said to have been created, suffice it to say that the provisions contained in the said Chapter apply only to cases of transfer from one person to another and not to pledges which are dealt with in Chapter XIV of the Defence Savings Certificates Rules, 1966, which does not prescribe any formality except a written authority which in the present case already stood executed. Furthermore, it is highly doubtful whether Chapter XIV itself would be applicable to the Khas Deposit Certificates when there is a specific provision in the Khas Deposit Certificates Rules, 1973, in the form of Rule 11 relating to transfer as security.

10. It may also be mentioned that pursuant to an order passed by this Court, the Khas Deposit Certificates were produced by the State Bank f Pakistan for the purpose of inspection by this Court which shows that all the requisite formalities for transfer stood fully completed and in fact the certificates bear the endorsement in the form of a rubber stamp of the word "paid". It follows therefore that the petitioner-Bank had become the owner of the Khas Deposit Certificates as far back as 29-11-1990 and it is clearly entitled to encash the same. In view of what has been stated above, this petition is allowed with no order as to costs. AA./B-131/L Petition accepted.